Google's AI Brain Drain, SpaceX's Huge Quarter, Airtable's 90% Collapse, US Data Fuels China AI

25:20The heat shield worked. That's going to enable more flights of Starship now at a more accelerated rate. That paves the way for the V3 satellite, which enables much more bandwidth for the Starlink network, which then powers the whole direct-to-cell play. So you had that piece of it. I mean, just the whole telecom aspect seemed very on track, and they're very bullish about that. And then you've got the whole AI data center play. Now, on the data centers, I think what they said is that they expected to go from 1.4 gigawatts to compute to about 2 by the end of the year. And Elon said that the spot price for computes in the$30 to$50 per watt range.

25:59So, you know, you do the math that gigawatt is a billion watts. So,$30 to$50 per watt means$30 to$50 billion per gigawatt. And I think they're at the high end of that range right now. So when Elon says, look, we're going to end the year at$100 billion of ARR, all you have to believe is that they're at two gigawatts of compute running for$50 a watt to hit that. That doesn't include Starlink or the launch business or the Grok cursor piece or any of these things. So I think that's why they're so optimistic. And multiple ways to win is what you're saying, Sachs. There's multiple ways to win with the stock.

26:34I think Starlink's just an unbelievable juggernaut cash machine. If you look at the financials, there are segment reports, space, connectivity, and AI. And on the connectivity side, the Starlink side, they generated$2.6 billion in adjusted EBITDA. You can kind of approximate that to be kind of operating cash flow. Space was kind of, you know, negative$200 million to call it breakeven. And AI was plus$1.1 billion. But AI, to Brad's point, it's unclear whether the pricing they're getting on compute rental today is temporary and at a premium because of the lack of compute available in the market today.

27:12And people that need compute are paying Elon a premium for that compute. So I think there's a question mark where that goes. But the connectivity piece on Starlink, 4.3 billion in the quarter and 2.6 billion in adjusted EBITDA. He's got 12 million subscribers. That's doubled year over year,$66 ARPU per month, what people are paying per month. And he grew 20 % quarter over quarter. So if you extrapolate this out, he's pretty close to being at a 24 million subscriber run rate. On this multiple, and assuming this enterprise stuff, which is like airlines and other things scale, which they seem to be scaling with the consumer business, Starlink alone could be generating on the order of$40 billion of revenue top line with a huge amount of that flowing to free cash.

28:01That could be a$30 billion free cash flow within the year. That alone provides the cash flow to fund much of what Elon's doing. And if you just put a 30x multiple on that, which I think you can, because these subscription businesses are very high renewal rate, very low cac, I think you could probably get a 30x just on the Starlink business. business, the Starlink business alone could be a trillion dollar market cap within two years, within 18 months, let's say. That I think funds all of the rest of this as kind of science projects and upside. So I'm kind of making a bold case. It's crazy to me how well the Starlink business performs.

28:37And you can see it in AT &T and Verizon, HughesNet, Viasat. I mean, these companies have been decimated. I used to have a HughesNet satellite dish on my Sonoma County ranch in order to get internet. That's what we had to use. It It was like, you know, 200 bucks a month or something. Terrible, because those are high in orbit, right? And they take forever to... Terrible service. And that market got decimated by Starlink. And if he launches the handset thing, that subscriber growth is going to go... Right now, he's adding 2 million subscribers on the consumer side a quarter. You could see that going to 4 to 5 million a quarter.

29:09You could actually see an acceleration in the consumer subscription. There are 400 million mobile subs just in the United States. Just in the United States. You can make the bull case on Starlink alone. And then the rest of it is like, hey, is Elon going to do well with investing the excess capital that's spitting off of Starlink? How's Elon going to do with that money? Well, I don't know who else I'd give it to to like, you know, do what he's doing with Starship and with AI Compute and the TerraFab. Oh, my God. This is a science fiction. I mean, like if you want to talk about, you know, how the U.S.

29:42gets off of this dependency with Taiwan and China from semiconductors. If Elon takes this on his shoulders and he delivers what he's showing as a vision here today, this is going to be the greatest semiconductor fabrication site on planet Earth. Well, you know, I would say something, you know, David, to your point. You know how many CEOs or founders would just take that Starlink business, which is such an exceptional business, trillion dollar business going to two trillion, and they would not take any of these other risks. They would not do TerraFab. They would not try to build out the data center.

30:14they're not trying to build their own model that's highly risky, but highly important investments that are being made. I mean, it is heroic and important that we have this level of, I just think, unbridled enthusiasm for innovation on the frontier that Elon's doing. And I wish we saw more CEOs, more public companies willing to take this level of risk. We just got done talking about some CEOs maybe that were taking less risk because the safe bet was easier to make. Elon refuses just to take the safe bet. He's taking all the dollars from this thing where he has an extraordinary business and plowing them back into these things that are critically important to the United States.

