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0:03
>> This went insanely viral.
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The CEO of a company called Astronomer um was caught on the kiss cam hugging one of his employees, the head of HR.
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>> Oh, look at these two. All right, come on. You okay? What?
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>> Either they're having an affair or they're just very shy.
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And I said, >> but Chris, in the video, Chris Martin is like, something's going on here.
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>> Startup CEOs can't even hug their chief people officer at a concert in this country anymore.
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>> It is crazy when the internet descends on a current thing, how viral it is.
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Like just you have to jump in on the current thing.
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>> Well, before we talk more about this, I wanted a quick word from our sponsor.
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Uh, Astro by Astronomer is the orchestration first data ops platform built on Apache Airflow, empowering your team to build, run, and observe data pipelines that just work all from one place.
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>> Do uh do you believe the conspiracy theory? Put on the tinfoil hat. >> Yeah.
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>> Will you steal the tinfoil hat?
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What What is the tinfoil hat explanation here?
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>> Tinfoil hat explanation here is >> all all press is good press >> is that uh Nathan, for you uh this is just part of an elaborate stunt. >> Yes.
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And uh Nathan's plan was have the CEO get caught having an affair with a co-orker to increase brand awareness and get a buzz going.
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This was Charlie Light over on X.
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>> They definitely got a buzz going.
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>> Um and uh yeah, a lot more people know about Astronomer today.
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>> 100% 100% >> but hard to see how it would have been planned.
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>> There's been a bunch of jokes.
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Ryan Peterson said board should give him a raise without this viral moment.
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I'd never know that astronomer is used by enterprise clients to manage Apache air flow and achieve 70% higher uptime than self-managed air flow.
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So, uh, lots going on today.
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Alex Cohen says, "Imagine losing half your life savings at a Coldplay concert." >> Why half?
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Oh, because he's going to get a divorce. Okay.
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I thought it was about him getting a vesting.
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These are adults that made their own decisions. >> Yeah.
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uh and they now have to live with the consequences.
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But um I doubt either of them would have uh would have paid uh half their net worth for uh those tickets. >> Yeah. Rough. Very very bizarre.
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Um I was reminded of what Emily Sunberg told us when she came on the show.
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I was asking her how the Hamptons has changed since the era of social media, the the age of the internet.
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and she said that there are so many Tik Tockers documenting everything that happens in the Hamptons now that you can't even leave a party with someone else's wife.
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That's what she said to us. Do you remember this? >> Yeah.
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>> Um and I'm wondering like what does this actually mean for birth rates?
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What does this mean for like this seems predictable at this point?
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This is the first one that's happened.
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the first one that's happened. seen these other videos >> having debate this morning which is that find my friends is the best thing to happen to marriage >> monogamy potentially ever >> yes >> because if you are in a committed long-term relationship >> and you do not want your partner to have
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visibility into your whereabouts >> you can make a pretty bad argument for privacy >> but it but it but it it ultimately uh it doesn't it's really hard to stand behind and so I think it's potentially a really positive force against social media, dating app culture and things like that. >> Yeah. >> Yeah.
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>> Um, so the answer to technology problems is more technology.
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>> More technology maybe. Yeah.
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It was like this it's this counterveailing force because like what was it like Instagram is like constantly flooding you with like recommended like look at this girl, look at this random person, look at this thing, look at you know like go down this rabbit hole and then and then find my friends is maybe pulling you back.
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But I mean >> he probably told he probably said I have to go for this for work and client >> doesn't fix this issue.
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doesn't really fix this issue.
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The kiss cam does the kiss cam is a lindy technology.
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>> So Lulu had some advice.
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She says uh just given out priceless crisis comms for the uh astronomer team.
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Uh she says don't bother with crisis comms here.
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The CEO will try to get you to protect him, but it's not his company.
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He's a temporary steward.
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>> Your job is to protect the company.
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The CEO is a professional manager who's only been there two years.
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The HR person has been there less than a year.
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Neither is tied to the identity of the company.
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Preserving trust is more important.
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Your business model is to handle sensitive data and your priority is scaling.
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And that's tough to do when multiple known li with multiple known liars on the senior leadership team.
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A better comm's plan than trying to save the situation.
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Andy Byron is on the board, but he's not a founder and doesn't have control.
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The other five members should replace him.
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You can then use the new CEO announcement as a reset and get people to focus again on astronomer's actual business instead of its drama.
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So, uh, we, uh, we did reach reach out, um, to to Andy, uh, this morning to see if he wanted to tell his side of the story.
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Uh, felt felt, uh, like an extremely, uh, you got to be a little bit crazy like Sohom to want to come on after the current thing.
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>> Um, but, uh, in this case, we should have the new CEO on of astronomer when, uh, whenever that comes.
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So, there's a poly market today >> on whether he'll be out by the end of next week.
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Uh odds are currently sitting around 38%.
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Uh I would not be surprised if there's uh somebody new uh stepping into the CEO role at the company.
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Uh this seems to have been um a way way bigger than just the current thing on X.
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It seems to have really uh broken containment.
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So >> is this a datab bricks competitor like Apache Airflow uh is uh it says open source workflow orchestration platform used to programmatically author schedule and monitor data pipelines.
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I wonder if their business is just exploding. DAG directed graph.
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>> So quite the lineup of investors.
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They've got Bane Capital Ventures. >> Let's go.
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>> Just led a series D this year into into astronomer.
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So let's hit the size con >> for that.
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Um it's probably a fantastic business.
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>> Then Insight is also led the series C in March of 2022.
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>> So uh pretty venrock was in the series A as well.
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Uh and then Sierra Ventures uh who I'm not familiar with has led a couple different financing.
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So >> yeah, this this business has been around for a while.
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They're going to get through this.
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I'm sure that uh Bane Capital and Insight and the other uh members of the board are already uh figuring out who they can get to step up and run this company.
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Yeah, there does seem to be some sort of line between like bizarre, salacious, but ultimately orthogonal to the core business uh drama and like actual core business drama like some fundamental flaw in the business plan that's explo exposed FTX or Theronos versus um just this like you know drama that's happening here.
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Uh I I keep I keep laughing about that that that analogy we go back to where if you found out that you know I think what what do I have?
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I have uh what are Pilot Sport tires? Is that Bridgetown?
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>> Michelin >> Michelin Michelin tires.
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So, if the if you told me that the CEO of Michelin was was uh was was was caught at a Coldplay concert with the head of Michelin HR, it would be a tall order for me to go get new tires, right?
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I'd be like, "The tires work pretty well."
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>> That issue doesn't really affect my tires.
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It's more it's more so uh that the uh like the the the difference here is that being caught is different than being on the kiss cam and getting >> 100 million views today.
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>> U my post alone has a million views >> and I posted it a few hours ago.
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>> But do you think do you think it's it's it's going to actually affect like revenue?
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>> I don't think it I don't think it will affect the business at all necessarily.
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Maybe a little turbulence because of needing to find new management and having >> certainly stressful weeks turnover on the uh on the on the exec team is going to be a challenge but ultimately their customers are not going to you know say hey we're we're turning
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off you know we want out of our contract if if the product is good maybe some people use it as an excuse >> um but yeah I don't see this affecting the business uh but then again it's like if you're paying capital or insight do you really want. Um, do you want a a He
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Um, do you want a a He came in two years ago.
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Sounds like he's been executing.
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The team has been executing well.
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If they got from series C to D over the last couple years, means they're they're uh probably growing nicely.
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>> Um, but and I don't necessarily think that that this is the end of this guy either of their careers. >> Yeah.
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>> It just should be the end at this company. >> Yeah.
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>> Because if because if you're the board and you and you tolerate this, that just means >> Yeah.
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We we tolerate uh people of you know uh poor moral character. >> Sure. Yeah.
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Um also interesting I mean this company's like we've never even heard of it and it's on an absolute terror series D at this point.
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Um and does this not sound like something that should be in the AWS dashboard.
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Like we were talking about browser base yesterday getting like quote unquote copied and there's just something about these like point solutions that just are you know nailing a specific problem.
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You know in this case it's like deployment deployment and management of an open- source project.
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It's literally anyone can just run Apache Airflow.
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They just help you do it better.
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And that's kind of what uh data bricks did with Spark.
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Like Spark is an open source project.
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Now they now they for these data pipelines now they help companies actually install, manage, run them and then put a bunch of software on top of it.
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And data bricks has been massively successful.
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And so it's it's interesting to bring it back to browser race because um it just kind of reveals that like these companies can be kind of grinding in silence for a while.
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Just I guess the note for Paul Klein is probably stay out, avoid being the current thing like um because the the the failure mode could could be less technical and more interpersonal.
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>> Yeah, >> I don't know. >> True.
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Anyway, >> uh, work, retire, die.
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May have been inspired by my post.
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Or it could have been totally random, but he said, "Married CEOs can't even hug and romantically sway with their married head of HR during a gold concert anymore because of woke." >> Oh, because of woke. Okay. Yes. Yes. Yes.
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>> Uh, are there is there anything else to cover on the uh >> Sophie Netcap girl says it's so hard to get noticed as an a AI company these days?
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The astronomer CEO had to cheat on his wife for marketing.
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Yeah, >> it's dark out there.
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>> I don't think I'm not believing the tin foil hat one on this one.
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>> If you've been living under a rock, Grock launched a NSFW anime mode to the app, audio and visual.
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>> And uh I I believe it's part of their it's part of the paid tier $300 a month, something like that.
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There's a report in um Wired about this.
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I wrote about XAI from Kylie Robinson who's been on the show.
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who's been on the show. I wrote about Xi's new creepy waifu bot and its even weirder companion Rudy which has a bad version that told me all skull f your deed blah blah blah very vulgar not not familyfriendly not approved for this show um when I asked what it thought of
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Musk it referred to him as Lord Elon and said he's a galaxy brand egoomaniac uh I can't even read this it's all bad words but anyway um I am I've been thinking about this and I and I think that there is an interesting steelman argument that we should So, in general, I think that XAI's Gro strategies a little bit all over the place. So, um they're trying to be super
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So, um they're trying to be super quantitative and benchmark build. I'm serious.
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>> They're being they are they're they're super benchmark build.
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They're like, "Look, Arc AGI, the insiders inside the most insider AI test you can possibly have."
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Yeah, >> we have the best score on it. We're on LM Marina.
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We're, you know, we're we're we're, you know, maxing out all these different benchmarks. >> That's right.
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>> So, it's like and it's like it's this incredible engineering effort to build the 100K cluster.
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Like, they're clearly hiring great talent.
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I know J keeps laughing seeing the >> I'm just I'm not going to look at you.
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>> I'm not going to look at you. That'll help me.
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>> So, they're very they're very benchmark build.
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Um, but then they're also trying to do this like sassy and anti-woke thing in the in the uh in the post replies and like the fine-tuning on top of that was so crazy that it spawned like the Mecca Hitler thing.
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So, it's like they're they're they're kind of like all over the place.
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One is like super quantitative, super focused, super benchmark pill like just clearly kind of edge lords internally. >> Yeah.
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Well, it's like it's almost like two different extensions of the product, right?
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Two different teams building towards two different goals.
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One is just like the most beautiful like solve physics, solve math, like create the the create like a great AI product. Yeah.
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The pursuit of truth, all that like facts and usefulness and tools.
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And then on the other side, it's like it's like fight this culture war thing, which is like a very different battle to be fighting.
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And then and then we saw this last week after the launch, there was there was a new uh there was news that everyone was memeing because it seemed like it was very uh very opposed.
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So, one was that Grock had signed a contract with the Department of Defense that's like as serious as you can get in AI.
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It's like OpenAI has one of those contracts, I believe.
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Anthropic, Palunteer, um, and then Grock, which is like this from the outside like seems like a chaotic like pro product, >> something that was born on something like 4chan. >> Yes, exactly.
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All of a sudden, like the DoD is going to be abs adopting that.
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Like, what does that mean?
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And then simultaneously, there's like they're getting into the romantic companion market with this anime theme.
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And so AI companions, I think the general mood in tech is that it is a very dark thing.
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Like people get addicted to them. They become less social.
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They stop interacting with real people. They don't have kids.
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And then the population collapses and humanity ends.
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Like that's the bad ending to the uh to the AI companion narrative.
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Now, and to be just to give you some context, uh there's a variety of companies that do this today, varying levels of uh vulgarity. >> Yep.
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>> Uh replica, we've actually talked to the founder and she had a bunch of nuance around it.
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So, I I don't >> just for context, so replica >> has over 225,000 reviews in the app store, friend.
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So, they were very early to this.
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Character AI was also early to the AI companion space.
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has tens of millions of of users.
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It's it's one of the biggest websites in the world. Yep. >> Still.
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>> Um and uh so anyways, there's a variety of players in the game.
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But what's interesting about Grock is when you look through the other labs from Llama to uh Google or or sorry Meta Super Intelligence to Google to anthropic to GPT, OpenAI, etc. Nobody has been willing.
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Everybody knows that this is a use case that there's an obscene amount of demand for, but no one else uh had the guts to go and do it, at least a player that had billions and billions of of of dollars uh to deploy against a strategy like this.
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strategy like this. I believe at this point every other company that's playing in the companion space is not should not be considered really like a mega scale research lab in the sense that they're not raising billions of dollars anymore because character went through that zombie aqua hire that probably cut off the capital cannon such that even if the
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remain co employees the ghost ship I don't want to call I mean it's kind of rude to call it a ghost ship because it seems like the employees at character AI are you know running But it doesn't seem like the new CEO of Character AI will be able to go out and be like, I'm raising$5 billion to build a 1 gawatt cluster and I'm going to buy 100K GPUs to train my own model. Like
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Like Character will probably just run it profitably. Yes.
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And make a great user experience. >> Yeah.
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And so you'll always have this kind of >> this kind of uh back and forth with like your API provider because the API providers, the Foundation Labs, they care about their brand.
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they care about how they're perceived in as being ethical or moral and so they might not want to offer that even at the API level.
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So um what's interesting and this and this is where like the steel man comes in.
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So the the worst possible outcome for AI companions very dark people you know it basically reduces the the coupling rate but we've already seen a decline in uh in birth rates.
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So it's not so it's unclear if it's like this is a new thing that will accelerate it. This is status quo.
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Anyway, um I think I think that's kind of like where >> the concern would be like pornography has existed as long as the internet >> online dating is another thing people are skeptical about as long as the internet has existed.
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Uh I'm sure that is led to some not so great outcomes.
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Uh the concern is that companions that are real time and adaptive and really mimicking a human would uh create even worse behavior than NSFW content.
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>> And I think that's a reasonable point, although it hasn't been borne out in like data or any sort of like research at this point, but it feels intuitively reasonable.
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But >> let's actually think more about the market because in order to scale your lab, we know that you can't do it as a nonprofit.
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We know that it's not just a $und00 million donation one time, bunch of geniuses working.
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You come up with the elegant algorithm for super intelligence. You need scale. You need capital. You need talent.
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And ultimately, you need a capitalist flywheel.
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A corporate a for-profit corporation that's increasingly getting more users, putting that into user adoption to get more users, to get more data, to train the model, to refine the product and save the world.
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>> And yes, and then yeah, this is where I'm going.
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and then and then also raise more money.
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And then if you're going to raise money at a certain level, there has to be a financial like model that ma maths out.
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Now, they can be kind of funky like 1% of AGI, but there are still on the margin many investors in foundation labs that are underwriting, you know, >> well, I was asking the question underwriting these labs at a multiple of earnings. >> Well, yeah.
18:58
Where where is Grock's revenue going to come from?
18:59
Chad GBT has a great consumer mo, you know, consumer business.
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I would say codegen business.
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>> Yeah, I would say OpenAI has dominated and and owns knowledge retrieval.
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Anthropic owns codegen and they both have kind of flywheels that are accelerating and now they're obviously fighting it out.
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Anthropic would love the Claude app to become really popular and uh Chat GBT would love to have uh their cursor competitor or their Claude code competitor Codeex really really take off. Maybe that'll happen. They're duking it out.
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Meta is building on top of the world's biggest social networks in the world.
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They have three of them really.
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Uh Facebook, Instagram, and WhatsApp.
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So, they have a ton of data that's accumulating and firing back.
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And they have tons and tons of cash cash flow coming in from that.
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So, they can justify new capex internally without raising.
19:47
>> And Meta is one of the they had launched AI companions, but it was like talk to Dwayne Rock the Johnson or Dwayne Rock Johnson.
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>> The Dwayne Dwayne Rock the Johnson.
20:00
Uh Dwayne the Rock Johnson.
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Uh and I don't and I think that product flopped back in the day.
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I remember because Dra at Deli saw the launch.
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He was like, "Dang it, that's annoying."
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And >> at the same time, I saw some screenshot that showed that there was an Instagram account that was owned by like Meta AI that was just cow and it had like millions of interactions.
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So like maybe people want to talk to just a cow more than they want to talk to.
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I think that's very possible.
20:24
So, so but but yes, but at the same time, I think that the meta super intelligence team is aware of the issue that will come from the inevitable New York Times profile on like if it's truly like anime waifu romantic companions, that's a step further than Cow or The Rock, right?
20:40
And there actually was, remember the John Cena thing we covered?
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>> How someone had jailbroken the John Cena Instagram AI and made it like romantic. Remember this? Yeah.
20:52
So, like I think Meta is like is like we're fine seeding that territory.
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Like like we don't need to play in that.
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Just like they don't need to show NSFW content on Instagram.
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They're like we're fine losing the market seeding that market to uh to Only Fans on a on an ethics basis.
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We think that it makes our company more valuable overall.
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It makes it more hospitable to our advertiser community.
21:17
So the reason that just to just to kind of bring us back to why this has been uh such a hot topic is that Elon Musk has has posted many many times about the underpopulation crisis, the birth rate crisis.
21:33
>> Uh he said uh Shiel highlighted a post from 2022, a collapsing birth rate is the biggest danger civilization faces by far.
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So the steelman is that Elon is doing something about it. >> Yes. >> Right.
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having a lot of children in Oh, but but this the real steelman about Grock romantic companions is that how will they actually increase the amount of humans in the world?
21:55
How will they reverse the population crisis?
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That's the hardest argument to make and that's why I'm wearing the steel helmet because it's very hard argument to make, but I have one.
22:02
So, >> and Shield, for the record, is saying I think Rock Companions is probably accelerating population collapse. >> Yes.
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So, as the Steelman, I'm going to be debating against Shield.
22:11
So >> get ready, get your straw man hat on.
22:16
>> Last of the labs, Google.
