Presidential Debate Reaction, Biden Hot Swap?, Tech unemployment, OpenAI considers for-profit & more

25:41It wasn't just the Biden team who once sold on their jobs. It was the media. It was his entire Democratic Party apparatus. They're all in on this giant con. I wouldn't have a problem with this sex. If it was like Reagan where they were like, God, it's got 18 months left. We're going to ride this thing out. And yeah, maybe we let him have a quiet thing, but to actually put him up for another four years is the issue here. If they just said, listen, we could 25th Amendment this guy or let him finish the last six months. That's one thing. But to say we want four more years of this? I mean, how much worse is it going to get?

26:15What's going to happen right now? I guarantee you, as he's out, we're going to have President Kamala. She's going to get her flowers for four months. She'll get to be the first female president in the United States. Then she steps out of the way. She decides she's not going to run because she's got things to do with her family. And there will be two new people who will be moderates. And then the real election starts in about 15 days. I don't think you need to go into all of those mechanics to get the outcome of a new candidate, all Joe Biden has to do is go into the Democratic Convention and release the delegates.

26:46Yes, of course, yes, technically. But the problem with releasing the delegates is I do think it creates a free for all, unless the party then exposes this next facet of their plan, which is that they are so in control that they only allow one candidate to go up there. Oh, they've already got that. Yeah, that's done. And then I think what happens is depending on who that person is, they'll either... I think the Democratic Party is probably at risk of a pretty meaningful recent. And I think that these tactics are very much seen and understood by the American people. I think that people do not like this idea that you vote for Person A, but instead you get persons B through Z.

27:28I don't think that's what anybody thinks the election for the President of the United States should be. It should be two people independently. And then when you see one person that's not really in a position to run faithfully, I actually think that Donald Trump last night showed tremendous restraint and compassion. I think that is the right way to deal with this situation. I think it's just acknowledging that President Biden is not altogether there. So without making claims of a cold or anything else, this is the security and the well -being and the economic prosperity of the most important country in the world.

28:00Why are we messing around? Let's just put it plainly, the Democratic Party is a collection of interests who want to remain in power. The Democratic Party is the party of government. Its goal is to allocate money and power from the government to the collection of interests who back the Democratic Party. In other words, it's basically a collection of interests who want to luthere a public. Well, obviously no one's going to vote for that. They have to make it about something else. They choose a figurehead. They talk about how this is about saving democracy. They basically invent hoax after hoax life or light it basically maintained their power.

28:34And I think what's happened is the mass has come off. The whole thing, the whole shell game has been revealed. It's obvious that Biden was always a puppet for these interests who are hiding behind him. And now it's all being exposed. This also goes all the way back to 2016 because if you remember and you look at the real run up into the 2016 primary, you have to remember President Obama sat Joe Biden down and said, that you cannot run. And the reason was to direct the Democratic party and establishment and energy towards Hillary Clinton who ultimately lost that election. There's a very important question here, which is if Joe Biden had actually run in 2016, you may have actually had him beat Donald Trump in 2016, and he probably would have continued into 2020.

29:21This would be a totally different situation for the Democrats. So back to your point, David, all of these back room shenanigans and negotiating and gerrymandering and politicking and power -broken is not how democracy should work. As messy as the Republicans are, I have to give, you know, I tip my hat to them, they run very straightforward, fair, visible, transparent face -offs between people. And you may not like the candidates, but the process is what it's supposed to be. Messy, turbulent, but you see all sides. Whereas this tends to be managed from the inside out, and I think that that is, as your point, being exposed.

29:59And I think that's what really has to stop within the Democrats. They need to open the floodgates. A Bobby Kennedy should have had the chance to run. Dean Phillips should have actually had the chance to run, but they were not. And they were prevented. And by the way, props to Dean Phillips, who in a very respectful and compassionate way was telling the truth from day one. And he was essentially censored. He was not allowed to basically tell you what he's like. Yeah. He told everybody what he observed in front of his face. Right. And if people had listened a year ago to Dean Phillips, then the voters in the Democratic primary could have made a different choice.

30:37They could have maybe replaced Joe Biden. But the party elders and the powers that be did not let that happen. And now they're in a panic a year later trying to do a hot swap because it's manifest to everyone to the American public that Joe Biden is not fit to serve. But the real time to hold on the me to speak to the hot swap for a second the time to do the hot swap was a year ago When Democratic primary voters could have voted for someone new the problem you have now Jake how I actually think that on balance The hot swap is not gonna happen. Let me just tell you why I think you make a really good argument for it nonetheless the reason it's not gonna happen is that Joe Biden and Jill Biden have come out this morning and said there's no way that he's stepping down It was just one bad night.

31:23He's fit to serve. There is no mechanism to replace a nominee who's ready won all the necessary primary votes without their consent. So if the Biden's are saying, we're not stepping down. There's no mechanism to force them to step down. And that's the situation we're in right now. It's a very simple mechanism. He's going to he's going to capitulate and you're going to have a problem. Oh, Bob is going to give him a call. I guarantee you, Obama's going to talk to him in the next 72 hours, guarantee the hot swap happens. I'm absolutely to make a special deal right now on it. Let me finish my point.

31:55Yeah. They can pressure him. And that's what you're talking about is they're going to try and leverage him out. But the truth the matter is that if they can't find the right leverage points, he does not have to step down. The right leverage point is very simple. He's not going to get any more donations. Last night, the Democrats who are donating all said no more money for Joe Biden. So he's going to have no oxygen. You need money to run these things. but I looked as one other final problem with the hot swap theory is not only is there no mechanism to force Biden to do it, but I don't think there's a consensus right now on who the replacement would be.

