0:00
You're watching TV, >> Jordy.
Search this video
0:05
What is going on in the timeline? >> We got a red flag.
0:08
>> We got a red flag on the play.
0:08
The timeline is in turmoil.
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Elon Musk and Sam Alman are fighting.
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Mom and dad are fighting.
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Mom and dad are fighting. Shots fired.
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This all started because of Apple, actually.
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Not OpenAI, not X, not the Everything app, but Apple and the and the iOS charts.
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So uh this started with uh Elon Musk posting Apple is behaving in a manner that makes it impossible for any AI company besides OpenAI to reach number one in the app store which is an unequivocal antitrust violation.
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XAI will take immediate legal action.
0:46
Well, the uh the community notes section took immediate action and added a number of extra context that they thought people might want to know.
1:00
First, in January of 2025, DeepSeek reached number one overall in the app store, similar to how RAMP is our number one sponsor on this show. Time is money. Save both.
1:11
Essentially, corporate cards, bill payments, accounting, and a whole lot more. All in one place, folks. Go to ramp. com.
1:14
Um, and just one month ago on July 18th, 2025, uh, Perplexity reached number one overall in India's app store. That's interesting. I didn't realize that.
1:24
>> Grock has hit number one in Japan. >> Oh, that's right.
1:27
Yeah, but factors contributing to that.
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>> So, most of the AI apps live in the in the productivity section.
1:33
So, that must have been in that.
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But it's odd because it's like we need a whole new set of of uh of categories for the new AI apps.
1:43
feel like they should have their own category immediately.
1:45
What are all the categories?
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I mean, productivity, I feel like that's everything from like spreadsheets to chat GBT.
1:49
Like, it's a pretty broad It's a pretty broad category.
1:54
Um, and and so they I mean, Apple probably needs to redo the uh the the categories.
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Where even are the categories?
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I feel like you can't I feel like they're hard to find these days.
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They have editor choice apps, which we'll get into because uh Okay, so browse categories.
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They have Apple Vision Pro apps at the top.
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That's an odd choice for the iPhone version of the app store.
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Then Apple Watch apps, then AR apps, then books, business, developer tools, education, entertainment, finance, food and drink.
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Food and drink gets its own cat.
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>> Well, I'm looking at the global top charts right now or global for the US.
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So, across all the different categories and right now, chatbt is number one.
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Number two is tea on her dating advice, which >> there's a new tea app >> which is helping men date safe. >> Wait, wait.
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So, it's the men version, >> the male version, >> the male version.
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>> Uh, it is >> it's men's cereal, the tea app >> rated, but it is number one in lifestyle and number two on the overall chart.
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Number three is T dating.
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Four is threads, which apparently just crossed 400 million monthly active users.
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>> Adams is not messing around over at HQ.
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>> And Grock is number five.
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>> Okay, it's not that bad.
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>> This is despite Apple.
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I I do believe that Elon is correct and that Apple's not including Grock in features which which are editorial separate editorial. >> Yeah.
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So, uh yeah, I mean Doge designer says Grock is the number two app in productivity, number six overall.
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So, why is it so hard to find?
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And what he's pointing out is that Elon Musk shared this.
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Grock is the smartest AI in the world and on the toughest test and came first by far in coding, but is not mentioned all at all under AI but by Apple.
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So, Apple did an editorial view on the AI powered apps and they listed out a bunch.
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Uh, Chachi BT, Google Gemini, Microsoft Copilot, Lightroom, Photo and Video Editor, which I mean I I use it every once in a while, but it barely has AI features.
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It does not compare to a foundation model.
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It's not a chat interface. Then you have Canva.
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Then you have Dolingo, which of course Dolingo uses artificial intelligence in some ways, but you don't think of it as like a competitor to catch.
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So this is clearly just like here are some fun apps and we're using the AI buzzword over at Apple.
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And I think it's given given the uh series of PR crises that Grock has experienced in the last call it six weeks.
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I think it is fairly fair for the app store to say hey let's let this breathe a little bit. >> Yep.
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>> We're not we're not removing them from the app store.
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We're not removing them from the rankings. They're still ranked. Yep.
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But maybe let's not feature it given that it's been saying. >> Yeah.
4:36
The other the other interesting thing is like Grock usage has to be split across X and Grock the actual app.
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Like I bet I wouldn't be surprised if the majority of actual uh prompts or tokens flow through X the everything app.
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Like that's certainly how I use Grock when I use it.
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I usually start with the post, click the Grock button, then I'm going back and forth a little bit there.
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And then also uh they actually have a a pretty awesome uh flow where now on any image you see on X you can press and hold and say edit this in Grock and then you can just type you can just type studio Giblly and it just gibblies it right there in Grock. >> Yeah.
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And they launched a feature to make turn it into a video >> video. Exactly.
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So all of those Grock tokens, all those Grock usages, that's going to feed into the X app, which again they've always put X in news and not in social networking because I think it couldn't beat Facebook and Instagram, but it can beat um like the the like the traditional news apps.
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So all of the different rankings are all very um they're it's all gamed different ways.
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Some of them are momentum based, some of them are different categories.
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And uh I mean we heard this from Nikita Beer where he was saying that uh his last app that went super viral he hid in the games section as to his those were his words he hid because the game section is so crowded that people wouldn't see him climbing the rankings but >> charts are based on acceleration broadly exactly total usage >> and there are only like 10 dominant social platforms.
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So if he had a ton of momentum he'd probably be in the top 10.
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people would be screenshotting and being like, "What is this?"
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And it would be on Mark Zuckerberg's desk and Mark would have to be like, "What's our plan to kill this?" You right.
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Um, as opposed to if you're hanging out in games next to 75 Candy Crush clones, you're you could be doing well, but realistically, you're not you're not really gaining that much.
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You're not drawing that much attention.
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Then at the last second, he swaps over to social networking where he actually wanted to be, and then he's at the top of the charts.
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Anyway, >> so Elon says Apple's behaving in a manner that makes it impossible for any AI company besides Open AI to reach number one in the app store.
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He starts getting community noted.
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Sam Alman fires back, says this is a remarkable claim.
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Claims that Elon is uh using X to benefit himself and his own companies and harm his competitors.
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Sam starts getting community noted.
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Elon fires back and says, "You got three million views on your BS post. You liar.
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far more than I've received on many of mine despite me having 50 times your follower count.
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Elon's getting community noted, but Sam fires back. Skill issue or boss. >> Skill issue or boss.
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>> Uh, anyways, based on the timeline's in turmoil says, "Will you sign an affidavit that you never directed changes to the X algorithm in a way that hurt your competitors or helped your own companies?" Who said that? This is Sam.
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Sam said that an apologize if so.
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U one thing is that open AI has >> consistently dominated the narrative on X organically many of their >> to some degree I feel like I feel like OpenAI has been more dominant just in the real world and actually anthropics done very well on X and there's been this whole theme of like Claude has better vibes and big model smell and oh >> stuff like >> if Sam Alman puts a post up he can put a picture of a Death Star and get% right.
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>> And so I don't believe that he's like shadowbanned and I don't believe that anyone in OpenAI is like shadowbanned or being held back in the algorithm. >> Yeah.
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>> But somebody responded to this.
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>> Really quickly, if Sam's worried about reach, he should be using Reream, putting his content all over the internet.
8:23
Reream, one live destination, one live stream, 30 plus destinations, multiream, and reach your audience wherever they are.
8:28
Uh, and thank you to everyone in the chat today.
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Mark, Siraj, we got Taylor, David.
8:32
We got a whole crew here.
8:34
Uh, Techno Chief, I believe, said good morning to me. Hello, Techno Chief. Good to see you.
8:38
Uh, and, uh, it's fun having all the crew assemble in the chat rooms.
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We actually can see the chat wherever it's happening, whether it's on X or on YouTube because of Reream. So, thank you to Reream. Anyway, continue.
8:52
>> A friend just just messaged and said, "Somebody tell Elon to unshadowban me." >> Okay.
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>> And I think that I I think I know who this is.
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>> I think it's much more likely that uh that that it's a skill issue.
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Like I think it is a skill issue.
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>> Sam is saying here, you never know. You never know.
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Um but uh somebody responded to Sam and Elon's exchange and they said, "Grock, who's right? Don't be biased."
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>> And Grock fires back and says, "Based on verified evidence, Sam Alman is right.
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Musk's Apple antitrust claim is undermined by apps like Deep Seek and Perplexity reaching number one in 2025.
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Conversely, Musk has a history of directing ex algorithm changes to boost his post and favor his interest per 2023 reports and ongoing probes. Hypocrisy noted.
9:36
So, we'll see how >> this is 4D chess because in general people don't believe Grock because they believe it to be insane.
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>> Well, it said some wild crazy things.
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And so, if Grock is siding with Sam, people will be like, "Well, Grock's wrong." Elon's actually correct.
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>> Yeah, >> that's the beauty of these things.
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>> Elon is thinking, "What have I created? monster. >> Monster.
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>> This is like the child that uh what's the what what's what's what's that uh mythology where where the child kills the uh >> Edipus Rex. Of course. >> Yes. Edipus Rex moment.
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>> Child coming for the for the father. >> Yeah.
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>> Well, we'll see how long you want to play on that on that analogy. It gets pretty weird. >> It gets pretty weird.
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>> I mean, marries his mother in that in that >> scene.
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Uh but uh we'll see how long Grock lasts in the timeline today. We'll see. >> We'll see. We'll see.
10:29
So the uh yeah, the Wall Street Journal wrote it up.
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Um Apple is behaving in a manner that makes it impossible for any AI company besides OpenAI to reach uh number one, the App Store, which features lists of top and trending apps as a key way for apps to access new customers.
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Apple doesn't say much about how or why it chooses particular apps to feature.
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Uh among the factors, it considers it usability and positive reviews and ratings.
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Yeah, it's definitely getting more and more complex.
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>> It's just important to break out editorial decisions from the App Store team and true rankings, right?
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>> I mean, it I I really I think a lot of people have not taken a tour of the modern app store on iOS because it used to be that you just show up and there were and there was just a list of like the charts were like a few clicks away.
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I'm like seven clicks deep.
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There's an ad for just Google, I guess, in here.
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There's essentials that are just top games right now.
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Like, you have to scroll and scroll and scroll and then you go over to apps.
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Then you can browse the categories.
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But even when you browse the categories, you go to productivity, >> it's going to give you like the when I go to productivity, you think I'd be browsing to hit like, okay, show me the top productivity apps.
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No, it's it's showing me an app called Sofa, a downtime organizer.
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Then it's showing me essential productivity apps that are selected by the app store editors.
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Then the best calendar apps, best to-do apps, best email apps, best focus timer, habit tracking. It's going going going.
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And >> well, the big question is how much how much discovery is actually happening in the app store.
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Is this where people are finding the top charts, but it's seven it's seven clicks deep.
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And so yeah, if I go to free apps, it's chatg number one, then Grock number two, then Microsoft authenticator number three. AGI chief.
12:14
Let's hear for Microsoft authenticator.
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maybe doesn't get enough love.
12:19
No, but the question here is are people discovering various LLMs through Tik Tok and X and Instagram, various platforms.
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Is that where discovery happen is happening? >> Yeah.
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>> And I'm sure there's some discovery happening in the app store, but it it has to be a very small fraction of the the downloads being driven are are actually driven by the editorial decisions from the the app store. >> Of course. Of course. Yeah.
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and and games don't even show up in the top like it's not uh games are not it's a completely separate tab.
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You cannot select games as one of the subcategories of apps because games are not considered apps anymore in the app store.
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To answer the question about like hiding in games.
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Um yeah, the other the other question is just like how much how fair is it to give yourself a little boost in your app that you paid 70 billion dollars for? >> Yeah.
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Like I was thinking about this and I was saying like >> 44 billion. >> Well, it was 44. >> Yeah. >> Yeah, it was 44. It wasn't 69.
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I thought it was 69 for some reason.
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That was that was the price per share was he he paid so ridiculous.
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Anyway, um >> I was thinking about like before the launch of Instagram stories, I didn't have a way to share Snapchat stories on Instagram.
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like you could screenshot them, but there's no sort of like native way to share a link to a story that if someone on my Instagram feed sees it, it clicks and it automatically opens in Snapchat.
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Like there it was always a walled garden.
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And then when Instagram stories came out, there was really no way to tie those two platforms together.
13:56
Like in the in the pre- meta era, there was a way when you shared a post on Instagram to check a box and automatically share it to your Twitter and it would not just share a link, it would share the actual photo. Yeah.
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with the comment and it would work as a native post on X and it could, you know, not not really go viral, but it could it could it it existed on Twitter as like a first class citizen in the sense that the image was there. There was no link.
14:30
It was just like you had just actually opened the app, posted the same photo with proper crossost, right?
14:37
And then eventually once Facebook bought Instagram, Twitter had to respond by breaking that integration.
14:42
So early on, Twitter had this very, this was like the Adam Bane era, like the early uh back the Dick Costello era, Twitter had this idea of like we're going to be the command line for your life.
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And there was this idea of like I'm going to be able to tweet at you to send money to you.
15:01
Like the everything app idea is something that's over 13 years old at this point, maybe 15 years old at this point.
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Like the Twitter executives were thinking about this a long time ago, like being able to tweet money at you, being able to twe like use >> use Twitter as kind of this like substrate or this like API for all sorts of things.
15:19
Other apps would be built on top of Twitter.
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There was Tweet Deck and Tweety Bird and like all these different like the mobile app was by an independent developer >> and they just didn't and they were like why would we need one?
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We just developed the protocol. Well, this too. Yeah.
15:33
Well, you need one because you want to stuff ads in it obviously and you want to monetize it. It makes a ton of sense.
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And so Elon came killed all that.
15:37
But >> the other challenge here is is Grock has a variety of NSF W features. >> Yep.
15:48
>> And when Apple is making editorial decisions about which apps to feature in the app store, >> Yep.
15:54
>> that is certainly going to be on their mind.
15:56
We're having Eugenia from uh Replica on the show later today.
15:58
I'm wondering if Rep rep Rep replica I think has is currently in the app store with 226,000 reviews.
16:09
Um hasn't gotten kicked out.
16:13
I'm trying to think if any other um if any other apps so like Only Fans for example does not have an app.
16:19
I'm wondering if any of the what character AI does, right?
16:26
So Apple's clearly d drawn the line at like like AI chat bots even if they're somewhat erotic are okay, but we but >> that doesn't mean they're going to that doesn't mean they're going to feature they're not going to promote it to the average person on the app store. >> Yeah.
16:42
No, that's absolutely correct.
