welcome to technology Brothers the number one live show in Tech we are live from the Temple of Technology The Fortress of Finance the capital of capital today is uh Thursday February 13th 2025 one day until Valentine's Day we did our Valentine's Day guide yesterday and we hope you've picked out some fantastic gifts for your loved ones this
show starts now Jordy how are you doing my lovely wife uh listened to the full episode yesterday and she was very fixated on the gift guide and was very excited about you know what we were sort of recommending and so expectation expectations going into tomorrow are you know at a fever pitch basically so uh wish me luck everybody I don't want to
don't want to disappoint yeah bad day to be a gentle dealer if jordy's walking in um that's great well we got a fantastic show for everyone uh we got a bunch of fundraising News Mercury FAL Harvey we got stories about the Transformer shortage we can't even get enough power for these AI companies uh two iconic tech people did interviews we're going
to cover both of them first Uber CEO Dar kosari and second baros former CEO Elizabeth Holmes um she did hers in people D went to Strater uh little bit of different Outlet great cont we'll it here and we through thetimeline but first I wanted to open with a uh a little story fromone other than David senra Founders podcast The
Godfather of podcasting the podfather one of the greatest ever do it he says when James Cameron was 20 he was a truck driver he decides he wants to be a filmmaker but he can't afford to go to film school this was how he solved that problem and what a high agency person looks like he'd go to the stacks the library at USC home of a wanted filmm
program Cameron couldn't afford I'd find somebody's 300 Page dissertation on optical printing Cameron said and I'd be going through it and I'd think well I got to get this so I'd pull the Staples out and I'd photocopy the entire 300 pages and then I kept just doing the same thing week after week for about six
months and I'm driving a truck but I had these binders sodium process blue screen Optical printing film stock emulsions lenses cinematography I was going through this stuff chapter and verse and making my own notes and all of that I basically gave myself a college education in visual effects in cinematography while I was driving a
truck for the cost of a couple hundred1 in photoc coping he essentially put himself through a graduate course in visual effects at the top Film School in the country without ever meeting a single Professor Jordie Amazing Story what an icon my my question becomes uh you know this was pre cell phone era was he learning and driving you know did he have his
binders was did he have his binders out basically like on the steering wheel and he's just kind of like reading like imagine being slammed you a rear end camera and he's just like oh sorry he's reading about optic film stock emulsions and you know that that was a that was a different era but uh I'm glad he you know he made it out uh and I'm
glad glad I'm glad he did that but um it's crazy because that that's just like free internet and all of that information is 100,000 10,000 times more so much more accessible for sure yeah it's so much more accessible but yeah autodidacticism has been a driving force behind entrepreneurship for a very long time it's kind of unclear if you can teach it
but uh yeah I mean I the same experiences the Dyson story is very similar right he just like I'm going to make a vacuum and then just you know spent a decade learning how to make the best vacuums awesome becomes a go rocks wild but yeah I mean I love this and I think why this resonates with me so so much is that you can tell that even
though James Cameron is like a Hollywood guy he's a filmmaker it's a very uh it's a very wordell industry he is the shape Rotator of the word cell industry in the sense that like he is obsessed with the science behind film Emulsion and how VFX work and the blue screen and of course he also understands storytelling acting
and emotion and all the different things that go into making a movie but he doesn't shy away from the technical side and I think that's why well then look this resonates with me so much yeah the the technical side and then later in his career he gets into submarines which is every man's dream right I like one of the most one of the best ways I know to
get to sleep is learning about Narco submarines that they build in the Jung it's like the most most fun fascinating content I'm like these guys are going to uh you know build the submarine in the jungle take it out drop it in the water and you know basically take millions of dollars of of their cpg product across the world what how fantastic is that but
um you can imagine he brought that sort of like you know just obsessive learning approach you can imagine he brought that just obsessive approach to building his own you know subar which of course he had you know teams of people work on but um for sure still impressive uh well let's move on to some insane fundraising news Sequoia has been on an absolute
tear Holy Trinity firms they just don't they just don't take a break uh we got two massive fundraising NS uh fundraising rounds from seoa let's kick it off with the Mercury investment uh Sequoia to lead Mercury investment at over $3 billion in value uh fintech is indeed so back Kate Clark got the scoop over at Bloomberg let's
break it down talks what this was a big mixup by the way because you remember Kate Clark Clark was the scoop Queen over at the information for a long time and so Bloomberg Bloomberg scooped the scooped Queen yeah yeah she sco scooper Bloomberg scooped it was a Super Scoop well said Super Scoop um but they had to they had to have taken out a Max
contract to get to get her because um you know the information um you know she was a core piece of their um you know team well she might have broken the news that seoa capital is investing in Mercury Technologies but we're breaking the news that Kate Clark broke the news so stay tuned uh Sequoia capital is in talks to
lead an investment in digital banking startup Mercury Technologies at valuation more than $3 billion according to a person familiar with the matter there's one guy in in Silicon Valley who leaked this who is it who could it possibly be well so the other thing maybe somebody isn't a lawyer or is it somebody in seoa well so the other the other thing is uh the
account arur Rock oh yeah actually ended up leaking just the details like directly so it's very possible that it was whoever runs arfur that just you know put this out there no idea that and so uh fintech is surging they Mercury is based in San fr Francisco they're raising hundreds of millions as part of the deal uh the company was founded in
2017 by Ahmad akund um actually good follow on X highly recommend you go check him out uh they have a physical credit card uh an online banking tools tailored to startups the company reached $500 million in annualized Revenue according to the information which earlier reported some of the funding details the deal is expected to double
Mercury's valuation from 1.6 billion in 2021 after after it raised 120 million Mercury's existing investors include Andre and Horwitz K2 management and CRV what's interesting is um so we we have a Mercury count plays very nicely with ramp who we love and uh seoa was actually just in the recent ramp round as well so yeah um even though you know
fintech uh it's all a bunch of technical mumbo jumbo but uh you know these tools do play to play well together in interesting ways yeah so one one interesting read into here is one extremely impressive that that Mercury was able to you know basically double their 2021 valuation which was like the peak of Zer right and they did this for
a few reasons one continued to grow and just sort of compound on their existing base they they have you know one of the best banking products in the world even if you look at you know uh Commercial Banking consumer banking all this stuff um one thing that's kind of interesting is on that 500 million of annualized Revenue they put up $200 million of
evida which um which is notable because one is just very impressive doing you know multiple you know nine figures of of of actual evida but they're raising it you know they're raising A3 billion valuation they're actually not getting a lot of credit for that that earnings right like if you had a pure play SAS company at 500 million of Revenue doing
200 million of iida that would easily be trading at at that could easily trade at $20 billion right you know figma I don't think was anything had anything close to that level of um Eva you you're getting the size Kong ready um I just heard million of Eva and that deserves a size gong of its own that is a good insect but the but
the reason they're not actually getting full credit for the the they're not getting priced sort of in the way that that you know comparable companies might is because the vast majority of their earnings are from um interest yield so when you have money in a Mercury checking account it's like 0% interest and you can move it to their treasury or
savings products and get a little bit more interest but the majority of startups are sort of like fairly simple in their financial operations so they just keep all the cash in one account and so um you know the reason that you know seoa is clearly willing to pay you know you know values a company at multiple billions of dollars based on
everything that they've built but they're putting a a huge discount on the on the revenue because if rates drop over the next few years a lot of that that that actual like um profit will just dry up right and there's nothing there's nothing that mercury can necessarily do about that because it's set by the that's a good take that's
very yeah that's very interesting I like that and I don't know if you saw the news today but uh where where was it uh uh hot inflation chills rate cuts on the cover of the Wall Street Journal today uh rise 3% likely putting on hold any move by fed to loosen policy So based on your analysis that means hey that e is going to stick around for a
while but know there's always a risk as things uh progress and it's just so that's where the discount yep comes into play that's interesting I I I remember when uh the the Zer bubble kind of popped and a lot of people were asking like who's going to be the beneficiary it feels like Mercury might have been the number one beneficiary in the sense
that everyone was migrating off of Silicon Valley Bank so there was this massive I need a new account and I think they onboarded a ton of people and they built a ton of good willll and they didn't you know there was no disruption during that uh small local Regional Bank crisis forget exactly what they call it um and obviously then as interest rates
