E171: DOJ sues Apple, AI arms race, Reddit IPO, Realtor settlement & more

25:25I was like Yahoo, adding Google search, right? And then by the way, on the heels of like turning off cars and losing these antitrust issues in Europe and then being sued by the DOJ here to then be in a licensing discussion with a third party for such a critical technology, I think is just says not very good things about the state of the company. Freiberk, we're thoughts on this potential deal. We don't know what features this would power. I don't know if it's Siri or it's just image editing or search or an extension of search maybe giving an answer. I have no idea It seems to me like there's if at if Apple's doing the right thing which I'm sure they are they're probably building their own alternative Platform here.

26:09They realize it's gonna take them some time in the interim. They want to have a stopgap and my guess is I go I go on a Google they're probably gonna get paid instead of having to pay someone else for the technology because Google will realize some benefit from getting users over to search results and seeing ads. So Google will probably benefit and pay them instead of them having to go pay someone for access to some technology that consumers might want access to. Saxony, that's here. I'm sure Apple is going to make an investment in building their own models here. Yeah, I mean, who would look at the launch of Google Gemini and say, I want that?

26:47that launch was a total fiasco. I'm talking about a company. I think it fits the Apple philosophy pretty good. How woke would Tim Cook have to be to look at the launch of Gemini and say, oh, yeah, I don't see anything wrong there. You got that exactly right. I want that. Yeah. Siri, show me the president of the United States. I mean, apparently Tim Cook is the only person on Earth who's impressed with the launch of Google Gemini. I mean, I can't believe the story is true. It's just, it can't be true. I'm so excited today to launch Gemini on stage here at iOS 27. Oh my God. Can you imagine them on stage doing searches?

27:24The story can't be true because it would be so strategically done. Like Jamal said, even if Google Gemini were great, you'd still want to invest in having your own thing because it's such a strategic technology. Why would you ever outsource it to your main competitor? Right. But in this case, you know that Gemini was terrible. It was a If the story makes no sense, I just can't believe it's true. It's a problem with people knocking on each other's doors. They spent $30 billion last year on R &D. 30 billion. Apple. To be clear. They spent $30 billion on R &D. What did they spend it on? Katering.

28:01I mean, you gotta think Apple Vision is a big piece of that, right? Chips. I guarantee you like half of that is like the M3 and 4 chips. and like not a couple crumbs fall out of somebody's pocket. And so there's 50 million allocated to just like, you know, mucking around with llama or mucking around with mistral. What if they took project Titan, the car, car deal? That was 10 billion. I suppose that they had spent on that. And if they put that towards AI, it would be my personal. Again, it goes back to the people. I don't think the person in charge of the windshield wipers project Titan is going to be the person that figures out about how to land a really killer LLM.

28:41That's a different skill set. But it's not even that expensive. I mean, you're right. It's an mechanical engineer and once a computer scientist. So these are not the same people. They're not fungible that way. I mean, I guess the question here is Apple capable of building on a culture basis, Friedberg, this type of software. They're a hardware company. It's not hard. They're standing on the shoulders of the whole open source movement. All you have to do, like Jamasset, all you gotta do is take the latest Mr. Model or jump on hugging face and start working. I mean, you're not starting from zero because of open source.

29:12Not only you're not starting from zero, not only do you have the foundational models that are excellent and available in open source, you have probably the most prolific set of training data that has ever been created in the entire world to make these models kick ass. Yeah, you have all the Apple photos. I wonder if in their terms, so that's the thing is their terms of service is so privacy based. I wonder if they could even use that information. And I just think look at the end of the day, the Apple brand is still exception. And so if you're given a $10 million a year job at Google versus a $10 million a year job at Meta versus a $10 million a year job at Apple, if you're like one of these killer AI people that get these kinds of offers, I got to presume that Apple gets their fair share of these people.

29:55Yeah, you would think. And even in the worst case, you see Microsoft doing pretty heavy handed deals with companies like OpenAI and just to speak with inflection. So it's not as if these deals can't be done, right? And so it just kind of like leaves, I don't know, it's just, it's quizzical. To spend that much money, to not necessarily be willing to compete on the human capital, to not necessarily be in the market, acquiring these businesses. I don't know, it's just a question mark. Like what's going on there? Yeah, Traumaath asks, what's going on over there? We have some insight footage. Nick, you want to play tape?

30:36What's going on here?

30:42What are we watching?

30:49I hope we didn't keep you waiting. Mother Nature. Mother Nature. Welcome to Apple. How was the weather getting in?

31:05Oh, she's controlling the weather. This is so pretty. This is so pretty. The weather was however I wanted to be. Yeah, they did this couple of... But this reflects their self -image. I mean, they released this. They care about the planet. No, it reflects that they think somehow this is an accurate reflection of the way they do meetings. No, I think it was the... No, I think it was the point they were making is they were trying to do a skit about like how they're doing less packaging and including that that's get was to tell you that you're not getting a charger in your next iPhone because they they don't they want to say was cringe.

31:34I think it was yeah, it was super cringe, but yeah, I think it was super cringe, but I do appreciate that they are doing sustainable products and not putting as much stuff in landfills, so I think they should get a lot of credit for that. What I do think about this deal that's really interesting is it's sort of cementing the Google and the Apple alliance against Microsoft. Microsoft has big AI ambitions. So this is kind of interesting. If you've locked in the duopoly of Google and Apple and then you lock in Google's search monopoly and you start fighting Microsoft, I think that's what we're...