16:42
Um >> so and then again I I think it's very hard to say how Apple makes these editorial decisions, but it's very possible that they are talking with people on the Apple team and being like, "What apps do you like?
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What apps are you using?"
16:59
Making decisions that way, right?
17:00
I think I think part of Grock over the last month or so is like figuring out like how do we get >> strong consumer adoption?
17:09
Which categories are we going to get strong?
17:13
>> I'll tell you how they get strong consumer adoption. Sock 2 compliance.
17:16
They need to get on Vant.
17:16
Automate compliance, manage risk, prove trust continuously.
17:18
Vanta's trust management platform takes the manual work out of your security and compliance process and replaces it with continuous automation whether you're pursuing your first framework or managing a complex program.
17:28
No, that is a good question.
17:28
How can Grock actually get consumer adoption?
17:32
The companion space seems like the maybe the right move even if it is a little weird.
17:36
But is there any other path?
17:36
I mean forking it into Axe and Twitter and like having it show up on every post seems like a reasonable way.
17:44
I wonder it is weird that they have two apps.
17:48
I thought X was supposed to be the everything app.
17:50
Like like why are they trying to get me to install a second app when they should maybe just say, "Hey, we're actually going to be the everything app.
17:58
You can use Grock fully and you're all the upgrade and you can get on Gro heavy and you can be paying $200 a month for a top tier the super insane level LLM but it all exists and it's all managed within the X app that already has a lot of a lot of installations your Grock is >> is uh top or near the top of a bunch of different benchmarks >> and yet that doesn't guarantee consumer adoption Right?
18:28
People don't switch products because something is >> 20% better in this technical way, right? They develop habits.
18:34
And the other thing, it was only a month ago, Grock or XAI announced a partnership with the Department of Defense, $200 million contract. So that's serious.
18:46
>> Uh but again, you know, figuring out where they're going to ramp revenue with consumers that in when it's not just bundled into X, the social media app. >> Yeah.
18:56
I think it it's interesting to to debate like when can a new technology be bolted on and become additive to an existing platform versus you need a new app to actually get it to work.
19:10
So, Facebook actually rolled out a search engine in Facebook, the Blue app, like years ago.
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And when you would go to search, you could search for your friends, but then you could also go and it would search the web, too.
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And it would say, "Hey, you're searching for this thing.
19:29
Uh, there's no posts about it out there, so let's just pull from the web."
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And they basically built a search engine >> team, pull up this post from Chad GBT.
19:40
I want to see John's live reaction to it.
19:42
>> Okay, let me let me see this post.
19:42
Um, whereas whereas like like stories was something that was added.
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>> So they chat GPT quoted Grock saying that Sam is right and said good bot. >> Good bot. Wow. Timeline's in turmoil. You love to see it.
19:59
It's a great day on the internet.
20:00
Um, >> but there's always Yeah.
20:02
So, so I I think there is something about like the pixel screen the screen pixel real estate that is um that is somewhat like like screen pixels are are uh like scarce and you can only do so much like it's it's like Instagram was able to add reels as a tab integrate those into the main feed.
20:24
They were able to add stories up at the top as a little bar and it got crowded but no but Instagram did not did not see massive churn. >> Yeah.
20:32
>> Yeah. But I think that if they I'm I really think if they try and stuff like okay yes this is also like clawed code and you're going to like do your you're going to do your homework in Instagram now you're going to do your your your software engineering in >> in surfers up here you're going to have
20:50
a chat below >> I think no I think it's I think it's too too big of a step whereas going from photos to videos to reals to stories like all of that works within the same kind of UX u UI buy space, but if you try and bolt on like a productivity tool into a social network, it it it winds up being a little rough. And so maybe
21:10
And so maybe that's the reason why Elon like realizes that like Grock has to be a separate app because if I'm using Gro heavy to solve Olympic level math, I might not want that to happen on the chaos timeline feed, >> right? >> Yeah.
21:27
I mean, if if you're a software engineer working at a company and every time you your your boss walks up to talk to you about something, you're in X the everything app just scrolling the timeline while coding.
21:40
That might be tough, right?
21:40
It might be better to be doing those doing that coding work and you know with with Grock, right?
21:47
>> Put put a spreadsheet in there.
21:47
Put put a database in there.
21:49
Let me let me build let me build an entire business within the everything app.
21:53
Tyler, what's your reaction today?
21:58
>> Um, I think so, so one thing I've been thinking about is like uh I forget who it was, but someone said like um as a company you want to like do things that your competitor that like go against your competitor's morals, right? Do you remember?
22:09
>> Yeah, this was Paul Graham. Yeah. Okay.
22:11
It wasn't it wasn't morals, but it was just like the idea of counterpositioning.
22:14
counterpositioning. this idea that like Avi Schiffman at friend like he's making a product that is a wearable AI device and if he makes it look like an Apple product and he makes it like oh it's instead of an AirPod and you know an iPhone it's a necklace like and it has
22:31
Apple design language like Apple will totally be able to just steamroll that by launching something very similar whereas if he comes out with something that has such a bizarre design that Apple would be like wow if we try and copy >> and he's not trying to make it useful for anything other than being your friend, >> right? He's he's he's also
22:48
He's he's he's also counterpositioning against chat GPT, which is a >> tool.
22:53
It's it's not its default state is not to be your friend.
22:57
People use it that way, but and and in some ways it's designed to to function like that, but >> ultimately um yeah, I think he he's found he's carved out his own and and Grock did the same thing by coming out and and like leaning really heavy into companionship, right?
23:18
If they're going to go in that kind of countering, I think they could also see them doing almost like a cluey type thing where it's like, >> okay, you can use this for your homework like you make it very good at like >> you don't have to use like cheating per se, >> but I think that's like an interesting way that like if they want to go further down that like consumer kind of positioning. >> Yeah.
23:38
It just it's odd that it feels like they're trying to do a lot right now.
23:42
now. they're still in the exploration phase because I have I mean maybe this gets to like the value of transfer learning in reinforcement learning but I have it I have a hard time believing that many people who are in the market for like a companion are like I
23:57
definitely want it to be able to ace humanity's last exam like I in fact in fact in fact I think that you might want a companion not to be better than you at math like I think you might want a companion that just kind of like is Oh yeah, I agree, man. Like that math Like that math problem.
24:14
>> This is a toxic friendship dynamic.
24:16
People are like, I want I want my friend to be great, but not better than me. >> Exactly. That that's real.
24:19
So they need to they need to dumb it down.
24:21
They need to be the inverse of bench hacking. >> Yeah.
24:25
The the truth >> the new meta is going to be teaching your AI how to do things. >> Teaching it history. >> Yeah.
24:31
>> Teaching it how to do your homework. >> Yeah. Yeah. Yeah.
24:33
I mean the the Fineman method you teach and then you learn you learn it.
24:37
Like I would probably learn more from teaching an LLM the answer to a problem than it trying to teach me.
24:45
What were you about to say?
24:46
>> Um I was going to say like the truth seeeking like idea of Grock seems very much like opposed to the companion aspect.
24:53
Like those seem like two different ends of >> the hero of our group chat right now is one of the greatest fabulouss in history.
25:01
He's a he's a serial liar.
25:05
>> But but but he's the most entertaining character.
25:07
He's the core jester of our group chat because he hallucinates more than GPT2 and it's fantastic and and it and and it genuinely provides a lot of value than just someone who's like, "Oh, I will only give you things that are 100% I will only say things that are 100% factual.
25:22
I will only say things that are definitively provable."
25:25
It's like, no, he he he throws out a lot of wild pitches, but every once in a while >> he just slam it into the outfield.
25:34
>> Roy Lee is in the news again.
25:34
uh he bought a billboard in uh in Manhattan.
25:41
Uh and he said, Alex Cohen says, "Fine, I'm starting to like the Cluey guys because Roy put up a billboard that says, "Hi, I'm Roy. I'm 21.
25:48
Uh missing an apostrophe on the second I'm clearly deliberate." Uh absolute wordsmith. This was very expensive. Pls buy my thing. Please buy my thing. Clearly. com.
26:01
And John Chu, Coastal Ventures, says, "This is why I invested in Roy Lee.
26:06
Once in a generation talent at tapping into culture and zeitgeist." This was a spicy post.
26:13
People kind of going back and forth on whether or not this would actually deliver.
26:16
Roy also put out a post saying that like everything he does is for short form.
26:21
So he bought this billboard.
26:23
He expects it to convert on the short form that will be created around the billboard.
26:27
around the billboard. certainly feels like people will create will take pictures of this shar when you look at um >> I think what I'm interested to see from Cluey is where they really get where they really get long you know retention right because they have
26:45
>> top they kind of yeah extremely full >> top of funnel marketing uh but when you look at like it doesn't it seems like if they just focused on students right they seem to be in this kind of place where they're they're >> thinking about exploring a lot of different exploring different markets. But if you look at the way that chatt's
27:02
But if you look at the way that chatt's usage uh basically tokens generated dropped as the summer started, >> that's a good it's a good argument to say clearly could just focus on >> products for for students that will eventually graduate into the workforce and things like that.
27:18
But anyway, >> well, they didn't make the top AI agents by revenue chart that Anon Sonwal shared uh said, "Who would you put your money today to win in the long term?"
27:27
The top was cursor at 500 million in annual revenue.
27:32
Uh and they're making $3.
27:32
2 million in revenue per employee. Glean's at 100 million.
27:39
Merkor is at 100 million. Replet's at 100.
27:42
>> How are you defining an agent?
27:44
>> I think it's just AI startups.
27:44
Anyone who's used the AI agent like meme basically >> stolen the agents are going to be pissed about this stolen valor. >> I don't know.
27:55
>> It's hard to call Mercer Core and >> I agree with that one.
27:57
That one feels particularly odd, but uh and Glean >> even Glean is is enterprise search. >> Yeah, it's search.
28:04
But I would say Replet is an agent company.
28:06
Uh it's kind of like every AI company's now now a now an agent company.
28:11
Harvey uh you know hasn't really branded themselves an agent.
28:16
>> But it's interesting like you're not putting claude you're going to put cursor on here which generates revenue from claude code. >> Yeah.
28:23
>> And is a a gentic IDE. >> Yeah.
28:25
You don't put drop is crazy and also not including chat GPT which has deep research which is probably the most used AI agent in the world right now I have to imagine just by number of queries.
28:37
Um there it's missing some stuff.
28:40
It's missing some stuff, but it's okay.
28:42
Also, Devon's not on here, which is kind of odd, but that's the nature of these lists. It's CB Insights, folks.
28:48
They do the best they can.
28:48
Let's pull up the videos of Sam Alman on AI ads, and I think it will crystallize a little bit of like what we mean when we mean like moni monetizing a free LLM, a free AI chat app.
29:04
It doesn't necessarily mean stuffing display ads in there.
29:06
Just like the answer to Facebook's monetization problem was not banner ads on the in the right bar.
29:15
It was in feed ads that look it if you're watching reals and you see a reals ad, it looks exactly like a real.
29:21
And in fact, the best performing ads on Instagram reels feel just like user generated content.
29:26
They don't look like Super Bowl ads. They're additive.
29:29
They're Yeah, they're additive and people often enjoy them.
29:31
Um and so that will be at least this is the semi- analysis argument that I sort of agree with.
29:37
Um uh that will be the the the like what what we say about ads in AI.
29:44
It will be more like commissions for agentic checkout at least at least to start.
29:49
So let's pull up the first video.
29:52
>> The example right now there's a lot of people that have websites that monetize with referrals to Amazon. Yeah.
29:56
And they're frustrated because a lot of the I mean traffic just like organic SEO is way down. >> Yep.
30:04
>> And the general read here is that OpenAI will ultimately start to earn that same type of revenue that the publishers historically did. >> Yep.
30:13
So um uh uh there was a fireside chat at Harvard Business School with Sam Alman.
30:20
>> Let's give it up for Harvard Business School.
30:21
>> Let's give it up for Harvard Business School.
30:22
>> It's the Harvard of Business School.
30:24
>> That's what they've been saying. we've been saying.
30:25
Um, so he he got a question from the audience about ad monetization and we'll hear how Sam Alman responded to it.
30:33
>> Although fair, it could be a barrier for early stage entrepreneurs or startups or even small businesses.
30:38
Given this context, do you envision OpenAI exploring alternative monet monetization strategy that could include like free free API access perhaps supported by advertising or other uh methods to foster innovation in the future?
30:56
I I will disclose just as like a personal bias that I hate ads.
30:58
Um I think I think ads were important.
31:04
>> We love >> to give the early internet, >> but I think they they do sort of somewhat fundamentally misalign a user's incentives with the company providing the service.
31:14
I'm not totally against them.
31:17
I'm not saying I would never consider ads, >> but I don't like them in general.
31:20
And I think that uh ads plus AI is sort of uniquely unsettling to me.
31:26
You know, when I when I think of like GPT writing me a response, if I had to go figure out, you know, exactly how much was who paying here to influence what I'm being shown, >> I don't think I would like that.
31:42
>> I think I would like that even less.
31:42
So, there's something I really like about the simplicity of our model, which is we make great AI and you pay us for it and it's like we're just trying to do the best we can for you.
31:54
And then >> Senator, we that has some inherent lack of access and inequality.
32:01
We commit as a company to use a lot of what basically the rich people pay to give free access to the poor people or the poorer people.
32:12
You see us do that today with the chat GBT free tier.
32:14
Um you'll see us do a lot more to make the free tier much better over time.
32:19
And I'm interested in figuring out how we bring the equivalent concept to the API.
32:24
>> Um but I >> I kind of think of ads as like a last resort for us for a business model.
32:32
>> Um I would do it if it meant that was the >> that's where he says he says I kind of think of ads as a last resort of a as a business model.
32:39
But recently he dropped a new podcast.
32:41
This was from I think a month ago.
32:43
Uh and it's from the Open AI podcast.
32:46
So you have to imagine that they that the that the run of show and the talking points in here are very carefully selected to, you know, move the narrative forward and kind of educate the community on where the company is going.
33:01
And so and so we'll pull up Sam Alman's interview on AGI GPT5 and what's next from the OpenAI podcast.
33:10
>> So that brings up the other question from people who are using this or skeptical is that OpenAI now has access to this data and there's the concern one was about training which open has been very clear about when or when not it's training you have the options to turn that off.
33:23
The other thing is like uh advertising things like that.
33:26
What's open's approach towards that?
33:28
How are you going to handle that responsibility?
33:31
We haven't done any advertising product yet.
33:32
Um I kind of I mean I'm not totally against it.