32:25The fact of the matter is that Kamala Harris is next in line and she pulls even worse numbers than Biden does. So there's every reason to believe that she would do worse than Biden in the election. And I think it's not going to be easy to basically shiver and push her aside. And so you can talk about Newsom, you can talk about Michelle Obama, you can talk about Hillary Clinton. The fact of the matter is that I think you're going to have a big, homalop problem. And because of that, you know, there's no mechanism and there's no clear replacement. I think that although a lot of people are going to say what you said, Jake Al about the hot swap being desirable, I think in the end of the day on balance, probably not going to happen, although certainly I admit it could.

33:06I'll bet you $10 ,000 right now to whatever charity you want that Biden will not be in the nominee. You could be right, but they've got to work out those two problems. They got to work out those two problems. I'm just offering you a $10 ,000 bet and I'm not giving you any on straight money. I would not bet a lot of money on this because I'm not sure. I'm just raising some problems with the hotswap theory. Okay. Freeberg, you've been a little bit silent here. You want to wrap us out so we can get to the next time. I'll wrap us out. I'll read the final paragraph of the email I sent to the Democratic Party leader a few months ago as a Coda to this conversation.

33:38Here goes. The United States is facing a fiscal crisis, the likes of which the world only sees every few hundred years as world leading nation states overextend themselves, take on unaddressable debt loads, increase social programming and eventually collapse under these conditions. The cost to service the interest alone on our federal debt is now greater than a trillion dollars per year. This already exceeds the discretionary defense budget. The debt service expense will only swell as interest rates are unlikely to decline back to 0%. and I do not subscribe to the easy to refute economic arguments of modern monetary theory.

34:11Simple arithmetic is all that's needed to discredit it. Furthermore, I can identify dozens of federal programs sponsored by Democrats that are not achieving their objectives, yet we continue to fund them as if they were performing exactly as anticipated when originally conceived. Every federal program should be held to account for performance every year. If not, they should be defunded. Instead, I see the party pushing new programs that create new expense burdens without first addressing programs that simply aren't working. Accountability is a critical first step in reducing our federal deficit below 7 % of GDP.

34:45I believe our nation is facing financial and the social peril. I urge the party to become the quote, party of reason and results, put forward leaders that can lead, hold government programs that aren't working to account, make sure that every dollar spent on social programming has a measurable impact in if they fail to deliver results. to cut them. The opportunity to be the party of reason and results is wide open. Myself and many of my friends would scramble for the opportunity to support that party. That's the end of my statement. And I think to get a response. Then a month later, the handler said, so and so has this on their docket.

35:17They're going to call you. Never going to call that. Of course. Yeah. Because you're not a donor. They only care if you donate and you're not a donor because I donated. I donated and I didn't get anything. All I asked for was I think we know why you're behind him. Come on, the podcast. I mean, he couldn't, the debate format to your point, Freeberg, was like the easiest debate format ever. And the greatest thing, I think Dave Porton, I pointed this out on Twitter, like Trump's best strategy was to just let Biden talk. Like just get out of the way and let him talk. And there was one moment where he's like, I'm sorry.

35:49I mean, Trump was pretty graceful here, which is a big statement. He, like at one point, was like, I'm sorry, I don't understand what he just said. Like I don't know how to respond to something I don't understand if he what his point was Hot swaps coming and I am an undecided voter have a big announcement sacks I have a big announcement about my undecided vote. You want to hear it? Yeah, let's hear it. It's just breaking news I am not voting for a bind I've eliminated Biden this possible. I was waiting to see what I have the best No, I never was clear about that. I am also eliminated Trump. You've also eliminated Bobby Kennedy.

36:22So you I'm not an ordinary trouble or Biden cavity. I said, they're not five per second. Maybe Cornell West. Let's move forward. Let's move forward. Who's last? Bring anybody out of Kiefer weekend at birdies part two. I mean, the weekend at birdies joke is real. I mean, it's cruel and it's real and my lord get it together. All right, there's a really interesting trend going on that I wanted to get everybody's thoughts on AI and corporate efficiency killing tech jobs. So let's pull up this chart, this somebody shared in our group chat from Fred. These are software developer job postings on indeed.

37:00From early 2020, that's pre -COVID, obviously, to this year. Look at this. The number of job postings for developers has absolutely come crashing down by 80%. This is below pre -COVID numbers. In addition to this, we talked about getting back to work, Penske and Dell saying you have to be back in the office, sorry, this fall for a day is a week, or resignation accepted. What are you seeing in your portfolios, any thoughts on this trend of the major jobs, the high paying elite jobs, Chimoff, maybe going away. This is a trend we haven't seen in our lifetime. So it's always room for elites at elite companies.

37:44and now it seems the demand's gone. What's going on here? I just think that company formation has changed after the end of Zerb. And so I think that that chart speaks more to a couple of things. One is that where typically people were hiring for software engineering roles, which was a lot of SaaS businesses, contracted a lot, and the net new amount of SaaS startups also, I don't think materially increased. And so that was one big switch. Second is you went through a whole bunch of layoffs at the big cap tech companies as they reestablished profitability. I think when you layered those two things that explains that chart more than the emergence of AI tools, just practically what I see is all of these AI tools can add a 10 or 15 % lift to an individual person if you are in a traditional organization.

38:35I don't think these things are the panacea that they're marketed as being. These are not creating 10x engineers. At some point, these tools will be good enough. And at some point, companies will get started from scratch that use those tools and create a level of productivity at one tenth of the workforce, but that hasn't happened yet. So I think that that chart is more about layoffs and contraction and tech more than anything else. Yeah, I just to explain this chart a little bit more in depth. The 100 % number back in 2020, then boost up up to two and a half times that amount and then comes back down to 60 % of that amount.