30:56And by the way, Brad, it's such a good point because if you look at other CEOs and other management teams, they're getting in on this. They're starting to realize that buying back your shares, giving dividends is not as important as betting on the future. DoorDash got taken to the woodshed because they're investing too much in CapEx. Obviously, Google got smacked with their CapEx spend. So that keeps happening over and over again. And just on the headwinds that SpaceX is going to face, the arguments that I think will turn out to be wrong, but they're valid to talk about here are, hey, is this demand for tokens and compute going to keep up?

31:30Or does on-prem and desktops and open source models getting smaller, better? Does that actually mute at some point demand? I don't think it does. I don't know. There's an upper, I don't know, there's an upper bound for on demand intelligence. The second one, obviously, is Starlink is for people who are in a rural neighborhood. If you've got Verizon fiber to your building or spectrum, you're not putting nor can you put a Starlink on your building. So the piece there that's going to be explained probably in the next year or two is every single Tesla sold is going to have Starlink in it when they get that merger done.

32:06What that means is you're going to have Wi Fi networks, connecting any phone to any Tesla, say all those robo taxis out there, you'll be able to connect also directly with the next generation of Starlink. So your phone will be able to direct if it's got clear line of sight, it's going to be able to connect to any Tesla on the road, which there are many that all future ones will have a Starlink built into them. So those are super promising. And then finally, you know, there's been a lot of speculation about the valuation. Brad, you brought it up. I think that liquidity when people were asking you and I heard you talk about it, hey, private companies, venture capital, we are a voting mechanism.

32:44And then when it goes public, it becomes a weighing mechanism. And sometimes you'll have this moment in time where there's hand wringing about those valuations. And the hand wringing peaked in the last quarter, you had 160 times price to sales ratio for Tesla when it first came out 160 times, right? You take this$2 or$3 trillion market cap, and you put it against a smaller revenue number. Well, if you look at the revenue number increasing, now we're down to a 45 times price to sales ratio. So some kind of balance is occurring here. Yeah, Brad, between these private and public markets as well as the increase in revenue?

33:24Yeah, I mean, honestly, I think this is all super healthy. I think the SpaceX IPO is extraordinary. I think the consolidation here is perfectly predictable. And now you have a company at$1.4 trillion that I think if you take a three or four year view, you can see yourself tripling your money in this business at a very reasonable valuation on the Morgan Stanley numbers or on the Elon numbers or whatever. but that's always been the bet do you believe that elon is the greatest innovator and a great allocator of capital but the price of entry matters right when you get carried away on day one of an ipo and you buy this thing over two trillion you got to know that this is going to happen i was on cnbc the day of the ipo and i said i would want to own this company but i'm not sure today's the day i would buy the company right and so i you know entry price matters and this is just fundamental.

34:13But let me give you another one. We've talked about the Anthropic IPO, or a lot of people have talked about it later this year. I hear a lot of people saying$1.5 or$2 trillion. David just talked earlier that it's going to be run rating over $100 billion maybe by the end of the year. That's like 10 to 15 times revenue. That is not that much for a company that just grew 10x and is rumored to be profitable in Q2. And so I look at the market, the consolidation we saw in the month of July, you know, we put in the Leopold bottom, hopefully in July that, you know, a lot of semi stocks were down 30, 40.

34:48Hey, hey, listen, the guy's doing great. He can, he's apparently still up 80 % for the year, just made another big private investment. I think he's done an extraordinarily good job building a firm in a short period of time, but the market did panic around that as he had to cover. I think all of that is really good. So as I look ahead, marching to these IPOs later in the year, on the back of the SpaceX IPO, I think we're in really good shape, you know, particularly if these revenues continue at pace. You know what Elon's really good at is just building stuff. Like factories, physical sites. That is such a core advantage in this world where everyone's competing for data centers and fabs.

35:31The software layer needs hardware in the physical world in order to deliver their software services. And there is no one better than Elon at actually doing that. Look at how gigafactories have been stood up around the world. This is his core competency. So Brad, like when you put Elon up against a Dario and a Sam and even an Alphabet, which has 27 years of doing this, I mean, man, Elon's got a core advantage of this is what this world comes down to. He said something like that on the call where he said, look, putting up data centers is nothing compared to the difficulty of putting up a rocket, right?

36:07It's like creating data centers is not rocket science. So they take some of those hardware expertise that they have from SpaceX and they put them into data centers. And that's why they've been able to stand up more data centers or bigger data centers faster than all the competitors. A couple of points there. Is it clear why Starship is so important to Starlink? Okay, let me just explain this quickly. So basically, SpaceX has developed a new V3 satellite that has 10x the bandwidth of its V2 satellite. So currently, the Starlink network is powered by V2 satellites. They deploy them on the Falcon 9 rocket, and they launch about 27 satellites per launch.

36:49And that adds about 2.6 terabits per second of total network capacity. Starship deploys 60 of these V3 satellites per launch. That would add 60 terabits per second of total network capacity per launch. So over 20 times more capacity per launch. That's the power of it. So if they get Starship working, by the way, the last test, not only did it prove that the heat shield worked, My understanding is they actually launched or rather they deployed 20 V3 satellites as a test. And they were able to make connection with those satellites and prove that it worked. They even had cameras on them. The reason we were able to see the Starship was because they're like, YOLO, let's put some HD cameras on them.