Rose they were able to generate a lot of money grow their business a ton and that is a fascinating story yeah they went through different they were always positioned as a startup you know neobank and got a very dominant position quickly despite facing pressure from brex but they actually had a huge amount of their customer base in Revenue early on was uh
companies that were Amazon you know sellers that just needed a US bank account that they could run a bunch of card spent through so early on even in like 2020 a lot of their revenue would have been from debit card interchange and then suddenly they're making five five and a half percent on on every dollar on an annualized basis but they
had billions of deposits right so it's a fantastic fantastic business model and they don't have to do any of the the sort of really complicated sort of higher risk stuff around banking which is lending because they're a neobank um and one of the things that's also worth noting here is a lot of people are like
well why is mercury not buying a bank Charter and the reason for that is that once you have a charter you're getting highly highly regulated and they will force you to diversify your customer base diversify your sort of business lines and lending practices because the FDIC doesn't want you to you know take on all this risk and then go under right
because then they have to bail you out and so Mercury was able to you know they they've hit a few of these different waves the sort of Ecom wave the general growth in startup investment and then the post svb being there to sort of catch the companies that needed a new bank partner and then the other thing that they did was quickly roll out
increased FDIC coverage at the time I was competing with Mercury and um we had we offered a 4% sort of annualized yield on balances so it was like a high high yield checking product which was very interesting for companies because if you had a million every million dollars was 40K a year of of relatively risk-free uh you know yield but then svb
happened and our bank partner didn't allow us to extend our um FDIC coverage by working with a bank Network and Mercury had enough bank that they were able to make it happen and so um that's when we ended up doing the deal with with row uh who also had you know increased FDIC coverage so anyways awesome awesome to see for you know
clearly fintech is here to stay they've had a lot of the industry's had a lot of naysayers over the year but at the end of the day the product experience is so much better for customers yep on on average that these companies are here to stay yeah man like there's something that's so satisfying about I mean this is the first time I've set up a new
company the TB uh since I guess 2016 and and everything is just like so much SM and and it wasn't bad in 2016 like but even then know strip Atlas was working like it was here's like a here's a crazy operator workflow you're going to be able to go into operator like I guarantee you within the next year and say I want to create a new company and
it'll ask like okay do you want to C Corp or an LLC where do you want to incorporate and it'll ask you for the information and it'll just do it for you and it'll be like all right I want do you want a bank account it's like sure and it's like cool I just set you up with Mercury and it's like cool I just set you up with ramp I just on boarded
due to this pay payroll tool so like a single agent will be able to drive this whole experience yeah which typically like in 2016 this was like weeks and weeks of kind of like administrative paperwork annoyances going to a bank you know then being like well like your startup so like you know it's G to take long yeah and that's the type of job
loss that I I I literally think every every single person in a startup who gets stuck with that operational role is like I wish I could have been on strategy I wish I could have been on product I wish I could have been on sales there's no one's like oh yeah like you know at my startup I loved being the guy that had to set up payroll it's like
good they make it doable but it could be so much better and so the the warp team the the payroll product they they had been working on a totally different you know app a consumer mobile app and then they had so much annoyance setting up um different you know sort of tax jurisdictions around because they had a lot of remote employees that they were
like okay we're just going to create a payroll product that just does this stuff automatically um did you know that three of the top 10 most valuable private YC combinator startups are payroll providers ripling Gusto and deal I never knew about yeah all three of them uh I looked at it I was like should I start a pel
provider I mean like seems like there's like free money for a while yeah um both both uh Mercury you know we we talk a lot about you know uh uh some dominant wins from Founders fund of course and then seoa but both Mercury and deal were seated and the series a by by Andre so these are huge huge windfalls for the firm Andre did the Mercury uh seed round
and then they did deal at you know um Mid double digits uh post uh and that deal now is is just is absolutely they just had a they just had a monster like did their quarterly financials leak or I think they just announced that they're doing like 800 million of AR which is just like you know insane lot of money well the funny thing is not only are
there like three or four dominant startups that are essentially scale ups at this point like in the in the multi-billion Unicorn decorn range uh in payroll there were also like three to four public companies that are in the like tens of billions range and then there's a cple like power law winners that are even bigger it is such a big
Market because it's just so much it's just all the money flowing around from everyone getting paid and you just take even the tiniest slice of that and boom huge company and so yeah I'm G look up why do why do bank robbers rob banks because that's where the money is and it's so hard to get money out of out of different parts of the organization when but when it's like
yeah we pay our employees our payroll cost is is you know 10 million 100 million a year sure you're gonna make that easier take 0.1% no problem yeah so uh just to give you an idea of Market size so one of the biggest players in payroll is uh ADP which stand great great acronym automatic public looking this up yeah I'm on of course I'm on
public I'm it's automatic data processing and they have 20 billion of of TTM revenue and over almost six billion of of of evida and I don't know single company who who uses like got 50 plus companies in my portfolio I don't know a single one that uses ADP and so it's just very obvious I know who uses ADP it's like Disney you know yeah sure
sure but but these companies are like cable in the sense that totally you have a bunch of subscribers you know contracts locked in that that probably will never turn but then eventually the Rings and the deals and things like that no no it's a fantastic industry fantastic uh uh it's just it's just a very interesting industry we should do a
market map yeah uh maybe we should collab with uh with our girl Justine um well let's move on to our next big funding announcement uh FAL has raised 49 million series B I thought they were talking about the belgian-made battle rifle the fal but this is a generative media platform for developers uh I was excited 49 million
that gets you a lot of fal's uh enough to arm a small militia potentially take over Silicon Valley but these guys are taking over Silicon Valley using AI we' love to see it the nonviolent way uh let's go to Todd Jackson he says rocket ship is an overused term but it's hard to come up with another way to describe F's trajectory going from 1 million to
40 million in ARR in one year is more vertical line than hockey stick their crazy focus on performance and reliability have meant that they've built what developers and Enterprises actually need to deploy Aid driven media creation at scale handling over 100 million inference requests daily with 99.99% uptime that's why companies like
Kora canva and Amazon ads rely on their platform for image generation and why the founders are perfectly positioned for the next wave of generative video their recent AI video starter kit an open source in browser editor for AI video linked below was the first of many cool launches they have up their sleeve this year first round had the chance to
back this team at seed and is the team that saw where the puck is going and furiously built ahead of the curve this time next year even these numbers will look small so yeah uh little bit of the glaz anator 3,000 coming out for the portco but we'd love to see it hey I mean you can fair fair game to do a little to pull out the glazin Ator if
you if you're going when you seated a company and they raise a $50 million series B pull out the glazin let's go I you know I once po I had my first portfolio company go to zero to 100 million of annualized Revenue and I that I got in like sub20 uh post yeah and I posted I posted that uh I didn't say say the portfolio company name but I posted
that it was um more meaningful to me than like holding my child for the first time like obviously just like baiting people and like nobody got the joke like everybody was just like congrats man like that's amazing and like couple quote tweets they were like this technology brother says that like getting like you know a N9 fig
Revenue you know uh PCO is is better than you know so anyways for the record that's great that was a joke but um yeah any fantastic fantastic Pro uh progress so we had a debate in in our um in our uh in our uh group chat with with some uh former Brothers of the week about you know what happens to these companies
that go Z to poti 100 plus million of AR in in this super super super short period of time you see like companies like cursor fouls on that trajectory um 11 Labs mer all businesses and um there's a lot of reasons that you could be short these companies but in general I'm very like very bullish right it's it's very hard to get people it's very
much easier to raise Venture Capital than it is to get customers to send you payments for your product right and people are clearly paying for these products they're using them they're integrating them into their businesses they're getting a lot of value out of them one thing that I did think was um uh let me try to find uh pull up the you
pull that up it just feels so yeah one of our buddies said the you know the iron law of anything that goes up quickly must come down quickly it's very py it does it does make some sense but uh it all of these Revenue numbers just just really make it clear that although the valuations feel like the dot boom although AI feels like a potentially