39:12So it's an index. We don't actually have the raw numbers here of the number of developer jobs open or close. Sacks, your thoughts. What are you seeing in company formation to Jamat's point? And overall, what do you think this means for the American elite workforce, people with really high end degrees and really high end salary expectation? Well, I agree with Jamat. This is too soon for AI to be responsible for this. I mean, the AI productivity gains are just starting and we're not really seeing job elimination yet or job replacement. I think this is just a symptom of economic weakness. And the main reason for the economic weakness is the rate hike cycle.

39:52Remember, we went from practically zero percent interest rates to five and a half percent in one year. And a lot of people were expecting that to cause a recession. That's normally what happens when you get a very, very rapid rate hike cycle. Is it sucks liquidity out of the economy and it contracts economic activity and you get a recession? I was one of the people who thought that and that didn't happen. I think one of the reasons it didn't happen is there was a huge backlog of jobs, of sort of open job postings. I think originally it started at 12 million open jobs. Well, what's happened is the rise in straights has created some economic weakness.

40:30It's caused a reduction in liquidity and investment. It's created more pressure on companies to be profitable. And so all those things have cascaded through. And what it's doing is it's burning off this job backlog. So we haven't necessarily seen unemployment yet, but we're seeing a reduction in the job postings. And I think that's what's going on. And I would just say that the economy may not be in recession yet, but I just think it's weak. And this is just one metric showing that. Freeberg, you're running a company now, you're doing hiring qualitatively. What you're seeing in terms of hiring from when you were running production board, you had many companies, people were fighting it out in the peak Zerapara and giving people incredible, incredible compensation packages.

41:15Then you also had people trying to take talent and maybe talent hoarding was going on. It seems to have dramatically switched. We've been putting job postings out and seeing hundreds of people apply for jobs that we would get dozens previously What do you see what's the game on the field in terms of hiring? I'm not really I don't really have a great perspective on this We're we hire very specialized people at O 'Holo and in the special Specialty field we're in we're the best in the world so everyone wants to work here Got it I'll answer your question Jake. I'll let me see from our portfolio companies as hiring's got easier It is way higher much easier to hire devs right now software developers then two years ago.

41:54No question about it. Yeah, and I think globalization also having a big impact here. I honestly, my theory on this is that because there's not three competing offer sacks from Big Tech, when you're a startup, you know, trying to land somebody and you're like, we have to be Uber or Airbnb or Coinbase, you know, like a mid -market company, or the Google offer, the Apple offer, the Amazon offer, typically like a developer would have of those three sets of offers. Here's a startup that's willing to give you 1 % of the equity. Here's a mid -market company in Uber and Airbnb at Coinbase that's offering you 300K.

42:28And then here's the like incredible $500 ,000 offer from Amazon or Google. Those offers just aren't there. So then it makes for the ability for startups to hire great talent. This is the best time possible to be a startup. The talent on the field is incredible. Opening I, it's considering a for -profit conversion. version and that means possibly an IPO soon. According to report Sam, Altman recently discussed this with major shareholders like maybe Microsoft and it's possible open AI will become a for profit benefit corporation similar to inthropic or XAI. If you don't know what a for profit benefit corporation is a benefit corporation or B Corp in the industry means you have a stated mission that the board is responsible for going after you know, save the whales, provide AI software for all of humanity, whatever it is, in addition to the standard acting in the interest of all shareholders.

43:22And so this of course means OpenAI, which was valued at 86 billion could IPO at some point. What are your thoughts on this? We saw the revenue numbers are crushing it. We've thoughts, Jamoth, on OpenAI IPO. Is that a possibility in your mind? I mean, it makes so much sense for them. So I think they should do it as quickly as possible. We are in the first inning of what should probably be an enormous tectonic shift in technology. And I think if anything, whoever wins in the first inning usually isn't the one that's winning by the ninth inning. And so I would encourage anybody that's winning right now to monetize, get secondaries, take money off the table as fast as possible because the future is unknown and the more disruptive of the technology is the more entropy there is, which means that there's going to be more changes, not less.

44:13And again, I would just look at search as an example. I would look at social networking as an example. When you look 20 years later, the people who captured all the value were not the ones at the beginning who everybody thought was going to win. And so I think if it plays out similarly, it's important for the people that are in the lead today to recognize it's too early and they should monetize their perceived success as quickly as they can to the largest magnitude possible. In other words, you might be opening a bank. You might be my bank. Grab the bank. Grab the bank. But what is it called secure the bank?

44:46So, secure the bank. Secure the bank. What do you think? Secure the tax on a potential IPO by Sam and the team at opening eye and the impact that might have on the wider space. Well, for a long time on this show, I've been saying that you need to clean up that, you know, convoluted business team corporate structure with all the line charts everywhere. That structure is what created all the problems with this nonprofit board that they had. You've got a for -profit entity reporting to a nonprofit board. It created a culture clash. And as we've said before on the show, it's not a good idea for a start to innovate on structure.

45:21Using a tried -and -true C -Corp is the way to go. You're ready for IPO. If you ever get that far, you don't need to restructure the company. It was always funky and weird that OpenAI had this nonprofit structure. And really, they should have fixed it years ago. And like I said, given Elon his equity, given Sam his CEO package, and they didn't do either one of those things. And so now they're left with this crazy org chart that's a mess. And I don't even sure, I mean, I think you would want to clean it up as soon as you can, because I think my sense is that the longer you wait on these things, the harder it actually gets, but more calcified these things get.

46:01I'm not sure how easy it is to actually fix this thing, but yes, they should fix it. They should make it a standard C -Corp. They should make things right with Elon because he provided the first 40 million of C -Capital. They should make it right with Sam. He should get his CO -Comp. And then they should IPO so that the public actually has the ability to invest in this AI wave and ride this wave as, you know, the same way they did with the whole .com boom in the late 90s. I mean, a lot of those .com companies didn't work out, but some of them did. Amazon, Google, and so on. And the public had the opportunity to participate in that huge wave of innovation.