33:38
>> Not totally against it. Yay.
33:40
>> Areas where I like ads.
33:40
I think ads on Instagram kind of cool. A lot of >> Yes. Ads on Instagram. Very cool. Let's go.
33:48
>> I am like I think it'd be very hard to take a lot of care to get right. >> I I have faith. I think you can do it.
33:55
People have a very high degree of trust in chatbt which is interesting because like AI who's mates it should be the tech that you don't trust my friends too so I trust them >> people really do um but I think part of that is if you compare us to >> social media or you know web search or something where you can kind of tell that you are >> being monetized and the company is trying to like >> deliver you good no doubt but also Yeah.
34:26
This is the monetized block.
34:26
This is monetized block, >> whatever.
34:29
Like, >> you know, how much >> how much do you believe that like you're getting the thing that that company actually thinks is the best content for you versus something that's also trying to like interact with the ads?
34:41
I I think there's like there's a psychological thing there.
34:46
For example, I think if we started modifying the >> output like the stream that comes back from the LLM >> in exchange for who is paying us more, >> that would feel really bad.
34:58
And >> this is a great solution.
34:59
Give you the actual answer you want, but hey, these are the best headphones for you, but if you want me to buy them, I'm gonna have to go cook as an agent.
35:07
I'm doing the work and I'm going to take a cut of that.
35:11
>> That's that's amazing. I'm so down for that.
35:13
Like it the the agent's like I'm getting paid either way. >> Yeah. Exactly.
35:17
And I could say I could say, "Okay, which headphones do I want?
35:21
Do I want the Sony's or do I want the uh or or or do I want the the Apple AirPod Maxes?"
35:26
And if I decide the Apple ones, it goes checks out.
35:29
It uses some coupon code.
35:30
It gets some comparing this to the other ways that people discover products and services. >> Yeah.
35:36
If somebody searches best luxury hotel in Hawaii, >> they're going to get ads against that and then they're going to get organic rankings that aren't necessarily the truth, right?
35:49
Because the truth is >> for something like best luxury hotel in Hawaii is very subjective. >> Yeah.
35:55
>> Then they might go and try to get recommendations from an influencer. >> Yep.
36:00
>> In hopefully the influencer is disclosed. >> Yes.
36:03
>> Whether or not they're being compensated by the advertiser. Yeah.
36:06
>> And >> so if I were to ask you as an influencer, like what design software would you recommend?
36:12
Like what would you say just honestly? >> Figma. com.
36:17
>> Think bigger, build faster.
36:17
Figma helps design and development teams build great products together.
36:20
Uh this is a paid >> disclosure.
36:22
But yeah, the disclosure is super important.
36:24
And if and if the influencer is saying like, "Oh yeah, I love this hotel, but that hotel is giving them like, you know, 2 weeks free a year," then like that's not >> that's not a a super ethical >> totally. Yeah.
36:38
It needs to be disclosed.
36:39
And then also also the the beauty of the LLM is that is that >> like the like the the recommendations are going to be able to be tailored. So, best luxury hotel.
36:48
Well, if you're if you really want a certain type of pillow or you really want, you know, a a pool in your unit or you want it to be wheelchair accessible or you want you high ceilings or you want, you know, beachfront access, like there's a million different parameters that could go into that >> and the thing and then it could just and then it just saves you the time at the very last step.
37:11
>> Well, the thing that catch needs to navigate is maintaining that trust, right?
37:15
I trust that Instagram is going to serve me ads that >> that I I trust that they're going to try to serve me ads for things that I will want to buy, right?
37:24
Sometimes they serve me an ad, I'm like, "This is this looks garbage.
37:28
I'm not going to buy it."
37:28
Other times they serve me an ad, I'm like, "This looks great. You're actually good. Good call.
37:32
I I I am interested in this product."
37:35
>> And the thing is is like if Chad Chad GPT has to maintain that trust because if they recommend you a hotel and they're like, "You're going to love this.
37:41
I know I know what you like.
37:43
You're going to love this hotel."
37:43
and you go there and you spend all this money and you stay there and it's and it's terrible.
37:46
It's the same thing if you go to a friend for a recommendation for a hotel.
37:50
They recommend you a hotel, you show up there and it's like, "This is terrible.
37:53
Like, why did you recommend this?"
37:55
And if they go, "Oh, yeah, I recommended it because I was getting like 7% referral fee."
37:58
You're going to be like, >> "What are you doing?
38:01
Why are you monetizing me?" Right?
38:03
So I think like it's a very um uh it's an interesting challenge that they have where they're going to be directing already directing so much economic activity and how do you monetize that in a sustainable ethical way.
38:20
>> Exclusive from the Wall Street Journal, AI startup Perplexity made an unsolicited longshot offer to buy Google's Chrome browser for 34. 5 billion.
38:31
>> This inspired me, John.
38:31
Everybody needs to be making longshot offers.
38:33
TBPN, let's let's submit an offer to buy the Golden Gate Bridge >> private. >> That's a good one. That's a good one. What else?
38:42
>> We got to be thinking bigger.
38:43
>> What else should we buy? I don't know. It's tough.
38:46
Yeah, it's it's it's really when I saw this, it's funny to think that Sundar has to go to the board or like probably send them an email and say like, I'm required to let you know that we've received this offer from Perplexity to buy one of the crown jewels of our product ecosystem.
39:07
>> I wonder I wonder how how real this is.
39:12
like it seems like we would like the reporting is pretty loose.
39:16
We can read through this Wall Street Journal article and then kind of like dig into it a little bit more.
39:21
So, um, Perplexes offer significantly more than its own valuation, which is estimated$ 18 billion.
39:27
Has this ever been done before?
39:31
Has any tech company been able to pull off an acquisition that's bigger than their own valuation? Like, >> totally.
39:36
What was the what was the slow ventures company that that uh Metropolis, right?
39:41
Didn't they buy company that was much larger, you know, basically more >> kind of reverse merger almost? >> Yeah, exactly. >> Interesting. >> These things happen.
39:50
>> So there's there's also pressure.
39:50
So estimates of Chrome's enterprise value vary widely, but recent ones have ranged between 20 billion and 50 billion.
39:55
I have no idea how you got that.
39:57
I feel like Chrome is probably more valuable than that just on I mean I imagine that the default search engine in Chrome has got to be as valuable as the default search engine in iOS Safari, right?
40:10
And how much is Apple paying Google every year?
40:17
>> 20 >> 20 billion >> per year.
40:20
>> I mean you'd pay like you'd pay way more than $50 billion to get $20 billion of profit every year. >> It's crazy. So that feels low.
40:26
I don't know where I don't know where where those estimates came from, but they are apparently o under pressure.
40:32
US District Judge Amit Meta is weighing whether to force Google to sell the browser as a means of weakening Google's strangle hold on web search.
40:41
hold on web search. Uh it's so it's so interesting that like we're having this debate now like Google's had 99% of the web search market for two decades and they finally have a crack in the in the in the in the foundation with JT GPT
40:59
actually eroding things AI LLM's kind of upending web search dominance like >> yeah we're having we're having James from profound on later today which which >> is built a big business very quickly because consumers are now using something besides Google search to to do web searches. >> Yeah, this is like the last this is this
41:16
>> Yeah, this is like the last this is this is like completely the wrong time to be focused on this.
41:21
Like the ship has completely sailed, but that's kind of the that's kind of the pace that the government operates at.
41:25
So >> yeah, the journal says perplexity offer could be an attempt to signal to the judge that there's an interested buyer should he force a sale.
41:30
I'm I'm I think there would be a lot of interested buyers if there was a forced sale. >> Yeah. Who else would buy it?
41:37
Apple, Meta, Microsoft, get Bing going again. >> Bing. It's Bing, Bing. >> Bing it.
41:47
I mean, Microsoft would have a wild strategy because they'd have all the code to chat GBT, all the OpenAI, intellectual property, like they could do they could do what Perplexity is thinking about, right? >> Um, >> yeah.
42:00
I mean, what does this say?
42:00
What does this say about I mean so they just launched >> the Perplexity Comet browser.
42:09
>> Yeah, Daniel says Chrome's worth at least 90 to 120 bill. I agree.
42:10
I think 20 is a low Daniel.
42:15
But yeah, so they so Perplexity just launched Comet.
42:20
>> We had Arvin on the show.
42:20
He said this was a big important bet for the company. >> Yep.
42:24
If you're if you just launched a browser >> and now you're saying that you want to buy to compete with Chrome and now you're trying to buy Chrome. >> Yeah.
42:35
>> What does that say about the state of your new product? >> Distribution is king.
42:40
Like it's very clear that that even if you built a better product, the best product is not going to win.
42:46
And we see this with the with with the LLMs like like the the the leaderboards and the the vibes shift constantly, but the consumer adoption is just around chat. Everyone just uses chat.
42:59
>> That's the one that's broken through.
43:01
That's the one that people are familiar with uh all over the United States and all over the world.
43:04
And so um it's it's very hard to break through even if even if perplexity can like rocket to the top of the app store in India for a little bit like it's hard to hold on to when when the chatpt snowball is just growing bigger and bigger every single day. >> Yeah.
43:20
>> Much like the graphite snowball code review for the age of AI graphite helps teams on GitHub ship higher quality software faster.
43:25
Get started for free graphite. dev.
43:26
Um is is there a is there a poly market on perplexity by the way? Can you look that up? I will.
43:34
>> Will Perplexity acquire Chrome in 2025?
43:37
>> What's the What's the market on it?
43:39
>> When I posted about it earlier, it was at 12%. >> Mhm.
43:44
>> And it's and I said 12 seems quite high and it's now at 3%.
43:49
>> It went down even though they're in the journal saying they're going to do it.
43:53
>> They're like the market opened at 34% at like 9:00 a. m.
43:57
when the news dropped and it's now down at 3%.
43:59
So, >> wait, just today it went from 34 down to three. >> Wow.
44:03
So, this has basically been like debunked. Yeah, makes sense. >> Yeah.
44:06
I mean, there's um I would I would put the odds of this deal happening closer to 0% than 1%.
44:17
>> That sounds fair, >> but great way for Perplexity to get >> Yeah. >> in the journal. >> Call me.
44:24
No, this is great for SEO.
44:24
It definitely puts Perplexity and Web Browser in the same keywords.
44:31
>> Perplexity was also bidding on Tik Tok. Yeah. Earlier this year.
44:34
>> Arvin loves a w a long shot bet. A long shot bid.
44:39
>> I invited I invited uh I invited him on the show this morning.
44:41
Uh he I don't think they want to.
44:44
>> No, he's not ready for press.
44:45
>> Not ready to chat, but uh we love a we love a size Lord launch offer.
44:50
>> Keep throwing these out.
44:50
More more startups should do this.
44:51
Uh Google hasn't indicated a willingness to sell Chrome.
44:55
In testimony this year, Pichai told the judge that forcing the company to sell it or share data with rivals would harm Google's business, deter it from investing in new technology, and potentially create security risks.
45:08
Chrome has roughly three and a half billion users worldwide.
45:10
It's like >> it's like Perplexity has probably like millions of users, but it's just going to take decades even at reasonable growth rate to hit three billion.
45:20
It's just so many people >> and accounts for more than 60% of the global browser market.
45:25
That's lower than I thought it would be.
45:27
Founded in 2022, San Francisco San Francisco based Perplexity recently released its own web browser called Comet to some of its users.
45:35
Tyler, you've demoed these. Yeah.
45:38
>> What are you daily driving these days in terms of the web browser?
45:41
>> I'm using old reliable Chrome. >> You're using Chrome? >> Yeah. I I don't know.
45:43
None of the agent um browsers really seemed very helpful to me.
45:48
>> Have you turned from CL from Cle? Yeah.
45:51
Well, I I stopped using that like the you know, right after the show ended.
45:53
Um I was >> I mean I'm not doing interviews.
45:58
>> I was thinking about >> like the Clueter.
46:01
>> What if what if Tyler was like been using Cluey every day hours a day?
46:03
We're like, "Wait, you've been interviewing with other companies." Yeah.
46:08
Well, that's the thing is that I I when I was thinking about Cluey, um I was actually wondering like if we ran the show through Cluey and we had like this just this idea of like streaming audio essentially and streaming pixels and then just somewhat random LLM queries firing all the time.
46:28
Like is that a good pattern versus chat GPT where you have to decide okay this is the time to query it.
46:37
And so when I think about like the going to you and saying like the pull the poly market up on perplexity or tell me the market share for Chrome like if we could have something like clearly running and it's just a big screen there that I can see and it's just pulling up answers to questions that it thinks we're about to talk about or ask or just adding context like that actually might be kind of useful to us.
47:00
Um but I don't know if a tool like that exists.
47:03
It also just might be so sloppy and so noisy and so inferenceheavy that it just doesn't math out. I don't know.
47:08
Uh are there any uh are there any value or like what what's actually seeing breakout for you in terms of AI adoption?
47:17
>> Uh I mean most of my time using AI tools is just like coding stuff. Yeah.
47:21
>> So it's like cloud code cursor a little bit.
47:24
>> Sometimes I just go raw chatgbt. com. >> Oh that's raw. >> Yeah. Yeah.
47:29
Just straight prompt like >> no raw text file.
47:30
What happened to what happened to good oldfashioned just handwritten code farm to table code? >> Apparently not. >> Pasture raised code.
47:40
>> But yeah, I don't know.
47:40
I mean like clearly I'm not like doing I'm not doing like sales calls or like anything that really requires that kind of like interaction. >> Yeah. Yeah.
47:49
>> So >> not super useful for me.
47:50
But >> yeah, I wonder how the product will change cuz like the marketing is not going to stop.
47:53
like they are definitely going to keep filling that top funnel until they figure out the the bottom of the funnel and the and the and the churn.
48:02
Um but uh but I I wonder what retention's like.
48:05
I mean I imagine that you know you bring in such a broad top of funnel like there's probably people that are sticking around.
48:10
There's probably people that just sign up and forget their credit cards down and they just pay for a while.
48:14
Like like the the the nature of just getting someone to convert for 20 bucks a month.
48:17
They don't even have a free tier, right?
48:19
Like you have to pay to like get get up and running.
48:22
No, they do have a free table. >> They do. Okay. >> Yeah. >> Interesting.
48:27
>> Um, there was something um Oh, yeah.
48:27
Uh, Tyler, did you see Vibe Sort?
48:30
Someone wrote a uh sorting algorithm that uses an LLM.
48:36
You have to put in your you have to put in your OpenAI uh API key and then it just passes the random list or the array of numbers to Chat GPT and asks CHTP to sort it and it just comes back with whatever it can do.