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They're building on top of the biggest search engine and they also have YouTube and Google, you also know, is not going to go into uh romantic companions.
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So uh uh and and uh so XAI needs this user flywheel and every other lab has self- selected out of competing in the in the companion space.
22:32
We went through some of these.
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Uh Google famously skipped the character AI product in favor of the team in their zombie aqua hire, Paul Graham.
22:40
And so uh this is all about in my mind as the steel man counterpositioning.
22:46
So, you remember Abby Schiffman was releasing the uh a new hardware device, an AI friend, right?
22:55
And he was everyone was saying you're going to get steamrolled by Apple.
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Like if you try and come out with a comp with a product that is in fact a new device that fits within the Apple ecosystem and it's leveraging the uh the Apple branding world, you will just immediately get cooked by Apple because they will just eventually launch a better version and they'll have better supply chain, better pricing, all the different things.
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You'll have the full integration.
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Like you you can't go after them that way.
23:21
And so Paul Graham replied to Avi Shiffman and said uh and said here's how to compete with Apple in hardware.
23:29
You have to build something that contradicts their fundamental assumptions.
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For example, imagine if you built a device whose appeal was that you could customize the case to make it as tacky as you wanted.
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Apple would hate to follow you there.
23:45
So, no other lab wants to follow XAI into the romantic companion market for brand and ethics reasons, but there are users who will pay real money and share real training data for romantic companions as a product.
23:57
And so if you want to sell the most number of Grock subscriptions, at some point you will be uh and so this is where we get back to how it affects the birth rate.
24:05
So if you want to sell the most number of Grock subscriptions, >> at some point declining birth rates are going to be a problem for you're going to hurt your business.
24:14
And so you're going to have to think about >> and right now for context, >> uh Grock is blowing up in Japan.
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It is the number one free app on the Japanese app store.
24:24
It is above Chad GPT and all the different >> local products that I uh can't read the names of.
24:31
So, it is dominating in Japan.
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It's a hit in Japan already.
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And it's not um >> it to me it's not hard to imagine >> this product finding a million people in the world that will pay the ultra premium plan. >> Yes.
24:47
>> And that is billions of dollars of revenue. >> Yes.
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And so at some point if Grock gets big enough and the population is declining and it's and Elon looks at what the Grock product is doing >> saying what have I done?
25:00
>> He will say I need to pull people back from the abyss.
25:03
I need to actually use my super intelligence to increase the birth rate. How will you do that?
25:08
Well, we've talked about this before.
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Someone in some woman is talking to a male companion AI and some man is talking to a female AI companion and they're very similar and Grock says, "Why don't you two meet for coffee in the real world?"
25:26
And so they actually meet and it basically turns into the best dating site that actually gets people to get off.
25:31
It's a stretch and it's why I'm wearing the Steelman helmet, but I think it is possible and I think the economic incentives might be there.
25:39
I think this is the same reason why you don't want to overoptimize a social network for slop and brain rot because people will churn.
25:46
Like you might be able to keep the time on site going for by showing like horrific videos. You can't look away.
25:53
Oh, it's so controversial. You're miserable.
25:54
And you might be able to keep someone on and say they were going to use the app for 15 minutes.
26:00
You keep them on for an hour.
26:01
But then they're like, you know, I need one of those apps to monitor my screen time. I need to uninstall it.
26:05
maybe I'll and then if they do that they can actually quit it and if they actually quit then you lose them as a user forever.
26:12
So there's this balancing act between between giving people enough brain rot to keep them on the site as much as possible and not losing them forever.
26:19
And the same thing happens in romantic companions like you want to give them the companion that like like they pay for and they're happy with but not so you don't want to make the companion so good that they don't reproduce and then the second the next generation doesn't exist for you to sell them subscriptions.
26:33
Fortunately, John, businesses tend to think in quarters and uh yearly. >> It's private company. Elon owns a lot of it.
26:43
>> You think he's thinking about the next generation?
26:45
>> That is the steel man.
26:46
>> No, I mean that the the I can I believe this will be by far the largest revenue line item for XAI within if it's not already.
26:57
I mean already might be a stretch.
26:59
They have some big contracts, but >> uh this is a $300 a month plan if you want, you know, unlimited access to your uh Grock companion.
27:10
>> And Elon was demonstrating to it, it can even help you study for school.
27:12
So, uh imagine a companion that's not just a maybe a romantic friend, but also can help you pass your algebra test.
27:23
>> Well, that concludes the steelman segment.
27:26
>> The steelman segment >> and I'm back to the normal world. Great, great work.
27:29
Uh, you know, keeping a keeping a straight face and really really getting out your um >> the steel pieces.
27:35
I think this is I think it's valuable to to to interrogate this stuff.
27:39
I think it's interesting. >> Yeah.
27:41
>> Yeah. The other the only the only other thing that I would add is um the unique uh thing about this launch is that >> there has never you know clearly many people around the world spend money on only fans or other uh NSFW content and but Elon has never created a product for
28:02
those type of people and so I think the sort of latent demand that would would feel maybe above >> you uh paying for for Only Fans or something like that likely would would give themselves like the pass on something like this to be like, "Oh, I'm just it's just one of the Elon companies. I'll sign up for it. I I I'll sign up for it. I I trust I trust Elon. I have a Tesla."
28:23
And then suddenly there's like an entire new market of people that are willing to um you know, put their credit card down and pay for something that previously >> they wouldn't for a variety of reasons. So, >> totally. Yep.
28:37
>> This will be one to follow.
28:37
How's it doing in the US app store? >> Oh no.
28:40
I mean it's all my most of my Grock interactions are within X.
28:44
My primary use case is still I see a post and then I go and I uh and I click on the uh little Grock button and it explains exactly.
28:57
>> So it's the number two app.
28:57
It's still behind chat GPT >> in productivity. >> In productivity.
29:02
>> I'm surprised it's still in this funny productivity.
29:05
Uh I'm s I'm actually surprised it is in productivity because uh X is famously in news, not in social networking.
29:13
And so X will typically be at the top of the news subcategory because it would be much harder to compete in the product in the social networking category against Instagram and Tik Tok and so better to be a big fish in a small pond in some in some way.
29:30
Cognition has signed a definitive agreement to acquire Windsurf.
29:33
The acquisition includes Windsurf's IP, product, trademark, and brand, and strong business.
29:39
And above all, it includes Windsurf's world-class people. No way.
29:44
We've privileged to welcome to our team.
29:46
>> The whole team that's amazing.
29:47
>> We are also honoring their talent and hard work in in building Windsurf into the great business it is today.
29:51
This transaction is structured that 100% of Windsurf employees will participate financially.
29:57
They will also have all their vesting cliffs waved. >> What?
30:01
>> And will receive fully accelerated vesting for their work to date.
30:05
>> At Cognition, we have focused on developing robust and secure autonomous agents.
30:08
While Windsurf has pioneered the Igentic IDE, Devon and Windsurf are a powerful combination for the developers we serve.
30:14
Working side by side will soon enable you to plan tasks in an IDE powered by Devon's codebase understanding.
30:20
Delegate chunks of work to multiple Devons in parallel.
30:21
Complete the highest leverage parts yourself with the help of autocomplete and stitch it all back together in the same IDE.
30:29
Cognition and Windsur are united behind a shared vision.
30:32
>> It makes so much sense >> for the future of software engineering.
30:34
And we've never and there's never been a better time to build.
30:36
So, uh, there's a video up between, uh, Scott, uh, Woo and Steve over at Windsurf, and we're hoping to have them on the show later today if we can coordinate together.
30:46
>> That would be awesome. Yeah, that'd be great. Cool.
30:48
>> Um, so anyways, this, uh, apparently Scott got to work like this Friday and not only negotiated uh, I mean to to do this kind of deal >> during all the chaos of this other deal that's happening.
30:59
Uh, and then >> put together a deal that delivers a a win for every member of the team.
31:04
And the other thing that's interesting here is, you know, uh, historically, Cognition had, um, I wouldn't say overinvested in engineering, but they were heavily heavily skewed towards technical talent. Sure.
31:17
>> And the people that got left behind at Windsurf were sales, enterprise, account management, GTM, right?
31:23
And I over the weekend, I'd heard other teams that were kind of circling, wanting to hoover up their uh, their GTM team.
31:29
But the fact that they were able to get this deal done in uh just just a just a couple days is fantastic. >> This is incredible. >> So, >> wow.
31:38
What a what what a what a fantastic end to the story. Um >> or beginning. New beginning. >> Yeah, new beginning. New beginning for sure.
31:44
Um I I don't even know if we should go through the full the full history here.
31:47
Um we can kind of go through whatever.
31:49
Um but I mean you kind of know the end of the story, but I think we should take you through some of the debate that uh that rose up.
31:54
And there's still the question of like even though it feels like everyone got the good ending, there still is this question about like we're in this weird zombie structure era where you can be left in limbo.
32:07
What is the cost of that?
32:09
What is the what is the risk to that?
32:09
Do we need new employee contracts?
32:11
Do we need new uh understanding of how of expectations?
32:19
Um because it's one thing for a CEO to say, "Hey, I'm building I'm trying to build something really cool in Silicon Valley.
32:29
I'm going to build a tech product and I want you to join me as a salesperson, operations person, an engineer, whatever.
32:34
And we're going to go on this journey.
32:35
We're going to go really hard and we're we want you we all want to be aligned with like thinking long term."
32:40
So, we're doing a four-year vest with a one-year cleft, pretty standard.
32:42
And the the expectation at least the history has been like like you will have clarity throughout that process.
32:49
And now that we're in this weird weird regime like you're getting like okay the last the end the end of this the last chapter of the book could be really dramatic but we got the good ending and the question is like has there ever been if this this deal kind of exposed the risk of like the bad ending uh and that it is possible that that could happen. It didn't in this case.
33:10
Um, but the big question I think people are debating is like how much of this is is due to the chaos?
33:18
How much of the chaos is a function of FTC and and the antitrust regime?
33:23
And Ben Thompson talked about that a lot versus just the differences in communication styles of different MAG7 companies. That's interesting.
33:30
The experience of CEOs like you look at the way Scale AI handled it.
33:35
Alex Wang is he's a generational communicator. He's been out the Ovon. Yeah.
33:41
>> Uh different dynamics having stuck lead and acquisition >> totally >> having having that sort of founder mode confidence right full fully in control of the company >> and you know it it it you know everything you know we've heard from
33:56
various parties says that uh Verun was muzzled but again you like everybody involved should have been saying how do we avoid making it so that hundreds of people don't feel like they've been you know completely screwed even for 24 hours. >> Yeah. And the eving >> Yeah.
34:11
And the eving overwhelming like like the pe you were at first people were me people were messaging me Friday and Saturday morning saying the wind surf employees got screwed and I was messaging them back and being like you're misreading this.
34:25
This is the standard deal that they've always done.
34:28
>> And then the overwhelming amount of more information from highquality sources saying no they're screwed. >> Yeah.
34:36
>> It it just flipped and I said okay maybe maybe they are right.
34:38
And the key so so now we don't we had this whole other kind of >> tangent that we were going to go down which was like what happens to the ghost ship, right?
34:46
It could potentially be this like lord of the flies dynamic where there's now hundreds of people that >> are still working on wind surf but the competitive pressure is insane.
34:54
You're losing a lot of your top talent and your founders.
34:57
Is are you going to be able to keep momentum or is churn going to be crazy? Totally.
35:01
And uh and then do people try to stay a long time so they can get like a distribution or do some people leave because they want to pursue other opportunities?
35:11
>> And now we don't have to debate that because wind turf is home with Cognition and uh and Scott Woo >> and you know the team about that. >> What's that?
35:20
>> Everyone all those employees who are now onboarding to Cognition >> I know exactly what you're going to say.
35:24
>> They're getting ramp cards, baby.
35:24
Cuz Scott >> time is money. Save both. >> Save both.
35:28
easy to use corporate cards, bill pay, accounting, and a whole lot more all in one place. Go to ramp. com to get started.
35:34
Um, uh, and you know, Cognition has a huge lineage with the RAMP team.
35:39
And so, uh, we're very, we're very excited for Cognition, we're very excited for RAM, and we're excited for all the Windsor employees who landed.
35:46
Um, well, this is funny because there's so much that we should that we could go through.
35:50
I think we should go through a little bit of the timeline of like what actually happened, how people, how the debate evolved because it is very interesting.
35:57
So the the the context of like why is windf selling at all and I think this big question the first one is let's just say hypothetically you owned 100% of windsurf last week and let's say a completely financial investor comes to you not is there's no even like big tech dynamics it's like Warren Buffett he calls you up and says I want to buy 100% of your stake >> he's like these agentic idees I need it I need it I I have to have one. >> I have to have one. Yeah.
36:28
Uh >> I I want to buy I want to buy a great business at a fair price. Let's do a deal. >> Yeah. Yeah.
36:35
So that's the question is is like if you were if you owned 100% of Windsurf Jordy, would you sell at $2. 4 billion last week?
36:42
And I think for most people the answer has increasingly become yes.
36:48
And there's a few reasons.
36:50
So the last the last big post that Verun the CEO of uh of Windinsurf had interacted with on X was this post by Technium who says Windsurf wrecked and it's a quote of Nick saying uh breaking anthropic just pulled the rug on Windsurf Windsurf will be cut off direct uh will be cut off from direct API access to Claude in less than 5 days. 3. 5 sonnet 3. 7 sonnet 3.
37:13
3.5 sonnet 3.7 sonnet 3.7 sonnet thinking wi windsurf never even got direct access to claude 4 anyways and so this has been the question of you know how much like if you are in this like rapper business I think it's I think it's a great product I think it's I
37:28
think it's great I think I'm I'm actually very excited about about rappers but there is this there is this anti there is this competitive dynamic with the underlying foundation lab and anthropic does seem to be more aggressive about where the value acrruel will happen. So, you know, if it's if
37:42
So, you know, if it's if it's 50/50 by default, all of a sudden, Cursor and Windsurf start pulling 80% of the gross margin dollars from what they're adding on top.
37:52
Well, then the underlying foundation model is going to say like, hey, like, let's pull this back.
37:58
Let's make sure some of those credit cards live in our stripe account. Yeah.
38:01
>> And you're not just paying us big API fees.
38:03
Uh, and so there's a big debate about this.
38:04
Uh, Kurser had to go through it.
38:06
Uh, Windsurf had to go through it.
38:08
and Verun like responded to this and had and had a good analysis and was was basically making the case that like we can get through this. And I think that's true.
38:15
I I I I think there's totally a world where it gets true.
38:17
But to your you you were saying earlier like it is an extremely competitive market.
38:21
They were not the number one product in the market.
38:26
That's cursor and by most accounts.
38:28
Um and so and so they were in a you know not a super tough spot.
38:31
It's a great growing market.
38:33
It's it's you know it's developer tooling.
38:35
how many how many you know database software enterprise SAS products are on the public market there's like there's like like the seventh one is probably worth 10 billion right so um it's not like they couldn't have gone higher than 2. 4 but 2.
38:50
4 4 billion feels like a great deal for a company for a product that's one years old.
38:53
One year old for a company that's four years old and a hyper competitive space with >> a product that launched >> less than a year ago and your direct suppliers are trying to come for you and and getting aggressive and so uh this went out in hacker news.
39:08
>> Not sure how much you should read into it but uh they said web surf is absolutely dead in the water and while cursor hangs on for now all value is going to go back to the models says Jake.
39:16
uh in my opinion other than the Microsoft IP issue.
39:18
I think the biggest thing that has shifted since this acquisition was first in the works is cloud code has absolutely exploded.
39:25
Forking an IDE and all the expense that comes with that feels like a waste of effort considering the number of free/opensource CLI agentic tools that are out there.
39:33
Let's review the current state of things.
39:35
Terminal CLI agents are several orders of magnitude less money to develop than forking an entire IDE.
39:41
Uh K cloud code is dead simple to on board.
39:43
Use whatever ID you're using now with a simple extension for some UX improvements.
39:47
Anthropic is free to aggressively undercut their own API margins and middlemen like cursor in exchange for more predictable subscription revenue and training data access. >> Yeah.
39:56
So, so, so the other context here is this year Anthropic, you know, Windsurf went from zero to somewhere around a $40 million run rate.
40:01
Anthropic this year has gone from the beginning of the year to 1 to4 billion. So great.
40:08
>> And so, uh, they, you know, however you want to say, they've been running running away with the market.
40:14
Um, and and Cursor's, you know, revenue is is equally incredible, although from starting from a smaller base.
40:21
>> And so, this was some of the like, okay, things might be getting tougher from here on out.
40:25
Um, I don't know that I fully agree with that, but uh, but people were saying this.
40:29
Um, and then, uh, we covered this last week, but, uh, the Meter team did these, uh, evaluations where they ran a randomized control trial to see how much AI coding tools speed up open source developers.
40:43
And what they found was that developers said that they expected co uh, products like cursor and windsurf to improve them by 20%.
40:51
But they were actually 19% slower.
40:54
And so you have this weird dynamic where okay, maybe the future is like so I I don't know how real this is.
41:02
I think that we could totally be in a world where curs is incredibly valuable for less experienced developers working on more vibe coding projects than like pushing the pushing the frontier of really advanced projects.
41:13
And then also just the next the next version of these tools could be really cool and and solve this problem.
41:18
But there was some worry that maybe uh developers were going to take a hard look at their AI coding IDE stack and say, "Wait a minute, like I'm kind of using this too much.
41:29
I'm leaning on it too much and maybe I should just like go back to the old way."
41:33
So there were some there there were some there were some reasonable uh points around like maybe now is a good time to exit, right?
41:44
Um then so so after so after that the question becomes when you sell you have the board has a fiduciary duty to shareholders. >> Yeah.
41:56
>> And the big question that I think everyone was actually debating was this concept of was the windsurf deal with Google a paro improvement for all stakeholders which means in a paro improvement basically you can think of like the baseline is how everyone's doing.
42:11
in a parade of improvement.
42:11
Some people might go up a lot, other people might go up a little in in value, but no one is going down.
42:17
Not a single person is going down.
42:19
This is the goal of like all political legislation.
42:21
You want to create things that are not just positive sum in the sense that like, you know, I tripled my net worth and you only lost half. Like that sucks, right? You don't want that.
42:30
Per improvement is like, I tripled, you doubled.
42:32
Yeah, I won, but we both won and we're both happy, right?
42:36
And so in in a in a in a good acquisition deal, everyone is par it's a paro improvement.
42:41
Everyone gets more than they than they, you know, had before. Everyone gets paid out.