37:38Right. Now, I think those satellites basically it was just a test and they burned up. So I think the next big milestone here will be when they launch Starship with, let's say, 60 of these V3 satellites, put them in the correct orbit, make connection with them, add the bandwidth to the network. That's going to be a big milestone. But you play this out to its logical conclusion and the bandwidth available to the Starlink network goes up 10x or eventually 100x times. And that's when they can do all the interesting things like direct to cellular. There were some interesting hints that Gwen Shotwell talked about with ground stations about what they could potentially do there.

38:17And they might buy T-Mobile or something like that, Zach. So it's easily within their range of purchases. And I think Elon mentioned something about potentially the Starlink network could eventually handle roughly half of internet traffic. So, I mean, this thing could get so much bigger than just 12 million subscribers to your point, Freeberg. But look, I want to actually talk about the data centers for a second, Brad. I do have a couple of questions about this. So Elon mentioned that, okay, we're going to be at 2 gigawatts by the end of the year. He said that we will be at 5 to 10 next year, closer to 10 than 5.

38:52So let's just say 8, okay? So I'm just making that up, but it's in their range. So let's just say that's an add of 6 gigawatts. So they go from 2 to 8, okay? To me, there's two questions there. One is, how do you know that the spot price is going to stay where it is? Can it stay at$50 per watt? How do we know? How do we track that? How much risk is there around that? I got the sense on the call that Elon thinks that number is going up because the market is memory constrained right now. I think he mentioned that we might see a 20 % increase in memory production next year, but the demand is going up 200 % plus.

39:30So the market is constrained by whatever the bottleneck is at that time. Right now, the bottleneck is memory. So where do you see the spot price going? How do we know? How much risk is there around that? And then the other question I would have is if you go from 2 to 8 gigawatts, you have net a 6. We know that a gigawatt power data center is$50 billion of CapEx. So six incremental gigawatts of compute would be$300 billion of CapEx next year, assuming they build that, right? I mean, they have optionality around that, I'm sure. So how do you finance that? What's the most non-dilutive way? They said their payback is a year or less.

40:11I'm sure that's tied to the spot price. So you only have to finance it for a year. And the question, do you think NVIDIA gives them that financing? Or how will this play out, I guess, is my question. It's a great framing, David. first it's 50 billion dollars per gigawatt to build minimum okay so you're 300 billion dollars so in order to finance that it seems to me you either have to go into the market and borrow the money or you have to do a dilutive equity raise neither of which they want to do um or you get nvidia to backstop it um which they've indicated that they're going to do more of but the problem there is nvidia shareholders don't want them backstopping unlimited because the fear in the world is that that spot price at some point, right, may go against you.

40:56And when it does, the payback period changes. Now, nobody thinks that the payback period is going to be one year, even though the spot price is suggesting that it is that today, right? Just a few years ago, people thought you would get paid or not a few years ago, a few months ago, people thought you'd get payback over four years. So you basically spend 50, you then earn 10 to 15 per year, You get payback over four to five years, and then hopefully you get the six-year, which really takes you up well above 20 % in terms of your returns. Right now, the shortage is so acute, and the willingness to pay from the Frontier Labs is so high because they all recognize they're on the verge of some massive breakthroughs, that they're willing to pay 3, 4, 5x market pricing in order to get at-scale compute.

41:46And that's what happened with the Anthropic deal with SpaceX. I think Anthropic would buy a lot more of that today if they could. Same with OpenAI. You're saying, Brad, they would be willing to overpay by a factor of up to 5x. Well, that's the$50 per watt that David was referencing. They would be willing to pay this$30 to$50 if they could get at-scale compute that would give them a competitive advantage over the other people in the market. And remember, there aren't a lot of people who have the offtake revenue that can afford to buy compute at this scale. It wasn't the Chinese open source companies that were buying SpaceX's XS compute or building the 10 gigawatt plant in Ohio.

42:27That's OpenAI and Anthropik. So the vast majority of the offtake commitments are coming from Anthropik, OpenAI, and NVIDIA. right when you hear about the hyperscalers building all of this you know this computer they're building it out to sell to the people that we uh you know that we just mentioned so david net net if he builds six gigawatts next year and by the way probably only elon um you know can actually stand up that much in that time frame like jensen said to me on the pod it's like nobody comes close microsoft doesn't come close you know google doesn't come close in terms of standing it up in that timeframe.

43:05I think that he's going to have a challenge, you know, getting all of the componentry, right? I know he can stand it up, but can he get the memory? Can he get the chips? Can he get the land-powered shell all in time? I think the offtake is there, right? But to put it in perspective, this year, Anthropic and OpenAI combined, their starting total compute was like five gigawatts. So he's talking about incrementally adding more than they had as combined companies. But that's not that much of an increase when Anthropik is growing 10x year over year and OpenAI is maybe at, what, 4x or maybe higher now?