48:47
Um, and I was thinking that uh, have you ever did you ever did you ever have to do FSBuzz back in the day?
48:54
Have you ever heard of this? >> I've heard of it.
48:56
Yeah, >> we should we should definitely do uh, Vibe FSBuzz where it it uh, it it it for each for each number between one and 100, it queries it queries uh, the GPT5 API to ask it should it respond with the number fizz or buzz.
49:15
the most the most in inefficient and most inferenceheavy fsbuzz answer possible.
49:19
Um anyway, back to Perplexity.
49:24
Uh Perplexity told Sundar Pachai as part of the proposed acquisition, it would maintain and support Chromium, the open source project that supports Chrome and other browsers.
49:33
It also said it would continue placing Google as the default search engine within Chrome, though users could change settings.
49:38
That's crazy because you would think the first thing you would do if you own Chrome would be change the browser to mine.
49:44
I'm getting those ad dollars, but I don't know, maybe it's a nice olive branch in this uh somewhat somewhat uh hypy uh offer.
49:53
The Justice Department filed the antitrust case against Google in 2020.
49:57
And just a few five years later, in addition, they're here.
50:00
Uh, in addition to forcing a sale of Chrome, the judge is considering limiting Google's ability to pay to be the default search engine on devices and browsers and requiring it to share data with rivals, among other things, in weighing potential remedies.
50:12
Earlier this year, Meta questioned how much new AI chat bots might be whittling away at the traditional search business, of which Google has 90% market share.
50:19
So 60% share in browser, but 90% in search.
50:26
So even even for there's 30% of people out there that are using Firefox or Brave or or uh Edge. It's Edge, right? Is the Microsoft one. >> Yes.
50:38
>> Um >> but then they they they they use Edge, but then they still set their default to Google because Google has dominant or maybe maybe just Google users are quering more.
50:47
>> I'm so fascinated by perplexity. Yeah.
50:49
And I can't wait to see what it's perplexing and I can't wait to see what ultimately becomes of the business.
50:56
They're >> offering to buy Tik Tok.
50:59
They're offering to buy Chrome.
51:01
They're rumored, you know, they there's rumor mill saying that Apple's kicking the tires on it.
51:09
It's hard to tell if where that's coming from, right?
51:11
Is that just more marketing?
51:15
They have I think the last reported number or the alleged number is something like 30 million monthly activives which is a lot. Yeah.
51:23
>> But it but they have such a tiny share of overall queries. >> Yeah.
51:28
>> That it becomes and and it's just clear that that >> search feels like it'll be a winner take take all market. >> Yep.
51:36
And it's it's they're not g, you know, two years from now if they're sitting at 30 million monthly activives or or even a multiple of that, it's hard to see it, you know, being worth uh, you know, significantly more than Snapchat, for example. >> Yeah.
51:53
And I think that's why you're seeing Arvin talk about potentially maybe pivoting to B2B context with the Bloomberg thing.
52:00
Um, it feels like if you're if you're in a winner take all market and you're and the writing's on the wall that you're not going to be the winner in that market, a a B2B pivot feels like a decent move.
52:12
You could even put kind of anthropic in that bucket where there was a time when it was like, oh, is everyone going to switch to clawed like the app on their phone and then it didn't play out that way and now they have a dominant B2B business.
52:25
So you can imagine that perplexity niches down like the perplexity interface, the perplexity ability to to you know like answer questions, act as a search engine that feels valuable in enterprises, it feels value in finance, it feels valuable in medicine if you if you fine-tune the service for that.
52:45
Um but it's just a very different business.
52:47
So they have to go through a little bit of a uh of a of a rebuild or kind of re readjustment maybe. I don't know. We'll see. >> Yeah.
52:58
I mean, at at the end of the day, when when Elon bought X, it took it took someone like Elon to be able to put together the amount of equity and debt to buy that business.
53:09
And it he had to put a lot of his own capital on the line.
53:13
>> And in this situation, and that was buying a business that generated a lot of advertising revenue, right?
53:18
It wasn't it wasn't known as uh it it was a a bit of a dog in some ways, right?
53:23
maybe maybe never was living up to its full potential where in this case if you offer to buy Chrome and then in theory you have to create an entire new economic model for the business because you don't have the Google Ads engine built into it. It's it's hard to see.
53:45
It feels like basically impossible to pull that amount of cap to to to find people. >> Yeah.
53:52
Call me when the Morgan Stanley Associates are losing sleep. >> Good point.
53:56
>> Unless Unless Morgan Stanley is uh is burning the midnight oil. >> Yeah.
54:01
>> Uh this deal probably isn't happening.
54:03
>> I'm remembering that exchange between uh Allison and Musk basically saying, "How much?"
54:09
Ellison's like, "How much should I do? A billion."
54:10
And Elon goes, "I don't know.
54:13
I think you should do like two." >> Yeah. It's great. Who's who? Yeah.
54:15
So, I mean Arvin's got to got to find some Larry.
54:21
Get get a few of those guys on board for sure. >> 34 Larry's.
54:24
>> Well, we have some big news in the TVPN world.
54:26
We are officially partnered with Whimo via Spotify because Spotify has a partnership with Whimo.
54:32
So, you can listen to TBPN. Whimo is now. >> No way.
54:35
>> Yeah, this this just dropped.
54:35
Um, there's a new upgraded Spotify in Whimo launching today.
54:41
>> Uh, Whimo put out the post 2 hours ago.
54:44
You can connect your accounts and you can vibe.
54:45
You can listen to TBPN in your Whimo, which is probably the most tech thing you could possibly do.
54:50
Um, a a little birdie just told me that uh they spoke to a number of bankers >> that have not heard of the Perplexity deal. >> Mhm.
55:02
>> Which uh I imagine as it >> as it firms up, if it firms up, they'll certainly hear about it. UFC landed a $7.
55:10
7 billion deal with Paramount after a whirlwind 48 hours according to TKO executives. But zoom out for me. Explain UFC.
55:18
This is this is the punching one or the punching one and the kicking one.
55:27
>> This is one of your best bits. So Senro and I >> Yeah. >> love UFC. >> Yep.
55:32
>> And we'll text John and say, "Hey, John, do you want to watch >> do you want to watch Come Over and watch like the pay-per-view tonight?" And John It's awesome.
55:39
I love watching the game.
55:40
My boys, >> who's playing tonight? >> Yeah.
55:42
I mean, I'm there if the if the the teams are good, if there's a good matchup.
55:46
>> If >> Yeah, but it depends on who's starting.
55:48
I want to know >> the starting.
55:49
It It'll depend on the starting line.
55:50
>> I want to know who's playing.
55:52
>> So, uh, UFC, >> the kicking and punching one.
55:56
>> The kicking and punching one. >> They can do both. >> And wrestling.
55:58
>> They can do wrestling, too. >> And choking. Okay. Real naked chokes. That's a popular move. >> Got it.
56:03
Kind of a mixture of experts model in fighting sports. Got it. Yes. Uh, >> multimodal. >> Yes, exactly.
56:10
So, long relied on the pay-per-view model, >> worked well before the internet and illegal streaming, >> and the pay-per-view model has been in decline.
56:21
>> UFC has also struggled to surface new American superstars.
56:25
A lot of the uh biggest stars are international, but UFC's biggest market is in the US.
56:34
International stars have a lot of fans in the US, but they're not driving pay-per-views, right?
56:40
People in >> Brazil are not paying $100 to watch a single card, right?
56:46
>> And so the pay-per-view model has been in decline.
56:49
Uh the UFC's relationship with ESPN has been a little bit rocky.
56:54
>> Pay-per-view model in decline.
56:54
Is that is that just because of the trends in like how how yappy and how popular the the fighters are?
57:03
Or is there something else going on like a technological level where I like I don't have to click any buttons to open Instagram reels or Tik Tok or YouTube and with pay-per-view it's like technically difficult.
57:13
It's kind of janky tech systems.
57:15
Is that real a real headwind or is that like fake news?
57:21
>> So there's definitely friction to buying pay-per-views.
57:23
You got to like be on a traditional television.
57:26
>> It's not like inapp purchase like double tap and face ID like that. >> It's not that easy.
57:30
I mean, I think you can go in the the ESPN app and like buy the pay-per-view, but a lot of people aren't buying the pay-per-view to watch it on their phone. >> Sure.
57:37
>> I think the bigger challenge and and something that >> and Apple would take 30% if if you paid on your phone.
57:42
So, even then, >> I don't know. I think they would real. It's digital.
57:46
>> Oh, cuz it's for sure. It's for sure digital.
57:48
So, >> but but the but the funny thing isrictction is Dana has been in this challenge because he he he gets very frustrated about illegal streams and he'll every now and then he'll be like, >> "If you're watching a stream tonight, illegal stream tonight, we're coming for you. We're coming for you."
58:03
And everyone's like, "Okay, >> I don't know how you're planning to do that."
58:08
>> Uh, but they try to take they they I I I think that they try to like dodo the various streaming sites, right? >> Oh, interesting.
58:15
>> Like you can just like send a ton of >> time.
58:17
probably have someone like talking to Twitch and being like, "We are we are going live right at this time.
58:21
You need to have someone searching and taking down streams actively." >> Yeah.
58:26
But there's plenty of plenty of other like more decentralized illegal streams that are happening on random URLs with with >> And so Dana was in a tough position because the more he talks about illegal streaming affecting the business, the more people are like, "Wait, >> wait, I can streaming illegally."
58:44
He's a little striand effect. Yeah.
58:47
>> And so, uh, he had been looking for a new home for UFC.
58:50
People had debated, you know, would would Netflix be a potential, uh, buyer there?
58:55
There's a lot of potential candidates. >> Meta Quest.
59:00
>> You have to buy the headset.
59:00
You got to watch it in VR. >> I'm sure.
59:03
I mean, Dana's obviously on the Meta board and I'm sure that that idea got >> I mean, $7.
59:08
7 billion, that's one researcher.
59:10
Just Just cut one head one headcount from MSL and you're good.
59:13
and Zuck can just own all of UFC and be like, "Look, put on the headset or you don't get to watch."
59:20
>> Y the deal that was reported uh we're in Yahoo Sports. How the UFC landed a $7.
59:23
7 billion deal with Paramount after a whirlwind 48 hours according to TKO execs.
59:31
So, beginning in 2026, all UFC events will stream on Paramount Plus with select events also airing on CBS.
59:41
And uh so anyways, Ben Folks is reporting just how big of a surprise was the UFC's bombshell 7.
59:45
7 billion dollar deal with Paramount and CBS.
59:48
So big that even UFC CEO Dana White didn't see it coming. No.
59:53
Uh this is a quote, "No, I didn't think this is where we'd end up."
59:56
White said Monday during an appearance on the Pat McAfee Show, shout out to Pat discuss the new broadcasting rights deal, >> but this sort of this this is sort of how it played out. I love it.
1:00:06
These guys are obviously smart guys, very aggressive.
1:00:09
He's talking about the team uh the new team over at Paramount.
1:00:11
So, in an interview with CNBC, TKO president and CEO Mark Shapiro said he initially expected to make a deal that would bring only the UFC fight night events to Paramount, but after Sky Dance and and Fight Night events have always aired on ESPN, just fully ad supported. So, >> got it.
1:00:28
>> Um but after Sky Dance Media completed its deal to purchase control of Paramount last week, Shapiro said the deal for the entirety of the UFC's US broadcast rights came together in just 48 hours.
1:00:37
Now, instead of just the 30 UFC fight night events per year, Paramount will feature.
1:00:42
And the fight night events were were events that wouldn't draw big pay-per-view buys.
1:00:47
>> Those were not the numbered UFC events, correct? So, it's a UFC 776.
1:00:52
That's like pay-per-view.
1:00:52
Fight nights, just random on the on >> and there's only 13 of those events. >> Okay. Per year.
1:00:59
>> 13 numbered and 30 fight nights.
1:00:59
So almost every week there's something if you're fan, but you're really once a month is when you really want to tune in.
1:01:09
>> But for the they they sort of depend on more casual fans historically to drive pay-per-views.
1:01:14
People that are like, I watch UFC when Conor McGregor's fighting, right?
1:01:18
That's what >> they could spike the kind of a power outcome that people getting together being like, hey, we're going to buy the pay-per-view.
1:01:24
We're going to we're going to watch it over. That kind of thing.
1:01:27
So, possibly the biggest news in all of this for fight fans is the end of UFC's pay-per-view era.
1:01:33
Ever since the first UFC event in 1993, pay-per-view has been a vital part of the UFC strategy.
1:01:38
Remember, UFC when it started airing on TV was thought to be it was so shocking and violent to people that even politicians wanted to get it banned. >> Wow.
1:01:50
>> Like they were like, "This should not be on television."
1:01:52
So, it had to be in that bucket content because it was like Yeah.
1:01:57
It was like adult restricted anyway.
1:01:57
Do the fighters need to sleep well before the fights? Of >> course.
1:02:01
>> They have to be on eight sleep. Pod five. >> That's right.
1:02:04
>> 5 year warranty, 30 night risk-f free trial, free returns, free shipping.
1:02:07
>> We got to make sure Bo, friend of the show, is on an eight sleep.
1:02:09
I'm going to message him after this. Perfect.
1:02:11
Let's Let's figure this out.
1:02:13
Ever since the first UFC event in 1993, pay-per-view has been a vital part of the UFC strategy.
1:02:18
Under the current deal with ESPN, each UFC pay-per-view costs $79.
1:02:19
99 in the US plus the cost of the ESPN Plus subscription on top of that.
1:02:25
So, you got to subscribe and then you got to pay per event.
1:02:28
With the pay-per-view revenues reportedly in decline, it makes sense for the UFC to finally ditch that model.
1:02:34
The fact that it's doing so as part of a deal that will essentially double the roughly 550 million per year the UFC currently receives from ESPN likely only made that calculation.
1:02:44
>> This is this is crazy. This is crazy.
1:02:46
when they find out, wait, if I if I just sign up for Paramount Plus for $12.
1:02:48
99 a month, I'm going to automatically get UFC's numbered fights and the rest of the portfolio.
1:02:55
That's a message we want to amplify.
1:02:57
That is a crazy crazy value change because if you were doing if you were doing all 13, if you were the hardcore UFC pay-per-view buyer, you're up at $1,000 a year on UFC pay-per-view basically like $700, $800.
1:03:13
Like that's a lot of money.
1:03:16
And you're going from there down to $12. 99 a month.
1:03:17
That's 150 bucks basically.
1:03:20
That that is a steep steep savings.