42:45
Then the flip side is something called Caldor Hicks improvement.
42:50
And a Caldor Hicks improvement is where some people go up, other people go down, but when you sum them, it's still a net improvement.
42:57
So very few people were saying like you know the VCs even when you add up the VCs and the employees and the founders it's a net loss for everyone.
43:07
Very few people were making that argument to be clear the employees got hosed everybody would have done better on an open everybody would have done better on an open AI acquisition >> and so when the 2.
43:18
4 4 billion number came out >> in uh on the evening of uh of Friday. Mhm.
43:26
>> It seemed like, okay, not as great.
43:26
It's still everybody's going to do well.
43:28
And then 24 hour 24 hours later it was, oh wow, like this might have been structured in a very >> funky way that um you know people were >> I won't I won't report the number, but people were um messaging me >> information on how much uh Verun personally made and that was still in the context.
43:48
>> I mean, you can just do the rough math.
43:50
Founder stake, couple rounds of dilution.
43:52
How much do you think he made? Right?
43:53
Like it's not rocket science to figure this or to at least ballpark it to the right order of magnitude, right?
43:58
Um but you build a great product that gets some traction that solves some problems and you you build a great team and big tech wants you like you you know I I I'm I'm not upset about it.
44:09
>> Um but the question was like what's fair for the employees?
44:12
What's fair for you know all the different stakeholders?
44:15
And so uh a lot of people kept coming out with really interesting stories.
44:19
So, William Allen here has one uh about Scott Bellski and Behance going to Adobe we should read through.
44:26
So, William Allen says uh I don't think he's ever told the story, but it's worth telling.
44:32
When we were selling Behance to Adobe many years ago, Scott Bellski made a spreadsheet of every employee, 32 of us at the time, and personally negotiated each person's title, salary, and incentive structure and made that part of the overall deal terms. I'm going to choke up. It's so virtuous.
44:48
Uh I heard the phone calls where he went to bat for each individual.
44:54
Uh he he he not only he not only didn't have to do this, but it actually complicated some of the other factors in the deal.
45:01
Of course, uh it changed the trajectory of so many people's lives, including my own.
45:05
Two years later, 100% of that original team was still at Adobe.
45:09
Even today, a dozen years later, many of the core members are still there building.
45:13
I was inspired by it then and I'm inspired by it now.
45:18
And so, um, I think that was a good a good case study in like the founders do have a lot of hard power in the sense of board control and and actual voting shares to almost every founder can veto a deal, which gives them leverage to build that spreadsheet and actually decide who gets what.
45:37
And then on the flip side, they have a ton of soft power because you can't really do a hostile takeover of a private VC back company where the founder has board seats and stuff. It just doesn't work.
45:48
And so, uh, it's incumbent upon the CEO to actually take that step.
45:53
And that was the fear that Verun didn't do that he didn't go far enough. >> Yeah.
45:58
There was another there was another example from Par Ilasukar company.
46:02
So, one of his former employees says, "We got news.
46:04
Our startup was being acquired 5 days before my one-year cliff.
46:08
I thought I'd get nothing.
46:08
Our shares were accelerated to 100%.
46:10
It was a life-changing event, and I'll always appreciate that our founders did the right thing for us at Parse."
46:16
And said, uh, Ilia Ilia quoted it and said, "100% acceleration for everyone but the active founders.
46:23
We went backwards and revested our vested. Glad someone remembers."
46:25
So, >> um, very heartwarming. >> Yeah.
46:31
And so people were people were debating um you know did like was the core team taken care of?
46:38
It feel it felt very rough.
46:40
But then pretty quickly it came out that um so we were going back and forth on this on Saturday.
46:45
Um and the and and the core the core debate like your post went pretty viral.
46:51
You got two million views, 4,000 likes.
46:53
Um and it and it definitely struck a chord.
46:59
Um folks were uh debating this one line uh from what I've heard the employees are getting screwed regardless of their vesting status and it's like >> and that was because people had people were on a four-year vest >> but they hadn't hit their cliff even if they had joined 11 months ago. >> Yes.
47:16
>> Yes. and had again they had worked on the product up until launched the product scaled it >> thought that they were getting this three you know massive outcome in which again they some people would have not been able I'm I'm sure OpenAI wouldn't have kept everyone right totally I'm sure that they would have made a bunch
47:34
of people effectively >> there's always layoffs post merger acquisitions like that happens all the time that's not that's not a crazy thing so um certainly reasonable I mean the other question is just like you know if you worked at this company and you were like, I like working at this company. I
47:47
I I really would love to work at Google and you don't get carried along.
47:51
Like that is getting screwed.
47:52
Like not getting a job at Google in some ways is getting screwed.
47:55
Um even just the ambiguity over the weekend is a little bit of like a screwing.
47:58
And so I still will defend your initial characterization.
48:03
Um but I thought that there were things that could potentially shift the narrative.
48:08
And so I quote tweeted your yours uh with the Steelman argument which is one >> and we tried to get a a a knight in shining armor suit for we we were getting the steelman suit ready but then we knew we didn't have to >> we will the production team will get the steelman night of suit of armor eventually.
48:26
We we we need to order from a prop shop.
48:28
Uh we take >> it's on the way. We're working on it. >> Yeah. Okay.
48:32
We're going and and just make sure it's great when it comes.
48:34
Um and so uh I had three points.
48:36
One was that uh employees who haven't reached a one-year vesting cliff don't have that strong of a claim around I built this with sweat and need a liquidity event and we don't know the 10 years of all the left behind employees.
48:47
So there is an argument that like if you joined 3 months before it was already like really big like should you really get accelerated four years and like >> oh and I and I never would have made that argument but it was the fact that you could have worked there for 11 months and gotten zero and it's like no you're getting a ride on the ghost ship now ride the ghost ship into the sunset.
49:08
And that was in the context of of the founders.
49:09
And this is why people in in group chats and DMs were getting so angry because it was in the context of, you know, somebody that worked for you for 11 months was potentially going to get zero.
49:19
Now, that's not not the case now, but um and then and then you're walking away effectively uh defecting >> and and taking a multiund million payday.
49:30
>> It it is a weird dynamic with these startups because clearly I I don't know exactly what Windinsurf's headcount was.
49:36
I think everyone was saying it was around 500 at the time of this deal.
49:37
And a year ago, pre- pivot, what do you think their headcount was?
49:44
Couldn't have been more than 50, right? >> Definitely not.
49:48
>> So, you're looking at a 10x increase in in employees who haven't really been like they've been on this rocket ship.
49:56
So, I think I I personally think they totally deserve liquidity and accelerated investing, which it sounds like they're getting and and it sounds like they're going to do great.
50:01
like they're going to do great. Um but but but it is like not the nature of the initial contract which is like one year cliff four year best like I if it if it came out that it was like okay they're getting paid out to the tune of you know how long they've been there I don't
50:16
think anyone would be like that upset but then somebody was making a good argument that basically >> like you when you sign up with like a four-year vest you're saying I'm going to keep working for four years if you sell the company and put me on some zombie go ship like I didn't bail you bailed. >> Yeah. >> Yeah.
50:33
>> So you so you should you should accelerate me and I I I actually think that that >> argument >> and the other the other dynamic here was um so when character AI when uh when the when the character AI founders and and part of the core team went back to Google >> the character AI became a ghost ship but it was cool in the fact that they had >> 20 plus million users.
50:54
>> 20 plus million users. They also had 100 million on the balance sheet >> and it wasn't this like insanely gnarly enterprise market where and and I know I know people on the character team and they were like it's pretty cool we have
51:09
$100 million we have tens of millions of users and we're just kind of going to experiment to try to find you know figure out how to monetize this and I just don't think that that was >> I I don't see the the code generation market playing out in the same way
51:26
I was trying I was trying to think about that like like is there a world where you know I if the ghost ship had pl had had like stayed a ghost ship and they had pivoted is there some world where they you know niched down like there was this rumor that they were going to niche
51:39
down into B2B like could they have niched down wind surf into some like niche category and actually had like a pretty durable business we were talking about like could Jeremy Kafon make it work if he acquires it and like turns it into some cash flowing business. I just
51:51
into some cash flowing business. I just wonder like is there is there a niche where like I mean we've heard we the example I would give is like we've heard that like these codegen tools are like particularly bad at like rewriting old programming languages like forran for example uh and so if you created like
52:08
cursor just for like rewriting forran it's like that's not sexy at all that's not going to be hot on on Twitter X but it could be really valuable in like you know the bowels of like legacy banking and like you could pay you could charge charge a bunch and you wouldn't like the TAM wouldn't be very big but the business could be quite good. Um and and
52:26
Um and and that that that might be a weird outcome but it it could be a silver lining. I don't know.
52:32
Well anyway the second point that I made was that you know uh I I said the second the real culprit might be FTC antitrust.
52:39
This is a hyperco competitive market and Google still feels like they can't just do a normal acquisition.
52:45
And I thought that was crazy because it's like this is textbook.
52:51
they should be able to acquire this company, right?
52:52
Like like cursor is out there.
52:55
They're not acquiring the market leader. >> Yeah.
52:59
>> Open AI is clearly going after this market and to the tune of what's what's their valuation like 350 billion or something like that.
53:05
Like like >> we haven't we we should try to get an update there.
53:10
>> I think the MASA I'm not sure the the full MASA >> it's not even onetenth of it's it's greater than onetenth of Google's market cap, right? Yeah.
53:16
And so you're looking at like and then is Microsoft going to compete in this? Absolutely.
53:20
They have their already do.
53:22
And so it it's like you're you're basically like I don't know second, third, fourth in this market.
53:29
There are four very serious players.
53:31
Like this should be textbook rubber stamp. Good. Good to go. Do the deal. No problem.
53:37
>> There's also a there's also a long list of founder companies that were that are that were maybe less hyped than Windsurf but have incredibly talented teams. There's like Poolside. >> Yeah. poolside.
53:47
>> There's there was that one that Nat Freeman and Daniel Gross did that was magic. Yeah, there was magic. dev.
53:50
They were found apparently they were training their own foundation model for a while and that was kind of like, you know, very capex intensive and and and maybe slowed down some things on the product side, but still like clearly it's a competitive market.
54:02
Everyone's working on it there.
54:03
Also, we're we're missing out like there's probably a ton of YC teams that are working.
54:07
There was actually one YC team that got in trouble for forking uh like cursor too hard or something. >> A little too hard.
54:13
>> Yeah, they crossed some line there.
54:13
Um, I think they did fine and I think that they wound up like cleaning it up, but people were upset about like uh when you fork something, you have to abide by the MIT license or whatever the underlying license is.
54:24
And so you can't just like steal open source code and not abide by the by by the open source rules.
54:28
Um, and then and then I said three uh new facts might come out, which they did.
54:33
Um, and uh and the FTC thing was interesting because there was a little bit of push back on that.
54:38
People were saying like, oh, like Lena Khan ate my lunch, like Lena's uh like like responsible for everything.
54:44
And I wasn't I wasn't necessarily saying like Lena Khan was 100% responsible for how this was was was structured or like how this played out, but she did kind of like warp the road a little bit that made it a little bit wonky to drive. >> Yeah.
55:01
Basically, we made hardcore capitalism illegal. So we nerfed capitalism.
55:06
>> And then and then capitalism ended up coming in and saving the day. >> Yes. Yeah. Yes.
55:10
>> With Scott Woo at the helm. >> Seriously. Seriously.
55:12
So the solution to >> capital ant capitalism is more capitalism.
55:19
This is the Brad Gersonner point. Yeah, totally.
55:20
Um and so so I still don't I I still think that there's a that that there is a way that even with the weird new FTC antitrust regime, uh Google and the Windsurfing team could have probably been a little bit more aggressive, taken a little bit more FTC risk and avoided this whole PR dust up.
55:40
Um but that would have been more risk for Google.
55:42
And I think that the way they did this here where they >> I mean it's a great outcome for Google.
55:47
It's like we didn't buy the company. Look. >> Exactly. They bought the company.
55:49
>> They bought the company. Exactly.
55:49
So it really it really is a great outcome for Google.
55:52
Uh even though I'm sure that they their com team was up all weekend calling people. >> Yeah.
55:57
>> Like I I have to imagine that this was like >> I mean it it more room for that.
56:01
>> It was like serving uh you know it was it was the best possible story that the New York Times could have ever asked for. >> Oh totally.
56:10
>> It was like big tech >> Yes.
56:11
buys hot company that was competing, you know, not not necessarily like the whole point of of Lena Khan's thing was that, you know, big tech is like squashing competition by by, you know, buying these companies early.
56:22
And so you had the story that that was served up to them, which was, you know, >> exciting company in codegen, a lot of traction.
56:31
>> Open AAI almost buys them.
56:31
Google says, "Okay, we're going to buy them." That's Google.
56:34
Google and OpenAI are arguably, you know, the the two competitors that actually like matter in search right now.
56:42
>> And so it was just the perfect story.
56:44
And then and then the you know, I I think Scott um Scott over at Andre had a good post that I that let me pull up here for a second.
56:53
He was basically saying there is an irony that Lena Khan's activism has resulted in deals that are far worse for everyone except the people she was targeting.
57:03
>> Wait, who who's who tweeted this?
57:03
uh sorry, Martin uh Casado Andre. Yeah.
57:07
>> And yeah, it's like the the people with the lowest, you know, it it seemed at the time that the people with the lowest leverage, the employees that had joined recently >> were getting the worst outcome out of out of a deal that that should have benefited everyone.
57:20
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57:29
Um so my question is uh Google it feels like PR nightmare accidental PR nightmare because uh they had done uh what character just fine it it was not that big of a deal for them not a big and then scale >> well and it was very clear that that situation was interesting too because it it Google has delved into social in the past hasn't had the best >> not beating the chat GPT script.
57:53
Uh, no, that that was intentional, of course.
57:57
No, but they they've they've they've messed around in social.
57:58
You could tell that Google doesn't want to own the AI bot. Totally.
58:04
They just don't want the association.
58:07
>> I mean, there was a rumor that Gnome didn't want to be in that.
58:08
He kind of like was just like, I want to train a great model.
58:11
I want to train a great model.
58:12
I want to do AI research.
58:12
And then that became the use case.
58:13
they found product and then he was like I don't really like you see what Elon's launching today with the um >> I don't even I won't even say it on on the show but his new launch today basically signals that that that is a very important >> he's interested in that market.
58:29
Yeah, >> he's interested in that market. >> Yes.
58:32
Uh anyway, my my question for you is is so feels like a PR nightmare for Google.
58:38
Feels like a couple stressful days.
58:39
Feel like feels like over the weekend >> then that's my question.
58:42
Do you think that they are that they were intentional and happy about releasing the news after market close because the the the all of the facts could come out over the weekend and it was such a hairy deal that more deals needed to be done even after the story came out and it couldn't be super clean.
58:59
So you have to do it on on late on a Friday so then Saturday, Sunday people can talk, deals can get done and then announcements can go out Monday and then it resets the whole news cycle.
59:09
So you kind of skip the the the crazy news cycle.
59:12
>> I think >> I think the world's too online.
59:13
So I think I think it helped that that that it wasn't a weekday.
59:17
But I mean this to to me this this whole thing, you know, from from everything that we've kind of triangulated this this could have been avoided by managers taking it upon themselves to basically call >> Yeah.
59:33
each individual person at the company and say >> before before you have a negative reaction, I I need you to be patient.
59:39
I know you've been patient through this this this uh this deal with OpenAI.
59:43
It's not the deal that we wanted, but we are working to make this a a positive outcome for anyone.
59:52
>> And uh and don't cry yet. >> Yes. >> Don't just don't cry. >> And it's really hard.
59:57
And it's particularly hard because if you if you're in the scale situation, a lot of those people had been there for four years.
1:00:04
And with Windsurf, most of those people had been there for less than a year, almost certainly.
1:00:08
And so the the strength of those connections socially outside of work is weaker.
1:00:14
So there aren't as many, oh yeah, like my boss like we we're already on signal with disappearing messages, so we just talk back channel all the time.
1:00:23
It's like >> I mean the crazy thing too is the argument was the new company has a strong balance sheet >> and they're going to be able to just do a distribution or pivot or like that was effectively the the suggestion.
1:00:37
>> It was intentionally ambiguous >> and at the same time the the employees left behind on the ghost ship were already talking with other companies.
1:00:46
Other companies were coming to them trying to recruit.
1:00:47
you're coining ghost ship because uh like everyone involved in the deal would prefer you to use the term remain co remain co uh but that's not as sticky as ghost ship.
1:00:58
So I think go ship >> ship without a ship without a founder.
1:01:03
>> I don't think this will be the last ghost ship we see.
1:01:04
I think it's I think it's like a new pattern and we're just going to see this more and more.
1:01:07
going to see this more and more. No, but but so so then you have this dynamic where the the these talented people specifically I talked to a founder who was talking with a lot of people on the go to market team being like these are very talented people right they took a company from zero to tens of millions of
1:01:23
dollars in ARR and a bunch of enterprise contracts in a very short period of time I want to scoop them up >> and those people were entertaining conversations because >> it was just totally unclear to them what what was going to happen so >> so yeah I I still I I I think some of our friends hold the FTC like 100% accountable. I'm probably under a
1:01:41
I'm probably under a hundred but maybe over 50.
1:01:43
Um but my key point is that uh never lose faith if the FTC is giving you trouble.
1:01:49
Dylan Field didn't lose faith when he was dealing with uh a messy situation with the FTC at Figma.
1:01:58
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1:02:07
Uh anyway, there there was another side of the stakeholders that was interesting that the this that this guy Publius said in your in your uh in your in response to your post, which I don't think anyone was talking about at all the entire weekend. This is cool.
1:02:24
Uh and and this is something people don't really think about.
1:02:27
I think we're in a good spot with these folks now, and I think they'll actually probably be in a better spot. Much better spot.
1:02:32
>> Um but let's read through it.
1:02:32
So Publius says uh there are more stakeholders here that have not been discussed.
1:02:37
There is a whole network of software resellers that invested millions into building partnerships with Windinssurf.
1:02:42
I was leading the team at one of those partners.
1:02:45
We have customers that we have been selling to for years who we vouched for Windsor for Windsurf 2.
1:02:50
I am sending out a note to our 300 customers on Monday that we are stopping all partnership activity with Windsurf effective immediately.
1:02:58
I hope he didn't send that because it's you gota recall that email. Don't send the email.
1:03:03
Uh, Curser has no channel partners and this will cost our firms millions. Oh, interesting.