43:41The demand exists in the world. The demand exists in the world today. I think it will exist in the world for, well, the next 12 to 24 months. But there is a wall of worry in the market. The reason we saw the poll back in July is Kimmy scared people into thinking, oh, my gosh, they're going to undercut the Frontier's revenues. and if they undercut the frontier labs revenues who the hell is going to pay for all this compute that's why you saw a 40 percent trade down in the core weaves of the world and you know the the all of the the semiconductor stocks and semiconductor related in some ways the fact that there's a discussion going on that this next 10 gigawatts is going to cost you know sacks 500 billion dollars and you ask the question where does that come from a secondary offering does nvidia put it on their books?

44:26Do they create SPVs off their books like some people are doing? You know, the fact that we're having this conversation, everybody's aware of it, the market has been educated on it means I think people will be able to change in real time, if it doesn't come to pass, or if it slows down, which I suspect this cannot keep up at this pace, you know, more than another two years or so. Although, as our good friend Bill Gurley likes to remind us, he's like, I can't believe that we're all just taking in stride this level of seller financing, right? He would call it circular revenues, right? But the market has gotten comfortable with this.

45:05And remember, like we saw in July, if there is a scare about demand, the whole sector trades down. Yeah. Everything will trade down, you know, together because that's just the leverage that you're pumping into the system. You're effectively backstopping people's ability to build ahead of their revenue. So it becomes much more violent if you ever see demand slippage. You know, famous last words, I don't see it today over the course of the next 12 to 18 months. But you know, you have these unknown, unknown moments that certainly causes people to be fearful. Credit spreads are blowing, you know, have continued to stay wide on these deals.

45:42So there is fear in the market about them. All right, everybody, the fifth annual, If it's September, you know it's time for the All In Summit. The fifth annual is happening. Yes, that's right. David Freeberg's been at work and we have an all-star, all-star list of people joining us. Jensen Wang, founder and CEO of NVIDIA. If you care about where AI is headed, you won't want to miss this conversation. The best. The Oracle. Satya Nadella, CEO of Microsoft, fan of the pod. We'll be coming on for the second time. Jared Isaacman from NASA, the one, the only, Brad Gerstner and Bill Gurley, BG2, coming back.

46:17SpaceX's Gwen Shotwell, my guy, Jake Paul, Nick Shirley. A lot of incredible people coming. Martin Shrelly maybe is even coming. That's going to be fun. Go to theallinsummit.com to apply today. Allin.com or theallinsummit.com. Any of those will get you there. and we're taking over Universal Studios again. We'll have our own private playground. Dave Friedberg, great job on the summit. Casino night too. I heard it's gonna be a big casino night. Biggest yet and the concert to be announced who will be performing at the concert, but it is gonna be incredible. So I'll just say one of the things about the summit, we've had people come to the summit from over 60 countries.

46:58It's really incredible to meet all these people, entrepreneurs, investors, people that are just really interested in the topics that we talk about. We try and have the world's most important conversations, but it's really this amazing community experience. That's what brings folks back. So we try and invest more and more every year in making it an amazing experience, not just cool content on a stage, which I think is what a lot of these other shows really deliver, but it's like, how do you actually come and have an experience for a couple of days? It's going to be awesome. So we're excited. It really is those three things that we focus on.

47:29One, you're going to learn something, right? You got these great people on stage. You're going to learn something from them. You're going to meet new people. you're going to network and then you're going to have these great experiences. It's the trifecta folks. You're excited, Brad. You're excited to be back. What are the dates? What are the dates again? Look at your calendar. You're speaking. September 13th through 15th in LA. This couldn't be better dates for the summit. I mean, we're going to be within 60 days of an election, midterm election. We're going to be within 30 days of an IPO, you know, potentially of Anthrop.

47:58I mean, like, it's going to be heated. The SaaS-pocalypse, not the Saks-pocalypse, this is the SaaS-pocalypse, is, I guess, winding its way out. The indigestion might be clearing. Airtable just got acquired for less than it raised. It's a profitable SaaS company, a great product, $480 million, half a billion dollars in annual revenue, growing 20 % a year, respectable if it was a public company with almost a billion dollars in cash has been sold. It's been sold for 1.28 billion, about 10 % of its peak valuation, which was 11.7 billion in 2021. Now they did have a bunch of cash. So if you include the cash position, sale was 2.25 billion.

48:40They were acquired by a firm called Bending Spoons. This is an Italian company, Milan-based company. They buy challenged, but interesting businesses, AOLs, Legacy Business, Evernote, Eventbrite, Vimeo, meetup.com and they just went public last month shares that is bending spoons went public last month shares jumped 15 on the air table news sacks when we look at this this was a company that had done a lot of things right had a massive amount of cash in their war chest but rumors were maybe the founders were a little exhausted maybe some of the investors were exhausted who bought in at a high level, what can we take away from this transaction in Bending Spoons?