1:03:24
>> The hardcore fans are going to be excited. >> Yeah.
1:03:26
And a lot a lot of I mean a lot of fans would you know somebody's hosting the pay-per-view one night. Yeah. Makes sense.
1:03:33
But still, I mean that's a big big savings.
1:03:36
that's a big big savings. Uh, I do wonder what the ad load will be like because when we watched UFC uh that a couple months ago with uh David Senra, um I noticed that it felt extremely extremely contentrich and like the flow of the show was fantastic because you'd just be watching a fight and then it would cut to the commentary, the post
1:03:59
show, the like in ring, Joe Rogan's doing an interview and then pretty quickly they start telling you who's coming up next and the actual fight to like you're only watching maybe like a half an hour of of fighting over an hour or two of content, but it didn't feel like, oh, I'm not crazy commercial break and I'm totally taken out of the stadium. Like even even the they did a
1:04:17
Like even even the they did a really good job with the production to show like when they show you the stats.
1:04:24
It's virtually laid over in the stadium like you're watching a camera pan around the stadium.
1:04:28
So, it actually kind of feels like you're there the whole time.
1:04:31
It was really well produced.
1:04:31
I wonder if they'll lose any of that by stuffing ads all over the place. >> Yeah, we'll see.
1:04:35
I mean, and you compare that to NFL.
1:04:37
NFL is like roughly, I think, 25% of of the time allotted to NFL is advertising.
1:04:46
>> Y that's not the case.
1:04:46
That hasn't been the case for pay-per-views. >> Yeah.
1:04:48
And it certainly feels like it's Yeah.
1:04:50
It's like it's a a shift in the in the type of content. Yeah.
1:04:52
They just got to work on making seamless transitions to advertisements like we do here with Fin AI, the number one AI agent for customer service, number one in performance benchmarks, number one in competitive bake offs, number one ranking on G2.
1:05:03
You can get started at fin. ai.
1:05:05
AI >> and anyway, so Paramount is uh or Sky Dance uh Young Allison uh is all is just getting aggressive across the board, right?
1:05:15
He's uh there's been rumors of this free press acquisition >> that uh I'm sure is still in the works, but it had been reported it was a quarter billion dollars for the free press.
1:05:26
From our sense, they have about a million uh a million people subscribed to their newsletter, most of which vast majority of which are non-paid.
1:05:34
And so uh that just says that Paramount sees and C CBS, Paramount, you know, the the combined and Sky Dance sort of this combined entity just see the free press and um >> y >> as as highly uh and Barry Weiss specifically is just highly strategic, >> right?
1:05:54
And then CBS also uh cut the late show which is losing 40 million a year.
1:05:59
So they're really like kind of like shuffling the chips around like really restructuring the organization like what does CBS actually do?
1:06:04
Well, now it's potentially UFC and Barry Weiss as opposed to Steven Coar, I guess, uh in terms of like headline stuff.
1:06:13
I love this I love this article.
1:06:15
Back in back in 2009, Dana White swore that if UFC 100 did a million pay-per-view buys, he'd bungee jump off the Mandalay Bay. It did. He didn't.
1:06:32
When UFC 151 was canceled after Jon Jones refused an appointment, an opponent switch, White called Jones's coach, Greg Jackson, a sport killer.
1:06:37
He left a crater in the UFC schedule that only MMA fans could fully appreciate.
1:06:41
A few years later, when Conor McGregor and Nate Diaz shattered the pay-per-view world record at UFC 196, it was a testament to how big the sport had become.
1:06:52
We cared about those numbers as much as we did the outcome.
1:06:54
Since UFC 1, when people paid out of morbid curiosity, this what you were talking about earlier, pay-per-views have been a vital part of the identity of the sport.
1:07:04
It's hard to get nostalgic over being gouged, but what follows here should shouldn't be mistaken as such.
1:07:10
But Monday's news of UFC coming uh $7.
1:07:12
7 billion partnership with Paramount came with a small pang of sadness upon realizing the pay-per-view model will soon belong to a buyer.
1:07:22
>> Yeah, I'm interested to see how this impacts the fighters because early in their UFC careers, they don't get any exposure to pay-per-views points, which is like a percentage of pay-per-view sales that top fighters would earn.
1:07:34
So, if you were a rising fighter and you got on a pay-per-view card, you weren't necessarily getting cut into that revenue.
1:07:40
But if you were Conor McGregor or a true superstar, you were actually getting some percentage of the sales, right?
1:07:47
They call these pay-per-view points.
1:07:48
And so, now that that model is going away, I mean, I'm sure that number one thing on the fighter mind with this new deal is how are we going to actually, you know, basically get cut into the to this new structure, right?
1:08:03
because historically a lot of fighters have have critiqued um the the way that UFC fighters are comped.
1:08:10
But >> this is a funny nostalgic article.
1:08:11
This this uh this writer clearly really loves UFC.
1:08:16
Back in the mid as the UFC combined the tuxedo affairs of 1990s boxing with the vibes of an underground temptation.
1:08:26
From there it slowly stockpiled its greatest passions behind the payw wall.
1:08:29
Remember how red Dana's face would turn as he tried to sell the pay-per-view at the end of the televised portion of the card? Remember the names?
1:08:35
He goes through BJ Penn, Matt Hughes, Chuck Liddell, Tito Ortiz, uh Randy Couture, Conor McGregor, Ronda Rousey.
1:08:43
Go through the posters of the past and they were special.
1:08:48
They were the special attractions, the names on the marquee for the numbered events.
1:08:51
Those were some good parties we shelled out for.
1:08:52
As MMA fans, they were ours. >> Well, end of an era.
1:08:57
Yeah, probably Holdings, the company that of course owns WWE and the UFC, >> uh, is a 36.
1:09:06
8 billion company as of today. It's up 11.
1:09:13
>> Let's take it over to Mark German himself.
1:09:16
He has some new reporting.
1:09:18
Apple plots expansion into AI robots, home security, and smart displays. Apple, Inc.
1:09:24
is plotting its artificial intelligence comeback.
1:09:26
Don't call it a comeback.
1:09:27
Uh actually you can call it a comeback.
1:09:29
Give you >> I mean it makes sense.
1:09:30
They've been they've had they they've gotten a lot of hate over the last few years for the roll just particularly the roll out of Apple Intelligence.
1:09:38
Very hyped a lot of features on display at WWDC that didn't ship when the new iPhone launched.
1:09:44
They sold the new iPhone against it. Yeah. Exactly.
1:09:48
And so um I I think that there were uh there were high expectations because of Apple's position with ondevice inference being very >> I gave you Gen Moji. Are you not entertained?
1:10:00
>> They shipped a few things.
1:10:00
Uh I think that I I would love to see the Gen Moji actual usage data because I feel like even though it's not popular in Teapot and OnX and in the tech the technarati uh it might actually be seeing like decent adoption and joy.
1:10:15
I mean, I've seen people share uh generative imagery from Microsoft Copilot, which I had no idea was a popular image generation platform whatsoever. >> Facebook crowd. >> Exactly. Exactly.
1:10:26
So, so I I I I wouldn't be so sure that Genmoji is is producing zero value.
1:10:31
Um but at the same time, it's clearly been a tumultuous time for the company.
1:10:37
They've been kind of on defense in terms of public relations.
1:10:40
Uh but Mark German is still scooping every single day.
1:10:41
Apple's plotting its AI comeback with an ambitious slate of new devices, including robots, a lifelike version of Siri, a smart speaker with a display, and home security cameras.
1:10:51
A tabletop robot that serves as a virtual companion targeted for 2027, is the centerpiece of the AI strategy, according to people with knowledge of the matter.
1:11:00
Uh, the smart speaker with a display, meanwhile, is slated to arrive next year.
1:11:04
Part of a push into entrylevel smart home products tabletop robot that's a virtual companion. Yep, >> that's big.
1:11:13
>> Lot of lot of software they got to write to make that work.
1:11:15
They got to get on graphite.
1:11:16
dev code review for the age of AI.
1:11:18
Graphite helps teams on [ __ ] on GitHub ship higher quality software faster.
1:11:22
Tim Cook, if you're listening, get on. >> Get on graphite. So, this is big too.
1:11:26
Home security is seen as another big growth opportunity.
1:11:28
New cameras will anchor an Apple security system that can automate household functions.
1:11:31
The approach should help make Apple's product ecosystem stickier with consumers to the people who asked not to be identified because the initiatives haven't been announced.
1:11:39
I mean, this seems like something that they could knock out of the park.
1:11:42
Like just the smart thermostat.
1:11:44
Like these these patterns have been defined for a decade.
1:11:49
And that's like the sweet spot for Apple to come in and like the Sonos home speaker where we were saying like it they're just like the speak.
1:11:55
Everyone knows what they want out of a connected speaker system.
1:12:00
They just want it at the level of Apple execution.
1:12:02
It doesn't require going zero to one in some new territory.
1:12:07
And so I feel like they could be very successful in in the home video monitoring, home thermostat, home speaker.
1:12:14
So I I I think I like this overall.
1:12:16
The robot is where it gets funny because this feels crazy, but I'll I'll going into companionship feels interesting.
1:12:26
>> I don't think it's a companionship.
1:12:26
I I I I don't I don't think of it like that.
1:12:29
>> Tabletop robot that serves as a virtual companion is the centerpiece of the AI strategy.
1:12:34
I I mean, so let's read what the actual report is on this robot.
1:12:37
The tabletop robot resembles an iPad moni mounted on a movable limb that can swivel and reposition itself to follow users in a room like a human head.
1:12:46
It can turn toward a person who is speaking or summoning it and even seek to draw the attention of someone not facing it.
1:12:55
The hope is to bring AI in to life.
1:12:55
I don't think of this as like companion necessarily.
1:13:00
This could just be >> Jarvis >> assistant. Yeah, Jarvis. Jarvis.
1:13:02
I mean, I guess Jarvis isn't a companion, but companion has a bad flavor to it right now, a bad a bad vibe because people are saying like, "I married my companion," and that feels very Black Mirror.
1:13:15
>> I do think that there's a serious Black Mirror risk, but I'll go into that in a second, but what were you about to say?
1:13:20
Yeah, I'm I'm not going out and saying this this feels like a competitor to friend.
1:13:24
com or any other players that are actually focused on companionship, but this does feel like giving Siri a presence in the home, like an always on presence in the home.
1:13:37
>> It will be interesting to see how they solve it.
1:13:38
Uh a partnership with OpenAI or Anthropic seems logical, but Apple Siri partnership with OpenAI Enthropic before September on Poly Markets is a 6% chance.
1:13:48
um by December it's at a 44% chance though.
1:13:52
So, but this is a very low volume market, but still it feels like um we haven't seen a lot of messaging from Tim Cook that they're going to be building a huge data center, going to be training a foundation model.
1:14:05
It feels like they're going to need to partner on some of the underlying infrastructure for that because I would not I would not want Siri hanging out in my kitchen talking to me.
1:14:13
Like Siri is just not reliable enough.
1:14:16
But I would I would welcome Claude or or ChatBT into my house.
1:14:22
Uh but but I would treat it specifically as a like an Alexa. What's the weather like? What's on my calendar?
1:14:31
Uh look up the history of the Roman Empire.
1:14:33
I I would ask it questions like that and I would use it as a knowledge retrieval tool.
1:14:37
I would I might start to trust it in some agentic contexts.
1:14:39
And the question is, do you want do we want a robot iPad with an arm swinging around your kitchen?
1:14:47
And so and and hopefully when you want to know the weather, it's you're you're within earshot.
1:14:56
>> I think I think this could be really cool.
1:14:58
I think it could be really cool.
1:14:58
I mean, they say FaceTime because you're competing.
1:15:02
You're they're still competing with their own. >> Yeah.
1:15:04
But if you're ever in the kitchen like like this is an example.
1:15:06
So FaceTime calls will be a key function of the device during video conferencing.
1:15:11
the display will able will will be able to shift to lock on to people around a room.
1:15:15
And so as you're walking around, the FaceTime is just following you.
1:15:17
That actually feels more social.
1:15:19
I remember during co I I bought uh Facebook's uh camera.
1:15:25
They had some sort of device that you would mount on your TV and it would act as a uh as a video conferencing system.
1:15:31
And I used it a few times.
1:15:34
I ultimately churned, but it was but it was it had a really wide angle lens and it would like zoom in on the people.
1:15:39
It had really good face detection and so it would center you no matter where you were in the room, but as soon as you walked to the other side of the room, it wouldn't be able to follow you because it it didn't have any motors in it.
1:15:48
Um, and I feel like >> Can we pull up the link in the chat?
1:15:55
>> This all reminds me of the Meta Portal.
1:15:58
>> Yeah, that's the one I'm talking about. The portal basically.
1:15:59
I didn't market it as a robot, but it would sit on a table and it would sort of follow you around the room.
1:16:06
And Meta is no longer selling MetaPortal uh as they wound it down.
1:16:11
So >> anyways, uh Tim Cook told employees >> I gifted some of these and they were pretty wellreceived.
1:16:18
Uh most of them wound up being used as uh like uh digital digital photo frames though >> and they weren't actually used that often for calls.
1:16:28
I don't know if putting it on a robotic arm is enough to make it useful.
1:16:33
I think you do have to nail the underlying uh speech recognition and and the in the in the conversational nature like it has to be powered by a Frontier LLM.
1:16:44
>> You know what's funny?
1:16:44
>> What >> is I feel like the product I I I could imagine them having a mood board internally with the Pixar lamp hopping around >> that's literally listed here as like one of their inspirations apparently.
1:16:53
of their inspirations apparently. So Tim Cook told employees in an all hands meeting this month that Apple must win in AI and hinted at the upcoming devices the quote the product pipeline which I can't talk about thankfully Mark German has his moles in Apple that are talking
1:17:08
Tim Cook says it's amazing guys it's amazing some of it you'll see soon some of it will come later but there's a lot to see >> so Apple obviously always is cooking on moonshots very little of it surfaces to Mark German and even less actually services, you know, publicly via Apple's own channels. >> Mark German, if you have a little extra
1:17:28
>> Mark German, if you have a little extra time, you should leak uh Julius's user numbers cuz Julius has over 2 million users now.
1:17:35
They're trusted by folks at Princeton, BCG, Zapier.
1:17:37
What analysis do you want to run?
1:17:41
It's the AI data analyst that works for you.
1:17:43
Connect your data, ask questions in plain English, and get insights in seconds. No coding required.
1:17:50
>> We need to get our logo up there.
1:17:51
>> Yeah, >> the fourth logo >> for sure.