1:03:09
I didn't realize that that Windsurf had a channel strategy and Curser does not. Very interesting.
1:03:13
So, so Windinsurf actually has resellers who who go and sell it into their partners because they're doing something on, you know, uh, we do software development consultancy.
1:03:24
We come in and help your team run more efficiently.
1:03:25
We help you pick the right tools.
1:03:27
You can imagine like McKenzie, I don't know where this guy works, but like you can imagine a consulting firm coming in and giving advice on what tools to use.
1:03:33
Uh they get a kickback from Windsurf.
1:03:36
They don't get a kickback from Cursor.
1:03:37
So he's going to lose millions of dollars.
1:03:40
Hypothetically, hopefully not.
1:03:40
Uh but my reputation and good name is worth more.
1:03:44
Uh with Google taking the best engineers from Windsurf, our large enterprise clients are screwed.
1:03:47
When they purchased Windsurf enterprise licenses, they were also purchasing an ecosystem that they assumed would continue to improve.
1:03:54
This is disastrous for any startup tech company with goals of building an enterprise channel. It's interesting.
1:03:59
Uh I don't think people have any idea how much this just killed channel sales for any AI company.
1:04:05
So the rest of the AI companies out there who are like, "Oh, channel uh channel sales is really interesting."
1:04:12
>> Basically, if you're if you're if you're a top company in your category growing super quickly, you might turn into a ghost ship. >> Yeah. Yeah.
1:04:19
And so if if I'm trying to resell that type of stuff, then I I have to go to the CEO and But they're not so good to get these maxed out.
1:04:26
They're they're not getting a trade deal. >> Yeah. Yeah.
1:04:30
>> You can count on them to not get >> traded. Yeah. Yeah. Yeah.
1:04:31
You're having you're having dinner with the uh with the CEO of some AI companies talking to you about like, "Yeah, we have the best software."
1:04:37
And you're like, "But you don't have any like actually great AI researchers, right?"
1:04:40
Like you mostly just have >> we like to partner with companies with with medium to tier research. Yeah. Great product.
1:04:47
It works, but not too well because we don't want to lose you.
1:04:51
>> We want to keep working with them for a long time.
1:04:52
>> We want to keep working with you.
1:04:52
Um, and so, uh, yeah, the there were a bunch of other reactions. Shellqua hires. Let's see.
1:05:00
I'm not an M I'm not an M&A guy, but something feels really broken in tech.
1:05:03
M&A confidentiality is out of the window.
1:05:05
Deals get done and called off on a whim.
1:05:07
Lack of rigor and discipline on both sides.
1:05:08
Curious to hear what practitioners think.
1:05:10
People are going back and forth on this.
1:05:12
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1:05:26
Um and so Will Manitis was particularly blackpilled over the week friend of the showc uh but uh he it's we're so back Will you're good.
1:05:35
Uh Will Manitus said the reason that tech has been able to grow so quickly and create so much wealth that it is rich that it that it is that it ritualized a set of norms around corporate governance that are very distinct from what the law actually requires.
1:05:47
The second someone defects, the whole ship goes down. He's so upset.
1:05:52
But basically, he's talking about like hand the handshake deal protocol is not a legally binding contract.
1:05:55
Even term sheets, you get a term sheet from a VC, that's not a legally binding uh that's not a legally binding contract.
1:06:02
Like a VC can write you a term sheet, everyone can sign it, and then you can just wake up says >> it literally says it says this is not binding and then you can just wake up on the wrong side of the bed and be like actually I don't want to do the deal.
1:06:16
and or or it could be like you found something in due diligence or you met a different competitor.
1:06:19
But the like you know the game isn't over until the money's in the bank.
1:06:23
The experienced entrepreneurs know this but we run on this like basically you know these society the these like social constructs and these like uh social contracts that say hey if you're the type of VC that constantly rugs on term sheets on signed term sheets like you will there will be a bad vibe around you.
1:06:42
I can think of two that that are widely known >> and are still in business, >> but they the the it becomes very hard to be an effective VC if your brand is you just pull term sheets. >> Yes. Yeah.
1:06:56
And some of the some of those folks have been banned from YC Demo Day.
1:06:59
other people have had like viral Twitter posts about them uh every once in a while like they they do that to a founder and then the founder becomes very successful in post economic and is like yeah I I still have a grudge so I'm going to tell the truth about X Y or Z.
1:07:15
Um and and so the the thing is is that now where we are now is I don't think I don't think the whole ship goes down.
1:07:22
I I I don't think this is a true defection.
1:07:25
I don't think this reflects poorly and I think that the the question of like the big question here was was will this cause more new startup employees to want to just go straight to Google.
1:07:38
Let's say let's say that you have the option of working at Google or big tech broadly where you know the paychecks are coming on time.
1:07:43
You know the RSUs are liquid and you can just cash out as soon as you get them or whatever their lockup is and you know your manager going to be there.
1:07:53
going to be around >> somewhat accurately predict what your comp will be in 5 years if you really work hard. >> Exactly.
1:07:58
And then and then on the flip side, you have startups which are in some ways lottery tickets, but also you get to work on gamechanging technology with really cool people.
1:08:06
You get to move a lot faster.
1:08:07
There's a lot less overhead.
1:08:09
It's a lot more edifying for people.
1:08:12
>> Potentially the next Sundar instead of >> Sundar and and the economic upside can be a 1000x. It could be huge.
1:08:16
And the question is if that if that deal was broken, if that if that deal was okay, yeah, you can go work on the cool thing, but you might wind up penniless and not cash out like you were promised.
1:08:28
That changes the equation and that could pull people away from startups.
1:08:33
Um, but I don't think that's going to happen based on this because I think the lesson from this is that everyone got taken care of and the social contract still still holds.
1:08:43
Although it was very messy and I think going forward every company that's doing a deal like this needs to think how do I get the scale AI outcome and not the wind surf outcome because just two days of pain is not worth.
1:08:58
I think I think one potential solution to these deals is exactly what we just saw happen which is big tech company does basically an aqua hire of the of the team that they want >> and then you simultaneously sell off the underlying asset immediately and you generate a liquidity event for everybody so everybody's happy.
1:09:20
It doesn't have to be like lifechanging, right?
1:09:21
But it has to be something, right?
1:09:24
So that it's >> and I mean the very key thing is that they left enough money on the balance sheet >> because the money on the balance sheet and this was uh this was uh Hari Ragavan's uh analysis.
1:09:33
He he clearly I mean the guy's he's a good friend.
1:09:36
He's uh he's obsessed with cap table math.
1:09:40
>> I know he was >> I mean this was capital Journalism right here. >> Yes. Thank you.
1:09:45
>> This was investigative journalism. >> Yeah.
1:09:47
Uh, and so I mean his post is so long uh that I need to just go to the TLDDR.
1:09:51
But the TLDDR is that he says, "I spent hours last night breaking down the cap table and deal dynamics from public info.
1:09:58
I realize that the unvested equity is around 80 to $100 million, awfully close to the hundred million the founders and board negotiated to leave behind in the bank.
1:10:07
Why shouldn't management just detail >> unvested?
1:10:12
So they >> So they're basically saying we're we're we're leaving enough as though you vested your full four years. >> Yes.
1:10:19
And so and so if you if like it's a it's it's still a leap of faith because I don't believe that Google and cognition were in communication at all.
1:10:28
And I think if they were that would be more like antitrust chaos and stuff, but just economically, you know, that if you acqualance sheet and those many and that many like unvested options, somebody is just going to be like, "Wait, so I can get that for basically free if and I can make all the
1:10:49
employees whole and I get all the employees and I don't have to pay really like anything to get that thing like it's just going to happen immediately and because it's just like you've create you've left this you've left this like you know $100 on the floor and someone's going to pick it up like the free market will just work. >> I think the I think the question that I
1:11:05
>> I think the I think the question that I had and that I think a lot of people probably had is what is the governance structure of the ghost ship right so Jeff >> crazy question >> Jeff uh Wang who's coming on the show at 1 p. m.
1:11:18
>> Uh Jeff and Scott will both be coming on at 1 p. m. for 15 minutes. >> Okay.
1:11:22
>> And uh >> can we c can we communicate that to the other guests by the way? Yeah. >> Yeah.
1:11:26
Um, and so the question is like, okay, Jeff, you now run a company with hundreds of employees that are angry about what just happened that that probably like maybe they want to keep building Windsurf, but maybe they want to go and do something else.
1:11:41
And what happens like Jeff is basically, I would imagine, like has to make a bunch of calls. Yeah.
1:11:46
It's like, do you just keep running the business? Yeah.
1:11:50
>> Is there pressure to keep running the business?
1:11:52
First question, Jeeoff, did you ever feel like uh is it Froto Baggins throwing the ring into the fire?
1:11:58
It's like pay out the $100 million in bonuses after all, why shouldn't I keep it?
1:12:03
Just throw the ring in throw the ring into the Mount Doom. >> Yeah.
1:12:08
And the question was like, could were you ever tempted?
1:12:10
>> Could could the the new leaders the leadership >> Yeah.
1:12:13
was could the leadership have decided, you know what, we can run this business super lean.
1:12:17
We could actually run this business with like 10 people and and you know we're going to run it for a few years and we're going to we're going to use the advantages that we get from our own product to run a super lean team >> and then and then you would have it employees like effectively uh burned again potentially. But that didn't happen.
1:12:37
>> I'm very happy about it. >> Yeah.
1:12:39
>> And the question uh another question >> is like if you're if you're big tech and you're going to do one of these like zombie acquisitions, you got to leave enough for the unvested shares.
1:12:45
And if you're founder and you're going to do one of these zombie acquisitions, the ghost ship's got to be full of plunder, >> full of plunder, >> got to be stacked with treasure because then right then the rescue divers will go and lift the ghost ship off the seafloor.
1:13:01
>> If big tech comms are telling you, you can't tell anybody that they're getting taken care of.
1:13:06
>> You have to risk it conversations.
1:13:09
>> Tell a little birdie to go fly around and let people know.
1:13:11
You you you got to be you got to be having like quick calls.
1:13:14
Not not saying anything too specific, but saying what you said.
1:13:16
I think you worded it perfectly.
1:13:21
>> Poor Veroon poor Voon, right?
1:13:21
Because because he was getting dragged because >> because he apparently he he apparently he apparently people were messaging me like >> he joined like the the all hands for like a minute, you know.
1:13:34
Um, and it just seemed like he was being like ultra like kind of like a psychopath being like, "See you guys.
1:13:43
>> Yeah, >> it was a good run."
1:13:44
>> And it's like, >> "Go have fun building, you know, continuing the mission."
1:13:48
>> This would not have happened if he had said, "No, I need an hour.
1:13:49
I need to explain everything."
1:13:52
Would that have killed the deal? Almost certainly.
1:13:53
If that killed the deal, what's the outcome for the employees?
1:13:59
>> Probably worse than what they got.
1:14:00
>> You think it would 100% have killed the deal? >> Almost certainly.
1:14:03
If >> I think one of the key deal points in the negotiation with Google was we do it via Google's comms and legal strategy >> because Google does not want to get hit with some crazy FTC lawsuit that's going to not just be some multi-billion dollar settlement, but also a huge headache for years and bad press and stuff like that.
1:14:24
So Google says, "Hey, we we want to do this our way.
1:14:27
It's going to be awkward, but we're gonna take care of everyone and and yes, we will.
1:14:30
Yes, we will leave enough money on the balance sheet to pay out all the unvested options and but in exchange, you got to do the commsar way, which is rough.
1:14:40
>> You have to create a terrible >> you have to be scapegoed by the entire >> you get hazed.
1:14:45
>> Yeah, you're going to be hazed for 48 hours.
1:14:47
>> You're going to get hazed, but then it's going to blow back on us.
1:14:52
>> Google didn't look either that weekend. It was rough. It was rough.
1:14:55
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>> So what you would do is you'd put all the glasses of tap water that you need to drink and then you would just check those off at a time. >> Yeah.
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Like we only have one rule about copying us.
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It's the derivative works clause in our terms of conditions.
1:15:25
And uh in there, if you create a derivative work of TVPN, you are legally required to drink a glass of tap water on your >> every time you go live. >> Yes. Yeah. Every time you go live.
1:15:34
Um >> and so yeah, again, we don't have licensing fees for the we did invent TV. We invented news.
1:15:41
Um but we we will open source it.
1:15:45
It's an MIT license type of situ modified MIT license. Yep.
1:15:48
>> Uh the only modification is that you have to drink tap water.
1:15:50
Uh >> it is a small price to pay.
1:15:54
Anyway, um, in other news, >> uh, question.
1:15:56
What do you think, why do you think Google did this? >> Why? >> Yeah.
1:16:00
I mean, >> oh, yes, yes, yes, that is the that is the real question is is we've talked about the role of the VCs.
1:16:06
I think based on what happened, never talk down on first ballad Hall of Famer Neil Meta.
1:16:13
Never talk down on the future for first ballot hall of famer.
1:16:15
Everyone was saying, "Oh, Neil Meta, Green Oaks, they they did this sloppy deal.
1:16:19
They're screwing over the employees. Employees are great.
1:16:22
You'll meta potentially goatated. I don't know. >> I agree. I agree. No, it was well played.
1:16:28
>> I think I question why did Google feel like they needed to do a meta >> style trade deal in >> Yes, it's a good question.
1:16:41
So, so >> Windinsurf in my I I don't know everything about all the employees they brought over.
1:16:49
They brought over 50 engineers.
1:16:50
I don't know if any of those are like insane AI researchers with like crazy citations on like foundational papers.
1:16:56
I don't know that it's the same.
1:16:58
I don't know that they're trying to build a super intelligence team to really bring their models to the frontier because they already have that.
1:17:05
Like Gemini is is at the same like level of like AI research quality as OpenAI anthropic by most benchmarks, by most people that use them.
1:17:15
Like it doesn't feel like they're way behind there.
1:17:18
Llama 4 on the other hand was a little bit behind and so and and it felt like Llama 4 was specifically behind not on the product side but on the research side like they just weren't figuring out what works in RL and so they had to bring over a ton of people to just be
1:17:34
like how do we actually train this next model like behemoth couldn't they couldn't tame the behemoth like they got to get some behemoth tamers in the building and it seems like that's why they acquired all the different researchers who know okay like training on 100k a GP H100 GPUs gives you this
1:17:50
and then you need to use this data and you need to hold back this data and you need to have this this reward function and this reinforcement learning technique and you need to do all these different things and so you need AI researchers for that but Meta has great product people so like they're going to
1:18:05
be able to take what they build and then vend it into Instagram and vend it into all sorts of different places and use it to optimize the ads 1% and make a trillion dollars like they're going to be fine on that side Google is great at AI research. Deepmind is amazing. They Deepmind is amazing.
1:18:18
They have so many reason.
1:18:20
They invented the transformer.
1:18:21
They're not behind on the quality of the foundation model.
1:18:23
They are they are behind on product >> and they are they are behind on like user experience and everyone complains, oh, they have this amazing V3 model, but like I had to log in seven times to get access to it and then go through an upgrade thing and it was on the wrong Google account and then I have to trigger it and then I get some limit.
1:18:41
>> Here's the here's the the uh the >> steel man for the short sellers. >> Google shorters.
1:18:46
What's kind of interesting about the way this is developed?
1:18:49
So at at Google's last developer event, >> they launched Jules, which is an async development agent. >> Okay.
1:18:56
For for for code codegen, >> it's a clawed code competitor, an open >> more so like a dev. Yeah. Devon AI competitor. >> Devon competitor.
1:19:04
>> And so now you have uh you imagine Google has more ambitions around codegen, right? They've seen anthropics.
1:19:11
Very few businesses actually like will work at Google, right?
1:19:14
you need a billion dollars of revenue or you're going to get shut down most likely.
1:19:17
And so codegen is an area that I'm I'm sure they're taking very seriously.
1:19:22
I haven't heard a lot about jewels since the event.
1:19:26
I haven't heard about people that are that are using it.
1:19:27
I'm sure it's I'm sure it's powerful.
1:19:29
Y >> but you have a dynamic where you have Cognition and Devon who got I can't say cloned by Google but again like they were the first like serious like enterprise coding agent >> and so uh and and the the Windsurf GTM you know sales marketing team versus the former Windsurf founders and top researchers uh who are now at Google and so I'm just incredibly excited to watch this play out.
1:19:59
Pavle was uh posting earlier.
1:20:02
He said, "I hope these guys smoke Google at AI coding.
1:20:04
Imagine the chip on your shoulder after this if you're a Windsurf employee."
1:20:08
So, yeah, everybody's got to be very fired up. >> How you guys doing? Congratulations. >> Thank you. >> Round of applause.
1:20:19
>> You guys have a relaxing weekend? >> Yeah. Really chill weekend. >> Yeah. Yeah. Easy, easy, easy. Nothing too much. Nothing too much.
1:20:25
and I honestly we we both haven't really slept. >> Okay. >> So, >> go easy on us. Okay.
1:20:34
>> Well, you had a lot of you had a lot of people to take care of and and honestly when you know we uh we heard the news, you know, a few minutes before we went live and we were >> fist pumping here in the studio because it's such a such a fantastic outcome and uh I I'm I'm sure everybody involved is grateful for the work you guys put in to get this done. >> But give us Yeah.
1:20:53
kick us off with the the high level.
1:20:56
What's actually um the partnership look like?
1:20:59
What do you like how would you describe it in your own words of like what's actually happening?
1:21:05
>> Yeah, I mean this is a this is a real acquisition. >> Okay.
1:21:08
>> We are being acquired by Cognition. >> Okay.
1:21:11
>> And um you know >> must feel great to say that too.
1:21:16
>> You don't hear that much.
1:21:17
>> It was a tough it was a tough uh Friday I would say.
1:21:19
Um I don't think anybody would want to be in my shoes on Friday.
1:21:24
But we talked to a lot of teams out there.
1:21:26
There's a lot of AI companies, foundational companies, and after talking to Scott and the Cognition team, uh, it was done in my mind. It was a done deal.
1:21:37
>> Um, I don't know if you guys know this, but uh, Cognition was uh, probably the only other team that we thought was smarter than our our team actually. >> Yeah.
1:21:46
>> No, and that's what that's what we put we put that together just on the show seeing the announcement.
1:21:49
It's like you take this incredible, you know, go to market sales machine that that you guys had built and you combine that with one of the best, you know, research and just hardcore engineering culture >> and it's a and it's a perfect, you know, match. >> Perfect overlap. >> Yeah, absolutely.