32:10I think that's what's probably going on here is they're trying to figure out how do we keep Microsoft away from running away with this. All right, we covered that huge NAR lawsuit back in December and there has been a settlement big news for the National Association of Realtors. They've agreed to pay $418 million in a settlement last week and federal jury found that the NAR and several large real estate brokerages conspired to artificially inflate agent commissions. The settlement is pretty pretty big deal. People are freaking out about it. As you know, the seller of a home pays the buyer's agents commission.

32:48So you have a buyer and a seller, 6 % fee typically, sometimes it's five, but they split that 3 % to the buyer and the seller, but the seller is paying that 3 % to the buyer. Now that can't be listed in the MLS anymore, and that deal cannot be done ahead of time. Buyers are responsible for paying their agents commissions going forward. If you bought a million dollar house and you were the buyer you would pay 30 ,000 to your buyer's agent or you would choose to not Have an agent or you would choose to negotiate it and you have to have assigned contract. This is a crazy just Shocking shock to the system according to most people who are in it.

33:28I've seen a lot of real estate Folks who are saying this is gonna be healthy because you have this you have to have this conversation between the buyers agent and the buyer But commissions in the United States are $100 billion a year, and one analyst projected the lawsuit could lead to a 30 % reduction in commission payments. And that would eliminate about half of the 1 .6 million active NRA members from the industry. You had a lot of feelings on this Friedberg when we talked about it a couple of months ago. What are your thoughts on this settlement? Is anything going to change? Is this as groundbreaking and shocking as people seem to think it is?

34:04Well, I would take this settlement along with a lot of the developments and advances in AI as being the moment of catalyzing real change in the residential real estate agency industry. It's an industry that's been known to have fixed pricing and be very expensive to consumers There's a real tax on the system. And it's largely been wrapped around this idea of mitigating your liability, reducing risk, servicing the customer. Many of those aspects over the last couple of years have been largely standardized through forms, digitized because so much of this information is no longer going to get paperwork from the courthouse, but a lot of the information's so digitally and can be accessed in a democratized way and the fact that so much of the service and discovery reading through documents, understanding what they mean and what they say can be automated through AI and LLMs.

35:05Much of this is kind of coalescing around what I hope and expect will be a more seamless, automated, direct marketplace for consumers. The challenge is that most consumers put most of their personal net worth into their home. And so it is where most people's net worth is tied up. And so because it is such a sensitive investment and it is their entire savings, they want to have a trusted advisor by them. So it's going to take some time before that trusted advisor becomes some piece of software. But I do think that software is going to play more and more of a role in providing advisory tools and services who consumers in this transaction marketplace.

35:45And that's only going to catalyze and accelerate the fee reduction. I do project and I do expect that much of what is charged on a commission basis on a percent of home value today will change to being a fixed fee and a 5K 10k for your buyer's So you can have someone do a lot of cart do the disclosure diligence for me for 5k? You know negotiate the purchase for me for 10k and you as a consumer will start to pick from a menu of The services that you want to have rendered for you and things that you're comfortable doing yourself I don't need someone to negotiate price. I don't need someone to find me at home.

36:20I've got red stand. I can go do that. I can arrange open houses on my own. The lock box is there. I'll go walk around the property. I don't need someone to point out that the color is nice in a room. And so I think that there's elements of what this happened here, which is a fragmentation and then an automation of these services. And as a result, significant fee reduction. And I'm in the middle of doing this myself right now with a piece of real estate where I'm not using an agent. And I've been using a direct listing service. I've used all of these standard forms. There's a lot of AI tools you can use to kind of read all the disclosures for you and make sure everything's copacetic.

36:56And these escrow agents, they'll handle a lot of what a lawyer will handle. And they'll get paid a fee, which is much less than the agent's fee. So I do think that there's a big disruption happening in this industry. I think it's really important for consumers. Agents are gonna be hands in the air telling you this is ridiculous. You need someone to help you. you need an advisor that will continue for a good chunk of the market for a very long period of time. But I do think that it's for the benefit of consumers over time to see these fees come out of the system and see those savings go back into consumers' pockets and for the value of the real estate to go to go in their pockets, not into an agent's pocket.

37:30Is it going to change the profitability of a realtor? Pretty meaningfully, right? Both realtor's won't be able to be a business. Right. I think the sellers will do fine and they might capture more of it because they'll worth, they'll, my understanding is the, the seller will maybe do both sides of the transaction. No, that's not what's going to happen and there's also going to be limits on that. But, but here's what I will say. If you look at the, the number of people, there are 1 .4 million members of NAR today in the National Association of Realtors. If you look at the distribution of earnings, You guys know this.

38:10My guess is probably 10 % of those realtors make 40 % of the fee income or 50 % of the fee income. Some of them are in long tail. So there's probably a third of those folks who are already kind of sub living standards in terms of income. Maybe half of them won't be able to make enough money in this new fee regime that it'll no longer be an attractive proposition to be a real estate agent for maybe half a million to a million people over time that are agents today. Yeah, you know, interesting this, the sellers are going to be faced with buyers who just show up having seen something on Redfin and don't have a buyer's representation.

