Trump's Cabinet, Google's Quantum Chip, Apple's Flop, TikTok, State of VC with bestie Keith Rabois

25:50Why should scarcity prevail in New York for four months of the year, et cetera, et cetera? All right, let's get to our talk. And we got a ton of stuff to get to. Google's new quantum chip is super impressive, freeberg. And we're talking about that on the group chat. On Monday, Google announced its latest quantum chip. It's called Willow. Here's the chip if you haven't seen it. It's beautiful. It was fabricated in Google's new chip plant in Santa Barbara. They started this project back in 2012. of their quantum computing project. And the headline basically is, will it perform to standard benchmark computation under five minutes that would have taken today's fastest supercutors 10, septillion years or 10 to the 25th power, which is billions of times hold to them the universe.

26:33If you don't know what quantum computing is, freeberg will expand on it. But basically, computers are binary. You've heard this before, one in zeros, quantum's use qubits, you know, those are zero one or both at the same time. and Google got a 5 % pop, they're up 13 % in the last five days, probably on the other news that Gemini 2 .0 is out as well, which is unbelievable. I've been playing with it. What do you think, free -bert of this big announcement? Google's announcement is a paper published in Nature that follows a pre -print they actually put out in August. So this news has been out for a little bit.

27:12There's obviously a press cycle this week around it to kind of make a big thing about it. But it is a very kind of important milestone in the evolution of quantum computing. So do you want me to kind of talk about quantum computing again? I think we've talked about this in the past. I mean, maybe a brief primer for people, but like what does this mean practically? I think what people want to know is when did these things actually have an impact in the way, say in videos GPUs have had? The big breakthrough here is that the whole basis of a quantum computer is called a Q -bit or a quantum bit. It's radically different than a bit, a binary digit, which we use in traditional digital computing, which is a 1 or a 0.

27:54A quantum bit, you can kind of think about it as a wave function. It's sort of a quantum state of a molecule. And if we can contain that quantum state and get it to interact with other molecules based on their quantum state, you can start to gather information as an output that can be the result of what we would call quantum computation. And that sounds complicated, but what it really means is that instead of doing kind of binary computation where we're adding numbers together or doing kind of other traditional arithmetic, there are really interesting functions you can do with qubits. Qubits can, for example, be entangled.

28:37So two of these molecules can actually relate to one another at a distance. They can also interfere with each other, so canceling out the wave function. And then when you read it out, you get a result that is basically a very, very complex problem that is solved through this quantum interpretation. It's really hard to kind of highlight like how different this is from traditional computing. So quantum computing creates entirely new opportunities for algorithms that can do really incredible things that really don't even make sense on a traditional computer. They're not possible to kind of resolve on a traditional computer.

29:13And sorry, let me just state one thing. The quantum bit needs to hold its state for a period of time in order for a computation to be done. And so the big challenge in quantum computing is how do you build a quantum computer that has multiple qubits that hold their state for a long enough period of time that they don't make enough errors that you can actually do a computation with them. So what Google was able to demonstrate here is they created these call it logical qubits. So they put several qubits together and by putting several qubits together they were able to kind of have an algorithm that sits on top of it that figures out, hey this group of physical qubits is now one logical qubit.

29:54They balance the results of each one of them. So each one of them has some error. And as they put more of these together, what they were able to demonstrate for the first time ever is that the error went down. So when they did a three by three qubit structure, the error was higher than when they went to five by five, and then they went to seven by seven, and the error rate kept going down and down and down. So this is an important milestone, because now it means that they have the technical architecture to build a chip or a computer using multiple qubits that can all kind of interact with each other with a low enough fault tolerance or a low enough error rate that they can start to do these quantum calculations.

30:29This is a big area of opportunity. One of the very interesting areas that a lot of people are talking about is in cryptography. So there's an algorithm by a professor who was at MIT for many years named Shores, called Shores Algorithm. And in 1994, 1995, I think, around that time, he basically came up with this idea that you could use a quantum computer to factor numbers almost instantly. And all modern encryption standards. So all of the RSA standards, everything that bitcoins, blockchain is built on, all of our browsers, all server technology, all computer, security technology is built on algorithms that are based on number factorization.