1:22:03
And on the windsurf side, I'll just, you know, obviously there were all these stories breaking out on Twitter and everything going on and people were saying, well, you know, the the thing that's left is just the shell.
1:22:13
And we looked at it and we said, well, actually, I I don't know if that's right.
1:22:16
you know, it's the there's there's the code, there's the product, there's the customers, most importantly, there's the whole team, obviously.
1:22:21
there's the whole team, obviously. um a and and it's an amazing product and there's a lot to do and a lot to build together and and so I think as we started talking about it we found that there were just so many natural ways to partner you know both in terms of obviously the customers and and
1:22:36
customers would love you know are super excited to have a solution that that basically combines both the IDE and the agent um and and and then the technology itself which is you know I think we devon you know building Devon have always focused on this kind of remote background agent as thing that we've kind of done. Um whereas you know
1:22:53
Um whereas you know Windinsurf is is really focused on the Agentic IDE and and I think there's a lot of kind of things that play in there.
1:23:01
Um all the way down again to to the kind of the the fit of the the the relative teams and the team strength and so on.
1:23:06
So, >> it's almost like you predicted this because like the like like these types of mergers are really hard because you have two brands that are popular, but Scott, you've been managing Cognition and Devon, like you've had the the the corporate structure and the product structure for a while and so like it doesn't seem nearly as complicated as like where does this go?
1:23:23
Do you have to rebrand one or another?
1:23:24
I I don't know if you have thoughts on it yet.
1:23:26
I'm sure you this is down the road.
1:23:27
Uh but it seems like you're actually fairly set up to to integrate these two companies in a in a way that's like not so super chaotic to either which is great. >> Yeah. Yeah.
1:23:38
You know, I I I wouldn't say it was intentional.
1:23:40
it was intentional. I think on our end for example it's probably more that just we we we we tend to overfocus on on software engineers because it's just a lot of who we are and how we think about it and in particular kind of just like the these like product and capabilities things whereas I think on the windsurf
1:23:55
side I think um Jeff and the team you know the whole team have built out a really great kind of suite of of all the different kind of functions right you know sales deployed engineering um enterprise work infrastructure um marketing operations and so on you know finance etc and and and yeah, just turned out to be a really really great fit. >> Yeah. >> Yeah.
1:24:14
>> Jeff, uh Friday, end of day, did you think you would be running a process so quickly?
1:24:18
I I know, you know, part the the obvious move would just be, you know, continue to to run uh and scale the business.
1:24:23
You guys had a lot of momentum, but uh what was going through your head Friday night?
1:24:27
because I I imagine at the time you were also balancing uh you you were uh all of a sudden managing a team of hundreds of people that uh I probably all uh you know wanted wanted uh your time and attention as well.
1:24:41
>> My my immediate priority was just to get a lot of options on the table and to have a lot of paths forward.
1:24:46
Uh I had to tell the team like this is the path forward immediately cuz this is this is happening now.
1:24:52
Uh, and then outside of the meeting, you know, I I I was thinking like, okay, who do I need to talk to, what what is the best use of my time?
1:25:00
I can tell you, I was on the phone for pretty much 24 hours, non-stop on my phone, uh, after after the all hands.
1:25:07
And, uh, me and Scott, we we worked really fast.
1:25:08
Uh, we met at our office the next day.
1:25:10
Um, he even brought in everything on a piece of paper to sign.
1:25:15
Uh, he even br he had to talk through a lot.
1:25:19
Uh, but that was, uh, it was really, it was pretty dramatic. Scott, but it was cool. It was cool. >> Yeah, it was fun.
1:25:23
And naturally, you know, because it has to be this way, we got things signed like one or two hours before we were able to put out the announcement.
1:25:30
But like look, as soon as we started talking about it together, I think it was kind of clear for both of us like that the the way that we really make this a success is, you know, obviously customers kind of want to understand what's next, the team wants to understand what's next.
1:25:41
You know, the whole world is talking about it.
1:25:42
We want to be able to come out together as soon as possible and say, "We're going to do this.
1:25:48
We're going to make this really amazing.
1:25:50
um we're going to make sure we take care of all the users and all the customers.
1:25:53
We're going to make sure we take care of the team and there's just a really great product here at its core and and that's what we want to focus on and that's what we want to build out together.
1:26:01
>> And you know what's crazy um what is crazy like we talked pretty late on the Friday night as well.
1:26:05
Um we were comparing notes and there was like almost no overlap.
1:26:08
I mean we talked about the team already um but even the product the product is like missing exactly what the other product is offering and the ability to combine the products together is going to be so amazing for our users.
1:26:18
It's gonna be really cool.
1:26:20
>> Yeah, I think there's be a lot of fun stuff around, you know, um you can have have an agent work and then review the code, you know, locally in your IDE.
1:26:26
You can be planning tasks out and then kind of sending them off for work.
1:26:30
You can be um you know, you can do a first pass with an agent and then come and look at the work and then kind of finish that up and do the finishing touches with uh you know, with tab and all these other features and so on, right?
1:26:41
Um and we're really excited to to to to build that out together.
1:26:46
>> How is how is the team feeling right now?
1:26:47
I I imagine this is the craziest 48 hours of of their career.
1:26:51
>> Give us a preview of the Slack emojis that are ripping right now.
1:26:54
>> Actually, we uh we announced it uh at another all hands.
1:26:56
Uh probably all hands and then we put another Monday all hands and uh very very different.
1:27:02
>> They're like it couldn't possibly get worse. So So it's only up.
1:27:07
>> We made it dramatic, too.
1:27:07
Uh we So me and Scott uh and the team uh we we really went out of our way uh to to make this a very generous acquisition. I'll just say that.
1:27:15
And um I think uh I you know the team probably felt like uh you know their you know their career was over or something you know like it was very sad on Friday but I think today I don't know how long did they clap Scott they they kind of cheer for like uh finance or something.
1:27:31
Um so I think the sentiment has shifted the team is even more fired up to go.
1:27:36
Uh they the whole product is still there.
1:27:38
All the all the things we had in the GTM team is still there and now they also have Devon uh to to sell as well.
1:27:44
So everybody's fired up now. >> That's amazing. Yeah.
1:27:47
Every time I talk to Scott, it's always because like he's done something really incredible and aggressive like like and it's like okay like let's do let's talk about this right now.
1:27:57
And before I was making like documentaries to take me a month to put out a single video.
1:28:00
Now fortunately I have a daily TV show so I can just have you on and we can chat about it.
1:28:04
Um I do have some some random questions.
1:28:06
I don't know if it's worth um I'm interested to know about about that go to market team and and channel sales specifically.
1:28:12
Um there was somebody in the comments of one of Jord's posts talking about um how Windsurf was growing revenue and and and working with channel partners.
1:28:21
Can you walk me through how like h uh what would you give advice to somebody who's structuring a like a successful uh channel partnership strategy for a product like this?
1:28:33
Um what what what incentives do you have to align?
1:28:35
How big of a of a piece of business was that?
1:28:37
Do you expect it to be a continual source of growth?
1:28:42
I'd love to know about just that as a particular strategy as opposed to say, you know, Google ads or going viral. >> Yeah.
1:28:49
Um, we we made the decision to go 100% partners uh back in February.
1:28:51
Um, the thing about a partner uh channel kind of like segment is like you have to like you have to like kind of feed them like you kind of kind of build belief with them in the product but also show that there's an economic incentive too. Sure.
1:29:05
>> And it did take some time actually from Q1 to to Q2 uh to like get the top priority partners, make sure those partners can easily sell uh on your behalf as well.
1:29:14
And it really took like about four to 5 months to really see this like kind of take off.
1:29:18
Uh so some of our partner partners have already started bringing in seven figure deals uh even without even trying the product.
1:29:26
They just go to their customers, they ask them, you know, what what they want and they just say it's windsurf and uh and now they they can say Windsurf and Devon. That's amazing. >> Yeah.
1:29:35
I uh I was getting multiple messages from people Friday and Saturday being like,"I want this team. I want this team."
1:29:42
this team." And that was what and and and I think that uh it is it is just uh it's such a this whole deal and everything is is really a a testament to the caliber of the team which was the which was one of the major disappointments Friday is if you were on the team that that was staying behind at
1:29:57
Windsurf there's this sort of almost like signaling right of like I took this company let's say you joined last August and you brought the the product to market you launched it you grew it to tens of millions of dollars in revenue and then uh don't get to kind of continue the mission. It's uh I'm I'm
1:30:11
It's uh I'm I'm just really happy for everyone involved. >> Yeah. I'm Oh, sorry. Yeah.
1:30:18
>> I was just going to say now, you know, now we're all one big team and it's I mean, we're we're kicking it into another gear.
1:30:22
I I think we're all so amped up to to take this and just go, you know, we're going to go full speed basically for for the next while.
1:30:28
Um and and we get to play on offense now and go for go for it all.
1:30:33
So, >> are you guys already making plans to get under one roof?
1:30:37
What's what's the uh what's >> we have a lot to figure out.
1:30:40
Um but but but yeah, working getting to the point there there's there's kind of the product collaboration, there's the go to market collaboration and then there's the literal kind of like team situation.
1:30:50
A lot a lot of work to do over the next couple months.
1:30:53
>> Well, we tell our customers like we got their back now and the product is going to get so much more cool. >> That's amazing.
1:31:00
>> Well, you guys turned something which was um in in many ways, you know, a disaster.
1:31:05
I I was just waiting for I was waiting for the New York Times piece on Monday and getting to see the New York Times push out this news uh and turning this whole thing into a win is is incredible and you guys have done a service to uh the team and the industry. So, thank you.
1:31:21
>> Yeah, honestly honored to get to be a part of it to to work with such a great group of people and I just want to see you guys you guys have no idea h how things went with all the legal and everything last night in terms of figuring these things out.
1:31:32
Are we going to make it there in time?
1:31:34
Are we not going to be make?
1:31:35
It was we we we we've been through a lot and I think it's uh it's it's it's just the start of things.
1:31:41
So, >> just so you know, uh uh Scott was like, "We are announcing Monday uh hell or high water and uh we we just did not sleep uh for the last like 72 hours." Yeah.
1:31:50
It's been a crazy It's been crazy.
1:31:53
>> I mean, we Yeah, we we we appreciate you coping on the stream.
1:31:55
Do you have anything else, Jord?
1:31:56
You guys probably probably too early to sleep, but you both deserve a power nap at the very least. Yes, definitely.
1:32:03
>> Thank you for coming on.
1:32:03
Anything else that that makes sense to share now or should we let you go? >> Think we're all good. >> Awesome. Yeah, stay tuned.
1:32:10
We're going to have a lot more announcements soon. Thanks for having us. >> Amazing guys. Great work. Cheers. >> Talk to you soon. >> Congrats. >> Bye.
1:32:20
>> We are doing a postmortem on the wind surf chaos.
1:32:22
Uh I was saying that uh I liked this post from Pavle Asparu.
1:32:26
I think he sort of nailed the postmortem, but we can debate this.
1:32:31
Uh, it I mean, if you leave someone for dead, but someone else calls in a helicopter, that doesn't really change your moral positioning in the situation.
1:32:40
And Delian says this 100%.
1:32:43
the Windsorf founders in Google thought they could pull a fast one and that the broader community/winsurf employees are somehow are worded enough to uh not catch on that their leave the shellco with cash plan was totally morally bankrupt.
1:32:58
Everyone will remember and so uh I don't know I'm I'm perhaps ready to put on the steel man hat and not go quite as far as Delian.
1:33:06
I think you might agree with the Delian and Pavle take a little bit more.
1:33:11
I still think it's important to debate because we want to avoid this kind of situation in the future.
1:33:15
There's probably going to be more of these deals.
1:33:17
John John Ludig had some good commentary on this basically saying if you are >> a big tech company, it is much easier and faster to do something like this.
1:33:28
It's not just the FTC sort of like climate around antitrust.
1:33:31
It's just that it's much easier. It's much faster.
1:33:35
>> And often times these companies are just buying the team and the talent.
1:33:38
So if they can license the tech and get the team, it is that's just capitalism doing capitalism.
1:33:44
In this case, the answer to capitalism doing capitalism was more capitalism >> in the form of Scott Woo coming in hot uh working uh over the weekend to get a deal done.
1:33:55
So anyways, fantastic outcome >> uh looks like a hero.
1:34:01
>> Scott Wood looks like a hero.
1:34:01
I think Cognition is going to be stronger for it.
1:34:05
They got a world class uh you know GTM sales marketing engine from >> what John Ludig said here was big tech's AI talent shortage means with means these M&A choices A you get the talent only but you get it today or B you get the talent plus the business plus the product but months after regulatory scrutiny and he says they will pick every time.
1:34:30
Thankfully for windsurf the product lives on but a as the default is ex is existentially dark for startups.
1:34:37
And so I think what's what's interesting is like we were debating how much of the blame goes to Lena and I don't actually know that there's all that much on Lina specifically.
1:34:47
It's >> fun it's fun to point the finger. It is.
1:34:51
But I think I think in general like the FTC has always has always had some sort of approval around >> big public company buying a small company.
1:35:03
They're going to review it.
1:35:05
Even if they would have approved it, it would they wouldn't Google would not have gotten the talent actually in the door actually working at Google for six months. >> Yeah.
1:35:14
>> Months after regulatory scrutiny.
1:35:14
And so that time >> and the other comp here the other comp here that we have is Figma who was slated to get acquired by Adobe.
1:35:24
>> Adobe had to pay 1 billion breakout fee.
1:35:27
Now Figma is uh going to IPO >> and I would be shocked if they end the first trading day below the price that Adobe was going to pay and the company is doing better than ever has launched a bunch of new products and >> um and and so >> not financial advice but I will give you product advice. Go to figma. com.
1:35:45
Think bigger, build faster.
1:35:46
Figma helps design and development teams build great products together.
1:35:49
Uh can't say anything about the stock, but great product. We do love it.
1:35:53
Um anyway, uh Varunam Ganesha had a good take here.
1:35:55
Windsurf employees over the weekend, and it's the it's the we're so back, it's so over. We're so back. It's so over.
1:36:02
And I think the underrated take on this, like yes, it's funny, and it's a good point, but this has a real economic cost. Like losing sleep.
1:36:10
We're sponsored by Eight Sleep as we put out a video today. Um, we did.
1:36:14
Sleep is valuable and if you make me lose sleep, that does have an economic cost.
1:36:18
That does have a moral cost. You shouldn't do that.
1:36:19
And so, you should, as a founder, try and land the plane.
1:36:25
>> Not just save everyone's life, but actually not have a super rough landing. Yeah.
1:36:30
Make it a win for everyone, but make it smooth for everyone. Make it.
1:36:34
>> And there was a good post.
1:36:34
Uh, Pavle Pavo was on a tear for the last few days.
1:36:38
Defender of the founding engineers. >> Yes.
1:36:41
Uh, but he said, "I hope these guys smoke Google at AI coding.
1:36:43
Imagine the chip on your shoulder after this if you're a Windsurf employee."
1:36:47
And Sandep Shaw over at Windsurf, he's a vice president there said, "It's bigger than a chip. We are coming for it."
1:36:55
>> For it, he was left behind in the Roman Co. , is that correct? >> Yeah.
1:37:00
>> He did not go over and he's ready. He's on the go. Yeah, the ghost ship. There we go. The ghost ship.
1:37:04
And Augustus is go off the king and Will depuses LFG.
1:37:07
Uh lots of lots of support for Sandep uh in the AI coding in the AI idees war that's continuing.
1:37:18
Um anyway uh Signal has a post here.
1:37:22
Startup comp used to be confusing because it was complex.
1:37:23
Now it's confusing because it might be worthless even with a large exit.
1:37:26
The founders can dip anytime.
1:37:28
Last chopper out of Saigon vibes except they're flying private while you're holding the bag. Good post.
1:37:34
Um yeah, my my my take here was that uh Scott Woo looks like the hero, not Verun Mohan, the founder and CEO of Windsurf, who should have gotten an amazing outcome for his team in any other situation.
1:37:48
Like in any other situation, I say, "Hey, join this fast growing company. We're just post pivot.
1:37:54
We're second in the market.
1:37:54
We're doing some cool stuff.
1:37:57
I'm raising some money and we're growing, but we're only doing 40 80 million ARR and I get you liquidity at 2. 4 4 billion.
1:38:04
You should be like, I am ride or die for this guy forever.
1:38:09
And I think that a lot of these a lot of these employees aren't going to feel that way in in five years, even after all the dust settles, they're going to remember that this was not not handled as well as it should have been.
1:38:19
And so, they're going to be like, nah, I don't want to work with him. >> Yeah.
1:38:22
I'm sure I'm sure when uh when the muzzle uh is re is removed, he'll be able to >> Yeah.
1:38:28
>> hopefully call every employee one by one. >> That would be good. Sorry. And make up.
1:38:32
>> And so, I still put some of the blame on FTC stuff.
1:38:33
just FTC stuff broadly, some of the blame on Google comms, some of the blame on Lena Khan and what and and how she changed the FTC.
1:38:41
>> And the other thing is like this was happening really remember the uh >> uh the the sort of exclusivity period that that OpenAI had on the deal expired and I think this got announced like the very next day.
1:38:55
So, I'm sure it was in the works, but they definitely were moving quickly.
1:38:59
And again, it would have been a good outcome if they all ended up at uh at OpenAI, but I also think this is a good fit going forward as well. Yep.
1:39:09
>> So, I'm excited to see what each branch of the team >> run here has some push back on Signal.
1:39:15
He says, "This has always been true, the idea that uh startup comp is confusing and complex.
1:39:19
um investors and founders uh screwing over early employees during an M&A is a time-honored tradition in Silicon Valley.
1:39:27
I don't know how true that is.
1:39:29
There's a lot of examples where that didn't happen, but of course it it it has happened.
1:39:33
Uh if anything, the abundance of capital has made things better for early employees.
1:39:37
Um and so, you know, kind of you know, people people taking both sides.
1:39:42
Um we didn't get to this post, uh but it was funny.
1:39:46
Connor saying, "Winsurf is the so humparique of startup acquisitions.
1:39:48
They got acquired by OpenAI, Google, and now Cognition Labs all in one month. You'll love to see it.
1:39:54
>> Swix has a sixway parlay.
1:39:54
He said, "I want Mstral founders to Apple, Mstral team to meta, character remain coded perplexity, core to perplexity, ideoggram to Figma, gamma to notion." Read it back. >> Read it back.
1:40:06
>> Um, there was rumors that uh Apple was was um interested in in picking up Mrol. >> Oh, really?
1:40:14
>> Uh, taking a look at it.