38:50And so they think from the stuff I've been reading that the sellers agent might be pointing them to, hey, go to these services and be acting as like one broker essentially representing both sides. That's what people are saying is the potential downside of this. Yeah, that's not going to happen for a couple of reasons, but let me ask you guys a question. If you guys want to go buy a new house, currently you just go sign up an agent or buy your agent and they go walk with you and eventually they'll get paid by the seller's agent. So now you have to negotiate a fee with them up front. Would you negotiate a fee and say to a buyer's agent, hey, I'll pay you 2 % of whatever home I buy?

39:29Would you be comfortable doing that or 3 % or 4 %? How would you have that conversation? No, well. What would you say, Saks? I mean, forget, I know you've got a different situation because you've got real estate people like working for you, but Like if you were to go out and get it would you go out and get an agent and pay and negotiate a few of them? It is not worth it to the buyer to pay two to three percent of the purchase price to make appointments You can see all the houses on MLS through Zillow or Redfin or whatever and what about handling closing and disclosure? No buyer would ever voluntarily agree to pay this massive commission.

40:03It's not worth it So it's game over for the realtors if buyers are forced to pay their own Brokers commission the only reason this system works is because the seller's force to pay for it Yeah, and when you sign the listing agreement with the seller's agent You can negotiate a little bit at the margins sometimes you can get the 6 % down to 45 % for a big listing But 50 % of it will always go to the buy side I mean, I've said to these guys, the buy side agent doesn't do anything. Why don't you make it 2 % for yourself and 1 % for the buyer? They won't do that. They just won't take your business.

40:40The seller will not represent you. They have like all sorts of rules against it. So the whole thing is like protect, it's like a racket that's protected. And now it's been cracked. Well, I still am like a little bit skeptical that this is going to work out exactly the way we're saying because it is just such a death blow to the industry of buyers or forced to pay their own commissions, their own Bicycle Brokers Commission. And in the articles, they're saying they're still like some gray area about what's going to happen. But that is what should happen. Buyers should be responsible for paying their own brokers.

41:12And if you do that, I think you'll knock out half the fees of this industry. Here's an idea. I wanted to charge an hourly fee as a buyer's agent like you. They will be doing that, Jacob, for sure. It's an hour, $300 an hour. It doesn't impact home prices as well. Like if you, if the buyer had to pay, all of a sudden their affordability effectively goes down because if they have to pay an extra $100 ,000 for a home, then that's $100 ,000 they can't pay, less than they can pay for the house itself because they have to pay an agent. But it all comes back into home prices, no? It nuts out because the seller's agent is no longer paying 6%, they're paying 3%.

41:46And so now the seller's agent has 3 % more that they're not. That's the same. Yeah, but net net. I think it's good for buyers and sellers because the transaction costs of trading go down. Exactly. Your money goes back in consumers pockets. I create a more fluid market. I think it's a great opportunity for startups. I'll say this right now. I think there's going to be a lot of startups that are going to come out of this ruling that are going to launch all of cart services, leveraging AI to make these services available direct to consumers without needing an agent. They're going to be pretty compelling services and they're going to show up real fast.

42:19I mean a lot of people will not list their home or sell it because that's 6 % Might put them underwater. So if it's now now down to two or three. Totally. Yeah people might be like It's always been crazy to me that anyone would pay a percent of absolute value It makes no sense. I bought a home for a million. I'm selling it for a million one So I've made a hundred thousand dollar profit, but I got to pay sixty thousand dollars of my total gross to an agent to sell it for me. 60 % of the profit goes to me. I just gave him 60 % of my profit on my home. It makes no sense. And the crazy thing is that a bad sale of your home would be, let's call it 900 ,000 or a million and a great sale would be 1 .2.

43:02So it's a very small margin where they actually have an impact based on the quality of their effort, but they get compensated for the whole thing. Yeah, for the whole thing. And they should get compensated no matter the outcome. should be that you get a flat rate $10 ,000 at a million. And then you get 10 % over a million or something. You could give just like you have the salesperson. The incentive comp should be variable based on performance, whereas the guaranteed part of the comp should be, like you said, a flat fee, it's kind of like the salesperson has an OT, I think that's like a base of a variable.

43:36Yeah, I mean, you could say, if you said 1 % up to a million, so that's 10K. and then 10 % for the next 100K and then 20 % for the next 100K. So you would, you know, that 1 .2 million is really hard to get. Yeah, I'll give you 20 % of that incremental 100. That would be a much better deal. You'll be getting paid for the actual performance. So it's really interesting. You know, Jake, I have an idea for the National Association of Realtors. Oh, here we go. If they want to stop being perceived as an evil monopolist, all they got to do is put out a cringe ad talking about the environment. Everyone's going to love him again.

44:08Absolutely. they should do an ad where they have a diverse cast of people and that diverse cast could talk about like putting sustainable, forestry around it. I gotta do is say something, something landfills everyone will love them again they can charge themselves up. Absolutely, virtual signaling right? They can change something, something landfills. Yes, absolutely. All right, let's keep the train moving here. The AI landscape shifting yet again, Microsoft just did. Another one of these These shadow aquahires, this time of inflection AI, Bizarre Deal, Microsoft has hired most of the team at inflection AI, including the CEO, Mustafa, who everybody knows.