31:11So if you can factor a very large number, a number that's 256 inch, it's long, theoretically you could break a code. And it's really impossible to do that with traditional computers at the scale that we operate our encryption standards at today. But a quantum computer can do it in seconds or minutes. And that's based on Shores algorithm. And if you want, there's some great YouTube videos that describe Shores algorithm and how it works. But it's like mind blowing when you look at it. It's like this really like non -intuitive, but simple set of steps that when you put them together on a quantum computer, it's like this thing can instantly figure out all the factors.

31:44And then you can break a code. One of the things that this highlights is that in a couple of years, theoretically, if Google continues on this track and now they build a large scale computer, they theoretically would be in a position to start to run some of these quantum algorithms like short -s algorithm. And so we're now kind of spitting distance or a couple of years, it's not really clear as it's three years, five years, seven years, but a couple of years away from having computers that theoretically could crack all encryption standards. And there are a set of encryption standards that are called post -quantum encryption.

32:11And all of computing and all software is going to need to move to post -quantum encryption in the next couple of years. So there's like this big kind of push now to like how do we do that? How do we celebrate it? I saw soon our post that I saw it in my feed. I ended up missing my next meeting because I had to figure out how long will it take for us to crack the encryption standards that we use for Bitcoin. Here's the answer because I was so tilted by this idea. So if you think of willow as essentially like one stable logical qubit equivalent in a chip. We need about 4 ,000 to break RSA 2048 and we need about 8 ,000 to break SHA 256, which is the underlying encryption framework for Bitcoin.

32:58So I think you're right. I think we're in the sort of like the end game. Two to five year shot clock. No, I mean, I think what will have to happen is some of these chains will need to obviously re -implement something at a pretty foundational level. The weird thing is free -proccess is like the willow chips error correction gets better. The more of these things you start to use together. Now there are some really big problems inside these chips like logical interconnects are very complicated. If you put two chips on a board like the C to C communication is common. This all the stuff that we haven't figured it out how to do.

33:36But this is a big deal. I was really like, why God, what's going on here? Other projects at Google are finally landing. You have way more incredible. And you have this now. I mean, Project Moon might be gone, but I think those projects, we're going to see a couple of them change the world, yeah? Just to give you a sense on the numbers, like Google's target for fault tolerance on a quantum chip to make it logically useful is one times 10 to the negative 6. Right now, this willow chip is kind of running at 99 .7%. So it's still a few orders of magnitude away. They have a long way to go in getting the fall tolerance low enough to actually build logical gates using qubits that can resolve kind of computational output.

34:23And so there's still a build cycle ahead and that pathways a little bit unclear. But what they've shown This almost feels like the shockly transistor moment. It's like, you know, here's this transistor. Now everyone's like, you have a lossy transistor and then you'll figure out PN junctions. You'll figure out all of these ways of just like getting the error correction down. But by the way, this reinforces what you said before, which is it's hard for an outsider like us to comprehend what's really happening inside of Google because the business they built was able to fund this. I mean, and I went down a rabbit hole because I'd never heard of who this guy was that runs his helmet, Nevin.

34:59He's a Santa Barbara. They have a whole team at Santa Barbara. They've been running for like 10 years. He has his own law and Nevin's law. And then I went down the rabbit hole of that. But what's amazing is so valuable for you, Maddie, Google had the money to fund him for the last 12 years. Exactly. And the greatest money printing machine of all time is paying dividends. Yeah. But isn't it great to know that Google takes these resources from search and Sure, maybe there's waste or maybe they could have done better with the black George Washington or maybe they could have done better with YouTube but the other side is they've been able to like Incubate and germinate these brilliant people that can toil away and Create these important step function Advances for humanity.