46:40And I think we go to something like that. We still need more public companies, right? Yeah. Freeberg, you got to thought here before we go into super intelligence and I'll use new company. I don't care if OpenAI is for profit or non -profit. It affects a few people that put money in and the employees doesn't affect anyone else. Well, no, it will affect the public if they can buy shares and they get to participate. You could say that about any business, right? Yeah, but OpenAI is one of the leading companies of the AI wave. It is the leading company. It's the leading company. They apparently raise money in an $80 billion valuation.

47:12So one could also argue that a company doing $3 billion in revenue, getting an IPO done and at 120 billion market cap, maybe the public already missed the big wave. Well, no, I don't think so. I mean, we saw a lot of these companies that you could have said that about Nvidia and it basically went up 30x. It could go up, it could go down. Anyway, there's a bunch of people who put money in who are going to make a lot of money if the saying gets to be for perfect. Yeah, the trend line is doubling revenue right here over here. So, yeah. My argument is it'd be good for OpenAI to clean up its Byzantine cap table and structure.

47:45and it would be good for the public to be able to have the opportunity to invest. So it's a win -win. I'm not saying they have to do it this minute. I mean, I think that it does take time to get your reporting to the level of maturity necessary to be a public company. And you don't want your earnings or your revenue. You don't want your numbers to be volatile. If you were an employee freeberg and it went out at 120 billion, would you clear your position if you could? Would you sell half your position? I don't know enough. I don't know enough. I'm assuming most Most of those trim off anybody, anybody want to play along here?

48:14Well, I've heard that they've had quite a bit of turnover because there's been pretty good secondary market activity, which means a lot of the employees have cashed out and they've made so much money just like what's happening in Nvidia now. There's very little upside relative to how much money you've already made. So at that point, a lot of the early people started to leave a screenshot on a higher model. Yeah, so they're trying to hire more people. It sounds like I heard 70 % of employees at Nvidia are millionaires now. That's a crazy number. Go ahead, Seth. Well, I was going to say that question that you asked is really a highly personal question because you could think that OpenAI is a great company that's going to be worth a trillion dollars in the future.

48:50Sure. But it still makes sense for you to take chips off the table because 100 % of your net worth is in that one company. So let me ask it that way. You got 90 % of your net worth in Vity. I'm sorry, 90 % of your net worth. Your person at OpenAI sitting on 10 million dollars in shares. Do you sell half? all what would you do personally, Sachs? I would take some chips off the table. I don't. If you were first, if you're like this is 90 % of your net worth, 99 % of your net worth. Well, I mean, you're an insider, so maybe you have a lot of information. If you were really bullish on the future of the company, maybe you take 10 or 20 % of your chips off the table.

49:26If you're less bullish, maybe it is 50%. So I don't know. I'd be influenced by my perspective on that, but I think that you could think it's the greatest company in the world and still, it would make sense for you to take some chips off the table because you don't want all your ex -o -unbasket. That's a personal diversification decision. And if it was $120 billion valuation with $3 million in revenue, Chimoff, and you're trading up 40 acts or whatever it is times next year's revenue, let's assume they do $5 billion next year. You're still looking at 30 acts revenue. You would clear. I think these multiples are not really what's going to drive their behavior.

49:59I think OpenAI is running a very strategic game plan to become part of the tech establishment as quickly as they can so that they are in the inside looking out as opposed to the outside looking in. They were able to add the former head of the NSA to their board of directors. They were shooting on that. By the way, Jamal, that was interesting. People got pretty well. It's how you become part of the establishment. Do you think the former head of the NSA no longer has a security clearance or knows people in the NSA? No, of course not. And I think that there is a group of people that want to make sure that these kinds of technologies and capabilities are firmly within the hands of the United States apparatus and not anybody else.

50:45And so I think that that pulls them closer to the kinds of folks that could otherwise give them a hard time, right, or regulate them, or et cetera, et cetera. So now what happens is when you have Senate hearings about this stuff, it's more likely that it's confidential behind closed doors, it's under the purview of national security, all these things are beneficial to open AI. And then secondly, they were able to get Elon to drop his lawsuit. Conveniently, I think it was like on the same day that the head of the NSA was added to the board of the former head of the NSA. So the next logical step is now to create capital markets distribution, which is really about syndicating ownership of the company to all the big deep pools of money, so that they are also growing in the same direction in support of OpenAI.

51:27And so that's what a lot of people don't get. It's not about valuations or this and that. This is about creating a high -level game theory of how to create an international apparatus that supports your corporate objectives. There are a few companies that have done this well, and they are now one of them. The only thing left is to get shares into the hands of the Black Rocks, the T -Rows, those, all the big mutual fund apparatuses of the world that then syndicate to all the individual investors of the world. And you have everything. You have government connections. You have no real legal overhang.

52:00Then the likelihood that an IRS agent, all of a sudden, decides to audit open AI is basically zero. Okay. So to summarize, it's cynical, but you're building an ally base that then makes it harder to investigate the company, criticize the company or anything like that, right? That's essential. I don't think it's cynical. It's like a smart business strategy. It's strong. What do you take on that, Sex? Well, yeah, they're borrowing their way into the deep state. I mean, the quipro quo is we will be your vessel. We will be an arm of the intelligence community of the deep state. We'll give you access to whatever it is you're looking for.

52:40And in exchange, you're going to basically protect us and allow us to get rich. And frankly, that's the deal that all the big tech companies have made. They are all in bed with the intelligence community and we saw this in the Twitter files where You know every week for the year before the 2020 election there were meetings Between the trusted safety people the censorship division of Twitter and the intelligence community so these people are working arm and arm and Basically the big tech companies have given themselves over in a way to this powerful apparatus this you know the deep state In exchange for, you're there willing to basically give up power, in exchange to be left unfettered to make their money.