44:46I just actually had him on this weekend startups. He was the co -founder of DeepMind. He worked at Google for years. And now he's going to be the CEO of a new company called Microsoft AI. It's essentially the consumer AI division of Microsoft, but they did give him the CEO title. So for background inflection had raised 1 .5 billion over the last two years. It was one of these giant fundings that occurred to build a foundational model. Like OpenAI is doing, like in PropPick is doing. They had a chatbot called Pi, very similar to ChatGPT. It was supposed to remember your history and build a relationship with you.

45:22That's all getting shut down. Read Hoffman who is a major investor in this company and who's on the board of Microsoft and who so linked into Microsoft, it played an important role in the deal according to reports and the inflection investors included Bill Gates, Eric Schmidt, and a bunch of other interesting folks. But this was a aquahire, which is the weird thing, Shema. They hired all the employees. They leave the shell of a company. The company is going to go do some enterprise stuff. And investors get to keep their equity inflection. But I guess that might be worthless. There's something going on here that we don't know about this deal structure.

46:00When you saw this deal and you see Satya taking the entire team, like he threatened to do with opening eye, if you remember same exact kind of thing on aqua or everybody, if you don't take the deal, what is your take of what's going on here? Why did this occur like this instead of just buying the company? I mean, it occurred like this because Reed and Bill are inexorably tied to Microsoft, so they were able to get a deal for investors that would have never happened otherwise. and so good on them. I think they did a very good job protecting the fiduciary interests of the investors of this startup.

46:36No conflict, no interest. Yeah, I mean, we say that a lot. This is so weird though, why not buy the company, Sax? Is it because of antitrust? Actually, that's a good theory. It's just as hard for Microsoft to get anything through at this point. So probably they're just like why even deal with the antitrust. They don't really need the assets. So I think they licensed the core tech from the Infliction C Corp and then they hire way all the talent and then the investors get made whole So I think it's like an aqua hire with a little bit of tech along with it that they get through the licensing deal Maybe that's just to protect them from an IP standpoint my take on this is that this was a bailout This was a bailout of the investors.

47:18I don't think investors got ripped off here I think the investors were like thrilled to get their money back for whatever reason this company wasn't going anywhere And it raised hundreds of millions of dollars read and bill obviously are wired in there on the Microsoft board and This company did have some talent that Microsoft wanted So they basically did a giant aqua hire and it bailed out the investors Freeberg is that your take? This is a bailout or do you think this is a new interesting and run around antitrust where Hey, if Adobe wants to buy the next Figma, just buy the team, do a license of Figma, some Fakaka lunacy, or do you think this is a bala?

47:56What are your theory here, Freberg? What does it say about Microsoft's approach to the AI space? I don't think this is some run around antitrust. I think obviously, like a lot of companies, there's been a realization on how quickly The way foundational model development is commoditizing and how quickly costs are escalating and how many folks are chasing it. So having some unique advantage in the particular plane of the market where they were participating as a startup maybe became difficult and untenable and negotiations and conversations between all these parties who all know each other very, very well and are all very friendly, you know, All right, there you have it folks.

48:43In other related news, the Saudis are planning a $40 billion AI fund according to the New York Times reps from the public investment fund in Saudi have spoken to a number of firms about partnering on it. This would be the second largest venture fund of all time behind soft banks, $100 billion Vision Fund One, which you remember was also backed by the Saudis and some other folks in the Middle East region. This new fund would reportedly invested in AI, start -ups, chip companies, and data centers. So we thought we'd do a little quiz here. If you were given the 40 billion, David Sachs, how would you allocate the 40 billion in AI in today's market, 2024 going on?

49:23If they put you in charge of this 40 billion dollar AI fund, where would you deploy it? Same question would come around the horn to you, Freeberg, and then you Chema. Well, the first thing is I wouldn't be in a rush to deploy all 40 billion at once because that's the recipe for spraying a lot of money into unproductive or overhyped things. So I would take my time, first of all. But second, in terms of kind of the framework, I would think about the different levels of the stack of AI and try to figure out where the value capters are going to be. And I think there's maybe four different layers of the stack.

49:56First you've got the silicon, you've got the chips, where Nvidia is dominant. it, then you've got the foundation models where it's open AI and then there's some open source models and then you've got kind of infrastructure, dev tools, vector databases, things like that. And then finally you have the applications sitting on top of that, which are just getting started. I think it's really hard to know from what we're seeing today exactly who's going to capture the most value in the stack. I mean, you could make an argument for against pretty much any layer of the stack. I guess if I had 40 billion to deploy, what I would do is try to identify who are the leading companies at each level of the stack and then who are the most promising challengers and I would make about it every layer so I'm covered.

50:37That's not what I personally do because I'm not, you know, I'm just not a hardware investor, I'm not really an infrastructure investor, I'm more of an application investor so I'm gonna focus on that fourth layer of the stack and distrust that there's gonna be enough value there. But again, if I was managing a $40 billion sovereign wealth fund, then I would play at every single level and I would hire the best people who know each layer of that stack. SACs mean you did a good job of sort of showing the four layers of the stack. I think open source, the application layer, and specifically robotics are huge opportunities that are under invested in right now.

51:12So I take the top open source projects, I find those top contributors, take the top 20 or so open source projects, and back them to the tune of, you know, significant money, 50 million, 100 million, whatever it takes, and try to own the top 20 or have insights into those top 20 open source models and own those teams. Look for the top contributors really easy to do on GitHub and hugging face and rep let another place is where they're active and empower those. Then obviously there's verticals. We're working on people who are doing screenplays and tax just like you are sacks and that's a fantastic place to deploy money.