35:46It's really awesome deep mind is on that list as well. Kid, where are your thoughts? Yeah, yeah, so I think First of all, I think there's a long time before this becomes a commercial product or application of any sort. So, you know, it's great that they're taking money, but think about it as like almost like Stanford takes money or the, you guys cover it in funds -basic research in some ways. This is at least a decade out kind of thing. There's another, I mean, out this area, way beyond my expertise, but I've been talking a lot of smart people because I do do financial services innovation. And obviously, the curve seems pretty critical, whether Bitcoin or other places.

36:20And there's a couple of concerns. One is, it's not even clear that you can verify that this is true, by the way. Like standard computing to explain sort of the magnitude of difference. Standard computing would take 10 to the 25th years to verify that what Google analysis accurate. So there's a chance that it's not even true. For the thing, for the sampling test they ran. Yeah. A lot of people are seeing about that. 10 to 20 50 number of years. That's the big I think hole in the whole RCS benchmark that they use that it only is, it's a framework that only a quantum computer could theoretically even.

36:56So how do you know the answer is correct? And then to be practical, like, so see me saw all this in saccharid, but you make it fast all. Second, then there is the post quantum computing encryption, which, you know, a lot of people, a lot of things, a lot of poor things have switched over to. So you have historical communications that were encrypted under an old paradigm that would be vulnerable and You know every year that goes by like the embarrassment level or the threatening level of old historical communications We're probably to has some decay function or some half -life So it takes another 10 years Communications that were drafted 20 years ago.

37:32Yeah, there'll be some embarrassing things that bubble move on But the more time it takes the more safe, you know sort of private communications in exchanges will be So I think that's positive. Third is there's a question of order magnitude here You mentioned you need like three words of magnitude sort of improvement is each step function You know incrementally easier and faster or is each step function you know 10 years and I don't know that anybody knows the answer to that That's right. That's right. Yeah, a lot more work here to to be done. You're not buying any quantum computing stock yet Not yet.

38:08We have looked at KB, you know, talk about like technology forward, you know, VCs over the years of SAP through partner presentations and we've never really pulled the trigger. There's other reasons like including like even if you have quantum computing, you have to rewrite software atop of it from a different, it's a completely different, you know, world and two different. Nothing maps, nothing maps at all. Nothing. So you're starting from scratch. So you have an application layer which might be actually an interesting business opportunity. Yeah, how are these things actually going to be be coded and how our developer is going to interact with them.

38:38If at all, maybe by that time, we'll just be AI. How do you build a compiler? Who the hell knows? How do you build the language properly? These are all complicated. Yeah. He's going to write the basic. Who's going to write the Microsoft basic? The interesting thing is there's a lot of work that's been done in this space. Like thinking about quantum computing and quantum algorithms is like an entire branch. People do spend a lot of time thinking about this and working on this. And there are ways you can kind of simulate and test and start to build out models for how you could utilize quantum computers, but obviously we just don't have industrial scale systems at this point.

39:11There was one interstellar Marvel Easter egg in your announcement that I wanted to get your thoughts on Freeberg. Google said that this massive jump in performance quote, lens credence to the notion that quantum computation occurs in many parallel universes in line with the idea that we live in a multiverse. So is that somebody in PR is high AF or reach too much science fiction? You know, you know, the crazy thing for us. So the crazy thing about quantum physics is such a mind. If you guys taken quantum mechanics, I have not. I have. Yeah. I remember the summer I took it like the quantum, the first quantum mechanics class, and I was like, glide it was a summer course because you really have to like think pretty deeply about what you've learned in quantum mechanics.

40:03There's just nothing about it that's intuitive. Like the way we kind of think about the world is not the way the quantum world operates. In the case of a qubit, as soon as you measure the qubit, it collapses to a value. If you try and measure it, if you try and look at it, it goes to zero or one. The probability by which it goes to zero or one is defined by, you know, the quantum state right at the moment you observe it. It's just such a mind -f***ing. So effectively this thing is existing in a superposition in multiple states at the same time until you try to observe it, and that's the case of quantum mechanics.