even bigger transformative technology than the internet and we are in another kind of transformation bubble there's going to be asset bubbles when we're transforming Technologies and rolling out an entirely new technology the N like like the actual fundamentals of the business are just very very different from the com boom where it was like oh
you put up a web page you got a 100,000 users and now you're iping it like that was what was going on in the boom now it's like well yeah there's some private Capital at risk and maybe you're overvalued but you really did get aund million in Revenue you know hopefully a lot of that's sticky now some of it might slos around other products as
people roll stuff out but I don't I'm not counting on you know if you're with cursor are you really going to go to Salesforce you know no it's like you're you're probably going to be pretty happy with that product and stick around yeah the the exact line uh from Jeremy gaon who's not you know entirely bearish but
is you know interested to see how these plays out because he'll be in the position to buy you know the companies that maybe build good businesses but don't truly grow into their valuations he said Easy Come Easy Go is the iron law of the universe and so if it's you know not that it's easy to to experience this level of growth but uh it certainly
happened quickly and so that could imply that other people will be able to achieve similar things and maybe end up being competitive but totally right uh in the dot era companies were going public with you know singled digigit millions of dollars of Revenue or or less getting valued at billions of dollars and this is certainly far from
the case and the other thing that's good is these are priv experienced private Market investors that are risking their capital and their LP's capital and so if these companies don't grow into those valuations it's not you know necessarily retail investors that are going to be holding the back I mean even even during the spack boom some of some of the
companies that went Spa uh had worse financials than a company like FAL here uh let's go through this company a little bit because I didn't know that much about them but uh there's a nice article here in fortune that breaks it down uh FAL stands for features and labels you know these guys are developers when they name their company something like that a machine
learning term referring to input data and the yeah it's like ADP automatic data processing yeah or IBM International Business Machines great name you know but like uh you know why not and I don't know FAL that's cool um but there's another layer FAL is also a Turkish term for fortune telling the startups co-founders tell me uh it's a
good Easter egg that's there uh we have a lot of Turkish employees and it's fun when they notice uh the the founders are both from originally from Turkey they first connected in the early 2010s in San Francisco they both worked in Ai and machine learning at tech companies um one was at Amazon the other one was at Oracle then coinbase and they became
longtime friends in the dead of covid uh the two were in the same bubble Palm Springs talking about AI they founded FAL in Fall of 2021 looking to provide developers with a platform and Acumen to more readily use generative AI models for image and video generation we made an early bet to position ourselves as just focusing on generative media as
opposed to many others who were very excited about llms we basically left the llms behind and specialized in image video and audio type models the company's been in the midst of Rapid make sure hands and feet are inside of the vehicle growth and now has 22 employees man 22 employees that's so small for how big they are uh this is
fantastic uh only 4 months after announcing its series a the startup has reached a new Milestone uh a $49 million series B uh notable Capital led the round with andreon Horwitz and Ben uh besser is in Kindred first round Capital all participated with the deal a16z General partner Jennifer Lee and notable Capital managing partner Glenn Solomon
will join the board uh if you're new to generative AI for images and videos the most important thing you should know is using these models can feel infinite you can rapidly generate impossible videos and images from Golden astronauts in space to Penguins playing instruments and while this sounds aesthetically cool
but fundamentally abstract uh what the founders are seeing is that businesses are starting to actively want to use this Tech they currently serve north of 50 Enterprises including Kora perplexity and canva uh and perplexity CEO who's been on the show before uh he is an FAL investor Fortune has a business partnership with perplexity so little
one handwashes the other on this article I like it I like it yeah pay the bills Fortune get get it done uh the use case are both Legion and specific good writing too uh with some startups building applications on the platform where other companies are focusing on AI generated avatars for training and education design super unicorn canva has
been using FAL as it develops and integrates its AI powered editing tools the use cases are very broad much broader than I think initially expected said the investor at notable Capital Dan Kahana you play with these models and it's fun you send them to your family and you blow your grandparents Minds with it but as you spend more and more
time you realize this totally changes photo editing architectural design fashion design all sorts of creative disputes again we're talking about the centur model talking about the human partnering with the AI there's a ton of ways that you can do this with generative fill this has been baked into Photoshop but not everyone has uh
Photoshop in their pipeline and often times if you're just trying to generate a bunch of ads or you know you're trying to give something to a user in canva you want something that's a little bit more uh little bit more baked into your UI a little bit more seamless a little better for the workflow and and this is a tool that can be uh integrated so very one
one of the things that one of the things that's clearly happening here is you know uh you'll oftentimes get the advice of stay small you can move a lot faster right as soon as you start bloating your organization and there's more people that need to sign off on different things everything just slows down and so
in in in their situation and cursor situation cursor I think right now has like 5 million of AR per employee right so it's like pretty like Best in Class um and so part of what's happening is all these new AI tools that every developer now has access to they're able to use you know them to build faster and just hire less people which also helps
them build faster right by just keeping the float down in these organizations totally um it's just fantastic to see I think uh py actually had a great piece we should dig it up and cover it because I think it's starting to play out which is that um we're now uh he predicted that you know as these tools get efficient and one person can do the job
of five other people it just frees up talented people to just do more things so before you might have had a hundred people building one company now you can have that same hundred people building five companies all that could be as big as the original company right just due to that sort of efficiency increase so we're just seeing more and more of these
stories like I don't I've never been I've never experienced a time where we had this many new companies ripping from zero to double digit you know millions of dollars in AR and so it's it's um you know just fantastic to see yeah yeah and the products are clearly real like obviously there was uh you know a similar boom during the crypto boom in
2020 2021 but there was always a question of like is this really a durable problem or are we just speculating with this sure the stocks might be a little bit frothy who knows where the valuations land but uh you know when I open one of these apps and I use generative AI to edit a photo I'm getting real value out of that and I
love that and I think that's going to stick around for sure anyway let's move on to our next fundraising announcement Harvey has raised $300 million from seoa in a series d uh Winston Weinberg says on X excited to announce our series D led by seoa with participation from conviction kleinet Perkins open AI GV team conviction elad Gil and Lexus Nexus
Lexus Nexus is an interesting one because they have all the data that you'd want to train on um yeah let's go through the announcement here today we are thrilled to announce our series D in 2024 we saw 4X annual recurring Revenue growth and expanded from 40 customers to 235 customers in 42 countries including the majority of the top 10 US law firms
so that means six at least uh yeah of the top 10 that's pretty huge uh and I'm sure they're paying a pretty penny for this uh We've also seen the legal and Professional Services industry shift faster than ever before lawyers are adopting technology at an unprecedented rate centuries old firms are experimenting with new business models
and Enterprises are driving significant savings with AI enabled workflows the pace of change will only accelerate in 2025 very cool uh have you seen a lawyer use Harvey or has it been revealed to you what's your take on Harvey I haven't yet I one of my uh neighbors and our and our our Council for TBN uh is at a fairly large law firm
wilky and I started asking him as soon as Harvey was like on the map you know already they quickly came out the gates and raised you know a few rounds back to back they're already at their series D I think it's a two-ish year old company maybe a little bit more um they so I started asking him have you heard about this have you seen it and so like nine
months ago hadn't hadn't heard about it used it anything like that um I actually should I'm not going to text him this moment because he's on fraternity leave but um I'm I'm sure they they they're already having conversations with the firm even like six months ago there was people futing Harvey on the timeline oh I don't know a single lawyer that even
knows about it or I like who's using this blah blah blah hard to fake uh this right hard to have the the majority of of the 10 largest law firms in the US using your product so they're clearly crushing it uh I think that you know some of the best applications of generative AI are the most obvious right you look at the legal industry where
every small thing costs hundreds of dollars even if it's just using boilerplate contract and so this was just such an obvious application but it took a ridiculously talented team uh and you know extreme Focus to actually get it to this point and so I'm sure there will be you know what what hasn't been obvious yet is you know in the