51:47But then I think robotics is going to be super, super compelling here and that takes a lot of money. And so you do have the capital as a weapon and the 20 -year view of this. And making a general -purpose robot like Elon's doing with Optimus or figure AI's doing with their robot, I think Robotics is a major place. You could probably buy, I don't know who owns Boston Dynamics now, I know Google sold it. So you could probably buy some robotic companies and then put the AI on them and really take a 20 -year view of Robotics. Trevor, your thoughts? How would you deploy the 40 million? The autumn three stacks are very difficult right now to find a footing, obviously.

52:32I think the general accepted framework for how to think about how the market has broken apart. But on the application side, I think is where you could think about finding more traditional business model advantages. So, I think your point about robotics is a really interesting one. Is there an enterprise -like sale of robotics tools that have positive ROI for enterprises? And is there a business that's working there and that is scalable? Vertical solutions in labor and automation and productivity gains are probably the best sharp ratio. Good alpha, lower beta, and a good place to kind of deploy competing in chips, competing in infrastructure, competing in models, it's such a, as we just talked about with respect to what happened with inflection and Microsoft this week, it's such a rapidly changing environment.

53:27It's hard to have high confidence in where things are headed there. So I do think that we do know that there are enterprise markets, we know that there are segments of things like food, medicine, you know, manufacturing, these are markets that aren't going anywhere and they could all certainly benefit from unlocks in software or in robotics and automation and hardware. So that's probably where I would think about concentrating capital, but you know, 40 billions of lot of money. So you probably think about deploying it over what period of time is a 10 billion a year over four years, and then is it broken apart and what way over those sectors and over what geographies and you know, then find good managers to help you get it blood.

54:09Trimoff, you're about to clean up here. You got to hear everybody's answers before giving your own. What are your thoughts on your other besties answers and what's your plan to deploy 40 billion for? The Kingdom of Saudi Arabia is public investment. The most important thing that fund managers get wrong is not having appropriate reserves for your winners. And if I look back The real Profit dollars that I leaked was not Not investing enough up front us, but when I didn't have enough reserve to do the full pro rata or even super pro rata and the ones that work. So the first thing you have to do, and when I do the regression on all of my funds, you really need to reserve between 40 and 50 % of a total fund size for reserve.

54:51So take 20 billion off the table. And now you have a smaller problem, which is how do you deploy 20 billion? Because the other 20 billion is purely meant for the winners, where you cram the money into the few that are winning so that you can make the most money. Of that 20 billion, I would probably take two thirds of it. And I would go to all the hyperscalers and anybody that's providing cloud compute and essentially buy out all of the compute credits on GPUs so that I could tell any startup in the world you will do a safe with me, the Kingdom of Saudi Arabia, I will give you free compute on pick your cloud provider, pick your model, I don't care.

55:33So if you want to run Lama on GROC, great. If you want to run Mistral on GCP, great. If you want to run OpenAI on OpenAI. Fantastic. But we will pay for all the compute. In return, we get 7 % upfront. And you have to tell us some benchmark of how This model is improving. And then you are hiring a team of People whose job it is and you can probably train a model to do this as well, to ingest the reporting in a systematic way to understand. If it is, as you guys said, a robotics company, there are measures of the quality of a robot's dexterity or vision or manipulation or tax completion rate. If it's a search engine, it's a different thing.

56:17If it's a consumer facing app, it could be users. If it's a drug discovery app, it's the number of legitimate protein synthesis passes that pass. Whatever it is. So now you've scoped the problem to 20 billion is in reserves, 15 billion of it is tied up in credits. And then the five billion, I do think it's what David said, what SAC said, which is a billion and a half to the hardware, a billion and a half to infrastructure, a billion and a half to some of these discrete ideas. You probably need a 30 or 40 person team total, no more. But that business could make a trillion dollars if it was set up that But the key is to get the credits out to people so that the reality is what the commonality across every single AI startup is that they will have to run on a model.

57:05And that model will be hosted somewhere in a cloud and all of that compute will need to be paid for. So Saudi Arabia should pay for that compute get six or seven percent up front and re -title the safe not as the what is the safe call Jason. Simple agreement for future equity. This should be the Saudi agreement. I love it. That's what they said. Well, there you have it, MBS, the all -in KSA $40 billion or fun. Give us a call. We'll fire it up and we'll deploy the $40 billion for you. My kid. Maybe. Actually, I'm curious. You guys, since everyone kind of seems to agree with the framework of the four levels of the stack, where do you guys think the value cap is going to be?

57:50Do you think it's going to be by the chip companies, the foundation model companies, the infrastructure companies, or the applications? I'll actually change my answer in a little bit. I don't think it's necessarily new technology companies per se that are going to benefit most, but I think that it's business is in traditional industries that are going to be able to leverage these tools, whether they're using open -source tools, or third -party technology capabilities that they're buying as a service or as a piece of software. where there's an incredible set of advances are gonna be realized in things like chemical manufacturing, drugs, general manufacturing that have existing scale and infrastructure that are the fastest to move to adopt these technologies are gonna benefit the most.