40:38So what's kind of happening, I think in that language, J .Kell is nothing novel was kind of discovered or represented. That's just quantum mechanics. It's a mind -f***ing. And you could go watch hours of YouTube videos if you want to like get taken down on the mind's rabbit hole with quantum mechanics and realize like nothing is. That's one thing I've always found fascinating about this discipline is that looking at a qubit changes it. Like it understands it's being a very hard. Well that's true for any particle. There's a slit experiment and if you try and observe a light as a particle versus a wave, it actually changes what happens, what the outcome is of it being a particle or a wave, same with electrons.

41:17The thing about quantum mechanics is the observation of a particle changes what happens. serious question. There's question here. Here comes Pukkho and Freebe. When you look at the quantum Berlin, can you get a better idea of the scale of Uranus? Let's move on. Let's move on. It's such a mockery to you, Joe. He was queuing up and joking at the same time. No, I was thinking about Schrodinger's cat. That's like another ridiculous thought experiment that when you use the same concept. It's the same concept. The quantum state of the cat is it's both in the box and not in the box. You don't know whether it's in the box or not.

41:57It's open the box. It's open the box. And then you open the box and there's an X probability that it's in the box. X probability is not in the box. But when you don't see it, it's both. It's both. Exactly. And if you're a cat lady, you have three of those boxes and I'm a dog person. Well, we got more engagement from Keith on that science corner than we have from David Sacks. I never did. For sure. So, yes. No, no, no, no. No, no, no. For the stylish batter, BMI. I need to, I need to take that. It's actually, they both said, this is stupid. And I'll never touch it. Except Keith was kinder and more articulate in getting there.

42:34He did. That's what I've just been snoring. Yeah. He went on this, he wanted, he wanted to move where he goes stupid. I mean,

42:44next topic. There's an advantage of Monday Part or meetings is I get to watch the science fiction stuff in every week Even if I don't really understand it, but like a decade of watching science fiction you pick up some tricks Do you play chess with Peter Tiel while that discussion's going on my chest actually show I don't play chess at all Okay, the reason why is if I do something I want to be really proficient. I don't have the time Got it. Got also you have a life you have a life Yeah, I like to do like other things things in the real world big set of big big shout out to Gukesh D My my my Indian friend 18 years old new world champion.

43:20I saw a lot of Yeah, you know, world champion. Did was he playing Magnus? Is that who we played every brown guy that's done any random useful thing in the world We all know each other were in a huge group chat. Oh, is it really? Yeah Just how it is. It's the name of the group chat. Isn't like the top 10 tech companies. The group chat's name is What Can Brown Do For You? What Can Brown Do For You? Okay. There it is. Also, UPS is filing a trademark infringement case. Hey, speaking of chip news, Apple is making its own AI server chips for internal use or report. Just came out that Broadcom and TSMC are helping them develop AI inference chips, you know, inference chips like rock, a hunch a moth, and there are obviously GPUs like Nvidia, GPUs, those are like the giant dumb trucks that help you build large language models.

44:12These inference chips are kind of like speeder bikes, you know, motorcycles quickly getting you the results from the same ones. It's called BALTRA. I don't know what that's in reference to. Mass production in 2026, they don't plan on selling the chips, they don't plan on cloud computing. The reason they're doing this obviously is because they really want the iPhone to be the interface and they have planted their flag that they want to have privacy and have AI working off of your local device and not having access to your data but having a compelling AI experience. My iPhone does not work. I'm just going to say it.

44:50Okay. I know what happened in... You upgraded your software. It's happened. You're on iOS 18. It doesn't work. After three years, I upgraded to the newest phone. I upgraded to the newest OS. The phone doesn't work, meaning like to call people, I can't call my wife anymore, I can't call my kids anymore. The phone bricks constantly. My photo's app doesn't work. It is just really bad. And I think for a company of this scale, I don't understand how it does not go through a more complicated test harness that catches on this. I'm sorry, I'm not trying to complain, but because I know it's hard for them, I know it's complicated and but it's really bad.