1:17:52
So, Apple is planning to put Siri at the center of the device operating system and give it a visual personality to make it feel lifelike.
1:17:59
The approach dubbed Bubbles is vaguely repres reminiscent of Clippy, which we are super bullish on, and we think Microsoft should totally bring back Clippy, an animated paperclip from the '9s that serves as a virtual assistant in Microsoft Office.
1:18:11
Um, Apple has tested making Siri look like an animated version of the Finder logo, the iconic smiley face representing the Mac file management system.
1:18:20
The final decision on its appearance hasn't been made with designers considering ideas that veer closer to Mimmoji, the player, the playful characters that represent Apple user accounts.
1:18:30
Device prototypes use a roughly 7-in horizontal display approaching the size of an iPad mini.
1:18:36
The motorized arm can extend the display away from the base roughly half a foot in any direction.
1:18:40
So, that's not really across the room.
1:18:45
It reaches across and pins you against the against the fridge.
1:18:50
Yeah, I think Apple should be able to nail delivering this in a way that doesn't feel Black Mirror and dystopian. >> Oh, that's funny. Sorry.
1:18:56
So So I actually didn't see this, but there's a quote in here.
1:18:59
Some people familiar with the product call it the Pixar lamp. >> Yep. Exactly.
1:19:02
I I I I think it could work really really well.
1:19:04
Now >> they have to be cognizant of that would be very cool >> because if it could hop off hop around that's Nat Friedman core.
1:19:14
This is this is this is this is doable with modern technology.
1:19:18
Um, but the risk is that they they botch it because Apple's had a rough go with the recent marketing and they've had a couple uh real like backlashes.
1:19:27
They had that one where they smashed all the pianos in the press. Do you remember this?
1:19:32
So, they had a uh a huge hydraulic press and they and they pressed like uh an easel with paints and a bunch of paint buckets and pianos and violins and all this stuff.
1:19:44
They get a bunch of blowback.
1:19:46
>> They got a ton of blowback from this.
1:19:46
We can we can try and pull it up. Uh do you remember this?
1:19:49
You remember >> I remember that it uh people were saying that they're like destroying these timeless pieces. >> Yeah.
1:19:54
And it's just like the thing that >> instruments and stuff like that. >> Yeah.
1:19:57
The thing that I love you're literally you're destroying it for this particular um uh shots fired.
1:20:00
Bill Bishop from the Substack stream.
1:20:04
You need better guests to talk about China and chips, not just Nvidia partners who are regurgitating Nvidia's talking points.
1:20:11
Bill Bishop, get on the stream. Call in. We'd love to have you. >> Bill. >> Bill, you're welcome. Hop on.
1:20:15
Of course, Aaron is riding with Jensen.
1:20:19
>> Yeah, he is the Jensen surrogate.
1:20:19
He's he's he's a surrogate for Jensen the juggler.
1:20:22
The other ad that didn't go as viral and and result in major backlash was the launch of the Apple Vision Pro.
1:20:29
So, when the Apple Vision Pro launched, one of the videos that they showed was of a middle-aged man looking at VR video of his kids, but he was alone in a dark room.
1:20:40
And it and and Ben Thompson was like, "It feels like he's divorced or something or maybe like the kids died."
1:20:46
It felt like Minority Report, which is a movie you I know you haven't seen.
1:20:48
Um, but in Minority Report, Tom Cruz's uh son goes missing from the pool one day and he has a he has a virtual 3D video that he plays back and gets very emotional about.
1:21:02
And and the the imagery was very similar in the Apple Vision Pro, but it wasn't an optimistic scenario.
1:21:08
It was like, yeah, like I guess if my son passed away or got kidnapped, like I would want to relive that, but that's not like gonna inspire me to to buy an Apple Vision Pro.
1:21:17
And so with with this like Pixar lamp, this this uh this robot in your in your kitchen or in your house, like they really I think they have to lean into to light mode, not dark mode.
1:21:31
They have to really be aware and and reality check themselves on the black mirror effect because uh the the idea of of someone hanging out in their kitchen being lonely and having this be the only companion that they ever talked to.
1:21:45
That's a lot less fun than hey, we're all cooking together in the kitchen and this is helping us keep track of the ingredients.
1:21:53
Or uh my idea was uh teach it to uh teach it to pour some beers and get it at the fraternity.
1:22:03
This thing needs to be tending bar at a frat house and inspiring dancing silhouettes like the original iPod commercial in order to be successful.
1:22:10
Get the iroot a stack of red solo cups ASAP.
1:22:14
>> Apple's cancelled for fraternityccoated marketing.
1:22:17
>> I think I think that would be amazing if this thing could if this thing could pour a beer without without foam.
1:22:20
I think they got a winner.
1:22:23
Um because it needs to inject itself into social.
1:22:25
Even the iPod, like yes, you could put in the headphones and you could and you could tune out the world and be that dancing silhouette during the iPod commercial.
1:22:35
Um but also you could say, "Pass me the ox cord.
1:22:37
I want to play a song for my iPod that everyone can enjoy and it's a social experience."
1:22:42
And so it's important to show both of those sides now more than ever.
1:22:46
And in in chat PT demos, in any AI product demo, there's always going to be the user who who uses the product to be more isolating, but the marketing should always be aspirational and pro-social.
1:22:58
Just like social media, social media at its best when we're highlighting the fact that like I have so many friends that just send me a random Instagram reel every single day and like that's our interaction and it's and for me it's a way to like check in with a friend and and like >> share a laugh >> and share a laugh and and it's a heart and it's a laugh.
1:23:17
>> I can I can imagine the ad creative for the Apple Pixar lamp.
1:23:21
You know, it's sitting on the center of a kitchen island and the family's hanging out and they're facetiming somebody. >> Exactly. Yeah.
1:23:28
uh one of the family members.
1:23:30
>> I can actually imagine us having a Pixar lamp here on the table. >> Really? Really? It's like Yeah.
1:23:33
It's like you want to be connecting two families or two two two sides of the family.
1:23:39
The East Coast side of the family, the West Coast side of the family.
1:23:42
They're both having Thanksgiving and they're able to connect, but there's everyone's being extremely social.
1:23:45
Do not film this thing uh with the lonely the lonely person uh you know, having the Pixar lamp be the only thing to keep it company.
1:23:56
Anyway, that's my advice for uh what else?
1:23:59
>> The projects coded Lynwood and Glenwood.
1:24:02
Core to the new home devices are current products like and current products like iPhones and iPads is an overhaul to the underpinnings of Siri.
1:24:08
Engineers are working on a version code named Lynwood with an entirely new brain built around LLMs, the foundation of Genai.
1:24:14
The goal is to tap into personal data to fulfill queries and ability that was delayed due to hiccups with the current version.
1:24:21
It should be able to do it.
1:24:24
>> Hopefully this team, this they they should have a uh a a a moonshot division just trying to solve iMessage search.
1:24:30
Um they could probably start there.
1:24:35
>> Every tech company needs that. Amazon search is rough.
1:24:36
Google Gmail search is rough.
1:24:39
The search has gotten so like dominated.
1:24:42
>> Billion dollar business in figuring out search.
1:24:46
I mean, that would be the killer that that might be a killer app for Comet and some of the browsers is just like actually being able to search my Gmail inbox better.
1:24:54
That would be pretty fantastic.
1:24:56
Um, >> I feel like it should be at the app layer.
1:24:58
>> Anyway, whatever they're building, they're building products.
1:25:00
They got to get on linear.
1:25:01
Linear is a purpose-built tool for planning and building products.
1:25:05
Meet the system for modern software development.
1:25:06
Streamline issues, projects, and product road maps.
1:25:10
>> Open AAI is on linear.
1:25:10
Let's get Apple on linear.
1:25:12
Let's get the Siri team on linear.
1:25:14
they they very well might be already.
1:25:16
So uh somebody uh Craig Federigi uh who you all know says the work we've done on this end to end revamp of Syria has given us the result we needed.
1:25:27
He added that this has put us in a position to not just deliver what we announced but to deliver a much bigger upgrade than we envisioned.
1:25:32
He said there is no project people are taking more seriously.
1:25:36
So that is very positive.
1:25:39
Um, a final decision hasn't been made on which models will be used, but Apple has been testing anthropic PBC's clawed for this purpose.
1:25:46
Mike Rockwell, the former vision prochief, who was put in charge of Siri earlier this year, is overseeing both the Lynwood and Glenwood efforts. H uh, apparently.
1:25:58
So, during the development of the tabletop robot, Apple engineers have made heavy use of G chat GPT and Google Gemini to build and test features within Apple AI and Siri teams. as a whole.
1:26:08
Software developers are increasingly using third party systems as part of their development process.
1:26:14
Getting into a Ring competitor here, Apple is working on a camera code named J450 designed for home security, detecting people and automating tasks.
1:26:23
The device will be battery powered and could last for several months to a year on a single charge. >> Cool. >> That's interesting.
1:26:29
If they can do this for they they can they can do this for a random home security camera.
1:26:34
They can't do it for So, they have, >> you're telling me they have the capability to have an always on camera?
1:26:42
>> Put the tinfoil hat on.
1:26:44
>> We need the tinfoil hat.
1:26:45
>> Uh, the device has facial recognition and infrared sensors to determine who is in a room.
1:26:49
Apple believes users will replace will place cameras throughout their home to help with automation.
1:26:52
That can be turning lights off when someone leaves a room or automatically playing music.
1:26:59
So, Apple, you're telling me that you can make a home security camera, of which I will p purchase multiple, and put them around my house, and it will be able to have a single battery that could last for several months to a year on a single charge and you can't make an iPhone. >> It's a little bit.
1:27:19
The screen's pretty bright. The screen's bright. >> Yeah. But an always on camera.
1:27:25
>> How long do you think your phone battery would last if you just constantly had the camera?
1:27:29
>> I I actually think I actually think running the camera sensor is a lot less power intensive than running a screen for sure.
1:27:35
>> And obviously a bunch of different applications.
1:27:36
So, >> but still, >> yeah, >> pretty powerful, pretty exciting.
1:27:40
>> I don't think people want an always on iPhone.
1:27:42
They want the thrill of charging the iPhone every night.
1:27:43
If you're an adrenaline junkie, there's nothing like being on 1% trying to fire off that last iMessage trying to >> I actually had a moment yesterday.
1:27:50
Uh my my one-year-old is uh starting to walk and I had this moment yesterday where I was I was I was I filmed a video of her walking. >> Yep. >> For about 10 seconds.
1:28:05
>> Uh everyone's in in the house is like laughing enjoying the moment and then my battery died >> and completely lost the video because I didn't hit I didn't hit like end the video.
1:28:16
So the battery died right in the middle of this >> memory gone forever.
1:28:19
There is actually that has something to do with the encoder.
1:28:22
There is a certain uh file type that you can use when you're filming on one of these cameras that if the battery dies, it will actually save the last of the file.
1:28:32
Um, but there's certain there's certain codecs where if you don't hit finish recording, the whole thing will be corrupted. It's very annoying.
1:28:39
We have the debate of the century. The debate of the year.
1:28:42
A showdown between former founder fund founders fund colleagues. >> Friends turned foes.
1:28:49
>> Friends turned rivals.
1:28:49
Everett Randall, he's been on the show before.
1:28:52
Delhi and Aspir, he's also been on the show before.
1:28:55
>> They haven't been mincing words, John.
1:28:57
They have been throwing shots. Yes. >> Back and forth. Every TBPN appearance.
1:29:03
>> They're calling the other one out. >> Yes.
1:29:04
And so they will right now strategies.
1:29:07
We're going to settle it today on the stream.
1:29:08
The slop verse steel debate. >> Which is better?
1:29:12
High margin software or capex intensive reindustrialization efforts.
1:29:18
Uh we will bring in Delian and Everett into the studio. Welcome to the stream. How you guys doing?
1:29:26
>> I like that background. Very good. >> Energized. >> Here we go.
1:29:29
We're going to be breaking it down live here.
1:29:31
>> Yeah, we're going to be breaking it down live.
1:29:32
Uh, I'll I'll every time one of you gets a point, I'll I'll put a >> we'll put a little point on the board.
1:29:38
>> If if things get out of hand, we'll be banging the gong and bringing order like it's a gavl.
1:29:42
Uh, but I'm sure I'm sure this will be uh I'm sure everyone will be civil.
1:29:48
>> Keep the name calling to a minimum.
1:29:48
Uh, good to have you both.
1:29:50
Thanks so much for being here.
1:29:52
Let's let's kick it off with >> Let's start off.
1:29:54
What's your least favorite thing about the other person?
1:29:59
>> We should kick it off with the original story.
1:30:00
Like, how did this all start? basically. Yeah.
1:30:03
>> Give us some backtory. >> Yeah.
1:30:05
>> You want to you want to give it? >> Yep. I I'm I'm happy to.
1:30:06
So, we were um back at Founders Fund, we were um starting to beef up our our like CRM and data science efforts.
1:30:16
>> And so, we were we were integrating some external data into our CRM, figuring out how we could filter opportunities better to each of the each of the investment team professionals.
1:30:24
And we were looking and we were looking at the different data.
1:30:27
And I was like, "Ah, it'd be really nice if we could filter this by gross margin so that all of the negative gross margin companies that come into our CRM, we could give them all the delion because it seems like those are the types of companies that that he loves to invest in."
1:30:42
And uh the the uh the the rivalry between um between you know the low gross margin side of the house and the high gross margin side of the house was born then. >> Okay.
1:30:54
uh and and Delian justify wh why why do you like these businesses?
1:30:57
Is that is that even is that even a fair characterization?
1:31:03
um fair characterization.
1:31:03
I think um you know my sort of oneliner would be I'm not sure that you know sort of gross margin is actually like the right thing to sort of focus on in a business especially you know sort of early on.
1:31:13
What you want to be thinking about is obviously EVO margin in particular a terminal you know Ebidot margin.
1:31:16
terminal you know Ebidot margin. And so when I think about the like at least founders fund ethos to you know investing we think that terminal Ebidot margin mostly is determined by ultimately how much of a you know
1:31:25
monopoly your company can you know be in the long term and so if you look at you know sort of mag 7 today obviously there's a decent chunk of them that you know have some phenomenal you know sort of gross margins and those tend to be the ones that are a little more software oriented. If you look at the one that is
1:31:36
If you look at the one that is at the biggest scale and has the best ebidot margins, it's the one that is the most, you know, basically hardware oriented for sure.
1:31:42
Some of it propped up by like CUDA and they're like, you know, sort of software side of the house.
1:31:45
But like Nvidia is the one that is performing the best of all those.