58:33And I think that's probably where most of the value will accrue is not necessarily a chip company, but in other businesses and traditional industries that can transform themselves using AI. So your answer is at the application level. And then within application level you could divide it up between existing companies and startups. Yeah. And existing companies that are able to leverage AI innovations that are lower in the stack. Another way to answer your question, SACs, is which spaces are the most crowded already? And so obviously chips are super crowded, lots of incumbents, lots of people going after it.

59:06And the foundation models are very crowded as well. and the application level is yet to sort of be built out, right? Because we're in year zero or year one of that. So I do think application level is where there's a lot of value. But I also think the hosting and the development of these various niche models is going to be a huge opportunity. So just once again, those open source models being put into a cloud computing environments and optimized, that could be a whole new level of AWS's and Google Cloud and Azure's. So there is an opportunity for somebody to compete with those incumbents by just being better at those models that are open source and having the team that's doing those updates and then optimizing that cloud.

59:50So I would go with the cloud level for those open source models and providing that as a service like VMware does or other folks do. WordPress will be a tiny example of an open source project like that. And then I just, something tells me this robotic space which has been a false start over and over and over again. I think this is the time where actually it's going to work. And so I love that hardware, robotics space. I think you're right, Saks. I think it's kind of bookended in my mind. I think the folks that are building fundamental hardware will make a lot of money over the next five to 10 years.

1:00:23And then the folks that are building the fundamental application level experiences will make a lot of money as well. And then who knows? The thing that we're not talking about enough, and I don't understand it well enough, is the entire way in which apps are built needs to fundamentally be rethought from first principles, because you essentially basically have these client server apps where you have all of this business logic that's sitting back in some server somewhere. And I don't think that that's how apps get built today in a world of AI. And so it doesn't need to work that way. So I don't exactly know what that means, but it just seems like most of the architecture of how the internet works today it doesn't make much sense.

1:01:06So that would then support Freebrook's point that all of the legacy things that we all know and trust also get rebuilt. And so that could create an entire wave where networking value gets recreated and everything. So my gosh, I mean, it could be very, very transformation. Yeah, I mean, the idea that you would just talk to a computer or a chat interface and you wouldn't use an app interface. You would just ask a question, so it would give you answers. Ask a question, so it gives you answers. Give it a task and give you a result. This is why Saudi needs to basically make a bet that there's just developers that are swarming around ideas.

1:01:41Let them show you what's happening because paying 800 million a year of fees is not the best way to generate a return on $40 billion if this is where you want to be investing. I don't think 800 million could pay for a lot of credits, which probably gets you one step closer to the answer. Or when it went public today, they have 800 million in revenue. Company is worth over $8 billion in trading. It's a 50 % what do you think? Tremoth is the opening of the IPO window again. This is a one off get stripe coming and what do you take from it popping 50 % on the first day? I don't know. I really haven't looked at the company.

1:02:22I haven't looked at the financials. But like this last three or four weeks, I think people have been so excited and rearing to go We're in the middle of another meme coin craze Don't forget I just think we are all getting pulled into that nonsense. I think the point is that I think there is a speculative party going on right now and I'm not saying that reddit is part of it, but Whenever these things are so mispriced just means that people are ready to gamble a little bit. There's definitely a lot of gambling in the system as we've seen. And we're recording this on Thursday. So who knows what the stock price will be tomorrow?

1:03:02Generally, the other thing is like, Powell did say finally, it looks pretty likely we're going to get these three cuts. So we're going to be down to four and a half to four, seven, five unfed funds by the end of the year. or it probably means that we'll get another 50 to 75 basis points to 2025. So people will look out to the end of 2025 and look at a Fed funds rate that's sort of like 375 to 4%. So they're getting pretty excited and frothed up. So this is the beginning of the beginning in terms of that kind of speculation. Yeah, we saw crypto go bonkers the last couple of weeks. Yeah. What's your take on all this?

1:03:42is there's a feel like people are in gamble mode again and does that concern you, I guess, after what we just experienced? Well, I think they're pricing in these rate cuts as if they're definitely gonna happen. Like Juma said, I think the market's expectation is with, let's call it 70 % certainty that you're gonna get three rate cuts this year. And it still seems to me that that's a little bit up in the air because inflation has not come down to the Fed's target of 2%, it's still right around 3%, 3 .1%. So it's been sticky around 3%. It was coming down pretty fast last year, but it's still there.

1:04:23So people I think are maybe gambling in the sense that they're counting on rate cuts that haven't happened yet, but they liked Powell's dovish rhetoric yesterday. day. And they seem to think that that means that the rate cuts are definitely coming. I don't know how Paul can promise that without inflation coming down unless he's trying to create a Biden put. There it is folks. Which was my theory going into this year is that is that we get a Biden put from the Fed. Absolutely. And it's looking at Biden has a clear path to victory based on the lowest unemployment of our lifetimes and this worrying stock market records.

1:05:02Yes, it's an easy Biden victory. Freeberg, what do you think about the risk on? I don't know. Biden is incredibly unpopular. If you look at his actual polling, he should not win the election. But that's in spite of your right. The economy seems to be doing pretty well. Stock market's certainly doing pretty well. A president with these fundamentals would normally get reelected, but Biden currently is not his polling is not the polling of a president who's going to get reelected. It is pretty amazing. If Powell comes through with the rate cuts, that will help him. It's pretty amazing how horrible a job he's doing that he's made Trump look like a better candidate to some people.