45:25You're not the only person. People are freaking out about the interface changes on photos, crashing is a major thing. And Apple intelligence just doesn't work. So it does seem key that Apple has gotten off their game of making polished stuff to race, to try and I guess catch up to their perception of, you know, AI being a disruptive force at the interface level, i .e. your phone or desktop. But what are your thoughts on this new story about them doing more chips? They've obviously They had great success with the processors and phones and now the M4, incredible. If you haven't tried the Mac Mini, best computer for the dollar in the world right now.

46:02But what are your thoughts on Apple? So the most important thing about Apple is to remember it's vertically integrated. And vertically integrated companies, when you construct them properly, have a competitive advantage that really cannot be assaulted for a decade, 20, 30, 40, 50 years. And so chips, class illustration, go all the way down to the level, in build a chip that's perfect for your desired interface, your desired use cases, your desired UI, and nobody's gonna be able to compete with you. And if you have the resources, because you need balance sheet resources to go in the chip direction, it just gives you another five to 10 year sort of competitive advantage.

46:39And so I love vertically integrated companies. I posted a pin tweet, I think it's still my pin tweet about vertically integrate is the solution to the best possible companies, but it's very difficult. You need different teams, different skill sets, and you need probably more money, truthfully, work double. But Apple is just going to keep going down the vertical integration software, hardware, you know, all day long. And there's nobody else who does hardware and software together in the planet, which is kind of shocking in some ways. Is there a world -class company, a company that's world -class and it's both software and hardware, other than Tesla?

47:09Tesla. Yeah, maybe. In video? Convenient? Well, they're not really, could they do a world -class UI, you know, maybe there's a foundation and we don't have a different vision, maybe a different team, not clear. Tesla's close, I guess. I'd say the software's good. If you define software as it touches a consumer, Tesla, Apple, in some ways Google maybe meta with the meta glasses. Trying, attempting. You can't see Nvidia because I think Nvidia touches the consumer through an app that then sits on top of CUDA, which I think is that's a brilliant strategy for them, But it's it's a Apple Tesla and then a long tail of people right with you anyway, just the point I was a lot of competitive advantages That the you know been actually leveraging for about 15 years now and even back then Steve There's some old great Steve videos.

48:05I'll see if I find you a clip Where he talks about this very intentionally from the 1990s You know he came back to Apple he said we're good doing vertical integration basically using those words of software and hardware and there's going to be nobody else that can compete with us. I think it's in an interview we did, it's published in the company of Giants, I believe, in these perfect on -point. You just followed that strategy for the next 25 years. Now you're seeing some of the manifestations, though, of a competitive strategy that gives you incredible advantages, is you get very sloppy in other places, especially over time.

48:39Because you have such great competitive modes that you don't have to compete at the cutting edge of this. The photos are basically unusable. I'm the biggest Apple fanboy in the world. Like I remember interviewing once with a job for Tim Cook and I walked in and I said, he's like, why are you interested? And I said, well, you know, I own every skew of every product you've ever produced except, I don't know how to every color of each, you know, iPod. And he was like blown away. And but now that my photos are up, it's completely unusable. So I totally understand, you know, it's about the frustration.

49:08And they are showing like the decay function, and culturally and otherwise, that eventually somebody will figure out an angle to rip them out. Yeah. I'll tell you, we talked about dictators at the beginning of this, Chimath, and obviously this is your real house as a dictator yourself, is there has to be a constant fear that some a hole is going to come to your office and be like, what did you do to the photos at? And that fear does not exist inside of Apple. It's not like the mobile media, You ever hear the mobile me story where he brought the mobile me team in and said, how is mobile me supposed to work?