generative sort of engineering coding space there's so many heavily funded big players everything from you know cursor to Devon which are again taking different approaches to to wind Surf and pool side and and all these different companies we haven't seen the same thing play out in legal AI there certainly are you know cool uh you know there are a
number of you know legal AI companies but none that seem to have the momentum and the sort of like you know tal uh potential power law effect of Harvey now has hundreds of millions of dollars to um you know deploy against this problem space and again I don't think this is the kind of thing that law firms are going to want like you know five or six
tools they're also not the kind of thing that Engineers can sort of more organically adopt software I don't think this is going to be the same type of situation just because it's such a privacy you know oriented industry and and so heavy around regulation so so I have a a theory that I want to run by you and kind of spitball and work
through uh there's always this question of okay yeah the company's doing well they got uh more than half of the top 10 US law firms but what is so Capital intensive about this and there was a big question about should they be raising a ton of money and training a New Foundation model because at a certain point open AI is spending $500 billion
dollars on Stargate to train GPT 6 or GPT 5S coming soon and can you if you're in a narrow Niche like a vertical software niche in AI afford to train a new model and I don't know that they I don't think that they need to necessarily I think a lot of what they're doing is posttraining not pre-training uh not the really expensive
training runs more of the fine tuning but then the question becomes well these companies are making money they don't have that many employees why are they raising so much money and I think for these very specific uh Niche AI companies it could be driven by uh a need to do deals and essentially pay for access to data that's not widely available on the
open internet and and there's actually a case that we can go through but but what's your take on that theory that hey maybe you need a lot of money because you you need to go pay the license and get the data legally and bring it into the llm and that's the value at I think that that's I'm sure a you know percentage of this fundraise will be
used to do that that said I would guess that it's this that this was more oriented around seoa wanted to own another 10% of Harvey and uh or you know there's a mix of investors in the round but it's more around hey we're in the position where we can do another financing we're only willing to sell 10% you know and we just
figure out what the number is okay 300 on three billion right and so I don't think at when a company raises this much money so fast sure they have to have a plan for it but uh of how to deploy that Capital but often times it just comes down to you know we're willing to sell 10% of the company right now and then
the market sort of sets the price right interesting interesting uh well I well we should go through this uh Thompson Reuters versus Ross intelligence case uh Ben Thompson broke this down on stery yesterday and I thought it was very interesting to understand how uh data and fair use are being used in these AI training so uh Reuters which is funny
because they're the ones in the lawsuit but they're also reporting on it another one hand washes the other uh situation uh reports a federal judge in Delaware on Tuesday said that a former competitor of Thompson Reuters was not permitted by us copyright law to copy the information and technology companies content to build a competiting a competing
artificial intelligence-based legal platform us Circuit Judge uh Stephanos bibas uh decision against defunct legal research firm Ross intelligence marks the first US ruling on the closely watched question a fair use in AI copy copyrighted uh litigation and so uh Ross intelligence was using Thompson reuter's headnotes as AI data to create a legal
research tool to compete with Westlaw it is Undisputed that Ross Ross's AI is not generative wrote the judge and so this is a this is a pretty important distinction um Ben Thompson argues that uh Ross intelligence was building a legal research tool based on natural language processing to enable plain language search queries that would
deliver relevant Court decisions this tool was a direct competitor to West law which is owned by Thompson Reuters here's the key aspect of the case which does have a bearing on generative AI the product itself did not violate Thompson reuter's copyright rather the judge ruled that training material that Ross intelligence used to develop its natural
language search functionality did specifically while Thompson Reuters refused to give Ross intelligence a license to its headnotes we which summarized a case and key number system the numerical taxonomy it used to organize cases Ross intelligence did use a company called Legal ease to generate its training data and legal ease is
alleged to have basically copied West Law's headnotes and so the reason why this is pertinent is that assuming this case holds up through a jury trial and any relevant appeals it establishes the precedent that using copyrighted data for creating a product even if that data is not in the final product it's self does lead to potential liability this is
also precisely why this case might not hold up there's two other cases and eventually it's going to go to the Supreme Court and so um it squares the circle in gener of AI cases but not if the problem was the training data it seems to me that the entity that violated the law is legal ease not Ross intelligence which by the way has long
since gone out of business because of this lawsuit which is funded by Insurance regardless I wouldn't read too much into this or any other case just yet all of this is going to need to be resolved by the Supreme Court at some point or Congress and so this is interesting because there's been this debate over uh oh open AI is scraping
YouTube or they're scraping you know there's all these allegations scraping the New York Times scrap and then there's the question about is it transformative and what is fair use and so you know if you're just if you're just a you know a a buzzfeed reporter even a podcaster like us we read I'm reading Ben Thompson's article right now
I'm like stealing his content you're generating content from it exactly so I'm reacting to it and so in theory this is this is uh this is fair use now the question is is the output of these llms is usually transformative because it is new sentences and and as long as they're not dumping direct quotes out it should be fine but there's a question about can
you scrape someone's and can you use their their their their content as as training data and this is something that was just clearly there was no legal basis for it because you know you look at the Historical precedent of anybody just physically walking into a library reading books pulling out quotes using that material to make other things
Jameson yeah yeah yeah James Cameron and then suddenly you know when a computer does it oh whoa whoa whoa whoa whoa can't do that and so we we've taken the other side of this we've said you know I'm sure open AI listening to live stream right now I'm sure uh I'm sure they're just actively feeding this into uh into their models but we encourage it right we're
trying to make yeah uh the models have our extremist beliefs and so it's actually influence Sho yeah yeah yeah it's part of our strategy but you know it is interesting you know the other side of this is that for a long time companies uh were able to monetize their data you know very effectively on like a per user basis you know pay walls
Enterprise contract to access that data uh I have a buddy who has like this fantastic media rollup company and he charges millions of dollars for big hedge funds to get access to that data and other you know policy you know makers and things like that and so it is this really interesting challenge of like what happens when the data USA ID
or what happen I pressed him on that Monday I said uh you know how how you doing bud uh he like our hands are clean um but uh the New York Times can't can't say the same thing but uh Politico Politico is the one yeah so anyway it's just this interesting challenge of you know even startups will tell you yeah startups have long included a not usually that
compelling aspect of their pitch which is like we're going to have so much data and that is going to be valuable inherently and what's happening now I think is that you need to take the data that you have and of course you want to protect it because if it's part of your mon ation strategy but it's coming down to it does seem like on a long enough
time Horizon the walls on all you know data that's shared online are going to drop right because um and clearly depends how easily it can be scraped because some some data I mean if you're talking about like healthc care Financial records like these are truly locked down yeah sure there's hackers that Break Stuff open every once in a
while they get a list of passwords or Home Depot receipts or Walmart stuff but like in General there have not been massive leaks of of really super proprietary data and certainly once it leaks it's on the dark web like as a company you are not just going to be like yeah let's ingest that uh whereas yeah sure you might write a bot that
scrapes the internet like Google does and then there's a legal question of is that okay or not and how can that go into pre-training so an interesting scenario that I'm sure Harvey is in is a you know law firms themselves generate so much data right and some of that some of that ends up becoming in you know in like public right through you know cases
and stuff like that totally but then a lot of it is highly confidential highly private and if you're a client of one of the companies that Harvey works with you don't necessarily want your internal private legal documentation to be used to I guess you could argue oh it doesn't affect you if they train on your stuff
and allow other people to reproduce documents you know to solve you know similar legal issues but at the same time there's like a bunch of and I'm sure but but that said I'm sure Harvey does some deals where it's like you know this is going to cost you $5 million a year but like if you allow us to train on the the full set of your law firms
you know 50 years of of you know internal Communications and you know things like that then we can sort of discount it or you know who knows right it could just be built into their I don't have any inside knowledge there yeah yeah it's uh yeah it's fascinating to follow we'll have to dig into Harvey more understand uh how they built the