1:31:47
And then even if you study within those, you know, which of those um, you know, uh, companies on the hardware side have monopolies versus, you know, sort of not, you see it's the one that with the monopoly, you know, clearly outperform the ones that don't, right?
1:31:58
So Tesla obviously in that you know sort of mag 7 but a part of why they you know sort of suffer much worse margins than like an Apple or an Nvidia is because like they actually do have you know you know competition and so my general characterization of you know sort of SAS is people always you know sort of study the original you know sort of gross margin but weren't burdening in the you know sort of cost of sales marketing etc.
1:32:16
And because you just have much less of a monopoly typically in SAS that ends up totally you know hurting your EBO you know margin profile.
1:32:23
So take like the like the favorite you know terminal scale thought of as a monopoly you know sort of SAS company that you know Ev I'm sure loves Salesforce their market share and all things CRM is 25%.
1:32:34
And so that's why you end up seeing like yeah gross margin profile is only burdened by like you know cloud you know sort of cost but their evida margin profile that is like you know sort of 40%.
1:32:42
And so, you know, the reason that I liked these negative gross margin businesses, yes, they're like tougher to start.
1:32:47
They may be more equity intensive at the beginning, but end up with way better, you know, sort of terminal margin profiles versus, you know, EV loves to, you know, invest in the, you know, AI slop codes that might have early gross margins in revenues, but >> So, Ev, what's the bullcase for for software?
1:33:03
What's the bullcase for SAS?
1:33:05
What's the bullcase for AI slop codes?
1:33:08
Look, so to to quote the godfather Neil Neil Meta himself, the laws of great businesses are the laws of great businesses.
1:33:15
The job of a business in a capital society is to is to maximize and find the efficiency frontier for three things.
1:33:25
Roy aka return on invested capital, the amount of capital you can actually deploy, and how long you can deploy that amount of capital at and above market ro.
1:33:33
There's a lot of different framings for the paths to do this and how companies can actually do this.
1:33:37
The one that people like in tech circles is Hamilton Hemler's seven powers.
1:33:40
A company accumulates power in the form of scale economies, network effects, uh whatever whatever power you want to take and then uses that power to produce above market re as long as possible and with as much capital invested in the business as possible.
1:33:56
There are great Adams based businesses that do this.
1:33:59
There are terrible Adam based businesses that don't do this.
1:34:00
There are great digital businesses that do this.
1:34:02
there's great or there's terrible digital businesses that don't do this.
1:34:04
Um, I mean, you want to hear of a great Adams based business that does this, listen to the acquired pod on Costco.
1:34:09
Like, it's certainly not like a Adams versus SAS thing necessarily.
1:34:14
The advantage that digital businesses have is that like in this process of producing above market ro for a long time is that their product form factor and the way that they distribute their product lends itself more to the the process of creating power I'd argue than most atomsbased businesses.
1:34:32
So if you think about like network effects the best place to create network effects is in a digital marketplace like an Uber and Airbnb or a Door Dash.
1:34:40
And so there's a lot of these forms of power that naturally lend themselves to digital products.
1:34:44
And the scalability of digital products tends to be a lot um a lot greater than than physical products.
1:34:51
And so you can see these these rapid growth trajectories like we're seeing from OpenAI and Anthropic and many others.
1:34:57
>> When did you guys find common ground?
1:34:58
Was it uh in the escooter era, the the sort of 15-minute delivery era?
1:35:02
Were you ever able to kind of come together and say like, "Yeah, the this is, you know, we can both agree that this is uh this is not it." >> We're good. We're good.
1:35:11
I mean, uh to be fair, Kleiner Perkins, Founders Fund have both invested in Figma, Stripe, Airbnb.
1:35:17
There is some portfolio overlap, right? Rippling as well.
1:35:21
There's a Modern Health I believe as well. There's a few others.
1:35:24
Um but yeah well to to Jord's point where where else is the common ground and where where else is the divide >> or or or the consensus in in the disagreement?
1:35:33
disagreement? Yeah, I was going to say you ever and I were texting before this of like you know what are you sort of two companies that I think um you know both of us were enthusiastic about in you know sort of 2021 that actually both
1:35:44
of you sort of trended well but are you know sort of counterpoints or two arguments and the ones that we kind of came up with were um you know 2021 I was really you sort of you know high conviction on Hrien in 2021 was super
1:35:53
you know high conviction on Rippling both those investments have you know performed quite well over the last couple years but look you know sort of wildly different in terms of you know profile um you know Rippling like many
1:36:04
you know, sort of SAS companies does end up having, you know, an initial, you know, very high gross margin, but does still have to spend a lot on sales and marketing to bring in, you know, sort of net new customers. Hadrien on the flip
1:36:12
Hadrien on the flip side, deeply, you know, sort of negative gross margin to start, but now as they've gotten to scale, they actually have like super limited, you know, sort of sales and marketing spend because there's only like, you know, 10 15 customers that matter and the moment that you're delivering for them, they just proactively start, you know, sort of throwing revenue, you know, at you.
1:36:28
And so um you know I think there are times where um you know both of our you know stories obviously you can play out.
1:36:34
The thing that I'd be curious to hear from you know sort of average is to actually like compare and contrast you know you were bringing up you know some of these digital businesses you know that um end up having these you know network effects.
1:36:41
network effects. I would kind of argue that like you know the like 2010s um negative gross margin businesses like you know the like Uber Door Dash you know uh you know types um I think of as more as like you know Adams businesses but there was a whole set of investors
1:36:54
in like the mid2010s that were generally unwilling to approach both Adams based businesses that started with negative gross margin but even some of these local marketplaces that started with negative gross margin that like swore off of the Ubers the Door Dashes etc. Um
1:37:04
Um you know it's very clear that Uber and Door Dash through you know lots of investment through building out these local you know sort of networks of you know both supply and demand were able to and you know drivers were able to eventually get to a point where now they actually you know have very attractive you know sort of financial profiles.
1:37:22
Today the equivalent of that is like there's all these investors that you know back in the 2010s would have refused to invest into any company that had negative gross margin and are all now pouring cash into both the like AI
1:37:31
application layer companies and the like you know foundation models that all have like ridiculously I mean I forget I think it's girly is non-stop you know not my favorite person in the world but girly is non-stop talking about like you
1:37:40
know what is going on here they're selling a buck for 90 cents >> and so so I think I think it's it's an important example because you had that um uh you know plenty of examples of these chain gained losses during that that era where a restaurant was selling something
1:37:55
below cost to a platform that was selling something below cost to a logistics provider, an individual contractor that like maybe wasn't actually making money if you factored in depreciation and fuel cost of their vehicle. And that ultimately worked out,
1:38:06
And that ultimately worked out, right?
1:38:08
Door Dash is a is a massive fantastic business uh based on the power of the American uh consumer.
1:38:13
But when you compare that to today where a lot of the conversation uh on the timeline this week has been the margin profile of this new generation of software companies that has to pay a lot for sales and marketing but also inference.
1:38:29
And so I think like the debate should really be you know continue to be around just how quickly will uh the cost per token fall.
1:38:40
And I think a lot of people have a lot of confidence around that.
1:38:42
But I think that that is the the key thing that Everett's sort of like broad investment thesis right now is dependent on. >> Yeah.
1:38:53
Like do you think there's going to be that same path of like Uber for a while had a bunch of negative gross margin people going into it?
1:38:57
Like do you actually think that >> I want to pull this post up.
1:39:00
Uh Everett actually posted this in Jan January 31 of 2024.
1:39:05
So over 18 months ago, he said, "I'm making a real effort to not take for granted the $3 Uber across town era of AI, and I hope you are, too."
1:39:12
Uh, and so I I I guess the question is, uh, and it's funny because because then then a bunch of people I I thought it was a good point.
1:39:22
I thought it was a hot take then, and I think then, uh, you know, a bunch of people kind of paredited that take all over the timeline.
1:39:26
Um, stole your whole flow, as you'd like to say.
1:39:30
Um but uh but but but I guess the question is like are we in some sort of different regime right now where uh the the traditional gravity and like uh fundamentals of software investing have changed because we are out of the zero marginal cost era and does that impose risks to the strategy that you know you've sort of employed or like we're kind of putting you in this in this box.
1:39:53
Uh but if the if the fundamental structure of zero marginal cost era is going away that that presumably uh forces like a rewrite of your logic around investing I would imagine. >> Yeah.
1:40:06
I think that I think the the biggest variable that's changed from the 2010s SAS era to today is that in the 2010s and you you basically made this this point without making it Delian though is that the thing that that was missing from from your talk track is that the competitive intensity of SAS during the 2010s was much much much lower than it is today.
1:40:24
lower than it is today. uh like during the 2010s there was an entire crop of companies in the 2000s but then especially in the 2010s you could basically pick either a vertical segment uh you know like HVAC or car dealerships or you could do a horizontal function
1:40:39
like the CRM or you know some very niche workflow for like the finance team you could build a software product around that workflow around that vertical and you really only had to deal with typically like two to three competitors like there really wasn't that much competition relative to what there is day. Um, and there was less um, just
1:40:54
Um, and there was less um, just just like general pricing pressure, competitive pressure, um, just the general pressure that you actually had a lot with, um, with some of the digital marketplaces early on.
1:41:05
And so, so like I think there was a whole crop of investors then and like the SAS investors then were like, well, we don't need to we don't need a bunch of cash burn.
1:41:15
Um, and it's actually it's a really unhealthy indicator if these SAS companies are producing a bunch of burn because they're not competing with anybody.
1:41:21
So if they can't like sell their product for good unit economics on day one when the competitive intensity isn't very high then they're probably not a very good business.
1:41:29
I think the thing that's changed now is one you have the change from zero marginal cost to actual meaningful marginal cost in the in the form of in uh inference.
1:41:36
And it's also just a hell of a lot more competitive than it used to be.
1:41:39
And so you you are have and by the way there's an immense you there's probably 10x more capital than there was 15 years ago to go into these companies.
1:41:46
And so like every single category now has become like mini, you know, like mini ride share or like mini Uber market where it's like, hey, there's probably a really big pot of gold at the end of the tunnel.
1:41:58
Um, and we need to be the ones that get first to scale.
1:42:00
And in a lot of these categories, the ones that have gotten first to scale um have gotten a lot of brand equity out of it and have gotten um a pretty resounding lead.
1:42:06
I think the um the only other piece I I would say I lost my train of thought. So >> yeah. Yeah.
1:42:13
But it's going to basically it's going to be like a capital fight now on the on the SAS side.
1:42:16
Uh I I wonder if if uh if the contrarian trade around hard tech is is is entering a similar era where it's become consensus and so we're going to see more capital fights and when a founder goes out and says yeah I'm going to do something crazy but I need to spend a billion dollars of capex people are just like yeah I this could be the next base. Sure.
1:42:37
It made sense to have a capital war in ride share, but now we have a capital war in like this niche agentic workflow in some industry that that most people have never heard of.
1:42:45
And also capital here's $200 million for military boats and UAS and UAP like all these different subsegments are going to wind up if if capital wars start popping up there that could potentially uh be a headwind to Delian's model.
1:42:59
Is that is that roughly correct?
1:43:01
How would you how would you uh how would you fight back against that?
1:43:03
Look, I think it's it's always, you know, sort of uh important to talk about, you know, sort of specifics here, right?
1:43:08
Um, you know, one of EB's, you know, sort of major investments in the last year is this, uh, you know, company called Captions that basically does AI captioning of, you know, various, you know, sort of videos on social media.
1:43:17
Um, when I think about, you know, handing, you know, sort of two Stanford grads and $100 million to go try and, you know, sort of replicate that, yeah, feels like, you know, they could, you know, go do something like that.
1:43:27
There's like, you know, clear, you know, voice recognition models.
1:43:30
They can go, you know, sort of pay on ads on TikTok, etc.
1:43:31
Um, and you could probably go and replicate that.
1:43:35
And so, you know, you know, our oneliner founders fund is competition is for losers.
1:43:38
And so, you know, I think I was a loser for investing.
1:43:42
>> Um, the chat were saying this wasn't spicy enough.
1:43:44
And you just delivered Delhi. So, thank you.
1:43:47
>> Um, now, you know, if you take, you know, sort of two Stanford grads and $200 million and tell them, hey, I need you to go replicate this manufacturing facility and go start building a bunch of, you know, sort of satellites, re-entry vehicles, you know, bioreactors that can actually survive the environment of space.
1:44:01
environment of space. um most you know sort of Stanford grads you know can't go you know ask chat gpt how to go do that and I haven't really faced significant competition irrespective of the fact that you know all things space factories are thought to be you know sort of the hot new thing
1:44:16
>> to be clear we use captions here on clips we enjoy the captions app we thank for making it possible and subsidizing our >> and there is a y there is a y a varta-esque yc company so they're coming for you >> Indian varta I think will be a little bit less competitive than you said Indian captions. Also, if you're the
1:44:33
Also, if you're the caption CEO and you know founders fund is trying to invest in your next round, please still let us do that.
1:44:37
Helpful counterpoint for me.
1:44:42
>> Dian, you were um you you were correct that it was getting it was getting too friendly of a debate.
1:44:45
Um I did want to make sure I could I could pin this one on you.
1:44:49
If you can recite the equation for return on invested capital, I will victory to you and I will donate $5,000 to a charity of your choice. Let's go.
1:45:01
>> Hopefully he's got Cluey running. >> Exactly. Exactly.
1:45:03
My like, you know, equivalent for Everett will be if you can explain, you know, basically why you can't create microgravity down here on Earth.
1:45:09
I will also donate $5,000 to a charity of your choice.
1:45:11
But I don't think you have, you know, I may not have the, you know, basic understanding of business physics, but you don't have basic understanding of physics.
1:45:16
And one's more important about understanding the universe around you. >> Okay.
1:45:20
>> I mean, I'm I'm pretty fixated on the 2035 Midas list.
1:45:23
That's really kind of the the final step.
1:45:28
Have >> you been on the brink yet or I forget whether or not you've made it up there? >> Taking shots.
1:45:34
>> Not even on the brink yet.
1:45:34
You know, Marie joins, you know, KP after you and she beats you. >> Laughing me. >> It's okay. It's okay.
1:45:39
Uh eventually we're going to we're going to bring back the extra names in Kleiner Perkins.
1:45:42
It used to be Kleiner Perkins, Coughfield, Buyers.
1:45:46
It's going to be Kleiner Perkins, Randall Brasswell.
1:45:48
Eventually once we're working on it, we're working on it. We're pitching it.
1:45:51
Uh where where should we go next?