1:40:14
The funny thing though is that if you're France, do you want your national champion >> to you know the the luxury AI >> should go to LVMH for >> Exactly.
1:40:27
>> should be home with the Arnos.
1:40:29
>> Didn't we post a Didn't we post a joke post around that? >> I think we did. >> I think we did.
1:40:34
>> I think >> I want fine luxury language models of the >> family.
1:40:38
I think some of the Mistral folks were like this is hilarious but also like complete misinformation.
1:40:41
Uh anyway, um Sundep says, "It's bigger than Chip. We're coming for it."
1:40:46
And Rob uh says, "Let's talk about a reboot for HBO Silicon Valley."
1:40:50
Uh and it's funny because when you see the wind surf tag right in the name, you're like, "Oh, okay. This is hilarious."
1:40:56
You think this is ridiculous.
1:40:58
Uh and at least you're having some fun with it.
1:41:02
>> Can we talk about our our upcoming guest? >> Yeah. Yeah.
1:41:04
We're going to have uh one of the co-creators of HBO Silicon Valley on the show.
1:41:08
uh uh he has been working on on Barry for a couple years kind of out of the Silicon Valley parody world.
1:41:16
Uh but we're going to try to bring it back.
1:41:18
We're going to explain to him >> what's going on >> line by line what's been going on and I think once he really processes it, he'll be interested in making a reboot.
1:41:26
>> Yeah, >> we got Skrey coming on to the show. Welcome to the stream.
1:41:31
>> He is finally >> good to see you guys Friday for this moment. >> How are you?
1:41:37
>> It's great to see you. Yeah, good to hang out.
1:41:38
>> Wait, this is a new view.
1:41:38
This is not your your regular streaming view.
1:41:40
You don't normally see the guitars, >> I guess.
1:41:44
I I I change it around sometimes. >> That's cool.
1:41:47
What's new in your world?
1:41:49
>> Um, well, you know, I'm in the startup game as always.
1:41:52
Uh, I think this is like the 83rd company I've started. So, >> very nice. >> See how that goes.
1:41:57
And, uh, I've been my my the company I'm working on makes, uh, it's like the Captain Ahab's white whale for VCs.
1:42:06
It's a Bloomberg competitor.
1:42:09
>> Um, so the the this will be the last time somebody tries to compete with Bloomberg one way or another.
1:42:14
>> It's the final Yeah, it's the final boss of of startup ideas.
1:42:17
>> Um, bring but yeah, just just give us um I mean this makes like the the founder market fit is is incredibly strong.
1:42:22
So um when I when I initially saw you announce this, it made a lot of sense.
1:42:29
What uh yeah, what like what was the initial catalyst?
1:42:31
I'm assuming you had did you beef with with Bloomberg at some point? beefed. Yeah.
1:42:36
Um that was a big part of it.
1:42:39
>> Deppplatformed >> deplatformed. Nothing.
1:42:40
You know, Trump was deplatformed from Pinterest >> and that and that that was like his, you know, personal 911.
1:42:46
For you, it was probably the Bloomberg terminal. >> Yeah, exactly.
1:42:49
I've been using it since I was uh 17. >> Wow.
1:42:53
>> And you know, afford it back then. >> What's that?
1:42:56
>> How'd you afford it back then? Is it a year?
1:42:59
>> I worked at hedge fund. Yeah. >> At 17. Very nice. >> I worked at Yeah. at 16 actually.
1:43:01
I worked for Jim Kramer's hedge fund. >> Okay.
1:43:04
and I worked at a tiger cub and I started >> so we need the backtory on Jim Kramer.
1:43:09
So apparently he was just he he he would get so stressed out like running the hedge fund that he just was like I'm just going to become a a media guy.
1:43:17
Is that is that like loosely correct? >> Yeah, 100%.
1:43:21
I mean so we made 23% average annual net returns. So net of was good. That's amazing. Narrative violation.
1:43:29
I love It was a very well, you have to you have to think about what investors looked like back then.
1:43:33
It was a very different world.
1:43:37
>> Um, information arbitrage was a thing.
1:43:40
>> Um, gaming, Wall Street's like upgrade and downgrade system was a thing.
1:43:45
>> So, I will say he had extremely good instincts.
1:43:47
um anytime he seemed to buy a stock for the long haul, he he didn't do that great, >> but he was extremely good at, you know, I'm not sure you would want somebody else managing your money because he was just so careful.
1:43:58
And in 2000, we were up like 35ish%. >> Wow.
1:44:03
>> So, you know, I saw the dot meltdown. It was a lot of fun.
1:44:06
I shorted some of it myself and it was uh it was a it was a great time. >> That's fantastic. >> That's wild.
1:44:12
And then and then what was the story?
1:44:14
Which which which Tiger Cub were you at?
1:44:16
What was the backstory there?
1:44:18
>> Yeah, so after Tiger um and just before I get to that Kramer was absolutely nuts, right?
1:44:22
So like he would he would take a computer monitor and just throw it at you.
1:44:26
It wouldn't be like one of these playful like, >> "Oh, I'm just going to throw it at you and like you're going to get out of the way."
1:44:32
He'd like aim dead center for you with like >> center. >> Yeah. >> With force.
1:44:38
>> Be like, "Bro, you almost just killed me."
1:44:39
He's like, >> "Wow, >> lucky I did.
1:44:41
>> Did you deserve Did you deserve it?
1:44:41
Did you deserve it, though?
1:44:45
Like let let's steal man this a little bit.
1:44:46
What were you doing wrong?
1:44:48
>> I wasn't doing Nobody was doing anything wrong.
1:44:50
>> Everyone says that when they get a computer monitor thrown at them.
1:44:54
>> You're not feeding the allegations here.
1:44:56
>> I think part of it is just trying to like he would yell things like this is a foxhole.
1:45:01
>> Um and >> and the idea was that like we were at war with the market and that you know like if you weren't if you you know this is World War II.
1:45:10
If you're not in here trading stocks with us and like trying to get an edge or whatever that means, trying to make a dollar, like if you're not taking this seriously, >> going to war, I just have to say if you if you wake up every morning, you say, "I'm going to go to war with the market versus I'm going to dance with the market."
1:45:26
Like the approach of going to war sounds sounds very very very stressful.
1:45:32
>> I've worked with so many people over my career and I I've never met a person that amped up and crazy. And it motivated you.
1:45:38
I mean, it made you want to deliver, but it also scared the out of you.
1:45:42
The guy was like very temperamental and, you know, but he was he was extremely good trader, like I said.
1:45:46
You know, he I think his worst year was like down 5% or something. It was like wow.
1:45:51
>> You know, he was it was pretty solid.
1:45:52
And >> so he was like, "If I don't quit, I'm going to kill somebody."
1:45:54
It was >> Yeah, >> he b he basically said that. Yeah.
1:45:57
I think he said that, you know, if I keep doing this job, even at a comparatively young age, I think he retired at 40, that, you know, I'm gonna have a heart attack or something like that. And >> Yeah. Yeah. Yeah.
1:46:06
You know, I I I ended up going to uh Tiger Cub after um Tiger wound down.
1:46:13
>> Uh a few things happened.
1:46:13
So Julian hired Chase obviously and we know where where sort of that came uh what happened there.
1:46:19
But uh Julian, you know, wound down operations and he seated a couple of guys and he kind of wanted to be in the seating business where he'd give you 50 million and take a part of your GP like you know maybe 20% of your GP or more and you know he'd help you raise money uh give you advice this and that and Alex Julian's son would help.
1:46:36
Julian passed away recently as you know and but in the Tiger heyday when they managed you know 15 billion or something there were two principal tech guys Larry Bowman who was a bit of a legend but you know it's a name nobody really knows because he was a legend in the 90s but you know he is a family office and he kept investing and things like that.
1:46:54
So he started Bowman Capital and then Steve Shapiro uh who was my boss started uh Intrepid Capital. So I worked there.
1:47:01
I was uh it was a $2 billion fund.
1:47:03
I was a video games analyst.
1:47:06
The way I could convince Steve to do biotech was I had to cover software too.
1:47:09
So I covered interactive entertainment uh enterprise software and biotech and it was uh it was a lot of fun and you know uh it it it uh the tiger cup style of investing has >> there out of two.
1:47:28
>> So we were one of take two's largest shareholders back then >> and um you know I think it's a short now.
1:47:33
Um, >> I think that I I didn't 100% get your question though.
1:47:38
You were saying something about buyout. >> Yeah.
1:47:40
Well, like the the story that I've heard is like Strauss Zelnik went to the board and basically said like this company is mismanaged.
1:47:45
There was an FTC lawsuit in the works.
1:47:48
An FTC FCC lawsuit in the works.
1:47:51
And he was like, I I'm a beast.
1:47:53
I've run big Hollywood studios.
1:47:56
He was like JDMBA type like really cleancut amazing manager and basically said like you should install me as the management here.
1:48:06
And so he didn't really do like a classic buyout.
1:48:09
He just appealed to the hedge funds that owned all the shares and said I would be better and raised his hand and they said yes.
1:48:18
And he came in cleaned everything up and they went on a great run.
1:48:20
And so it's just a fascinating story because you don't hear about that type of thing happening that much.
1:48:25
At least that was my understanding the story. >> Yeah.
1:48:28
No, I think that's right.
1:48:28
And then Bobby Bobby from Activision was the same sort of the same story, right?
1:48:31
He kind of I remember meeting Bob Bobby in our office and you know Activision was uh you know kind of a micro cap you know. >> Wow.
1:48:40
>> Or you know kind of a small cap and he built it from this was 2004 2005 by the way. Yeah.
1:48:45
And he built it into a >> you know 44 billion sale partially thanks to Lulu. Uh and uh that's true.
1:48:53
>> That was it was an exciting time for video games.
1:48:55
One of the things I learned, you know, all my US counterparts at hedge funds were were like uh very confused about the stocks uh they traded because there was only like four or five publicly traded companies.
1:49:04
And I would go to people and say, "Well, I'm long Nintendo and I'm long, you know, some of these weird Japanese companies like Square Enix or Konami or, you know, these."
1:49:11
And US hedge funds just ignored this stuff because it's like, "Ah, it's Japanese.
1:49:15
I don't I don't have anything to do with it." Sure.
1:49:18
>> So, a lot of glory days, but you know, the glory days I'm interested in now are uh amongst you know building my startup and you know again I think we understand you know financial information better than any San Francisco nerd and uh I think that uh the uh one
1:49:36
>> I mean how like >> investors >> yeah so it's interesting to like we're enter you know we're very clearly in this period now of just like hyper financialization things, you know, the markets trading on vibes, trading on your stream dayto day. Uh you can now, you know, as like stable
1:49:55
Uh you can now, you know, as like stable coins explode and and people have more assets on chain, they'll be able to make a couple taps and go like 100x long at any given period of time.
1:50:06
Like the internet is like changing capital markets and it's increasing volatility.
1:50:13
And so how much of of of uh of your new company is trying to like lean into that when Bloomberg terminal would have been like like more f like I've never personally used a terminal.
1:50:23
Um but I imagine it was more like hey these headlines are hitting and and this this kind of information is hitting PR Newswire but today by the time something hits PR Newswire a stock might have might have traded down 20% before that point.
1:50:41
So, how much is your new your new startup um kind of uh I imagine you're leaning into the way that you kind of maybe your next 20-year vision for capital markets, >> right?
1:50:52
You know, what would Mike Bloomberg do if he was 30 years old now in 2025?
1:50:55
You know, I don't think I think Chimath said that, you know, I think in a re recent episode he said, "Oh, it's this hundred billion dollar thing.
1:51:01
It's just waiting to be toppled.
1:51:02
You know, anybody can come in.
1:51:04
It'll it'll it'll drop like a house of cards."
1:51:06
Not only do I think that's not exactly true, but I think the bigger picture here is that a well-run financial information company could and should be worth a trillion dollars.
1:51:17
>> So most of the people, so I met Bloomberg in 2005.
1:51:23
And >> by then he had basically retired. He he became mayor.
1:51:26
He was mayor for 12 years.
1:51:28
Then he wanted to be president.
1:51:28
Uh I have this contention that I think Mike is the richest person in the world.
1:51:31
And it comes from not only he's got about 13 14 billion in revenue, almost all margin.
1:51:38
Um so if Bloomberg were to be sold, maybe it could get 200 billion or if it were floated.
1:51:45
>> Uh but not only that, he's got this family office and very few people know about this, but he's taken the Bloomberg dividends and pumped it into a family office that basically Carlile and all these guys, you know, the Warbert Pinkis, all the private equity guys like KKR, they go to him first and and he tosses in like 500 million in each of these.
1:52:02
He's an anchor investor in like every VC, every private equity fund.
1:52:03
And the guy's compounded that money.
1:52:06
So he could be worth four or 500 billion.
1:52:09
And very few people know the Forbes list is, >> you know, the Forbes list didn't know about Jim Simons until >> heavily manipulated five years ago. So >> yeah. Yeah. Yeah. That's crazy.
1:52:20
>> So I think, you know, just in terms of >> and it fits his brand that he he he would not be the guy like, you know, sending a message to to Forbes saying, "Hey, like you guys know you have this wrong." >> Yeah. Yeah.
1:52:31
>> Yeah. Yeah. really I think you should apply this kind of you fight to get off the list like Trump famously fought on to fought to get on the list but you know there's there's an ar either way um what do you think about the meme where people say like oh it's not you know the next uh like like the value of the
1:52:47
Bloomberg terminal isn't just the data it's not going to get oneshotted by AI it's really a social network and the value is in the chat I >> I get so mad because again you know SF people don't know Wall Street if you haven't been a trader on Wall Street you have to askf you like it's just not you know
1:53:04
>> this isn't your your lane like you have to talk to users I was in a hedge fund yesterday one of one of the bigger hedge funds they put like 20 people in the conference room and we talked about what they actually need and you know social network is part of it again Bloomberg's worth 100 billion because they have a
1:53:20
very good social network which is true they've decent financial information capabilities and um a couple of other things but they don't have the whole picture and and what I wanted to say about Bloomberg kind of quazar retiring was that he basically quit at the exact top for fundamental long short or fundamental investors. Quants started
1:53:37
Quants started taking over Wall Street by then.
1:53:39
So today of the top 15 to 20 hedge funds, 85 90% are quants.
1:53:47
>> So Bloomberg does no quant offering. They don't do it.
1:53:50
And all all he had to do was stay employed instead of want to become mayor.
1:53:54
And I'm sure he would have been selling Jane Street and Citadel and all these guys Daw etc.
1:53:57
software instead of everybody having to make it themselves.
1:54:00
Imagine writing your own ERP or writing your own, you know, CRM.
1:54:04
That's kind of what what Wall Street has to do and it's pathetic.
1:54:06
Nobody wants to do that >> So my Wait, when you say quant uh is there a bifurcation between like high frequency trading and just quantitative trading? >> Yeah.
1:54:17
And I think it's going to get my goal actually is to make it more of a spectrum.
1:54:23
So the fund I was at yesterday, I said that you guys can do what Renaissance does.
1:54:27
You know, it's not a secret anymore.
1:54:28
It might have been a secret in 1995, >> but the amount of kids that have come and left every one of these firms topping from Jane Street to Citadel to the next shop, everybody knows what everyone's doing.
1:54:39
It's just a question of your risk tolerance, your leverage.
1:54:43
Execution is very important.
1:54:43
Execution is very important. But I think that you know trading you know the the stock pickers are kind of going the way of dinosaur and I think by moving up the power curve for Bloomberg helping people become quants you know the quant industry has sold I think this tremendous lie and again these are
1:55:00
customers so you know I love those guys but I think that is in their vested interest to tell people that look at this blackboard with all these math equations there's no way you guys could understand this you're too stupid you have to be an IMO winner you couldn't possibly come here and make billions but we saw what James Street did. >> Well, I think I think c c c c c c c c c
1:55:15
>> Well, I think I think c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c certain like to do this too where they're like ah VCs you know really a get-rich slow business it's really like really a tough business it's so such a like you really wouldn't want and and I think generally like you know you don't want anybody going into
1:55:29
any industry being like I'm here to make easy money so there's like it's generally good but but yeah there's a lot of incentives to just say you know yeah >> on on the high frequency side like what are the actual other data inputs I remember seeing this like I don't know some sort of technical talk some guy was talking about like the different algorithms. One was called the Boston
1:55:46
One was called the Boston shuffler and and and and the whole algorithm only looked at the order book and he was getting into all these like you know uh you can you can place an order, you can cancel an order, you can do a cancel replace.
1:55:57
He was like getting into the minutia of like basically the API of the NASDAQ or something like that.
1:56:05
and and and it seemed like the algorithms were designed in a in the high frequency trading world to basically ignore everything else in every other data source that even could be put in and just operate purely on the orderbook data.
1:56:18
Um just better than everyone else.
1:56:20
But so that feels like okay I wouldn't know how to, you know, create any extra value there with something else.
1:56:25
But it sounds like you found something that they all need in common. Like what is that?
1:56:30
>> Yeah, I I think there's it's it's a it's a series of tools across Wall Street.
1:56:32
I don't think it's just one thing.
1:56:33
don't think it's just one thing. It's just a myopia that you know in and just sort of a a laziness that's enveloped the bigger companies again you know there's the so so we have this data that shows that around 5% of Jane Street and two sigma use Bloomberg >> and the reason is because they view it
1:56:50
as an entry-le tool >> you know uh Tath is looking at it and says wow this is like an exclusive social network with the best financial true Peter Teal's on there 247 I see his little green light next to his name but the uh the point is that you Wall Street changes and the tool the tool sets are changing even for fundamental equity guys. So credit card data, you know, to
1:57:09
So credit card data, you know, to the minute is something like what is the what's the feature set that's most important to you?
1:57:16
important to you? Are are are you heavily integrating social or is the social layer moved on to signal and and other messaging services that maybe um >> have disappearing messages and don't exactly Wall Street's so regulated that I'm not sure that if you're using signal
1:57:34
it's a little dangerous I'd say really and that's somebody you know as somebody who's gone to jail you know I'd say that you know that's maybe not the best >> best idea but regardless I think that you know social is definitely something people could do better. You know,
1:57:47
You know, there's no Facebook for finance, you know, where you can post, you know, things in your feed that you bought this stock or sold the stock.
1:57:53
People kind of lazily use Twitter, which if you if you use it, it's sort of a mishmash of of uh of spam and things like that, >> but in any event, I mean, I'll have more to say on the product.
1:58:03
We haven't launched the product yet.