1:05:44That is an extraordinary achievement by Biden and we'll have to agree there. Look I think the bigger economic issue to be talking about was that buried article in the Wall Street Journal about commercial real estate. Do you see that article? That was crazy. So this Wall Street Journal article reported that of the 36 billion of Office loans that came to you in the commercial mortgage back securities market last year only one quarter were paid off and full That's according to data from real estate analytics from cred 10 Is that extended pretend strategy that you see there? Oh, yeah, I mean only one quarter of the loans got paid off So 75 % didn't get paid off and full So there's tons of buildings that are underwater right now, but nobody wants to foreclose and then sell them at a fire sale price.

1:06:35So yeah, everyone is it's pretend to extend. Yeah, kick them a can down the road. Nobody wants to take the medicine. Well, they're hoping they're hoping that rates will come down fast enough and occupancy rates will go up fast enough that no one has to foreclose. But if rates don't come down, then you have a real problem. I mean, again, everyone is just assuming that inflation will continue its path from 3 % to 2 % and then we'll get these rate cuts. And they're hoping they can cling on. Landlords are clinging on and I think the banks that loan them all this money are clinging on for dear life.

1:07:08But if rates stay higher longer, then you're going to see some real distress. Including the regional banking system. Freeberg, you had a science corner here. A couple of different things came up. The Hubble Voltauscope, 3D printed, organs, what, where do you want to go with this? I mean, do you guys want to talk about how the universe is expanding at an accelerating rate and expanding differentially everywhere we look and we don't understand how or why? 100 % and Saks needs to use the low. So yeah, definitely. He dropped. He dropped. I love science quarter. Let's do it. Freeberg is your time to sign to to shine the Southern science tell us what's going on with the universe my favorite topic Astrophysics my favorite That's back.

1:07:57Oh, we had it for Uranus Dead set on it. We're dead. It's a collision course He disappeared again. It's just gonna drop it into in Uranus jokes. I hear him giggling with his camera He's with his riders. He's a he just went to the riders room to get an update on the Uranus jokes It's long been known that our universe is expanding. We've all heard about the big bang theory. And a couple decades ago, scientists began to observe the brightness of supernovae or exploding stars. And then by looking at their brightness, we could tell how far away they were. and then looking at the shift of the light, whether it's getting red or blue, you can tell whether the light, the supernova is moving away from us or towards us and how quickly.

1:08:50And so what scientists have used those observations to deduce several decades ago and for which a group won the Nobel Prize, is that our universe is expanding, meaning that everything is moving away from itself. It's almost as if we're all in a cake. The best analogy I've heard is that there's raisins in the cake and as the cake expands in the oven all of those raisins look around and they're all moving apart from each other. So the distance between everything is getting wider, space is expanding. And so we can actually - From the central moment of the Big Bang. That's the theory is right. The cell started in the Big Bang and it's not like, you know, we're all in the middle of the universe and the universe is moving away from us.

1:09:33It's that the entire entirety of space is expanding itself. And so everything is moving away from everything else. The challenge in the data was that recently we saw the different types of stars that were observed with the Hubble Space Telescope had actually a different rate of expansion of the universe than it was previously thought from the supernova that we saw. Everyone thought there was something wrong with the Hubble Space Telescope data. So, you know, in a final print published last month, the James Webb Space Telescope, which showed much higher resolution of imaging and as a result much better data.

1:10:13And here's an image of it. You can just see the difference between what came out of James Webb and what was used in Hubble. So that shows one star that was used to calculate the rate of expansion of the universe. And what the star showed is that the rate of expansion of the universe as measured across a thousand of these stars called Sephiet stars in five different galaxies had a value that didn't match the value that we see when we look at exploding stars very far away. And so it once again confirms what the original Hubble data showed, which is that the universe is expanding at different rates in different parts of the universe, which totally doesn't make sense.

1:10:51And there's no really clear answer as to the physics of why. If there was a big bang and the universe started to expand, it should be expanding the same everywhere. There's no reason that different parts of the universe should be expanding at a different rate than other parts of the universe, that there's differential expansion happening across the universe. And it really tells us that there's very little we know or understand about this large -scale structure of the universe and why these things are happening. There was one group that put out a theory where they said that the local universe where we see these sepian stars that this data is based on.

1:11:24There's almost like a little bubble. and on the outside of the bubble, there's galaxies and they're pulling stuff out faster than what's happening where there's not as much density. So there's a lot of different reasons and explanations for why this might be happening. But it's kind of a big story because it basically confirms that we see a lot of differential expansion happening across the universe and we don't know why. Just another big mystery of the universe. So super kind of interesting confirmatory data from James Webb this week. Joach, do you want to talk about the pig kidney? I mean, I think it's really incredible.

1:11:57They took a kidney from a pig, and then they use CRISPR Cas9 to edit out the certain subset of the pig genes and edit in a certain useful subset of human genes, and then they transplanted that kidney into a 64 -year -old man. And he apparently seems to be doing well. It's really incredible. And this is a guy that was at end stage kidney disease and my father went through this. But when you're at that end stage renal disease, you're getting dialed every three days for up to four, five, six hours, trying to basically have a machine that does the job of the kidneys for you to keep your blood clean.