business I mean the open AI startup fund is in this deal so obviously they're working closely with open AI at the same time seoa is uh I think writing big checks into xai and and grock is now going to be able to leave uh relatively light legal opinions I think that that that was announced and so uh there's always a question about like legal aids
for consumers versus uh you an Enterprise product that integrates with truly proprietary data Harvey's clearly taken the latter strategy but it looks like it's working out and congrats to the team over at Harvey seems like you guys are crushing it uh well let's move on to more AI news but this time on the energy side uh there's a great article
in chinat talk uh all about uh trans the Transformer shortage and we're not talking about the Transformer architecture we're talking about literal physical Transformers and the Transformer shortage is choking the US supply chain if Trump wants to build he needs an industrial policy for Transformers it doesn't matter if you
want to build housing AI data centers renewable energy in installations evv charging stations semiconductor Fabs or drone factories you need Transformers for all of the above not even the fossil fuel industry is exempt oil and gas drilling both require special Transformers to Supply Power to rig Machinery compressors refineries and
more I was talking to uh uh I mean they nuclear power companies that want to deliver nuclear power to oil and gas Drillers so that they can get more power to run their tools people don't realize that you need a lot of energy to get the oil out of the ground often and so these Transformers are really key and I haven't heard of any companies building
these so I thought it would be an interesting Deep dive so technologically speaking Transformers are relatively simple they were first invented in the 19th century and yet the inability to build Transformers is causing us industrial policy to Short Circuit uh in the words of the utility resource planner AJ Pandy the Transformer
shortage is bad it's like hair on fire biting my nails losing sleep levels of bad if you wait to if you if you build new multif family housing you could be looking at a 2 and 1/2 year wait for a Transformer to supply the building and that's if the manufacturers are even accepting orders I had no idea uh the Trump Administration has ambitious plans
for AI infrastructure permitting reform and offshore drilling projects without Transformers however the US is destined to remain a build nothing country no matter how many billions of dollars the federal government dishing dishes out so how did it get so bad and that is an interesting question covid-19 impacted Transformer Supply chains but a
Confluence of several demand side factors extended the shortage first the US grid is aging we know this Transformers are typically rated for 40 years of service and much of the US grid is reaching the end of its allocated life and so just replacing and upgrading existing Transformers is driving a ton of demand second overall electrification
is increasing nationally Americans are using electricity instead of natural gas to cook their food Heat their homes take hot showers and this trend is effectively irreversible and third and most and perhaps most most obviously scores of new renewable energy projects and EV charging stations require Transformers to come online newly leased
offshore drilling projects will have a similar effect and so we want to do more with Transformers and yet uh the supply side is not keeping up and so the N A yeah yeah the children the children we need to get children to stop playing Minecraft and start mining coal they they clearly yearn for the mines let's make them let's make them productive
yeah the answer is clearly steampunk future with uh me on an Airship twirling my mustache powered by coal and and steam steam Revolution that's the end that's the end goal for sure back to blimp back to blimps you know blimps for sure yeah I saw a fantastic photo of the Hindenberg docked at the Chrysler Building Incredible or maybe it was the
Empire State like it's so ridiculous it just looks so cool and futuristic uh but at the same time I think it's more like I think blimps are more like unicycles than anything else where it's like novel but then there's so many drawbacks that it just doesn't make sense so I think I'm anti- blimp anti-rain and I just want suponic Jets and Rockets really
anyway uh the niac identified four structural supply side challenges in a report released in June of last year labor shortages the US does not have an effective pipeline to train and retain the manufacturing Talent we've seen this in so many different Industries there's a historic industry cyclicality there's been a strong correlation between
Transformer demand and the housing market and so when the housing market took off in the early 2000s Transformer production followed but then when the market crashed caused many manufacturers to exit the market there's also a lack of standardization it's difficult to efficiently scale up production without a with a custom product and so utilities
are very specific about their Transformers there's no standardization really every utility has its own specification if you're a small utility you're asking for a very very small batch of this very bespoke thing and there's also a material shortage Transformers are made with grain oriented electrical steel go s never
heard that term before glad to know it now but there's only one domestic manufacturer who is unable to meet demand contributing factors include the destruction of the azovstal steel plant in marup and sanctions against Russian steel producers Rising demand for nonoriented electrical steel a key ingredient EVS that comes from the same
manufacturing facilities will also increase Supply tension the net result is that domestic Supply can only meet 20% of Transformer demand and Transformer prices have risen 60 to 80% since 2020 not good stuff should we go into physical attack this is a great one so crazy crazy crazy a 2014 analysis by the Federal Energy Regulatory
Commission the FC identified 30 critical high voltage substations in the National Grid and predicted that losing just nine of these substations as the result of a coordinated attack could cause a nationwide blackout lasting for weeks or even months and so this is your call to action become a prepper uh get a get a generator uh a gas a diesel generator
get a battery pack get a starlink uh you know if you have a family you should be investing in this stuff because uh the power grid is sadly very very fragile uh that report is 10 years old but according to an NPR interview with Richard morose uh former president of the New Jersey Board of Public Utilities the situation today is
not substantially different knocking out those high impact facilities is probably harder than everyone would think but he did not say that the underlying grid infrastructure had become less centralized what kind of security measures are in place to protect these high impact facilities according to Politico protections include armed
security staff bullet resistant fencing or video monitoring but these measures may not be enough to protect against a major blackout in 2022 alone there were a total of 1600 security incidents involving the US power grid in including 60 incidents that led to outages notable cases include the 2013 metf sniper attack and the 2022 attack on
substations in Moore County North Carolina in both cases the perpetrators were never caught and so basically people just go and buy a sniper rifle or a long range assault rifle and then they just take pot shots at the substation and if they hit any critical piece of the in the chain one wire one bolt anything it can knock out the entire
Grid it's like an extremely like high leverage terrorist activity for a crazy person and they could have any sort of motives they could be left wi right wing they could be International it's like one person a $300 rifle and potentially millions of dollars you know or you know God forbid billions of damage so you think about the arson that happened in LA and the
potential for that like there are a lot of people that want to have like a high leverage terroristic impact and um and these electrical substations are sadly uh one of the most high leverage places to have something little anecdote little anecdote my mom was buying a condo and was in escrow and they were waiting on a Transformer to be
able to power the building and uh it dragged on every single day every every single week they'd say like Hey we're expecting this like in the next week just dragged on and dragged on and dragged on actually for months and she eventually just bailed and and bought another place because she was like I'm not just going to keep waiting
around for this you know this thing that who knows when it's going to come basically so actively you know slowing down various aspects of the economy yeah I wonder if I can find this will manius tweet I know he's talked about it uh Transformer yeah this is it he he tells the story of met Cal here uh we should just read through this because it's so
interesting 26k likes it's a banger folks uh on April 16th 2013 a team of Highly skilled gunmen opened fire on the meta's power substation in San Jose California in just under 10 minutes they disabled 17 Transformers and caused $15 million in Damages this is the most important terror terror attack you've never heard of quick thread the pg& metf
station provides most of Santa Clara Valley with power Facebook Stanford are Etc are all on this grid the attackers are still unknown they were never caught and the motive is still unknown this is so crazy uh it sounds just like complete conspiracy theory because of course when you don't have an answer you're just going to generate theories and who knows
they're going to be hard to verify a timeline of the attack but all this is like this is factual like facts it's just no one knows how to piece all these facts together uh at 12:58 a.m. in the middle of the night fiber optic lines were cut not far from the US Route 101 just outside the South San Jose just just outside of South San Jose the
substate loses internet and phone service at 1:7 a.m. some customers lost service cables in its Vault near The Meta substation were also cut 1:31 a.m. a surveillance camera pointed along a chain link fence around the substation recorded a streak of light that investigators from the Santa Clara County Sheriff's Office think was a
signal from a waved flashlight like I'm I'm ready to go it was followed by the muzzle flash of rifles at 137 a.m. pg& received an alarm from motion sensors at the substation possibly from bullets grazing the fence at 1:41 a.m. Santa clar County's Sheriff Department received a 9 911 call about gunfire sent by an engineer at a nearby power plant