49:23Are they the buyer of Last Resort now? Well, I think they're creating a great business for themselves because I think this will end up being a fairly profitable acquisition for them. Let me just add a piece to this, which is Airtable spun out its AI agent business, which is known as HyperAgent, into a separate independent company prior to this acquisition. So I think what's going on here is that the founders and talent of the company, they said, look, we don't want to have to make this legacy product work. That's basically a private equity play. I'll explain what that means in a second. We want to focus on the new thing, the AI company.

49:58That's where the big value creation is going to be in the future or the potential for it. So essentially the talent is going to focus on the venture play. And then they're selling the private equity play to Bending Spoons. Now, why do I think this could be a good acquisition for Bending Spoons? I think there was a really interesting data point that I saw in the commentary on this, which is only 30 % of Airtable's sales team was making quota. They had a 30 % sales attainment number. And that told me a lot about this business. What it told me is, and I'm reading between the lines here, but this was a company that had a successful PLG motion, in other words, organic growth, product-led growth, and they were growing about 20 % a year, but that was not good enough for its board.

50:46These are investors, some of whom invested at an$11 billion peak valuation. So they're looking for a venture type outcome. So what happens? The board pressures the founders to do something that frankly is unnatural for them, which is they say, look, you should bolt on a traditional sales led motion here to get the growth up faster. Does that work? No, they probably get a little bit of growth out of it, but they only get 30 % attainment. So they've got hundreds and hundreds of sales reps here trying to push on a string and it's not making it grow faster. So now what's the opportunity for the acquirer here?

51:23Bending spoons can go in here and do what Elon did at Twitter, eliminate 85, 90 % of the cost structure. Don't do this sales led motion. Just go back to your product-led growth roots, you'll probably keep most of that 20 % growth and it'll be a very profitable company. You'll be able to - 80 % profitable probably, right? Probably. I mean - 400 million to the bottom line, pays for the acquisition in a couple of years. People are saying they're only going to generate 30 % EBITDA margin. I think like you're saying, it could be 80, 90%. I don't think you need to keep most of this business or most of the cost structure associated with this business.

52:02Airtable is a company that has its fans. I think they will probably stick with it. And you'll be generating, I don't know, you could probably generate$300 million of EBITDA a year or$400 million while growing 10 % to 20%. So that's a play for bending spoons. And the venture investors here, Saks, they're happy to get their money back and move on to the next thing. It's a bit of a push for them in terms of at the blackjack table, rather than they've got to go 10X just to catch up. And then they would have to go 10x again to make their LPs happy. It's not going to happen. I think the question is, if Bending Spoons can basically take this business that's not making money and probably generate$400 million a year of EBITDA and pay for the acquisition in just three years.

52:47Amazing. Why isn't that something that the company could do on its own? And I think that's the structural problem is I think it's very hard for both VCs who are on the board and the founders to shift into private equity mode. Why? Because they're going to have to demolition what they've built, right? They've got all this loyalty to the team. They don't want to think about how do I eliminate 80, 90 % of the cost structure. It's just not what they do. I mean, what founders want to do and the outcome that the board members are going for is a venture-backed outcome. And I think they could have done this.

53:22They could do what Bending Spoons does. They're not built for it, Zach. They're not built for it. And moreover, the structure of the cap table is all wrong because they're sitting behind this giant liquidation preference. All these investors who have to get paid back who invested at this$11 billion valuation and all the way up as well. The incentives are broken, Brad. And you, you yourself, at your firm altimeter, you were pretty frisky in this period. You made a lot of bets. So I don't know if Airtable was one of them, but you made some SaaS bets there. Some of them were at high valuations. How are you looking back at that time period?

53:56any lessons that you take going forward? Multiples of revenue can compress very quickly, right? It works great when the company's growing greater than 50%. But remember, it's just a heuristic. It's just a very rough estimate used almost exclusively in Silicon Valley. You know, so people are saying, oh my God, this thing sold for two times revenue. But when you actually look at it on a look-through basis, probably sold for maybe 30 times free cashflow. I don't think it's easy to get it to 400 million in EBITDA. I think if it was, the board would have done that. We're involved in some of these companies.

54:29Once they slow down, the company morale goes to hell. Turnover among your customers begins to spike. It starts to feed on itself. It sucks to go to work every day. Brad, what do you need to keep? It becomes very, very tricky. I don't know the core product and what's happening in terms of turnover in the core product, David. But my hunch is that the core product has started to really fizzle as the advances in the core product has slowed down. You're seeing a bunch of churn out of it on the product side. And now people are saying, listen, it's almost impossible for a software company today to keep any decent salespeople, to keep any different decent product development people, because they all want to go work on AI.

55:12Agreed, but you don't need them for this product. I agree. The market's being efficient. I mean, look, this is where I think Bending Spoons has an advantage that the company's board and founders wouldn't have, which is they already have an infrastructure, right? They have a core team at Bending Spoons that's managing now, I don't know, dozens of these properties. And so they can plug this in. I think AI in a way makes their job easier because in the past, the reason why you couldn't eliminate like all of the talent, the infrastructure is because you needed the institutional memory. You needed people who knew the code base.