1:12:39But it's just it's kind of a death sentence and it's like a slow moving death sentence at that. So the idea that you could now use this effectively infinite source of organs seems really compelling. Pretty amazing. I don't know what do you think? Definitely where we're headed. I don't even think there's any. Do you see, yeah. Speaking of medical breakthroughs, did you guys see the guy who got the and you're rolling chip. I think I'm gonna just with his brain. He's using the force. Yeah. That was all I think the force. Yeah, he described it as he was playing chess and he said like, I love playing chess and I've learned to use my mind to move pieces around and he said like, it's like having the force.

1:13:27I mean, Wow, amazing. I watched the livestream and he said that he was a quadriplegic from the shoulders down but he loves chess. He wasn't able to play chess. Now he's able to play chess. He was able to play civilization, the game, which I guess was really hard in the absence of having this chip and now he can do that. It's incredible. I mean, it's really cool that they kind of went public with it. I mean, obviously he agreed to go public with it. I think Trevor was his name. It's pretty amazing. And there's more amazing stuff coming. They're making significant progress over there. I was talking to somebody who works there.

1:14:01and you know, it's gonna be, yeah, it's gonna be a process, but they're making significant progress and they're gonna have, I think, even bigger announcements in the coming year. They're getting it done. Yeah, my kids that were really blown away by it, you know, it's interesting to me what, like, penetrates their cynicism bubble and, like, what they get actually impressed or excited by and they thought this was really cool. You know, so funny. It's like people are breathlessly like looking at the Elon Don Lemon video and they're trying to opine whether he had a good interview or a bad interview.

1:14:40And it's like he actually had one of the best weeks of his life. Yeah, Starship 3 made it out. Starship had an incredible performance last week and then this thing this week. I mean what an incredible 7 day run. and it's more than most of it's still having a lifetime. It's also nuts. It's so crazy. That downed them in an interview. There was actually some really interesting topics discussed, but I felt like this was the perfect baton passing between old media and new media where he was constantly trying to do a gotcha journalism thing. And Elon was trying to engage in good faith in an interesting discussion.

1:15:17And then every time they'd discussing that interesting, he kept trying to go back to sensational gotcha journalism. And it was a totally wasted opportunity if you had just gotten lemon had just stayed in the moment and Like engaged in good faith instead of trying to get this like clip. It was it really bad performance by Don lemon I thought It was really getting interesting at moments in time. He's obviously trying to get a job back at some mainstream media company Maybe this is his This is his resume if he can basically get some clip of Elon saying something that he can twist into something that it doesn't mean And you can say, I got Elon Musk, then he can get his job back at CNN or one of the places.

1:15:56I mean, he got paid out in full like 20, 30 million bucks. And by the way, those jobs are not, they don't exist anymore. Like Tucker and him were like the last of that generation to get those huge pay days. That's all right. Don Lemon got paid 30 million dollars by who? I think CNN, the report was CNN paid out his full contract. The same thing happened. I think with Tucker, they both got paid their full contracts. whoever negotiates those contracts with the networks over the last couple of decades is awesome because it's paid It's paid for play like whether you are on air or not you get paid and then they don't let you go to a competitor That's why both of them are doing internet stuff X or whatever carved out so I just wanted to give a shout out here at the end of the pod For the guys at all in talk Chris and Spencer did an amazing job the team over there from good future media of creating just that amazing fan account.

1:16:48Now that we're growing up here over at all in and we'll have a CEO announcement at some point, we have taken over the accounts and we're starting to make our own clips so thanks to them for supporting us and helping grow it. If you want to see the four of us, go to YouTube and type in all in podcast and then subscribe. We're almost at 500 ,000 subscribers and we decided that if we hit one million subscribers by the end of the year, we're gonna throw a party and y 'all will be invited. We'll have as many people at the party as possible. So go ahead and find us on TikTok, LinkedIn and Instagram.

1:17:24Just do a search for all in and you can search for all of us, Shamoff, David Friedberg, David Sachs and Jason Halle -Kannis. Thanks again to the super fans for helping us build up this amazing audience. Couldn't have done it without you. And yeah, we're just posting clips every other day on the YouTube channel. And so if you go in there, you can subscribe and then right next to it there's a little alarm bell. You hit the bell, you get an alert and you get to see our faces and know what we look like. We also put a lot of graphics. So if you're here as referring to charts, that's all on the YouTube channel.

1:17:56For David Sacks, I'm up by Hoppe Tia David Freiburg. I am Jason Calakannis and we will see you. Love you boys. Love you boys. Love you boys. Love you guys. Love you guys. Love you guys. You forgot your pants. Love you guys. Love you guys. And the host of this week in startups. So search for my podcast. This week in startups. We're new to you. Start a pimp. We're just going to get a plug in for that. No, some people don't know I have another podcast so please search for this week in startups and subscribe to that as well See you all next time bye bye. Love you boys

1:18:23Brain man David

1:18:28We open source it to the fans and they've just gone crazy with

1:18:41Oh, go thrifty! That's my dog taking a wish to drive away to the next planet! Oh, man, my ham is the actual meat and the apple! We should all just get a room and just have one big huge orgy because they're all... It's like this sexual tension that we just need to release some of them. What, your, the beef? What, your, your, your beef? Beef, beef, what? Let's get your, we need to get my veggies already! I'm going all in!

1:19:13I'm doing all it.