53:24I think it's a horrible development for the civil liberties of the ordinary American. But I think that is the reality of what is transpired. Yeah, and the number of CIA, former CIA, former FBI, Justice Department people working at the Googles, Facebook, Smith, as apples of the world is like a very large number. I have family as many of you know in law enforcement and in the deep state I guess I should call it sex and They are constantly asking me about job offers they have from these companies and shit Which one should they go to this is after they've done tours in Afghanistan and you know speaking many different foreign Languages and then all of a sudden they secure this incredible, you know three X salary bump by working in big tech So there is something to all of this.

54:12Gilia announced his new startup. Finally, it's called Safe Superintelligence Inc. or SSI. He was obviously an open AI co -founder, form of other chief scientists, and co -head of super alignment. Last month, he announced he was resigning from open AI after a decade with the company. And you remember, he was on the board that helped Augustreate Sam Waltman's firing. And then he reversed course a few days after and expressed regret in it. Everybody was asking where's Ilja doing all of this on Twitter. The co -founders in SSI include Daniel Gross, YC Partner, Empire Neural Labs, co -founder and OpenAI Engineer Daniel Levy.

54:51Companies goal right now is in the title. Develop a safe, super intelligence. Here's what Ilja told Bloomberg. The company is special in that its first product will be the safe, super intelligence and it will not do anything else until then. And Friedberg, is this super intelligence making safe super intelligence a great business model or is this something else? It's a little bit confusing to come into the market and compete with a throttle or a governor, I guess, on your startup. At least that's what some people are discussing. So what are your other ideas? I don't know what these guys are doing.

55:28Have you guys come to this company? I haven't seen anything. I mean, we're just facing it all over the first question. Yeah. Okay. I'll just re -merge another assist. Okay, quick bounce pass to Zach. Zach, give us your opinion. And the caveat, what we're about to say by saying that I've not heard the pitch directly for this company, I've only read what you've read in the press. What they're trying to do is the safe, super intelligence. And I'm not bullish about that pitch because I think it makes the company a little bit schizophrenic. working at cross purposes with itself. On the one hand, you're a new company, which means you're behind.

56:05You've got to catch up with OpenAI or Google these other companies that now have been creating models for years. So you've got to move very fast. On the other hand, you're saying you're going to basically make this very safe. Well, to be frank, safety concerns are a break pedal. They don't help you move faster. They make you move slower. Yes, it's a governor. And in fact, I think that this is the main reason why Sam Altman either kicked these people out of the company or starved their resources until they left. Remember that when a bunch of these people left OpenAI, they said that, hey, we were originally promised 30 % of the computing resources by Sam and then he reneged on that promise and give us what we needed so they all left.

56:47Well, I think that wasn't by accident. I mean, I think that Sam wants to win. He wants to develop AI as quickly as possible, specifically AGI. And he had this group inside the company that frankly was a lobby for moving slower. So now they have their own startup. He's on that group and he kicked out. Right, and so I don't, but I don't think that's the recipe for winning because you're the guys who want to move slower. It would be like taking the DEI group from Twitter and having them start a new Twitter. Well, I think that's a little bit harsh because I do think that by all accounts, This, Karpathy is like a top, top notch technologist.

57:25And he's one of the leaders in the space. Yeah. But I do think that he's going to be hamstrung by his own concerns about safety. And I think this is maybe the tragic situation is we're going to have this competition by all these different companies to advance AI. And the companies that care about safety more than others are going to lose. And so you have this Darwinian effect going on where there's going to be a race to AGI And I think that is genuinely a little bit scary For where this this all leads us, but I tend to think that it's not going to be solved by trying to impose the safety Governors you said I think maybe the best you can do is Impose a truth governor.

58:08So you know Elon says that we're going to make sure that our model at X AI at the Groc model is is scrupulously honest. It's not gonna lie to you. And I think maybe that's the best you can do is advance AI to be truthful. But when you start injecting these other safety concerns, I just think it slows you down and hamstrings you. I think the best way to hit truth is to cite your sources I have been putting into, and I don't know if you've, have you played with Foro yet or Claude's new sonnet, Jamath, I think. I mean, it is unbelievably good. If you put site your sources, it's really starting to understand what you're asking for.

58:45I don't know if you've seen this, but I was asking it like I'm hiring some positions. Give me the high low average of this position, give me five sources of information, put it in a table, and then average the high low and median. And it came back to me, sacks with an incredible thread, Jema, of this position and then and source, class, or, you know, in the salary .com, whatever it was. And I was like, holy cow, this is an hour or two of research or work done instantly. There's an important insight here that I think people are missing, which is that foundational models are quickly becoming a consumer surplus.

59:24Every model is roughly the same. They keep getting better and better, but they're also approaching these asymptotic returns. And what do you do when something approaches as an asymptotic return, you need to change a key underlying variable that you use to build these models. And it looks like one of those variables that people are looking at is how you basically take the internet, not as raw data, but then you actually kind of refine it and refine it some more and then use that as the basis of learning. And what that does is it drives up model costs to a degree that are probably untenable for most companies except but for a few.

59:59So I think it was Dario Amade, the CEO of NPROPIC, who said the cost of a good functional model today is in the billions, but by 2027, it could easily approach $100 billion. The problem that that represents for Ilya's company, and I wish him the best of luck, but the reality is there isn't $100 billion for him to have. Google will find it, Microsoft will find it, Facebook will find it. Amazon's coming out of the way. AI will probably find it, Amazon will find it, but I suspect that these other startups, there just isn't that much money going into AI because the returns don't justify it. So I think the bigger problem that you have is that it's becoming an arms race.