55:45Now AI can learn the code base instantly. That's an interesting insight. Maintaining is easier with AI. I think maintenance mode becomes way easier with AI because you don't need the historical knowledge anymore. The AI can go in and sort of reconstitute that historical knowledge. Let me get you in here, Freeberg, if I may. When we look at the lessons from Peak Zerp and SaaS, and then we look at this moment in time, this surging AI market, any parallels that we might find here or lessons between the two? Between ZERP and AI era? The ZERP SaaS era, we had a lot of very high valuations, a lot of enthusiasm, a lot of suspending disbelief.

56:28We're here in the AI era. We just talked about the price of compute and all these companies being at 100x price to sales ratio. Any parallels here or not? It's a kind of a softball question for you. No, this is a very different paradigm. The AI CapEx build out and model training, which is where the predominance of the capital is flowing, is not about some high multiple on revenue, which is where capital was flowing into SaaS. It's like, oh, you get a 20x multiple, turn a dollar into 20. That's great. Let's do it all day long. this is a very different structure and strategy and capital allocation process.

57:07So I don't think that I would look at them as being linked. It was a softball question, to be honest. I was letting you hit it out of the park. Look, I mean, obviously, SaaS companies were overvalued during the Zerp era for two reasons. One is that we had artificially low interest rates. So we had a kind of a speculative asset super bubble. But the other is that people were treating these things like guaranteed annuities and actually growing annuities. They'd look at it and see, oh, 120 % net dollar retention. So this thing will just grow 20 % year over year forever as a base case, right? And they were then priced that way.

57:41But what we've seen with AI is obviously there's disruption and you can't, to Brad said, I'm sure they're seeing elevated churn right now and it's not an annuity. Things can change. So obviously now these things are trading at a much greater discount. All of that being said, let me just say, I don't think you can extrapolate to the entire SaaS space based on this one company, Airtable. I think there's some things about Airtable that make it very different than, I don't know, let's say a Salesforce or a Workday is, you know, Airtable was always a little bit of a quirky product. I remember at the peak hype for this company, people were saying like, oh, this is like a new Excel or a new Google Sheets.

58:22New Microsoft Office, yeah. Yeah, it was basically a spreadsheet for words. That's how people were viewing it, is this new kind of spreadsheet for words as opposed to numbers. And it never achieved that kind of promise. It never achieved that kind of ubiquity. People understand how to use spreadsheets. Everyone uses them. Airtable never got to that point. Most people still don't know what Airtable is. Again, it had its dedicated fans, but it was a hard product to explain to people. When do you use it? It had a cult following. But it never achieved that sort of level of acceptance. It was never self-explanatory in terms of why you should use it, what the use cases are.

59:02They never were able to kind of get the marketing right because of that. And to be honest, if you look at Claude Cowork, Perplexity Computer, agents, those things are now doing what Airtable did. It never carved out, I think, a niche where it was super clear when you were always supposed to use Airtable. And really, it was part of this hodgepodge of this grab bag, you could say, of no-code tools. This is the category it was put in. And no code has to be the most impacted, the most disrupted area of SaaS right now because, I mean, what is clawed code really good at? I mean, that's the ultimate no code tool.

59:38Lovable clawed code, perplexity computer, all of these harnesses. Yeah, the thing with Airtable or Retool, things like this is it's true you didn't need to be a coder to use them, but you had to learn how to use Airtable. You had to learn how to use Retool. It was kind of these alternative programming languages in a way. and you just don't need to learn any of that anymore. I mean, you use Claude and you just tell it what you want it to create. And so, you know, if you do want to create some sort of new dashboard, some sort of, I don't know, like a verbal spreadsheet or whatever, you just tell Claude what you want.

1:00:10You don't have this learning curve. Look, all of SaaS is being impacted right now, but this has got to be the most impacted area. So I don't know that you can totally extrapolate based on what's happening to Airtable. I don't necessarily think that you want to replace your CRM, your ERP, your HR system with something that's been vibe coded. You want the certainty, you know, for anything that involves compliance. I got to be honest, my team, Saks, made, I don't, do you use like a portfolio off the shelf SaaS tool for managing crafts, like portfolios and everything? Well, we vibe coded something actually.

1:00:47So yeah, we just did the same too. So my team just built something that is so mind blowing that to buy with off-the-shelf software would have been a quarter million dollars in software and like a million dollars in integration over two or three years. And we built it in a month. And now we have complete insight into the whole portfolio, the competitive set, the founders, everything going on. Keep in mind that one of the reasons why Leopold got blown out, okay? I mean, it is because he bet on the SaaSpocalypse. Remember, it wasn't just that he was super long, these chip stocks that had a correction.

1:01:18Oh, is that right? He was short SaaS? He was short Adobe and a whole bunch of other SaaS companies. And those trades also moved the wrong way on him. So again, I just think that it's painting with too broad a brush to say that all of SaaS is going to get obliterated here. Yeah. And there was a really good post about this. Let me just quote from this where they said, nobody buys Microsoft because Microsoft writes the best code. They buy Microsoft because Microsoft is the rail that everything else runs on. Active Directory is where your employee identities live. Excel is where your board deck's numbers come from.