that still had phone service at 1:45 a.m. the First Bank of Transformers riddled with bullet holes and having leaked 52,000 US gallons of oil overheated whereupon pg& control center about 90 M North received an equipment failure alarm at 150 another Flashlight Signal caught on film marked the end more than 100 expended 762 by 39 mm cases were
later found at the site at51 officers arrived and found everything quiet unable to bet get past the locked fence and seeing nothing suspicious they left in the subsequent investigation it became incredibly clear how professional of an operation this was of the 100 shell casings found all had been wiped clean of fingerprints there were also
stacks of rocks found all over the site commonly used to gauge firing distance so they went they measured they put down rocks this rock means we're 200 meters away 200 yards away and so you need to adjust your uh your your dope accordingly essentially yeah uh they knew were to attack yeah just to kind of get into who might potentially be the
culprit uh if you've ever anybody that listens to the show that that follows Josh styman I knew notorious for saying good morning we are going to win almost every day and then uh also anytime something like this happens he'll quote tweeted and say how many us or how many foreign sabotage teams are operating on us soil
and so he was within the the 2016 Trump you know White House um uh you know working on National Security has a military background and so he had actually a lot of exposure you know a lot of times these attacks happen and the government figures out what happens but they don't necessarily deliver that to uh the press and the media because we
the government doesn't want the citizenry to feel like they're constantly under attack or there's sort of um sort of these these missions being carried out but it's very you know something like this to me uh screams like foreign sabotage more so than such a professional job who else would have the incentive to do this other than you
know for an adversary that just wants to cause chaos you know us and tests things right so yeah yeah totally yeah I'm staring at the tinfoil hat it's just Out Of Reach but uh I mean just thinking about like if me and a bunch of guys wanted to go do something in a foreign country could we get there on a tourist visa overstay that Visa start acquiring
weapons there's a million weapons all over uh America go to some gun shows buy some stuff figure out some back routes buy all the gear plan all this out like this does not seem like you know like a moonlanding level effort this feels like a couple guys from a pretty sharp team putting some work in some planning and then going and executing it with you
know a couple months of prep and they get a pretty crazy out outcome uh there's been a lot of conspiracy theories about whether this was uh you know a test of the system or an attack from an adversary or maybe just uh political extremists who are you know Americans and they and they and they want to cause chaos for one reason or
another it's hard to say but the important thing is yeah it's a relevant repost from Bill Amman who reposted within the last 24 hours from his account that has 1.6 million followers wow if you are not a conspiracy theorist by now you are basically the RW um and um and so little clean it up You Know Remix it to be say if you're not you're silly if you're not a
conspiracy theorist by now you're just silly that hits pretty hard too um so mix it up AC no I have long said that uh conspiracy theories like if it's a conspiracy theory and it comes true it's just history like 911 the the default narrative on 911 which is that Bin Laden determined to attack that was a conspiracy theory let's
define it was it a conspiracy absolutely it was a bunch of guys in a far off land literally conspiring to attack America and then the second question is was there a theory absolutely because the CIA wrote a memo theorizing that Bin Laden was determined to attack and so this the CIA basically said hey we are in the business of of crafting theories
about conspir Ires we think we are onto a conspiracy and then it came true and so now it's just now it's just IGN the theory ignore the theory aspect the definition of a conspiracy is a secret plan by a group to do something unlawful or harmful or the action of plotting so anytime anything whenever something happens it's usually because a
small one or a small group of people plotted to do something now you don't know the opposite is is when you're when you're building in public or when you're uh you know a politician and you're on the campaign Trail and you say if elected I'm going to cut taxes or I'm going to raise taxes and then you do it that's not a conspiracy you did it out
in the open you said you were going to do something the Tesla secret plan that is not a conspiracy there are conspiracies that happen all over the place uh but not everything is conspiracy but sometimes there are conspiracies that happen and and if someone is on to it ahead of time and has a theory about it it is technically a conspiracy theory uh
and so we almost need a different word to to uh denote a conspiracy theory that you think is wrong versus a conspiracy theory that you think is correct because obviously that there are there there are two paths that these things can take we we obviously we we keep a tinfoil hat on the set it's usually Within Reach of me
and you're a good counterbalance to me because you know I I'll have some crazy Theory and you be like oh like you know seems complicated you know could be a lot more simple and you know less nefarious than that yeah I I usually just like to go back to like you know is there some sort of Market pressure does this conspiracy theory
require me to suspend the idea that people are rational economic actors okay that's going to be a lot harder but when you look at this it's like you know if you're if you're a country that's competing with America and you can send a a group of five dudes over to America and just wreak some Havoc for you know what 100K in flights and gear there was
that's going to be a great Roi and so that's not that doesn't break my world model to consider that that's might be uh foreign interference a lot of the uh moms and wellness girlies in La had heard that Iran had posted like a day before the fires which they always post they always post they always post they're they're posters over there um
and uh they had posted you know in the coming days the United States will experience a you know catastro the world will experience a catastrophe the likes of which it has never seen and then as it became obvious that there was arson happening and these fires didn't all start organically then the The Conspiracy Theory windmill started turning but then
since then we've established that you know it was arson but we still don't really know what happened who did it what the motive was was was it mental illness was it homeless people was it you know they just got away with it I don't know if we'll ever know like this is 12 years ago at this point and there's no evidence there's nothing to
go off of there's no threads to pull it's like yeah you know they've already they got the shell casings there were no fingerprints what are you GNA do anyway uh there are other problems with the Transformer shortage uh mainly one is that a lot of these Transformers come from China uh $54 billion to exactly in uh 2022 in 20233 China was the USA's
thirdd largest supplier of Transformer components by value selling American customers 375 Million worth of Parts electrical parts of electrical Transformers static converters only Mexico and Canada outranked China by value Chinese made compon components represent 15% of America's Imports in this category this might not sound like
much until you remember that this calculation is by value since the exchange rate is is kept artificially low China likely provides a disproportionate volume of these components compared to other trade Partners the picture gets worse when you consider Imports of whole completed Transformers the oec reports that China was the USA's number one supplier of
Transformers and Transformer components in 2022 exporting 5.47 billion worth of product to the USA uh and so however for the large power Transformers that are most critical China is the sixth largest exporter so it's not all bad news but it is very rough and you could see that this could become a uh one of the poker chips on the bargaining table in the
tariffs we're restricting chips but chips aren't the only thing we need to build these AI data centers if we want dominance and artificial intelligence we need Transformers too and if China Cuts us off that's going to be that that's gonna be a significant setback so lots of uh you know we never talk about politics but
geopolitics always finds a way in with these stories uh so let's let's wrap up the Transformer discussion um and and see how they close this out by supplementing the 2020 uh Transformer executive order with real industrial policy the Trump Administration has a huge opportunity to jump start the construction of housing factories and energy infrastructure in
the United States I love the sound of that I think that should be bipartisan we all want to build more stuff uh to close we'll leave you with a full list of policy recommendations from the national infrastructure advisory Council the niac uh they recommend that the federal government craft policies and designate funding targeting it
increasing domestic capacity they want to use the chips act as a model they recommend convening all parties who drive demand to achieve greater accuracy in Transformer demand forecasting so everyone who's buying Transformers let's get them all in a room and let's say how many Transformers do you actually want how many do you need Stargate like how
many how many Transformers do you actually need cruso let's let's get let's get you in here and see so that we have an accurate plan of what we need to build domestically how important are the tariffs Etc uh they recommend encouraging long-term contracts and customer commitments uh they recommend establishing strategic reserve of
Transformers with the US government as the buyer of Last Resort uh and they recommend that the government promote collaboration between design Engineers from utilities and uh domestic manufacturers with the goal of standardizing Transformer design and reducing complexity uh and so there's a couple others here but basically you
need to grow the qualified uh grow the pipeline of qualified workers in the Transformer manufacturing industry and also ensure sufficient supply of electrical Steel by coordinating incentives so a lot of work to do on Industrial policy there but hopefully green shoots ahead what you got got a a good transition to some actually breaking news from the reindustrialize