1:45:54
Jordy, >> I guess uh >> Everett, how are you how quickly like how much should people be fixated on the cost per token with these frontier models over the next 6 months?
1:46:09
Like how how long can can uh venture capital sort of like backs stop these uh chained losses?
1:46:17
Yeah, I think that the the way to delineate um the the whole so so obviously like I think there was this um kind of consensus narrative that like every you know 12 to 18 months token costs were going down an order of magnitude and I think that did hold for a while.
1:46:29
I think what you've seen now is like actually for frontier models that's started to peter out a bit and like pricing has actually started it's still going down.
1:46:36
it's not going down nearly as much as it as it used to um when when like when when we were kind of in in the in the like the meat of the curve of of capability improvements on Frontier LLM um uh in terms of of pricing curve.
1:46:48
So I think that the way that you want to delineate it is like there's a certain like what I always tell everyone is that like there hasn't been a chat GPT query since GPT4 that like my mom hasn't been able to ask and have it answered by the model.
1:47:01
model. Uh so there's like the mom test of models where like there's a growing subset of tasks like economic or knowledge tasks that the models are tasked to do that no longer need frontier intelligence and when you're not on the frontier um either through
1:47:17
open source or just the like the the the cheapening and distilling of of older models like the price still falls off a cliff and there's going to be a very very large set of tasks that models do that are not on the frontier and those are going to continue to get dirt cheap. actually think that at the frontier
1:47:30
actually think that at the frontier you're probably going to see continued price decreases on a per token basis but nowhere near what you saw before which was like this this order of magnitude decrease on a very regular cadence.
1:47:39
Uh and so I think I think for for like depending on the company it's going to depend on one if you've actually built a company that has enough power where you have pricing power where you can price above the the kind of marginal token um price from the actual model providers.
1:47:56
And then two, like how much of your inference actually needs to be at the frontier?
1:47:59
Like how much of your inference can be an older model that's much much cheaper versus how much do you need to do on on the actual frontier.
1:48:03
I think that's what you're seeing like you know everyone loves to talk about cursor and Chris Pett over at Pace Capital had this really great um kind of like mini essay I think only like last night or a couple nights ago and he talked about like no one knows if Cursor has power yet because you know coders and developers um they're very very like they're taste makers.
1:48:21
They're very good at understanding the quality of the models and how much inference they're getting and there's a lot of price sensitivity for them because they have a really good understanding of how much inference they're getting.
1:48:30
Um, and so no one really knows I think no one can definitively say whether a lot of those types of companies have actual power with their users or if they're just drawn to an interface for frontier models or not.
1:48:41
And so I think that's what everyone needs to be looking out for is those two things like do you actually have power?
1:48:46
Like will people give you margin above the marginal cost of tokens?
1:48:49
And then two like do we even need the frontier uh inference for the vast majority of your product or is that is there a lot that you can offload to cheaper models?
1:48:57
>> Yeah, I mean I guess your counter you said there ever is that um you know a majority of what the foundation models are providing in terms of you know sort of value there and users is starting to be um you know sort of uh obiated by the like you know historical generation even some of the ones that are you know sort of open source.
1:49:11
So it seemed to imply that where value is acrewing and where you'd expect like the highest revenue growth wouldn't necessarily be at the foundation layer, but you'd see it more at the application layer since those folks can squat models out.
1:49:21
But like in reality, that's like literally just not what actually is happening.
1:49:25
Like if you look at which companies are, you know, sort of fastest on you revenue growth, user growth, etc.
1:49:30
, it is the foundation model companies.
1:49:31
model companies. It seems like a part of it is that they also have, you know, sort of the most pricing power where yes, you know, your mom, you know, uses GPT4, but like she's not the one that's necessarily paying like, you know, a hundred, a,000, $10,000 per month versus the true frontier capabilities on like,
1:49:46
you know, AI coding, the prousers, the one that actually do care about, you know, maybe your mom is fine with 115 IQ model and that's like fine for the rest of her life because she's just like not asking it that diff difficult of questions versus the people that actually are willing to, you know, to pay are the ones that actually do care about the 140 160 60 180 IQ. Again,
1:50:00
Again, maybe at some point that gets, you know, should commoditize as well.
1:50:05
But my sort of counter to you would be you've made this argument that seems to imply, hey, you know, things will acrew to the AI application layer, which if I understand your guys' portfolio is largely where you guys invested, but in reality, that's not what's played out.
1:50:16
The like places that have captured the most, you know, revenue growth, the most market share have been the ones that are actually pushing the true frontier, you know, of the, you know, technology forward.
1:50:25
And so, so far, at least in the last 18 months, your thesis is not playing out at all.
1:50:30
>> Well, to to be clear the isn't isn't it somewhat widely understood that anthropic has negative gross margins as well so it's it's not like they're they're doing >> like Ev's point was that you want to invest in these companies that have the you know seven powers and like you know
1:50:45
in the you know days of like Uber you know Door Dash etc that did end up you sort of translating it seems the most power then the foundation model labs maybe then the application layer we'll see how much power develops in the application layer but Ev we'll let you respond >> oh yeah I was going to say that that um
1:51:01
basically what Delian said was just wrong because even though it even though like if if you if you think about okay like let's take like whatever open AI and enthropics recently reported revenue run rate is the majority of all of that or at least the plurality of all of that is chat GPT and chatgpt even though it
1:51:17
is served by a foundation model company is an application it is a consumer subscription that has an immense amount of power it has an immense amount of branding um like you know it is the only it is like the first billion plus user consumer application that's been developed by a new company in a really long time. Um, and so I
1:51:32
Um, and so I think that um, like you could put whatever models you wanted through chat GPT at this point and it would not knock it off of its perch. I think that is power.
1:51:41
Like you could you could run cloud 3 sonnet through chat GPT and I guarantee people like the average user wouldn't actually know the difference.
1:51:48
Um, and like that to me is power.
1:51:48
And just because the foundation model companies are producing apps themselves doesn't mean that it's not the application layer that it's uh that that is accuring the value. >> Okay.
1:51:57
Then my question is, you know, you've got, you know, opening eye with the best possible consumer application layer.
1:52:01
You've got anthropic that like shifted over to positive gross margins and those margins are expanding and yet clinvesting into either of those foundation model, you know, companies. Why?
1:52:11
>> Uh I cannot comment on our current investment activities. >> Okay.
1:52:15
Uh gears can do you like making money or do you like you know you know all the competition.
1:52:24
>> Can you comment on on Donald Boat?
1:52:24
Have either of you bought anything for Donald Boat, the notorious ebeggger on X. com, the everything app?
1:52:33
>> Look, my little brother, you know, uh, you know, played the Uno reverse card and tried to get Donald Boat to buy him something.
1:52:37
So smart, you know, contrarian nature.
1:52:41
>> Let's talk about uh revenue quality because I think that you guys run into this in your respective domains every single day.
1:52:48
Just like in AI, you can have lowquality revenue like that might be the explo explosion of like consumer uh prompt to app uh activity, you know, might not be the highest quality re revenue.
1:53:01
Meanwhile, on the hard- tech side, if somebody gets like a random like cber or like experimental gets like experimental budget from some branch of the military and it's like a a fine, you know, fixed length contract, it it's not necessarily the right strategy to slap like a 50x revenue multiple on it.
1:53:20
So, like what's your view on on both of those?
1:53:23
>> Um, and then I want to talk about if we we should get into if uh if accounting rules even matter at this point. >> Yeah. Yeah, for sure.
1:53:32
Yeah, I mean in hardware land we think about this all the time of like there's clear differences in quality of revenue.
1:53:36
Everything from like you know defense you know program of record you have to value that very differently than even like a $50 million you know SBIR.
1:53:39
like a $50 million you know SBIR. And so it has been interesting to see a bunch of investors coming into this field where I think there's a lot of um pre-existing 10 years of rules around software of like what you know healthy revenue looks like rule 40 there's all these things that like you know even if you're somewhat unsophisticated infinite
1:53:56
blog post when you look at that in the world of like hardware and defense you know sort of investing or aerospace there aren't like infinite blog posts for people to study and so I admit that I'm sometimes amazed when I watch people come in even for I should never you know sort of trash my own portfolio but sometimes even my own portfolio companies I watch people invest into them and I'm Wow. Like you just have a
1:54:11
Like you just have a deep underappreciation for just like how long this company has until gross margin flips to like positive, how long it's going to be until they're actually, you know, sort of ready to, you know, go scale revenue.
1:54:21
Even if it on the back end it might be attractive, it may be years and years for them to, you know, sort of get there.
1:54:26
And so, um, yeah, I I see huge variation on that.
1:54:28
And then mostly what I end up, you know, sort of seeing is people just come in and like slap a 10 to I even saw 100x rev rate multiple on this like hardware company recently and I was like, "Holy [ __ ] Wow, people like not having IR for a long time.
1:54:46
Yeah, I think um so Delian's uh hero and close mentor Bill Gurley had an essay a long time ago called the 10x revenue club and I think it's like a good abstraction for kind of like tech revenue quality and like what makes up revenue quality and it's things like you
1:55:01
know how durable is the revenue like if you sign a customer are they going to stay for a year 20 years um you know how much contribution profit is going to come off of that revenue stream over time um all the basics and I think you can like take those same building blocks and apply it to AI. I think there's
1:55:12
I think there's several things that are worse uh for AI than at least than than relative to SAS for now.
1:55:19
So generally gross like gross margins are lower which means contribution profit coming off is lower.
1:55:24
Um I actually think that like depending on the category you could have customers that are more sticky or less sticky.
1:55:29
Like I know the meme is that everything's experimental run rate and none of these customers are actually sticky.
1:55:33
I think we see something very very different uh among the the our group of portfolio companies.
1:55:36
I think the the biggest lever that didn't exist in SAS that exists in AI that could be a huge call option boon for the revenue quality of AI is the actual contract sizes as people start to eat into potential labor budgets.
1:55:50
potential labor budgets. I know this is like still kind of like inning one and inning two and it's also like a little bit of a meme where everyone's like oh it's going to replace labor and labor's 10 times SAS and it hasn't really happened yet but I think if you look at some of these coding tools and you look at something like cloud code that is the first place where you can really
1:56:04
actually say like no this is replacing the labor that a developer would do and it is paid for on like a metered consumption basis and the monetization numbers we're hearing around developers using cloud code are pretty crazy in terms of like wow that's like you're paying like onetenth of like a developer's full-in cost to a company on an annual ualized basis for this product. And so I think that the like
1:56:22
And so I think that the like the the thing to watch is like durability of revenue plus the amount of actual revenue that a customer can give you.
1:56:28
And I think that you're going to end up or the amount of gross profit that a customer can contribute over time.
1:56:33
And I do think as some customers crack these agentic products that look and monetize more like labor, um AI revenue could actually exceed the quality of SAS revenue just because you're getting so much more gross profit per customer or or like customer relationship than you would on the SAS side.
1:56:49
Even though there are clearly things that are worse about AI revenue at at this current point in time than there are about SAS revenue.
1:56:55
>> Dillian, how do you think about the uh the the moral imperative of of a venture capitalist to invest in positive sum versus zero sum markets?
1:57:02
This idea that you know you're re-industrializing America.
1:57:06
You're saving the west versus moving chips around uh ver versus moving chips around the poker table.
1:57:14
Taking uh taking from some legacy, you know, web 1.
1:57:17
0 know company and putting it into an AI company.
1:57:19
Uh what what's your what's your thinking and argument there?
1:57:24
Is is is uh a a a market beating ROIC all that you need?
1:57:31
Yeah, I you know I think uh Peter always reminds us like you know our number one job is deliver returns for our LPs and so I actually tend to not try to you know sort of overly moralize when like analyzing the things that I want to you invest into for sure when it comes into
1:57:45
like policy and I'm in DC and I like need to you know sort of report to you know the security council that you know Bill Gurley is a you know sort of Chinese spy and like the investments that he's making should probably be banned from the United States. Yeah, for Yeah, for sure.
1:57:56
There I have, you know, sort of moral imperatives and things that influence that may end up, you know, shifting ROIC, right?
1:58:00
Um, so, you know, but when it comes to, you know, like which literal investments are we making, I think of it as just like, yeah, you just have to, you know, sort of make the, you know, sort of best possible investments irrespective of, you know, sort of moral imperatives.
1:58:12
But in some ways, I tend to think it turns out actually if you, you know, go too immoral, um, then that ends up, you know, sort of affecting ROIC.
1:58:18
know, sort of affecting ROIC. So um you know maybe and the last thing that I at least you know sort of you know close on you know for my you know sort of question you know for everit um is um you know uh one of the upsides of founders fund is you know we're very um you know sort of uh you know um let's say uh non-entralized distributed you
1:58:36
know not many you know sort of rules which you know ever for some reason you sort of chose to leave and so I know nowadays everything that he says publicly you know probably you know five comms people and five compliance people that need to you know sort of approve it and so my only request He was, you know, so blink twice if somebody's, you know, got a gun behind the camera. If you ever say anything that, you know,
1:58:54
If you ever say anything that, you know, goes off, Chris, just uh that's all you got to tell us, brother.
1:58:58
Yeah, let it let us know.
1:59:00
>> Hey, our wonderful marketing partner, Ally, is is is behind the camera with a green and red paddle, and she hasn't the red paddle yet.
1:59:06
So, that's >> that's very victory. >> Well, thank you both. >> Last question.
1:59:10
Are you worried about Uncle Sam potentially having sharp elbows now that we're hearing about intel? Yeah.
1:59:16
the federal government taking a stake in Intel.
1:59:18
Any any concerns about him going down the stack into the into the early stage game competing for those seed and in series A allocations?
1:59:27
>> Look, if Trump Capital wants to uh, you know, sort of mark up some of the uh, you know, re-industrialization companies, I'm all for it, baby. Cheap cost of capital. >> You're all for it.
1:59:35
>> I'll say I'll say two things.
1:59:35
I would say one, I think that the EV of like the enterprise value of Founders Fund probably 3xed the night that that Trump got elected.
1:59:42
So, I don't I don't think Delion would complain about that.
1:59:43
And then two, just as as a parting gift, Dellian, um you know, I think this conversation's been great and it's made me realize why you want to build factories in space because your math on Earth doesn't make any sense.
1:59:58
>> Well, thank you both for joining us. You're both good sports.
2:00:03
>> We'll have to do this again.
2:00:04
>> I think it might be a draw.
2:00:04
We'll have to have you both back soon.
2:00:05
Thanks so much for hopping on. >> Great stuff.
2:00:07
We'll see you guys later. Cheers. [Music]