1:01:51Teams is where the compliance recorded conversation happens. Azure holds a FedRAMP high authorization and Department of Defense impact level five clearance, which means a defense contractor cannot casually swap it out for something cheaper and so on down the line. So there's a lot of really good compliance reasons why if you're a large enterprise, you're not going to want to spend tens of millions of dollars ripping out something that costs you a million dollars a year. It just that just doesn't make sense. And I noticed that Benioff just tweeted five minutes ago that 15 out of 15 cabinet agencies run on Salesforce.

1:02:25Look, the government is not going to rip and replace Salesforce with something Vibe-coded. So, look, not all SaaS is equal in this dimension. I just want some Figma. I just think some of these SaaS companies with great founders who are in it for the long term and they have like passionate user bases, I think they will make the jump to AI-first products. And I'd put Figma in that bucket. Just to wrap this section. Yeah, please. igv is up 20 in the last six months it's up 20 in the last five years explain igv please so the high growth software stock index right snowflakes uh 88 in the last six months that's it's an igv is an etf of igv is an etf of of gross software companies right so to david's point there was a panic about software companies there was a big trade-out you know honestly they they performed pretty well.

1:03:14And as he mentioned, in the month of July, they were up when a lot of the semiconductor AI stocks were down. And some of these companies, Databricks, Snowflake, ClickHouse, etc., are doing extraordinarily well. As I just mentioned, Snowflake's up 90 % in the last six months, which puts it in the same category as the semiconductor AI stocks. So to David's point, you can't throw them all in the same bucket. But I do think that for these no-code, a lot of these application software companies, they're realizing that the game is up, sell the company, get what you can get. Importantly here in the Airtable story, all the late stage investors, we passed on this in the last three funding rounds, which I think were at$2 billion,$5 billion, and$11 billion.

1:03:56But all those late stage investors, which were the most venerable of growth firms, they all got their money back. And the early stage investors ended up making a lot. So if this is a failure. This is a pretty good failure for Silicon Valley. This is one of the points that was made at that time, which is, hey, this is a strong enough company and team and revenue base that if we just get our money back with the optionality, hey, maybe this would be a good investment. You could say the same thing about some AI bets. Well, this is one of those cases where the liquidation preference actually mattered.

1:04:25You know, normally it doesn't matter, but I think they got straight money here. My understanding is this wasn't like they had like a 7 % interest rate or they didn't have like a participating preferred where you get two times your money back and then they do the trade does anybody know because i looked deeply into this i think that net of cash they may have come in a little bit less than the total cash raise but it seemed like everybody got made whole yeah but if they had the i guess sacks that we live through moments in time where companies had to guarantee a 1x right you know 1x liquidation preference is standard it just means you get your money back before other people start to profit which is appropriate But also the interest rates were taken out, right, of these deals, I think, during peak The standard terms, you know, what's known as clean terms, it's just a simple 1x liquidation preference.

1:05:15Right. The preferred just gets their money back before the common starts to participate in a successful sale of the company. That just makes sense, right? But participating preferred is the double dip, right? Yeah. And look, we've never done that. You know, we believe in clean terms. No one's trying to be punitive towards founders. It's just it doesn't make sense for some people in the cap table to be making money while other people are losing money. Yeah, this doesn't make sense. Right. Well, that's just a transfer of value from some people in the cap table to other people in the cap table. So the standard thing you do is you make sure that the investors get paid back and then everybody participating in the upside.

1:05:56OK, fourth story here. China is training on U.S. data from U.S. providers. Forbes published an investigation called, These American Startups Are Making China's AI Smarter. And I think this relates to a lot of your work in the early part of the administration's facts. They claim US data labeling startups are selling valuable training data to Chinese labs, which in turn is helping them catch up with the US frontier ones. Two startups, Surge AI and Mercore, are both valued at over 20 billion dollars they sell training data sets to people like open ai anthropic federal agencies um they all sell the same data sets to top chinese ai companies according to this report like tencent bytans alibaba moonshot etc top six ai labs in china according to this report uh are spending 500 million dollars a year buying what forbes calls secret sauce uh phd written content, reinforcement learning, knowledge pipelines, all that kind of great stuff.

1:06:57I have investments in a couple of these companies, including Micro One. The founder of Micro One didn't participate in selling to China. He made that decision, Sachs. What do you think here about this new wrinkle in terms of really the secret sauce behind a lot of these models is the data. We've run out of open data on the web, obviously. We talked last week about the books being, you know, having the spines taken off of them and scanned in. I mean, people are looking for data. Mercore, MicroOne, all these companies are providing it. Should they be providing the same data and selling it to Chinese open source companies or not?

1:07:36Well, look, I think we've got to decide what our objective is here. Are we trying to just get in like a full-blown economic war with China? Are we just trying to prevent all of our companies from doing business over there? If that's our objective, then you can take that position. Historically, the rules have been that you want to be careful about technology transfer of technology that has a dual use, right? That it has a military application. My sense of data is that it's largely a commodity. I mean data labeling certainly is. If you basically tell them that they can't use data labeling, I guarantee you there's no shortage of labor in China that they can use to do the data labeling.