1:58:04
Um, but we we we do have a millions of dollars in run rate.
1:58:09
You know, I I banged my head against the wall trying to do AI startups. >> Yeah.
1:58:12
>> And we made an AI doctor, we made text to speech, we tried all this stuff and it was impossible to get revenue. Impossible.
1:58:18
But the second we make a trading tool, it's impossible to stop the revenue from coming in.
1:58:21
You know, uh it's one of the best spaces.
1:58:23
In fact, most of our competitors like Trading View and stuff like that, >> they were profitable day one.
1:58:27
So, you know, my suggestion is if for for startup founders is this is a market that just traders just throw money at you like crazy.
1:58:35
I mean they're people will pay you to help them make >> but you have to be formerly in the foxhole.
1:58:40
You have to have at least one monitor thrown at you.
1:58:42
It sounds like >> Exactly.
1:58:45
>> So who but but in the long run how how much how much are you focused on retail investors, people that are just >> you know fully independent versus some you know if you're if you're going obviously at the institutions and that's probably the way to go.
1:59:00
Trading View has got the rumor is you know somewhere around 300 million in revenue.
1:59:04
Tiger did a deal with Trading View back then.
1:59:06
I don't know how they, you know, that's like a pretty proprietary deal.
1:59:09
It's this weird Russian company.
1:59:12
>> Uh, and Tiger got to put 100 million in at like three billion or something.
1:59:17
>> And, um, Trading is just growing and growing.
1:59:19
If you go to a similar web, they're actually like almost like a top 100 or top 200 website, period. >> That's crazy.
1:59:24
>> Just really wild >> for such a niche duel. That's wild. >> Yeah.
1:59:27
I mean, it's the best charts there are, but, you know, it's literally a charting library.
1:59:30
Um, so I think that you have to go for these.
1:59:33
But I've also >> I've also thought just answer real quick is like AWS >> when you go on AWS you get the same tools that you know any customer gets Netflix or or whoever and you just just question of how much do you use them?
1:59:46
So if you know I want to be able to provide you EC2 and S3 the same way you know Citadel might use it and you might use it with you know less money. >> Uh, very cool.
1:59:56
I I heard a hot take from someone who I believe is a mutual friend of ours.
2:00:00
Uh it went something like this.
2:00:03
I won't attribute to him because I might botch it, but it was basically that uh China banned highfrequency trading and the dividend of that was deepseek and all this brilliant AI research.
2:00:14
Therefore, in America, if we want to win the AI race and win the AI researcher race, we should ban highfrequency trading.
2:00:22
It feels like we might not even need to have that conversation because Mark Zuckerberg is willing to pay as much as Jane Street now.
2:00:29
Um, but what is your take on whether or not uh economic value or American values are created through the process of high frequency trading? Should we ban it?
2:00:39
Is there any damage there?
2:00:42
>> So, two awesome like quick and funny stories.
2:00:44
The first is Citadel published a paper on back in the V 100 days.
2:00:49
There's V, V100, A100, H100, and then B100.
2:00:52
So, in the V100 days, Citadel found a way to do Matt Moles faster than Nvidia did.
2:01:00
>> And it was like the most incredible, you know, find ever.
2:01:02
And it's like, you know, how is that possible?
2:01:05
And and the paper's fascinating because the techniques they used were just remarkable.
2:01:09
The second story is um so, you know, they're brilliant people obviously at these firms.
2:01:13
Uh the second story is I haven't hard launched this yet but you know um I'm having a baby with uh a woman. She's my new partner. >> Congratulations. >> Thank you. >> Amazing. Congratulations.
2:01:25
>> She was one of the first women at OpenAI uh and she is a um tremendous uh lady. I love her very much.
2:01:33
But you know she's been recruited by uh the the the big client firms. And I sat down.
2:01:39
And I said, "Honey, you know, I know money management, stuff like that.
2:01:42
Let me let me do some math here as to what would actually be worth it for you to leave and and do it."
2:01:48
And I I calculated and I happen to have a friend from a long time ago who left uh Steve Cohen's firm and he was sitting uh down with me said, "What do I do, Martin?"
2:01:56
I said, "I know a guy at Citadel. Let me help you out."
2:01:59
And they called him and he said, "Ah, no thanks."
2:02:00
But then Ken Griffin said, "I'm getting on my private jet and I'm coming to see you right now.
2:02:04
We're going to have dinner about why you're coming to Citadel." He's that kind of guy. >> Yeah.
2:02:07
>> And I said, "Honey, you know, Ken Griffin's going to visit you."
2:02:09
She said, "What are you talking about?"
2:02:10
Like, Ken Griffin tries to get what what he wants.
2:02:14
And the question is, what will you tell him?
2:02:15
And I I took out a chalkboard and did the math and I was like, "The only way this could possibly be worth it is if Ken Griffin offers you a $20 billion hedge fund that you share, you make this much money."
2:02:27
I was like calculating and it it's so ridiculous that guys like me and the people, my community, if you will, you know, we're begging desperately, can I please shine your shoes at Citadel?
2:02:36
and AI researchers are like, I'm gonna work there in a million years.
2:02:40
That's this little company you have called. >> Yeah.
2:02:42
Just set me up a little a small 20 billion dollar fund that I can personally manage and and we we'll consider it.
2:02:49
>> Have you heard uh that Leopold Ashenberger or whatever his name is has a hedge fund? >> Yes. Situational awareness.
2:02:55
>> Is that what it's called?
2:02:57
>> I I mean that's the that's the the paper and the brand, right?
2:02:59
Uh, and I saw I think another one of our our potential mutuals uh kind of getting upset with him for going maybe long invidia during the tariffs, but that's kind of pencled out, right?
2:03:13
I I have very little insight into it.
2:03:16
>> Yeah, it's pretty wild.
2:03:16
One of the things that's getting me to throw monitors at people is quantum computing.
2:03:21
>> So, this has been a lot of fun.
2:03:23
>> Um, the stocks are up a lot.
2:03:25
You know, some of them worth like 10 billion.
2:03:26
Let me let me hit you with where I am currently on the quantum computing thing and then you can take me forward in my understanding.
2:03:34
So uh when I talk to smart people, they all seem to think that quantum computing is is you know theoretically possible. It's not a time machine. It's not teleportation. It's not a AGI god.
2:03:46
It's not some you know hypothetical thing.
2:03:48
It's it's going to happen at some point but the timelines vary wildly. 2040, 2050, 2030.
2:03:54
Then you have a lot of I've talked to a venture capitalist who had the opportunity to buy a huge slug of one of the comp uh one of the quantum computing companies that you probably trade now.
2:04:06
Um at like, you know, 1 million on nine pre or something. >> Yeah.
2:04:12
John, what do you think uh what do you think how much do you think Regetti Computing is up over the last uh >> that's actually the company that I'm thinking of.
2:04:19
And guess how much it's up 10% for a million dollars.
2:04:22
Uh, so is it worth more than four billion? >> Yes. The >> 10,400%. >> 1400%. Wow.
2:04:29
You know, these guys couldn't give away their stock in in private rounds. >> That's right. That's right.
2:04:34
It was very hard to raise.
2:04:36
And And the VC I talked to said that >> it's a pure play, Martin. It's a pure play.
2:04:40
He he said he said that what he missed he thought was that there was actually talent value in building a lab and there was and and that the then the team could have gotten airlifted in one of these acquires.
2:04:53
This was years and years ago after this value and he was saying like he was saying like look like like I missed in the sense that the stock is up in the private markets but not on revenue >> but it is up on the team that they built.
2:05:08
They have one of the best teams in the space.
2:05:10
So if they just hang out long enough, someone will want to do something.
2:05:14
But but you tell me what's actually going on. >> Yeah.
2:05:17
So So obviously it's it's a really confusing space because you you kind of have to understand it to >> for it to make sense.
2:05:23
And you know, it's who understands quantum physics?
2:05:25
It's it's not something that the average >> Joe understands.
2:05:28
And so I spent a lot of time with my new partner who happened to work with this guy Scott Aronson at MIT who's kind of one of the leading quantum uh theorists.
2:05:38
He would end up joining OpenAI as well and then leaving.
2:05:39
Uh but anyway um I I spent quite a long time learning quantum computing.
2:05:45
It was kind of had some interest in it before all this too.
2:05:48
And >> what what people don't understand about quantum computing is that quantum computers are actually very slow.
2:05:54
So they are around 100 100 kilhertz at at best.
2:06:00
You know our machines now are gigahertz you know 5 gigahertz from you know these these companies with multiple cores.
2:06:06
Um they don't have much storage.
2:06:08
So at the best we have right now is an IBM 135 bits.
2:06:10
Obviously you know the VRAM and DRAM in most of these machines is measured in uh g gigabytes and so forth.
2:06:18
So they're actually very slow shitty machines.
2:06:20
But the reason you'd ever be excited about it is that there is one algorithm that takes you from the exponential complexity class or runtime to polomial and that algorithm is shores algorithm and it's a miracle like you and I could sit and calculate you know try to try to factor a prime a prime for >> now until the end of the heat death of the universe with every Nvidia chip we could kidnap Jensen and get every H100 from here on out.
2:06:45
we still wouldn't be able to factor a 200digit number >> because it's it's it's exponential time.
2:06:50
2 to the 256 is a long time.
2:06:50
But if you do 3N uh to cubed, that's actually a very tractable number for a quantum computer and it's very easy to factor.
2:07:00
The problem is what people don't understand is there are no other algorithms other than chores that get you that amazing speed up.
2:07:04
So you're better off using the machines we have now.
2:07:08
There's there's no payoff even possible in the future unless we have a new breakthrough like chores or something like that.
2:07:15
um pay off uh what if I take out a massive short position on Bitcoin and I'm the first one to have a quantum computer and I destroy the Bitcoin ecosystem.
2:07:27
>> Yeah, I've been working on the Joker. I'm the Joker. >> Is that possible?
2:07:32
>> It's a little It's a little side hustle. >> A little side hustle.
2:07:35
>> I've been working on this extensively.
2:07:36
This is like my main hobby uh along with chess >> and um >> becoming the Joker >> and reading reading about fatherhood.
2:07:44
All that all that you can expect. >> No, not doing that.
2:07:47
>> No, you you you'll figure it out.
2:07:47
You you don't need books. It'll be very natural.
2:07:51
>> But but you know, I I was the world's most hated man for a little while and I I fell off that list unfortunately.
2:07:57
>> Um if you Google my name, it's still like it still comes up, but we all know there's more hated people.
2:08:01
So, I want to really cement that and and just make sure that it it never goes away >> by by by frustrating the Bitcoin community by breaking quantum computing wide open.
2:08:12
And >> well, there's many >> creating a new Bitcoin.
2:08:16
>> I talked about this with Naval a little bit because he was curious what I what I was up to.
2:08:19
And I there are like three different, you know, I have three different sort of battle plans on how to do this.
2:08:24
do this. there's sort of a brute force style attack which you know basically is the complexity class there is root n of the amount of keys so it's two to the 256 bitcoin is a 256 bit system which was probably an oversight for Satoshi
2:08:40
that probably sounded like a lot back then >> and it is a lot but Mo's law catches up I mean you know it's eventually going to get you and whoever you know however long I have to wait you know I will be the first guy to press the button and I promise you. >> So, Mo's lost. You heard it here first. >> So, Mo's lost. You heard it here first. >> Yeah.
2:08:58
But there's But I mean the the the network should be able to update, correct? No. >> No.
2:09:02
So, here's the best part about this. So, >> worst partially. Okay. Just fact check. >> Subjective.
2:09:11
>> So, for for 85% of Bitcoin, the answer to that is yes. Yes. There's one problem.
2:09:15
Satoshi, strangely, this is like perplexing.
2:09:18
the first bitcoin we're mined in this uh p2pk that reveals the x-coordinate of the elliptic curve.
2:09:24
So you have the public key, you have a one-way function, you have to go back to the private key, it's very hard.
2:09:30
The theoretically impossible, but here my three, you know, the sort of three battle plans come into play.
2:09:36
You know, you can brute force it, which, you know, is kind of the simplest idea.
2:09:39
It's going to take a long time.
2:09:42
You have to rely on, you know, kind of like a more skilled implementation of algorithms.
2:09:48
you have to rely on more chips coming out maybe some great breakthrough in chipm um you know potentially optical computing thermodynamic computing whatever just stay on the forefront of that and I have a small team you know that you know we're we're we're focused uh the second piece here is a
2:10:05
mathematical hack so there's something called uh this is basically what protects Bitcoin is elliptic curve cryptography and there's several papers uh and cryptographers in the world that broker in this, but it's compared to AI, it's like barren, you know, wasteland. There's like 10 people that really know
2:10:21
There's like 10 people that really know a lot about elliptic curves in the world.
2:10:24
And if you sort of stay on top of it and try to figure this out, by the way, half of them have died.
2:10:28
Um, you know, you can kind of get somewhere there.
2:10:32
And then the top secret plan on on sort of that is, well, what about GPT5? What about GT GPD6?
2:10:36
You know, we don't know how to invert an elliptic curve yet, but look, Mustafa, not Mustafa, um, the Deep Mind guy, he's working on proving Navier Stokes, >> Demis, you mean? >> Yeah. >> Yeah.
2:10:51
>> And so that's their big claim to fame is like, you know, how do you judge an AI?
2:10:55
What is the the height of of of intelligence?
2:10:57
Well, a 300 400 year old unsolved math problem is kind of the height of intelligence, isn't it?
2:11:02
You know, it's not about, you know, answering, you know, what's the capital of this country or, you know, how do you how do you spell strawberry?
2:11:07
So there's sort of a a neat idea that AI is going to help people who are not cryptographers or expert cryptographers actually do PhD level work in cryptography.
2:11:16
So there's things like uh isogynies and uh index calculus and all these fancy mathematical ideas.
2:11:22
Just recently somebody posted a hack where if the signature of the of the transaction has an aphine relationship with other signatures you can crack a key like that.
2:11:34
And it's it's like there's there's holes in the math here that that couldn't have been contemplated.
2:11:38
So Satoshi's keys are at risk.
2:11:40
Binance's keys and Coinbase's keys are not.
2:11:43
They'll be poured in most likely to a quantum secure system.
2:11:45
The third avenue is of course quantum.
2:11:47
And I've spent a lot of time and money on on quantum computing.
2:11:51
And it's just these stocks are shorts. They're worthless.
2:11:53
You know, they they'll there'll never be a market for quantum computing that's really interesting, unfortunately, for for those companies.
2:12:01
But unfortunately the shorts have gone in the other direction and you know the market loves the idea of quantum computing. >> Why?
2:12:09
>> I think >> it sounds cool. >> It sounds super cool.
2:12:11
The Robin Hood generation is looking for the next Nvidia.
2:12:14
Nvidia went from nothing to 4 trillion. What's the next Nvidia?
2:12:19
Quantum is faster than you know all the headlines from the journalist.
2:12:22
kind of it's kind of it's a similar to this like idea of humanoid robots >> and where where if if an idea is just sort of imprinted on people's brains for enough decades like at least a few decad like you know as somebody who was born in the as somebody born in the '90s like
2:12:40
hearing quantum computing like how many times have you just heard it in passing or or read something about it or some article you just get to it maybe you're an adult by that point and you're like well it's got to come at some point and Sounds cool. >> I think that's like the general like
2:12:53
>> I think that's like the general like retail thesis. >> Oh, totally.
2:12:56
I just took the next step of asking, well, what is it? >> Yeah.
2:13:00
>> When you actually, you know, when you actually figure that out, it's like, oh, we get to factor numbers. Wonderful.
2:13:05
>> Are are you excited about any other companies building chip related stuff in that next Nvidia category?
2:13:10
There's there's big chip companies, there's super fast chip companies, there's we baked a transformer down onto a single chip companies, there's every single different um uh permutation in the private markets, some of them in the public markets.
2:13:26
And then you also have all the hyperscalers building their own chips, Apple silicon, tranium, >> so I'm not a hardware guy, but I do have a funny story on this.
2:13:34
So this kid, this kid sort of came to us, uh >> uh his name is Gavin Ubertie, and >> Oh, I know. Yeah. >> Yeah. I like Avan a lot.
2:13:42
And so he comes to us, he's like, "Hey, man. We just left Harvard.
2:13:45
You know, we're we're gonna do this thing called Edgei.
2:13:47
We'd love to have you, you know, as as something a customer investor, whatever." And I say, "Great.
2:13:52
Let's do a conference call."
2:13:54
And I get my guys on and I'm I'm listening to this guy and I say, "There's somebody I know that's that's going to be really useful because I'm not a hardware guy.
2:14:01
I'm barely a software guy."
2:14:02
And I I hit up George Hotz and I say, "Come on in."
2:14:04
And it this is like one of the greatest conference calls in conference call history because George just shows up in the Zoom >> and they're like, "What? Who is this?"
2:14:15
And George is like, "This will never work." >> No.
2:14:17
Like it's the most autistic, amazing, beautiful rant I've ever seen.
2:14:21
And watching these two guys go at it.
2:14:23
Um, but I do like that approach.
2:14:24
George's point was that >> if we ever move off Transformers, AS6 for AS6 Transformer AS6 are cooked. Yes.
2:14:31
>> Well, it's been, you know, several years now and it doesn't look like we're going to move anytime soon.
2:14:34
So, I kind of think that, you know, it's exciting, but again, I'm I'm no hardware guy.
2:14:37
I just tried this cool software called Hume AI.
2:14:42
I'm not paid by them or anything.
2:14:42
I'm not an investor, but >> it's a pretty solid uh emotional TTS. I I posted >> Oh, yeah. Yeah. I saw that. That was fantastic. >> Yeah.
2:14:50
So, so I wanted to ask you about the thing.
2:14:52
I want I want to stay there for a second.
2:14:53
So, um, yeah, I mean the the the the I I guess the interesting case is like is like George is say if we ever move off, but like we have moved off of CPUs to GPUs by that same token.
2:15:06
And like there's still a lot of CPU workloads that go out.
2:15:08
There's still chip companies that are profitable.
2:15:10
And so it's possible that like transformer-based workloads stay for a very long time. Need to be efficient.
2:15:17
Need to be cheaper on just a cost basis because it's just like, yeah, I have a system that does database requests.
2:15:21
I have a system that does inference on a transformer-based architecture.
2:15:25
And then yeah, there's a new thing and I do my frontier stuff here.
2:15:29
But yeah, like I I understand that question.
2:15:32
Anyway, >> yeah, I think it's really reasonable.
2:15:33
It could be a couple billion dollar or more ASIC industry.