49:46They said, well, it's supposed to back up everything when you buy your new phone, you get everything you never have to worry about losing. Oh, slammed his hand down and said, well, why they have to doesn't work that way. Fired the person brought the next person in and said, now make it the way he said it's supposed to be game over. I don't think Tim Cook's doing that. Johnny Ives not there. And obviously Steve Jobs not there to terrorize people. Well, I don't think you look, you don't need to necessarily terrorize people, but I do think you have to go through UAT. So I think it's pretty reasonable when you have a large footprint of consumers using an app.

50:15To go through user acceptance testing is like first base. And typically what happens is you can do a process of a few months where several hundred thousand people get it all over the world. And as long as you do an okay job of getting a decent distribution of people, this would have come out. But I want to just talk about what Keith said as Well, it's literally not just photos. It's like the phone doesn't work. So there are just core structural issues with this operating system now that makes the iPhone maybe 10 to 30 % less usable. And that's really, that's really frustrating. The command center, you know, when you pull up your little command center to change the brightness and your AirPods, it's just like, what are they doing here?

50:59By the way, so do you need a chip? do you need a machine learning chip to do inference to figure out that when you constantly run your phone at a certain level of brightness, you should just allow the phone to be at a certain level of brightness. Just stop changing the damn brightness. Why does it read? I mean, this is not complicated software engineering guys. No, but this is my point. There's no arbiter of taste anymore. Taste is the backstop, we said. That's what we know. Yeah, let me, let me pause, double click on that for a second. So I think taste is great if you have it, but there's only so many people to plan it that are going to have you know, plenty of taste and be right.

51:38If you don't have taste, what most tech companies do is they use data. Data is something that's approachable and leverageable because Apple has like the antibodies to using data to measure success with the user experience, measure whatever success. If you subtract taste even by a bit, you don't have the scaffolding that every other company would use. And so you see the worst of both worlds. That's a great take. That's a great take. I mean, just go off the rails, right? You go off the rails. So you think that you think that what happened is like when Steve Jobs isn't there and Johnny I wasn't there, there's still a bunch of folks that probably think they have taste, but the real taste folks left and there's really no scaffolding left to.

52:19Yeah, but the scaffolding you had at Facebook Meta obviously or the Google uses would catch some of the stuff They put out of that like no doubt about it. You know that users are less thrilled and they'd use things less and you'd fix it And maybe even you take that to change the mean never to all tastes like I could argue that about Google or Meta They don't really have taste, but like yeah, you can argue the paradigms But fundamentally if you don't have that backstop if the taste subtracts even 10 % not all day down You're just not going to catch this stuff. And I think there's only like how many people in the world really have cutting edge technology user experience taste.

52:53I don't know too many. I would fund them right away. It's an incredible. Right. Chesky might have it. It's an incredible point because I. If I'm being really insecure, I would want to say, oh yeah, I know we had a lot of taste that Facebook back in the day, but actually we had so much scaffolding around data probably because intuitively we knew that that was way more reliable for us. It's more predictable scale. It's certainly more scalable, right? Like, it takes Steve out. You don't need a dictator, but you need a taste and taste is artistic. There's anything venture like, you know, like scaling venture funds is really, really challenging.

53:28Because early stage investing is more like taste than daily driven. And later stage, you can use data and scale it and scaffolding. So I think there's just fields. It's a little bit, also, you see, like, these sports teams, they just happen at Stanford when Jim Harball laughed. It took years for the decay function for the next coaching regime to show they're completely incompetent. Like the next year, they're pretty good. They lost one more game this year. They lost two more games this year. And then eventually they became like parable. And there's a decay function with an organization when you take out the person who is the original thinker or the leader or the dictator or whatever.

54:06And so I think some of this is showing up now. And then playing on a field that's not favorable to them, which is there are advantages And this is Apple has an AI, but there's some significant organizational, structural disadvantages. And that's the field that people are going to be competing on for the next five years from a consumer perspective. And they're playing on a field where they don't have all the advantages in their favor. Yeah. Yeah. Let's go to the app level here. TikTok is scrambling right now after an appeal score. Upheld the January 19 deadline. Red for advertisement. Here we go.