1:08:15In fact, they probably are. What I'm saying is there's a lot of ways to get this data. So look, if we basically ban these companies from selling to China, we should expect reciprocal actions taken by China to ban companies over there selling to us, maybe rare earths. These two countries are not completely independent of each other. By the way, I want us to be as independent and sovereign as possible. I don't want to have any dependencies. No dependencies. But we still, at this moment in time, do have some dependencies. So I think you have to ask the question, is this data really proprietary? Does it have a dual use?

1:08:53It is. Yeah, it's not data labeling. Does it have a military application? Yeah, I don't think it has military. It's definitely not data labeling. This is like hiring PhDs, hiring super professionals to, you know, create unique data sets. So it's science. China can do that too. And I guarantee you they are. I don't think this is going to give us a decisive advantage in the AI race. It's going to annoy. It's going to create annoyance. It's going to create friction. And how bad do you want our relationship with them to be? Do you want to risk starting another trade war? Look, I'm not against restrictions when I think they're going to pack a punch.

1:09:23For example, I'm really glad that the first Trump administration limited the export of EUV lithography machines to China. That was all the way back, I think, in 2019. So that was a really important decision. And so, look, I think targeted strategic controls make sense. I would just make sure that this one actually meets that bar. Brad, any thoughts here on this open source catch up the data being sold to China and our adversaries? Are you concerned about these open source models and then us providing data to them? First, I'm in absolute agreement with David that we want maximum competition. As we sit here today, the US is winning.

1:10:06We talked about it at the start. Our frontier labs are winning. Our open source is winning. And we have fairly limited regulations, right? She's coming here in September in a bilateral meeting to meet with the president. We're advancing relations on a variety of fronts. So I think everything looks good and you want to continue down that path. With that said, I will tell you that this will irritate people in Washington who feel that this, along with distillation and other things, could be the export of chips, all of which at a certain level make sense, cause people to wonder whether or not we're making it too easy on the Chinese labs to catch up with American labs in the race to frontier intelligence.

1:10:47So, you know, it's the type of story, Jason, that I think will continue to muddy the waters, that will continue to be monitored. The reason I don't think it will cause us to change our stance with respect to China is because we're winning. But if the president asks his advisors, you know, one of these days, six months down the line, are we winning against China? And all of a sudden he gets a response. No, we're no longer winning. They've caught up. They passed us, etc. Then these things will get a lot more scrutiny than they're getting today. I think the only reason they passed muster today is because we're still leading the race.

1:11:20I got to say, using Kimmy and Quinn and GLM-52 for the last 60 days, my lord, these things are good. And I don't think it's very patriotic to be giving them an advantage. I wouldn't do it. I'm glad the company... Sorry, what's the advantage? What's the data set that you're worried about that's so proprietary? Any of these data sets are created by experts here in America who are given the queries that have errors in them. So when you give a thumbs down to a query that's highly technical, it could be code, it could be biology and science. These are PhDs going in there and putting in the latest and greatest content and then verifying it, double verifying it.

1:12:00And that's why we're getting better and better results out of the LLMs. So essentially, you're just helping them catch up. And this could be a big advantage for America if we weren't sending it there. I think a big reason these models are getting better is because data is being leaked to them. But what makes you think that China can't do this? They have tons of PhDs over there. They would have to hire. No, no. If they were to do it at this scale, they would need to hire the best and brightest scientists and experts in the West. So basically, all the knowledge of the West is being put into packages for our LLMs to get better.

1:12:38They're sending those same packages and reselling them to Chinese companies, which means they catch up just as quick. I think it's a big part of why they're catching up in line with distillation. You know, it's really a very similar process. Look, if there's something truly proprietary here, I don't want us to sell our secret sauce to China. So, you know, I'd have to look into that and see, like, is there some real secret sauce here? But this idea that it would seriously disadvantage China, you know, they're graduating more math and science graduates every year than the rest of the world combined.

1:13:10I mean, they don't have a shortage of smart people, especially. Yeah, and we're graduating and kicking them out of the country. That's the other problem. We got to get that fixed. Well, it's like a lot of different issues here. I don't know if you want to conflate, but this idea that they can't recreate those data sets. I mean, look, if there's something truly proprietary here, if it has a dual use, if it's military related, but I don't know that that's what this is. Well, they're all proprietary by design, but I don't know about the dual use because I don't have the data sets here. All right, folks, that's another amazing episode of your All In podcast.

1:13:46Thank you so much, Brad, for joining us. Chema, good luck on your world tour. Hope you're enjoying a little rest and good luck trying to buy a white turtleneck this season. They're sold out everywhere. So go to the allin.com store, allin.com slash store. We have 1 ,000 signature Chamath autographed white sweaters coming. You can sign up in advance for this. All proceeds go to charity. And by charity, I mean Chamath's Yacht Fund. All right. We'll see you next week, everybody. Bye-bye.

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1:15:12I'm doing all in.