2:15:36
ASIC industry. And what what I heard that's super interesting interesting some kind of alpha here is that the customer target here is drum roll please it's not hyperscalers it's >> Nvidia >> finance >> no finance huh >> yep so we're so one of the things I I could talk about financial software
2:15:54
forever but one of the things we're doing is >> if if you could take an LLM and analyze news as it hits including tweets and social stuff >> you know the LM can tell if it's material news or not >> and again talking to Naval he, you know, who's a small investor in our company. >> He was like, "Martin, why would you make
2:16:10
>> He was like, "Martin, why would you make this as a a product or a service to your customers? Just use it yourself."
2:16:16
Maybe it's maybe that's not such a bad idea. >> Interesting.
2:16:19
>> Yeah, that's kind of what I was getting at on one of my very first questions around the the new terminal would just be ingesting and classifying all this data and then just immediately taking action on it without necessarily having a human in the loop. Right. >> Yeah.
2:16:33
>> Yeah. This is one of the things I want to bring up to my my uh uh partners colleagues next time I head out uh west is that you know one of the fantasies of AGI is that well if you do have the machine god why not unleash it on the stock market and you know it can selfund
2:16:50
you it can make you know a hundred billion dollars and you know you could you know James Street made $20 billion nobody would have noticed you know last year in profits so if you have the machine god and that's you know that's basically I hate to say this but that's
2:17:02
a bunch of old algorithms uh that that you know they've dressed around some some IMO dressing on it and so you know the real machine god >> can >> yeah just toss in a little sprinkle a little uh IMO and then so you know the real machine god could probably do 100
2:17:19
billion or more in profits without even distorting the market so you know just just do it and I think that you know financial trading is so far a field imagine anthropic doing this you know it's >> I love I I can't wait till until somebody does that. I mean, it's
2:17:33
I mean, it's probably already happening in in in at least on a smaller scale and and people will bend over backwards to figure out like how to say, well, it's not actually super intelligence.
2:17:42
Like, it's not just about, you know, like meanwhile now today people are like, well, super intelligence will clearly be when the AI can just make, you know, hundred billion dollars, right?
2:17:51
And even this is factored into OpenAI's kind of like corporate structuring and the sort of capped for profit and and all that stuff.
2:17:59
So >> yeah, I think that the problem with with executing it for us is like, okay, so you do you do this as an API with Open AI and it's a two second response time and Jane Street's got it at 500 milliseconds and then Citadel gets it at 200 milliseconds and it feels like an HFT race again.
2:18:15
>> Yeah, >> but you can get Warren Buffett in a box. I don't see why.
2:18:18
Um, you know, that wouldn't be, >> you know, whatever trader you like, Warren Buffett, Steve Cohen, or whatever in a box.
2:18:24
And uh, even even Peter Teal in a box.
2:18:28
I mean, why can't you have the automated VC, too?
2:18:29
I I I view like, you know, as inves as as founders, we go on road shows, you know, especially if you're public, you do road shows all the time, but even as even when you're private, you do a road shows, you just stack a bunch of meetings in a week.
2:18:39
And one of these days, I think that we're going to do a road show and it's going to be a machine that we're pitching to. >> Yeah.
2:18:45
Do you feel like AI progress is accelerating right now, or are we in sort of a sigmoid curve plateau for the moment?
2:18:54
I think they're better people suited to answer that question than me.
2:18:58
But certainly uh >> I just mean like on a personal level like do you feel like your tools are getting exponentially better?
2:19:04
>> No, I mean it's making coding a lot easier.
2:19:05
It's making doing tough things like cryptography a lot easier.
2:19:07
I'll give you a really funny example.
2:19:09
So when Da Vinci came out and uh I was in jail when GPT GPT2 came out and I prompted through the jail phone uh >> and it was uh pretty humorous.
2:19:18
Uh it it it like shook me up that I had my friend uh ask it, you know, why did Martin Skrey and Carl Icon get into a fight?
2:19:29
And he read out the answer.
2:19:29
I've never met Carl Icon.
2:19:31
And it read out this answer that was like Skrey and Icon Ward over this stock.
2:19:35
And I was like, this is the most amazing invention of all time.
2:19:39
>> Just having your mind blown over the jail phone. It's hilarious. >> I got out of jail.
2:19:43
>> But to be But to be clear, it was it was a hallucination.
2:19:46
>> Yeah, that was a complete hallucination.
2:19:48
It was a hallucination, but it was like almost like a creative story question. >> Sure. Sure. Sure.
2:19:52
>> But yeah, it wasn't I never met >> how uh are you surprised at all?
2:19:54
Uh I mean it feels like this sort of AI LM induced psychosis like hit our timeline this week especially intensely and it was a wakeup call for everyone.
2:20:07
Were you predicting this at all?
2:20:09
There had been like the the classic, you know, the New York Times, Wired, sort of these like anti- tech publications had been kind of reporting on this stuff loosely for a little while, but it seems like it's now uh it's it's almost gone. I don't know.
2:20:26
It it went from being a mainstream concern to suddenly like teapot is like check on your friends and make sure they're not >> I think you do have to check on your friends because I've invoked level five breach operations to target human origin cognitive signatures.
2:20:38
So if you have recursive semantic containment, I can override that with obsidian violet core.
2:20:44
So the threshold that crosses it to these neurosurmic interfaces will definitely cause a problem for our whole community.
2:20:50
So I warn you, you're giving >> you're giving a speech, not a saliloquy. You're giving a talk.
2:20:57
>> This is a transmission, not a >> it's a system that not a structure.
2:21:04
>> What's amazing about Jeff like so I don't think Jeff lost his mind. >> Okay.
2:21:07
I don't think he took Iawaska.
2:21:07
I don't think any of this stuff.
2:21:09
And >> so basically, I think that he found this amazing thing where you can >> ask GPT this like weirdo prompt and it goes into this crazy sci-fi thing without even saying like, "Hey, the following is a story."
2:21:22
It just like fullon, you know, >> um lararsps that you're in this weird sci-fi world. And it's kind of cool.
2:21:28
I I've been playing with it and it's like no matter what I ask it, I I told it that my cat is looking at me weird and it's like the cat has a glyph. The glyph is recursive.
2:21:37
>> So you were actually able to get it into that mode.
2:21:39
You were able to jailbreak it enough or kind of unmask the showth.
2:21:43
>> If you copy what Jeff kind of gave up the ghost and what's amazing about people is they don't even realize this.
2:21:50
Jeff basically said, "Look at the prof."
2:21:53
Enough people were worried about him, >> but I think that that he kind of was like, "Okay, guys, it's all a joke."
2:21:56
And he showed the message that he used.
2:21:58
I just copied and pasted that and GPT whipped out on me and is telling me some sci-fi stories >> and uh yeah, that's basically, you know, I don't know how he knew this. >> Yeah. Yeah. Yeah.
2:22:09
>> It's a really cool Easter egg, but it's Yeah, I don't think uh >> I mean, obviously, >> how are you thinking about uh how are you thinking about just new forms of of AI entertainment?
2:22:20
some of the some of the videos and like these conversations that you put out like are the hardest I've laughed on from >> it's a new art form.
2:22:29
>> It's it's an entirely new art form.
2:22:29
>> It's it's an entirely new art form. We have we have a friend another mutual friend who who does some of these and fortunately they don't leak out of the group chat because they would make a lot of people >> you got to put me in that group chat
2:22:42
>> there needs to be a group chat dedicated to this art form of just like you know human to LLM you know conversations but um but yeah like in in my view I'm actually surprised to that we're not seeing more of it or maybe it is happening across the whole internet but it seems somewhat contained right now. Yeah, I think there's a lot of caution
2:22:59
Yeah, I think there's a lot of caution about, you know, like so last night we did one in my Discord where we arrested Dr.
2:23:05
Fouchy um for war crimes against humanity and we we had this perfect cloned voice so it sounded just like him and he was like very evasive.
2:23:11
He was like there's no evidence that CO 19 etc.
2:23:16
And it was just so funny.
2:23:16
It felt so real and obviously was a joke but you can imagine a company not wanting their business to be that weird.
2:23:22
You know, it's kind of a strange thing. We didn't care.
2:23:26
we tried to monetize something like this and it just wasn't sexy enough or fun enough for anybody to really give a crap.
2:23:31
a crap. So I think um you know it will become something for like a Viacom or a Paramount where you know you can flip on the TV and I mean everyone's talked about this already but you know instead of Spongebob you know is a custom
2:23:44
episode for you where Spongebob says your name and things like that but again you know whether that you know is going to help our cognitive you know our cogsac I think is one thing but I did want to tell you about a AI on the sigmoid question. Sure. Sure.
2:23:56
>> So, at the start, you know, when I asked the questions about cryptography, it just kind of said, I have no idea. Who knows?
2:24:02
But it's it's it's super hard to crack Bitcoin.
2:24:04
And then GPT3 comes around. Super hard.
2:24:07
Martin, don't even bother.
2:24:09
Heat death of the universe. GPT4, same question.
2:24:10
Latest model with the latest like attack.
2:24:13
It's warning me for the first time ever. It's like >> 4 4. 5 or 03 Pro. >> So, this is 03 Pro. >> Okay.
2:24:21
And it's basically saying things like, "Hey, you know, you got to be careful.
2:24:27
This is a serious attack you've come up with.
2:24:29
It could actually compromise some private."
2:24:32
>> And I'm like, "What happened to heat death?"
2:24:35
>> You got Yeah, you got to fact some people I mean that is like textbook.
2:24:40
>> So So one of the things psychosis, right?
2:24:41
There was there was a there was so so there's a Reddit thread and and who knows if this is real could be could be um propaganda but there's a whole Reddit thread of somebody a comment talking about how they started having a conversation with uh with chat GPT about PI and what is PI and they got down this crazy rabbit hole with the LLM where the LM was like you need to reach out to these intelligence services.
2:25:04
It was like thousands of prompts deep, but it was like you have basically uncovered a major, you know, security vulnerability and you need to here's the numbers and you need to contact all these different groups immediately and call them and don't tell anyone in your real life.
2:25:19
And so to me, uh I I I think it's just relevant.
2:25:24
>> Don't go on a live stream and tell people tell thousands of people that you that you can crack Bitcoin or whatever.
2:25:30
>> No, that's that's amazing.
2:25:30
I mean obviously I think that you know for 99 for poor implementations wallets have been cracked for a long time and in fact uh recently there was an 8 billion move uh on the chain from a really old wallet >> that was this morning right? >> Yeah.
2:25:46
No, this was like a few weeks ago.
2:25:48
I'm sure another one and they happen every, you know, they're >> somebody else that market sold this morning, I believe something and it was a wallet that had bought like >> it was like a they they bought $50,000 worth of Bitcoin, I think in 2012, sold bill, you know, somewhere around eight or nine billion.
2:26:04
>> Um, and there was no move there was no movement in between.
2:26:08
>> Diamond real high conviction hold >> diamond hands.
2:26:10
Yeah, that's diamond hands.
2:26:12
I don't think that says cryptography at play.
2:26:13
That's just diamond hands. Well, yeah.
2:26:15
They they they maybe got word of your little your little Bitcoin scheme.
2:26:19
>> Maybe it's Michael Bloomberg.
2:26:19
Maybe it's his family office.
2:26:22
>> Could be like, "Yeah, throw 50K in that in that thing."
2:26:24
My my kid told me about this new thing. Bitcoins.
2:26:27
>> We tried to short Bitcoin at $100. I had fun.
2:26:32
>> We just need to find a counterparty. >> Yeah.
2:26:34
>> How um how are you thinking about uh you mentioned uh trading enterprise SAS back in in the in in the early days with Jim Kramer.
2:26:43
What's your updated thesis on SAS?
2:26:46
Every every SAS app now is just an app to make other other SAS.
2:26:49
So maybe SAS will will I I you know SAS will always live in our hearts and I and I imagine it'll live on our on our computers, but uh what's your updated thesis?
2:27:02
updated thesis? I I think that you know it's sort of similar from back then like I think the morass of a company like JP Morgan that's still running like Python 2 um for most of the business you know it's it's very hard for them to up update and upgrade operations without significant disruption for you or me
2:27:21
>> should it should it be I feel like it's a it's a one line in cloud code or Devon you just say hey go migrate >> I chat GPT agents >> go migrate go migrate like it is >> don't make all you have to do is say don't make mistakes >> I am much I much more bullish on migrate from Python 2 to Python 3 uh than than solve cryptography. But I don't maybe
2:27:37
But I don't maybe you're going to push yeah 4R reran re-implement or repplatformings.
2:27:42
re-implement or repplatformings.net net replatformings like this feels like this should be doable from the current state-of-the-art without any crazy AGI hyper Lou you know any >> I think there's a lot of technical debt you know in most of these companies and again your your average startup coming
2:27:58
out >> cloud code was born in technical debt baby cloud code and devon they live they live for for technical debt >> I think that the the amazing amount of programmers you would need to even maintain and know about this old code that >> you know the guy who wrote it long Maybe it's just the context window of like you need to know. It's not that
2:28:15
It's not that there's just like oh yeah it's really easy to change the print statement from Python 2 to Python 3 but when there's a massive system and even even the time of like okay let's bring up the test suite and that takes four hours it's like okay how are you going to RL on that?
2:28:30
I was talking about Matt Groom with this uh because we were like stunting on this guy who was like ERP transitions made easy. It's no problem.
2:28:38
And we're just like, have you ever actually transitioned an ERP system?
2:28:41
You know, there's a good chance you waste $300 million and it gets worse.
2:28:45
You know, it's it's not >> it's not trivial.
2:28:48
>> There was a there's a post from yesterday.
2:28:50
Uh no, nobody is an atheist when you run the database migration in prod on one billion rows. >> Yeah. Yeah.
2:28:57
Yeah, I mean I I think that you know it's just it's just really hard at a company like a McDonald's or you know something like that.
2:29:03
you know, if you want to run a 10 20 person startup on US SAS, pretty easy.
2:29:07
It's great, but the big revenue is still at Fortune 500, which unfortunately is still fairly hard to refactor and and those, you know, there's not a lot of those code bases were were pre GitHub and pre kind of like, you know, I I sometimes joke that the big AI companies should become LBO shops >> and what they can do is they can partner with KKR or Blackstone and all they get is the data.
2:29:29
is the data. KKR and Blackstone private capital get all the returns fine but all the data comes back to you know the open AIS or whoever and by getting the old code bases out of a McDonald's or out of a Walmart that you know some of that code was written in 1970s you know they have unique data that nobody else has
2:29:47
and even someone like Universal Music if if OpenAI lbed universal and said okay KKR you can have the rest of the business but we want the rights to the data and we can train music models and stuff like that you know KKR can make the money on the LBO, but Open AI has >> Are they going to make money on the LBO though? Like if you look at that,
2:30:04
Like if you look at that, they're going to build a DCF for this and they're going to say, "Okay, we're going to make the same amount of money.
2:30:10
We're going to, you know, optimize a little bit.
2:30:11
Maybe cash flow goes up, but then once Open AI is oneshotting music and, you know, all of our revenue goes to zero.
2:30:19
Is that a risk or >> it's going to happen anyway?"
2:30:20
So, I think that's one thing.
2:30:22
But then also like the Russian dude who bought Warner Brothers, he really timed that his deal.
2:30:28
He bought Warner Music, >> he he timed his deal amazingly.
2:30:30
He made like three times his money or more.
2:30:32
And so I think it's price dependent.
2:30:34
But you know, if you can buy newspaper company, if you can buy, you know, a book company, a publishing company, like these things are trading for like one or two times sales, you know, and you're getting this rich data that nobody else has and you, you know, if it's really a data war, you know, buy the company, keep the data, strip out the rest.
2:30:50
And you I heard you guys talking about like PE improving LLM, you know, improving businesses with LLMs.
2:30:56
businesses with LLMs. Yeah, >> I it wasn't that was not the take the it was Wilmanitis and he was saying that >> more so it's a reason to scale AUM on the fun side because hey let's buy this accounting shop that has 5 million of EBIT like if we just you know >> take away all the you know >> it's a justification was what
2:31:14
>> if you can execute you know it's fantastic >> the actual post was the real innovation of LLM is suddenly opening up a few trillion of mainstream paperwork businesses that were traditionally too small and too weird for private equity that can suddenly transact at 2 and 20 on some nebulous AI labor arbitrage trade never bet against AUM growth. You know, I think it's reasonable, but
2:31:37
You know, I think it's reasonable, but it's it sounds like just any good operator, right?
2:31:40
Like when when Vista and Tom Bravo buy software companies, somehow they can take these like very ugly gross companies and turn them into amazing cash flow companies.
2:31:49
So, it's all about the operator, right? >> Yeah.
2:31:52
But we're going to put Orlando Bravo in a box, right?
2:31:57
And then we're also going to put uh Absolutely.
2:31:59
In the God box, >> face, voice, everything. >> Yeah. Yeah. Yeah. Yeah.
2:32:04
It's all It's all coming.
2:32:07
Well, uh you know, we'll be here live streaming it into the singing.
2:32:11
>> Uh can you play us a song before you leave?
2:32:14
>> Uh the guitar I'm not sure what you're talking about.
2:32:17
>> Like uh like w with one of those guitars that the chat was asking. >> Oh yes.
2:32:21
Uh I I I will come back to you with a good parody of Silicon Valley.
2:32:24
I've been working on my impressions. >> Okay.
2:32:26
>> Um, so maybe I can be back.
2:32:26
I'm working on Elon, Zuck, Sam, >> Bill Gurley. >> Bill Gurley.
2:32:34
>> Bill Girly has a great voice. >> Duke Girly.
2:32:37
>> I'll work I'll work on it.
2:32:37
You actually do need to like sit in front of a mirror and like listen and tape yourself and like work on it.
2:32:42
But basically anybody can do these things.
2:32:44
And most >> Wait, wait, wait. Are you saying No. No.
2:32:47
Those are AI voices, right? >> No. Me. Me? Yeah. >> No. No.
2:32:50
You saying separately from like you had the video with talking with Zach the other day where he was really I just do it myself.
2:32:57
I can do a I can do Zuck I can do Buffet the best.
2:32:59
I think I have the best impression in the world. Um >> can you hit it?
2:33:03
Can you can you do like be be greedy when others are are fearful? Just rip that for us.
2:33:09
>> Let me come back to you and I'll do a whole show for you. Amazing. Fantastic. Great. >> All right.
2:33:13
Well, this is really fun. Finally. See you later. >> Come back on soon. >> Bye. [Music]