1:00:37It's not dissimilar actually to ride sharing. When people saw Uber's success, they thought, well, this is simple. And it was, but you had to subsidize losses for decades before that company was profitable. But meanwhile, you had to starve all of these other companies that were funded to compete with Uber until they ran out of money and died. I think that you could make a claim that the AI foundational model market will look similar to that. One startup can probably win, but there will be a bunch of open source alternatives. They're all asymptotically similar, and so it's an arms race on cost and compute.

1:01:09And I just don't see VCs having the temperament and the wear with all to fund hundreds of billions of dollars into multiple companies to do them. Freeberg, any thoughts on the latest models have you played with them? I'm curious. I have been having tremendous results. There is seems like there is, I don't know, I don't want to say a step function, but man, it's a lot better right now. Have you used any of these models? And are you applying any of them inside of your company? We're using a lot more models and we're seeing them be very practically applied at the edge so you don't need to have large models running on a large compute cloud to get practical value and this is definitely a big point in the industry is that you're getting highly functional application specific models that can be run in a more local environment on the edge.

1:01:58So they're not running the cloud on big compute clusters and there's incredible applications in things like machine vision and control systems. You can ultimately see this being I don't know if you guys I saw that Chinese dog. We never talked about this. China basically ripped off Boston Dynamics, or at least that's what it looks like. And they created this military dog, Nick, can you pull up the clip? And then they put machine guns on the back of the dogs back. The models are running locally in these devices. In fact, I think we're gonna have a few demonstrations of this at the, at the island summit.

1:02:31So the robotic applications are pretty powerful. Machine vision applications are very powerful. And when you see this insane video from China, by the way, This is a totally different topic. You guys seen this? I have seen this. So this thing goes autonomously into a building and it can then find its target and eliminate its target with the machine gun on the back. Incredible. And you can see this becoming like, let's say they build an assembly line and they put out 10 million, 50 million of these things and these things can now go run autonomously in the field. This is the dark side of small, highly performative applications, specific models running in an embedded way.

1:03:08Imagine those are amphibious. And they could travel against, they could travel across water and wind up at another destination. I don't know. Where would a beach invasion occur? Anyway, that was a very funky tangential aside. All right. We've talked about Microsoft and the bundling issues a number of times. Your Sanctuary had a spicy take on this. Well, the EU just charged Microsoft with antitrust violations over how it bundles teams. They're quote unquote slack killer into office. Here's a quick chart, Microsoft Teams obviously was bundled. Everybody has it automatically with office. You don't get a choice and they rocketed to 75 million members in 2022.

1:03:47Slack's 12 million. You've obviously got a lot of thoughts here. I'm sure too as well. Tom Watson, you were the early investor in this. Looks like Salesforce just got a big win. Benny Off gave some commentary on X. Microsoft excels with bundling. It's not, it's there not so secret weapon for dominating new markets We know the playbook office plus teams windows plus explorer Azure plus visual studio 365 plus one drive and X plus plus Game X box plus game pass. Here's a clip of Saks discussing this on episode 113 of your all in podcast If Microsoft can basically clone the breakthrough innovative product, they do one every year, and then they put a crappy version of that in their bundle, or 50 % worse, but they give it away effectively for free as part of the bundle, and then they basically pull the legs out from under that other company, so it can't be a vibrant competitor.

1:04:47And then the next year they'll just raise the price of the bundle, right? And they've done that with Slack, they've done that with Octa, they've done that with Zoom. Can we have a vibrant tech ecosystem, at least in B2B software, if Microsoft can just keep doing that indefinitely? All right, Zach, you heard your quote there and guessing you're not shocked by this action. Well, I think the EU made the right decision here. They basically cited with Salesforce who made the complaint and said that Microsoft was engaged in illegal bundling by combining Microsoft Office and Teams. And the reality is, Microsoft Office is a product that every company has to have, every, certainly every enterprise has to have.

1:05:29And by bundling, it means that that enterprise receives the Teams product for free until of course the price of the bundle goes up the next year, which it has it just about every single year. So what that does is, when that enterprise is evaluating the choice of do we use Teams or do we use Slack or for example glue or some other tool, teams on the margin appears to be free. Whereas Slack is something you have to pay for seats. And I think that is a legal bundling. You know, when you have a monopoly in one product and you systematically use it to keep adding new products, that again on the margins appear to be free because you've bundled them.

1:06:12And I think the EU has done the right thing here, which is push to end the bundling every single product needs to have its own Aulacarp pricing. And when you add together the Aulacarp prices, it should equal the price of the bundle. So in other words, you don't get anything on the margin for free. The customer needs to have the discretion to choose what it wants. If we don't do that, I do think that Microsoft will use the power of the bundle to systematically dominate enterprise software. And they won't take on everybody at once, but like I said, they'll every year, they'll add a new product to the bundle.

1:06:46Shem off what's the what's the middle ground here between the interest of consumers, which is, hey, I'm getting free, a free version of Slack. It's not free. It appears to be free on the margins because it's now part of the bundle, but then they raise the price of the bundle the next year. Correct. They boil the frog. So once they killed, once they pulled the legs out, pulled the rug out from under their competition, and that competitor is no longer viable, now they can raise the price of the bundle. Okay. And so it's kind of like dumping it in a way. I mean, this is a very old -earned to trust argument.

1:07:16When you would dump product in the market to kill a competitor, or you would price under your cost to kill a competitor, right? Yeah, you dump to basically drive a competitor out of business because there's large cost of entry, there's large cap -axe required to create a new competitor. And this is basically what they're doing is they share to give you, they appear to give of you, the slack clone or whatever, for free. But then once they pulled the rug out, they'll increase the price of the bundle. So, Tom, what's the balance here between say, I don't know, Apple giving away a free note -taking app or a free journaling app to consumers and, hey, consumers get this benefit of free product versus the bundling concept here with, hey, we'll give it to you for free, but eventually we're gonna boil the frog.