summit uh do Aaron slodov and Austin Bishop actually just sent us this while we were live they just announced reindustrialize 2.0 is returning to Detroit so if you don't know reindustrialize is a uh basically conference to get all the different policy makers investors and you know Founders together in a single room to figure out how we're going to
reindustrialize the United States right this is one of the top sort of National Security issues of our time and it's going to take um my hotel is calling me to kick me out of the room um hopefully it's not too loud um but anyways um really exciting event they did it last year was a huge success they have people like um Dan Gilbert who was you know
started rocket mortgage and owns the cabs and is part of stock and he's going to be hosting it so they're going to you know pull it out of the stops it's going to be an amazing event there was a lot of good stories that came out of it last year I was having uh my second child literally the same week that it was
happening last year so we both couldn't go but we'll have to go there uh this year one of the guys who's working on it Mike slle I wor I went to his previous conference uh the defense Tech Venture Summit in DC that was fantastic really well executed uh I gave a talk on stage the mics worked great there were tons of cameras all my slides were up they
looked great it was a lot of fun and a really great community and really top Founders went and so highly recommend checking out industrialize signing up getting on the list massive demand and I'm sure it'll be a huge huge event uh hopefully we can get out there but if not I'm sure we'll be live streaming it and uh reacting to the show as it goes
on I think that'd be really cool to do um anything else we should cover on the breaking news or should we move over to DAR kosari over at Uber do it do it and so uh Dar did an interview with Ben Thompson over Strater and I thought it was interesting because I wanted to talk about uh self-driving cars but he has a
very interesting background uh dar's family left Iran after the 1978 Iranian Revolution and and so did to be clear so did Dar from deli's family did the same thing really yeah so a lot of Dar America and just Dominate and so you were mentioning how Iran was kind of fostering that they may have started the fires in LA and that they're you know
kind of a near-peer adversary at this point to the United States certainly not an ally um and it's interesting because uh the the people like if if a family left uh what does that say if a family left Iran in 1978 like what does that say about their politics well it actually means that they're Pro business capitalist pro- democracy and those were
the people that got kicked out in favor of an authoritarian regime and so uh I'm a huge fan of all the Iranians and if we ever a new leer in Iran Dar Kosar I think would be the to take it over or our friend uh after Dar you know uh you know uh albo's Google and and merges it with with Deli you know like a generational run then go back and run
Iran that's that's one of the things is is uh same thing with you know Russia and China and Iran the our adversaries the actual people in these countries we have so much in common with we we all want generally the same things we want to have you know families and be you know great education and great economies we all want the same thing and then it's
our regimes that are just like yeah we are mortal enemies like totally and so yeah you know Dar our Dar has told us uh told me stories about his family coming over here with no literally nothing like basically a plane ticket and then work going you know going from being you know successful business people in Iran Coming To America with nothing running
it back up you know becoming wildly successful here Y and uh just goes to show the Ingenuity and creativity and drive of that people yeah it it's such an interesting uh kind of like AB test on you know is there some sort of raw CEO skill or raw business leader skill and clearly that's the case with d his family ran a very big company in
Iran and they thought that the children were going to join the family company when the time was right and then they had the slight Interruption of the Revolution that caused them to free flee Iran uh they were lucky to have an uncle that lived in the United States with his wife and they took us into their homes and they re rebuilt their lives um and
so we used to go to France in the summer so at the time no one really knew the changes of foot in Iran so we thought we would just leave go to France for a while while things cooled down calmed down so to speak and they never did calm down and so he goes to the United States and completely starts from scratch with
basically nothing uh they were lucky to come to the states and rebuild their lives and so he had an average Suburban childhood studied Engineering in college and quickly uh uh and quickly through that all the way to the start of a career in New York in finance so he was like an investment banker at Allen and Company uh then he meets Barry Diller
who was a client at the investment bank and he worked for Barry Diller on a couple of investment banking deals and he swears to himself Dar kosari says if I ever have the chance to work with that guy I will and he gave me the chance to work for him and I went to become his deal guy so to speak and so he's a deal guy we love deal guys on this show and
so he moves up in his career with Barry he goes over to uh uh IAC travel which then uh goes into its own entity Expedia he becomes a public company CEO it was a trial by fire and he the early years were pretty rough but after a while I got the rhythm of it Barry was the chairman and controlling shareholder and we built that company in Partnership for
many many years and it was a really good run for me and so I thought that was interesting he also talks about how he became CEO of uber a little bit more we have some details on this just from the reporting at the time but I thought it was good to revisit uh Ben Thompson says one big story is that as I understand it there
was a tense boardroom fight to even select you and DK says yes Travis kenck supported you even though you're like you're not going to be part of this company he was he just trying to get back at Benchmark or did you sit down and talk to him and sell him on your vision and so there's this question obviously Travis was in a rough scenario
he didn't really want to leave why is he backing the new CEO you would think that there'd be crazy tension there but uh DK Dar says I still to this day don't exactly know what went down at the board I believe that there were two other candidates I think it was Meg Whitman and Jeffrey immelt at least based on the news and I think I was the third
candidate that was the least objectionable to both sides and since one side couldn't win over the other they kind of went with me go go figure as far as decisionmaking but it certainly worked out for me and I think hopefully it'll work out for the company as well and so he has experience he actually took over Expedia from a Founder so he was a Wall Street guy then
he was a CEO guy and now he's sort of a manager uh and uh and I think I think that was interesting he says Expedia taught him to be an operator uh I went through a period where I was CEO of the holding company but also running expedia.com and that taught me operations and my background on Wall Street that taught me a lot about
Capital allocation so I think that training really prepared me to come in onto Uber and be the on the ground technical operator that the company needed but also understand governance understand Capital allocation Etc and so I have a huge amount of respect for Travis and the founding team because it wasn't just him who built the company
and they had to take a very aggressive stand as it related to regulations the taxi unions Etc they had to bust through an enormous amount of resistance I do think at some point the company got so big and powerful but it was still an undertaking call it upstart tactics and they weren't able to make that adjustment which is hey we're no longer
an upstart we now have millions of drivers it comes with a responsibility we have to have different kinds of discussions with regulators and I think I brought that maturity in hindsight so I thought that was interesting and I want to get to the yeah and the big the big question always with Uber is what how big would Uber be with Travis yeah
uh still running the company there were some dark years where D had this extreme pressure on him a lot of people didn't believe that he could sort of fill Travis's shoes and there will probably forever be a debate still of how big would Uber be with with with TK running it uh I joke before that that TK would have loved the uh post Dei era uh he he
certainly um he's starting to rear his head he did the all-in podcast he's done little stuff here and there he was spotting spotted in DC during the inauguration uh yeah maybe he'll do a people maybe he'll do a People magazine interview you know we can hope but the reason I wanted to talk about this was because I have been kicking around in my
head is Uber a winner or loser in the AI era and I and I haven't fully come to a conclusion I wanted to hear what Dar had to say and hear him kind of go back and forth on it so we'll go to uh their decision to exit self-driving cars and when they uh and where they go from there so uh Ben Thompson says you're doing
Partnerships with different autonomous driving companies in different cities why don't you give me your highlevel pitch on how you see this market then there's a bunch of specifics that I want to drill down into so DK says yeah definitely listen I don't think it's an if it's a when and the AV is a huge opportunity for the entire Marketplace
these robot drivers are going to be safer I think they have the opportunity at scale uh and it'll take a while to get to scale to reduce the price per ride and increase the Tam of the marketplace trillion plus dollars we think it's an enormous enormous long-term opportunity now a couple things have to happen before that opportunity actually turns
into uh uh into real Financial opportunity uh and so uh he talks about developing the advanced technology groups with atg which was Uber self-driving group uh is it the 2025 era in San Francisco well it could be it could be right but I do think the market has changed and I certainly hope it has first you need a consistently superhuman
safety record it's not good enough for a robot driver to be better than a human driver it's got to be multiple times better than the human driver I think the capacity for society to accept human failure is much more than machine failure I completely agree with that uh there was a fat ality in Phoenix did that change Uber's mind as far as