54:40Back to the boy red. Here we go. I refer you to my Twitter feed. I'm right. I mean, you and Jacob must sit. I mean, what do you do? You just sit at dinner and feed the kids and then talk about TikTok and China. So it's why they talk for the obvious. You don't have to have a conversation. In my view, like TikTok is a threat to the national security of the United States. And that's why it's going to be people who are like it's just an app. It's just an app. Why? Why? Right. So I think there's different dimensions. One of the problems is there's so many things wrong with your talk that actually sometimes people get confused because there's not just one of these or sometimes there's just one of them.

55:17So they are definitely using the app to track data about Americans. And there's evidence that regardless of what alleged protections exist, there are people in China monitoring what certain people in the United States are doing. And the CEO lied under oath to congressional committees about this. and the evidence is now in the public domain. Hopefully this justice department will prosecute him for lying under oath. I think setting a really good example that you cannot just purge yourself before Congress. Sorry, Keith, can you double click into that? So how did it come into the open source that what he said was a lie?

55:53Like what? So there are people in China who on the record have said they had access and had access to American user data, which he swore to under oath to the Congress that they were storing the data in Texas somewhere and that there's no possibility that Chinese nationals in China could access the data. There is now several instantiations of this in the public record. Let alone what's privately available. Yeah, I mean, the case specifically too, back in 2022, by dance, the parent company of TikTok had used an app to track locations, had used their app to track the location of journalists because they were trying to track leaks outside of TikTok.

56:32Of course it is. Then secondly, let me keep going here because it's worse. So there's a law, the fundamental problem is in China, there's a law that says if you're a Chinese company Upon request of the CCP you must provide all user data So any Chinese company is subject to that law period. There's no court intervention. You don't need to speak that bumble -maw and so any Chinese any executive of that company is subject to significant penalties on the record for not providing any user data at the request of the CCP. So, as long as that law exists, there's a real structural threat to the United States.

57:11Now, then there's the, is the app being used, manipulated on a content basis to influence policy in the United States, to disadvantage this or that or create hostilities. I don't really know the answer. I think there's been studies that suggest that and pretty rigorous methodologies. But that's a second level. And then third is there's the why the hell are we allowing Chinese companies to compete with us when no American content -based organization is allowed into the Chinese market? Whether it's... Whether it's meta, Google, X, you know, there's a strong argument there that reddit, if you don't allow our content or non -Chinese content into your market, why should we be enabling Chinese companies to be successful in quotes in the US market.

58:04And that's more of a fair trade -free trade. Keith, do you think that the Pegasus spyware that can infiltrate WhatsApp so that you can turn on the mic and listen remotely? And it has no fingerprints. It's very difficult to detect. Do you think an equivalent, let's call it a backdoor, exists inside of TikTok? Yes. So, my evidence for this that I believe is an interpolation of what's in the public domain is if you looked at that vote to ban TikTok, it was extremely bipartisan, despite controversy. And what happened was that vote was taken a week after there was an intelligence briefing to both the House and Senate Intelligence Committees that was confidential.

58:46And the votes, all the sudden flew through. I think there's things that are not in the public domain about TikTok that spooked a lot of elected officials and led to this bipartisan consensus. How many barb -partners in votes do we see on an allegedly controversial issue that, you know, basically the vote was like, you know, not even close in either how? 360 to 58. Yeah, when you see a vote like that on something meaningful, never. Yeah, yeah. You know, they definitely got spooked. I mean, if you just think about Navy SEAL special forces, they're not allowed to use a lot of these apps. Government officials aren't to use these apps because they know that all you have to do is If you tracked somebody's child and their TikTok usage, now you know what the parent is.