1:08:05What's your thought of how to adjudicate this or to execute on it? Microsoft. Microsoft has been bundling to bundling products to kill competitors for 40 years. The 10 years that they didn't do it was the 10 years when Steve Balmer was in charge during which there was a legal document between Microsoft and the Justice Department, a consent decree that prevented them from doing it. that consent degree came to be because of this exact strategy. The most famous example that was the tail end of that process was when they used Internet Explorer and they bundled it with Microsoft Windows and they killed Netscape.

1:08:46There's umpteen examples of this. I think that they've gone back to their old playbook. It's a playbook that you have to remember the executives that run Microsoft have been there for 30 and 40 years. they know this play and they know that it works and they've been rewarded incredibly handsomely by the public markets so they're going to keep doing it. Would Slack have sold the sales force? Now look, I'm not complaining, it was a $27 billion acquisition. But the question is, if it were allowed to compete feature for feature, could it have beat teams? Possibly. Would the board have made, and I was on the board of Slack, a decision to have tried?

1:09:25possibly, but none of those options were on the table because when you see a product, it doesn't matter how inferior it is, get bundled in, it's kind of DOA and then you're on a melting iceberg and so you have to make a very quick decision to preserve enterprise value. So I think what this comes down to is the FDC and the DOJ need to dust off that old consent decree, read it, and figure out whether this makes sense again. It seems like folks in the EU have more recently we read that consent degree that it can regulate or something. Look, what we've said all along is that the right approach to antitrust is to stop anti -competitive tactics, bundling is at the top of the list.

1:10:03Instead, what they've stopped is all M &A, which is actually bad for the ecosystem because you deny risk capital or reward and you need that reward in order to induce the next stage of risk taking. So, again, I think this was a good decision by the EU regulators and the competition authorities in the US should actually be looking to this. Again, it's a better approach than stifling M &A. You are so right on this. We are so aligned. If you look at, I've been talking to a lot of LPs and in talking to them, they're looking at corporate, credit and P &E deals because they can get a return on those.

1:10:41And then they're looking at Venture and they're saying, hey, why is there no M &A occurring? Where's our DPI? Can you guys sell some of these companies? is like, yeah, we can't sell them because Lina Khan is going to scuttle this M &A. And what that means is in a very real way, we have dollars being taken out of innovation in early stage and being put into, you know, privatizing SaaS companies, whatever real estate deals. And this is really dangerous for America. We really need more of this. Okay. Okay, I'll make one last wrap on this topic. I'll take the other side of bundling. Oh, here we go.

1:11:18I think ultimately if bundling benefits the consumer or the customer from improved prices, I don't buy the antitrust arguments on a lot of these cases. I don't think that you're keeping competitive solutions in the market. If the benefit of the lower cost product is actually there for the consumer, the customer. Supermarkets, for example, do this, right? So there's a lot of products in the supermarket like peanut butter milk eggs that have historically been big loss leaders because they get people in the store once they get a monopoly. They're effectively peanut butter is not a monopoly monopoly.

1:11:51The super market is that finds a bundle commodities but when a product is a monopoly and every commodity has finite shelf lives. Right. So we're talking about one week and teams is not a monopoly. Right. I'm not going to install it. If Microsoft offices and 365 is, you can't rip it up. You can't rip other options. You have options. There's plenty of options. And the end of the benefit of SaaS is that you can switch all the time. The options are market power. Of course they do. I can switch to Google offices. They have money. But in the enterprise market. I don't have to buy enterprise licenses for office.

1:12:24I can buy Google Docs. S &Bs think that way, but enterprise is. Enterprise is, enterprise is. Enterprise is, don't think that way. Yeah, I mean, I've never had an option to Google competing effectively in the office space against Microsoft. You have to look as the do off the list competing effectively against teams. Like none of your businesses have a monopoly. I assume I would argue is getting. No, no, no. No, no. Look, once they put teams in the bundle, slacks up growing. What's the monopolistic lock in the amazing thing about that? Is there's no switching cost? There's no switching costs. What?

1:12:55I don't think we're debating that. I think what we're debating is the sales practice where Microsoft says, well, you need office. you need Windows and you need 365 or sorry Active Directory. Well, if you'd like all of these things, we're gonna give you this product for free as well, and they're going to be tightly integrated. Then when you go to Slack, you have to pay more. And then you think to yourself, well, how do I go back to my CFO and say, I need an extra $1 .2 million a year for this enterprise license to Slack, and then people say, well, it isn't - That's my point. You're saving money if you stick with Microsoft.

1:13:26They're giving me this account. No, they're not because they're not - the bundle. That's the point. That's a theory. And if that's true, that should be prosecuted. I don't think that the I see a lot under the Microsoft internet. That's for action. Yeah. But that's the violating action. That's my point. That's the point. Why can't you just make Microsoft? Yeah. The idea of having a bundle should not be a violating action. No. All Microsoft has to do is they've got a price of the bundle. Allocate that price across all the components of the bundle. So people can buy each product to all a cart. That's all they can still they can still sell a bundled offering.

1:14:02If at the end of the day that sum is cheaper than you buying the alternative all a cart from third party vendors, that is a great deal for you as a customer. It can be cheaper. But the point is, Before talking about here is proactively keeping competition and I think that creates a good competitive dynamic. But maybe I'm thinking too first principles on this. I think you're missing something here, Priever, which is like what happens then? When let's just say Slack, there wasn't a suit or for Slack. Okay, let's take the internet browser example because I think it's better. If you didn't have a multi -hundred billion dollar company prop up a product because they just felt like it, i .e.