getting out of the autonomous vehicle Market or were you sort sort of already on that way and that sealed the deal I think we were leaning that way it certainly was a very very important factor in our determination but there were a couple other issues that were more Paramount one was they were in the middle of covid so all of a sudden
Capital was much more dear we went from losing two billion a year to losing four billion a year which is pretty scary my job is to make sure the company survives and this was a significant amount of money burning part of the or operation uh the other issue uh that was a big one was that even though we were developing atg to some extent separately
we treated them as arms length we did have the marketplace separate from atg and the other players with whom we wanted to partner like wayo didn't believe us so they couldn't do a deal with whmo as long as atg was there because they were like hey at some point you're just going to swap wh out with atg uh and so they want to be asset
light Hardware was not Uber's superpower at some point companies have to know superpower there are very few companies in the world who are great at hardware and software Tesla Apple are probably two of the leads it's very difficult to pull off the accident Capital how the business was shaping you either had to make a bet on a vertical or platform we
wanted to make a bet on platform and then just superpower were the four reasons why we didn't why we decided to get out of it and Ben Compares it to Netflix so on autonomous uh cars um there's a question here where does he say how does that differ around the world us federalism uh so there's a question about uh you're obviously the
ones that have variable Supply speaking of the network possibilities before I'm on board with that I should have been a devil's better devil's advocate here but let's Grant you this you are the aggregator sitting at the top of the stack I'm very curious to Think Through what do those layers some of which you just listed look like so let's take a
look at the actual cars is the software stack and the hardware made by the same company or a different company how do you see that playing out and dar says accepting Tesla it will probably be different so if I look at the stack it actually kind of looks like the hotel business I'll expand on that in a second but let's look at hotels for a second
right you've got the brands and the owners well you've got the demand layer which can be Expedia it can be booking.com it could be Marriott then you have the brands themselves whether it's Marriott or an independent and then you have the operator the operator these are the teams management teams sometimes Marriott is an operator of a hotel
sometimes there's actually local management companies as well that's an operator then there's the asset owners these are REITs real in real estate investment trusts uh Marriott doesn't own almost any hotels whatsoever these financial partners own the hotels and then you obviously have the finance here and so uh he thinks that's going to
happen in in in autonomous vehicles you have the network layer that's Uber that's Lyft it could be bolt it could be weo too they have the wherewithal of also going direct then you have the driver to to me that's kind of like the brand which is the Marriott driver or the whmo driver then you have the operator the management company this
could be us or move iio which is a partner of ours actually 15% of our inventory today come from Fleet operators that are on the ground in these cities so we think uh we can move them over to managing AVS very easily ultimately we think of OEM manufacturers most OEM manufacturers are going to have different software providers providing
AV sometimes on an exclusive basis sometimes a non-exclusive basis a GM Tesla are going to develop inh house but many of the other players are going to license it and so he's talking about this this fragmentation and he's applying the the Expedia lens and uh it's just interesting to me because we've seen this massive AI boom and my
question has always been you know we keep hearing oh gp5 is going to be super human or ASI is right around the corner and shouldn't those models be able to drive if they're super human like we keep hearing like they're they're going to be like better than any PhD and it's like well most phds can drive a car and so uh that should be part of the eval I
would think would be uh yeah it can also it can write papers but the same model should be multimodal multimodal enough to drive a car and so there's a question of like who wins that and then how much staying power is there in this aggregation layer certainly Uber has a lot of people that have installed the app they rely on it there's a whole
system payments ratings all this different stuff but if is is Uber vulnerable or are they actually stronger than ever what do you think yeah we we talked about this before I it it seemed like you know hear hearing this interview has like completely changed my opinion on so it's smart for Dar to go and and talk with somebody like Ben
Thompson because it'll actually be a very intellectual conversation more so than a journalist that's just trying to get a headline or yeah potentially dunk uh so I think that uh his point of view of comparing it to the hotel travel industry which he obviously has a ton of experience at from his time at Expedia that starts to make sense I always had
this lens on Uber as okay Whos is dominant Force they're experiencing you know they have uh the technological lead they have the actual traction lead people love the product they have their own app for bookings and so you know we had talked about this on the show before what happens to Uber are they a cable company that just has a lot of existing
you know consumer demand and you know comfort and usage and they just sort of over time like people just still prefer human drivers for certain things and you know maybe they just sort of end up taking a huge discount on their on their multiple because hey this business is going to be dead in you know 30 years completely and it's not really going to
be growing maybe you grow earnings but not Revenue you know who who who knows um but now seeing this I can't imagine a scenario where there's you know different fleets and operators and Technology providers and Uber maintains that sort of um you know routing demand from consumers to to these fleets and and and sort of being that Marketplace
layer so I can totally see a world where where they Thrive around this new trend right they're stripping out potentially uh there's a bunch of costs being you know stripped out when I ride U you know I'm about to get an Uber over to the pmf r die uh cage and it's going to cost me like $60 the majority of that is going
to go towards the driver who yeah just pulling up I open the door I get in you know say a few words and he drops me off in 10 minutes right I can see Uber really benefiting overall and I think this is the right narrative for them to take when they don't have this sort of internal technological lead or or even on the ground traction that a wayo does
yeah I do I do wonder if uh maybe Uber is particularly well positioned for this like slower transition towards AV Fleet rolls because even if the next training run of the AV AI system is just Flawless and superum in every way it's still going to take a long time to just build that many Whos like Jaguars going out of business like where are they getting
these cars from they need to make so many of them and then even once they do that it's hard to maintain that Fleet that can Flex up or down for hey it's New Year's midnight everyone wants to be in an Uber or it's Monday morning and everyone's commuting are people commuting in in Whos now or Ubers because we're in this like postar
ownership Society that's possible and Uber has this ability to with the uh with the demand based pricing The Surge based pricing they can say hey it's New Year's Eve surge pricing is going to be crazy 200 bucks to get to to just hop in your car and go pick up someone even if there's a lot of AVS driving 100% of the AVS could be in use and then
you're going to want human Flex up to actually meet the full demand uh and these are going to be people that just commute and they're just going to say hey I I I want to make some extra money and the prices are so good I'll jump into the market right now and have a little bit more flexibility there so I I could imagine that um that there won't
just be oh yeah one month like all the cars are self-driving immediately just because of how long it takes Buu the Counterpoint is that Whos now Venture backed they did a round where they raised from you know it's Google is majority owner but they did a venture around and so that tells me one I was surprised that Google didn't just try to
own the entire company but yeah that tells me that their Ambitions are to be the next Uber so they may play ball with Uber at some point maybe there's Partnerships that they can do but they're still competing for the same pie John I'm gonna get kicked out of my hotel room um okay and uh uh so we got WRA up the show then well I
was going to say if you want to run through a bit of timeline to to give the people what what they want you're welcome to or we can just pick it up fortunately I'm going to the airport this afternoon I'm flying home we're gonna be back in the studio back in the studio cannot wait yeah I I I think that's a good place to to to to stop it
we're done with the DAR story tomorrow we'll take you through Elizabeth Holmes prison interview we'll take you through a ton of timeline we're going to have uh you know a million posts built up we got a whole stack here folks so uh set your alarm clocks for sometime between 8 AM and 10: because we're not really on a
full schedule yet but we appreciate you dealing with all the Kinks of live streaming we're still figuring this out I think we've had a fantastic couple weeks with it and we're really enjoying it we appreciate you listening to the show wherever you listen so don't forget to leave us five stars on Apple podcast and Spotify leave an ad in your review
uh send us DMS tag Us in posts you want us to react to We will get it on the show and next week we'll have some updates on pmf or die and I got a quick line before they uh you know put me in cuffs and walk me out um but uh sign up for ramp buy you know move your portfolio over to public get an eight sleep run an out of home campaign with
ad Qui and get a bezel watch and then take it to your wander I think those a great that's just a simple recipe for a good Thursday there you go all in a noon on the East Coast it's still 10: a. on the west coast you got plenty of time to get all that done today so go do it thank you Brothers we will see you tomorrow we'll see you tomorrow talk soon talk soon bye