1:14:36Chrome and Google, you would have had Microsoft run away with the core interface for the internet. We don't know how that would have turned out. So by luck, we've had some modicum of consumer choice, but it's not as if Firefox did well. Firefox went to basically irrelevancy. Netscape went to zero. So there are examples where when Microsoft has done this they can starve the market of choice over long periods of time And I think if you hold on hold on a second So if you're if you're if your whole point is well, let's just bet on the large Jess of other large companies. That's a bad bet But I will show you multiple counter examples Google meet does not dominate market share You're talking about the largest you're talking about the largest of companies You're talking about about competitive practices Find me venture funded people risk taking people who need a return on investment Google is the worst example.

1:15:23They have the most indiscriminate forms of spending. I'm not saying that they shouldn't be allowed to. They're just trying to counter example to the point about bundling. No, that's not a good example because we do have Google Wave or any of these other nonsense products that didn't work. I think I'm not calling Google Meet a Grand Point. The point of a healthy product environment and market is not that one incumbent and another incumbent can create their own crappy versions. It's that you could theoretically have an open market where somebody can be funded with nominal amounts of capital and compete effectively.

1:15:54That isn't possible in many markets and software because of these kinds of strategies. So what you're reduced to are these huge companies with this product sprawl. I don't think those are good products. And I think we're lying to ourselves to say that they are. Google Meet is a terrible product. Okay? So whatever they're competing with is a terrible alternative. That's my point. And they've lost market share. They have not won market share by bundling. And if you try to find a real competitor to build an alternative to it, they're not able to get funded because the venture investor says, no, I can't and that's the market power that stifles competition.

1:16:32That's what this is about. And if you as an entrepreneur come up with a much better product than Google Meet, A VC will say, wow, we can go and blow up the side of the hall of that ship. I totally disagree with the conflict. I don't think there's a single person. No, Scott Skype. How many years ago for a navk? $1 .00 and the zoom camera. If left unchecked, I do that Microsoft will. I mean, zoom is a standing loan, unbundled product, and they totally dominated the market. Well, everyone else has been doing bundling. The bottom line is, if left unchecked, you will see people abuse this. It is not a big ass to have all our cart pricing and that will make the playing field.

1:17:08Yeah, and also the zoom example is a terrible one. And the reason is that P &L would have a whole blown on the side of it if they did not have 90 % of their R &D and OPX in China. So but for the grace of God and Eric's strategic thinking, they were able to survive. But that is a perfect example of a company that would absolutely not have existed. Had they not had a labor arbitrage. That is not the basis of a competitive and fair market. And you cannot expect people going off to all four corners of the world and trying to do all these gymnastics To viably compete against the Microsoft and a Google.

1:17:45I would argue that is not what a doby a doby has a bundling solution They if you guys have ever tried to sign up for a doby or end your subscription. It's nearly impossible Yeah, they just had action taking against them for that They've got these insane practices. They make you buy everything to get access to one thing Well, they come along. Yes Sigma, Figma kills the market, they come in and they're like, we're a better product. Better markets do win, even with bundling. That's my argument. I think the interesting thing with Adobe is that they have a product suite that's used in a narrow field.

1:18:15I think what's accessing is Adobe is about a sort of vertical system of record. I think what the thing about Microsoft and you could probably say about Google is but less so, but definitely for Microsoft is they are these very horizontal broad amorphous systems of record that you cannot easily replace. There aren't people running around building nine of the 19 things that Microsoft gives you in the bundle. That's the problem. Okay, well, the first of all, I mean on this very show we are arguing that the Figma acquisition should go through because it created a new market for web designers, whereas Photoshop was basically for Graphic designers.

1:18:54It doesn't compete with Photoshop. It compete to some of their other design programs, but that's Anyway, all right. We're not gonna settle it here. There's a different sweet and a bundle in the sweet sweets are okay bundling when you already have them inopoly in the relevant part of the Bumbleling is when you take a wrench and a can of peanut butter and put them together I'm gonna take them both. They're like well, I only need the wrench while you're gonna take the peanut butter And they're like well, I already have peanut butter so I don't need to buy new peanut butter We saw this in the cable providers in direct TV as well, you know, just you can't only works in one I pay for ESPN and if you don't like sports, all right, listen, another amazing episode for compassionate Chimoff, satire sacks and the Frank.

1:19:33Satire sacks wants to say one more thing. I just have a perfect wrap up. Please. Okay, satire sacks, go ahead. What's your, what I want to put you with this, here we go, satire sacks. No, let's put this tweet by Joe Biden, President Biden. Oh, God. Here's the elder abuse. No, I want to compliment Joe Biden on continuing to fight. You keep fighting Joe. Do not let the media get you down. One bad night is not a reason to get out of the race. All these people stabbing in the back that are basically ingrates and backstabbers you're doing just fine. All right. And from candid, and from candid, and from candid, to the Democratic Party, discrepancy your disgrace.

1:20:16What you did to the American people with this rope of dope is ridiculous. 20. Discretion. 25th Amendment. Get this guy out of office. President Kamala, hot swap it. Dean Phillips, let's go. We'll see you all next time on the All In Podcast. Love you, boys.

1:20:44And it said we open source it to the fans and they've just gone crazy with it. Lumbi West, I squee -na, Kim Watt! I'm going all in! What? What?

1:20:57Besties are gone! Go for it! That is my dog taking it away. It's your driveway. Sit next. Wait, I don't care. Oh man, my ham is the actual meat. We should all just get a room and just have one big hug or two because they're all I'm going to be a man. What, you're the B, what, you're the B. You're a B. We need to get merchies out of that. I'm going to leave.

1:21:30I'm going to leave.