59:29You start thinking about the security and safety of individuals. It's not a government of crazy. So 352 votes for an incredibly popular product. Think about how bad something has to be to get a consensus of 352 votes on an out that's used by, you know, huge traction in the American public. Pastest then, it's 79 to 18. And you are right. If you say you're going to ban TikTok, the vape was against TikTok, but then he opened one because that's where voters are. You're going to lose that generation of voters. Or you boys, arguably. Arguably. Okay. Here are either some risk. I can see some of that.

1:00:07Biting 10, if he's awake, extend this window by 90 days. I don't know if grandpa is up for it, but he could extend it a bit. And obviously this with the Trump campaign, you know, he says a a lot of different things. Trump has flipped flopped a couple of times during his first time. He tried to band it. Wait till he gets the read out that the rest of these guys got it. Yeah. And then he had a mega donor and TikTok investor, Jeff, you know, I'll escape packs $50 million. And he owns 15 % of it. When I had dinner with him, this is the, one of the things that I pointed out to him was this specific thing.

1:00:44I said, you have to look at the the Pegasus -like equivalent infiltration of WhatsApp, having been done on TikTok, because the reality is if TikTok has 200 million users, it is true that, you know, 199 million 999 thousand just don't matter. So you could turn on the microphone, you're not going to hear anything. But there's probably 1 ,000 to 10 ,000 to 15 ,000 people, and I do suspect that state actors are smart enough to figure out how to triangulate who you would want to be able to turn it on when that phone is in your pocket or when that phone is on a desk. And I'm sure you will hear all kinds of random things.

1:01:30And many of those things could be quite sensitive in nature. So I think that this is something that the government's going to have to look at really intensely. There's such a simple test here. What are they doing with their own people in China? They are are in a police state there. They make the stasigelis how much they're tracking individuals in China. So if they'll do it to their own people, they would have no problem doing it to an adversary and ask yourself, if the shareholders care about money, they would be willing to divest, no problem. They want to take the company public. So if you won't divest and get off the board as a CCP, it's because you see this as a valuable tool, right?

1:02:09I mean, just work through the basic logic, folks. Right. At some price point, right? What I would do if I were president, I'd say, you tell me the fair market price for Tiktok. And I'll go find, you know, I'll make sure that there's buyers. Right. Because CCP won't name any price. There is no price. That's the greatest tool they could ever have. That's the point, right? That would be like giving up your nukes. I don't think they should have to sell at a less than fair market price. I think that's, you know, the jet, like I believe in capitalism. But any free market should allow for, you know, some price discovery and if they can't name any price period, that suggests that you're doing something that's nefarious.

1:02:47There's no reason to get by the wage from off. You probably know this. You know, if you meet like at least, you know, some of the times I've met with the president, they take your phone away. Why do they take your phone away? 100 %. Exactly. Pretty obvious. Yeah. Exactly. Also, there are phones that can be designed to be weapons as we've seen. A number of people got some nut shots with their pages recently. All right, let's talk about ventures. We wrap up here, man. Keith, we're boy cooking with oil, new sacks, new red meat sacks. Are you a steak guy too? Keith, do you need a steak once in a while?

1:03:18Oh, of course. What's your cut? What's your cut? Are you cool, Ed? Are you a ribeye guy? I think you see my tongue. The healthiest part. H to 10, 12 ounces max, medium, solid. I don't really care. You're just pretty much. But Wagyu, I'll be a little not American, I think go wagyu, you know, like, like, early Japanese, yeah, sure. All right, all right. I think, uh, just shout out to my friend Kimbo. I'm a mature, you know, read me, we're public. Of course, of course. I'm a big fan of this cool, let's slash the Kanye. Oh, you know, you know what I bought? Mm, yes. I just bought recently a Denver cut, which I've never tried.

1:03:53Incredible. Denver? Okay. All right. Let's wrap up with a venture update here at the darkest hour, Keith, sometimes before the dawn, V .C. deal activity. has getting close to pre -COVID numbers in 2019. Obviously, major funding drop -off happened in 2022. Yeah, it's been a couple of years of this, but deals, the number of deals is coming back, the amount being put to work, coming back to, I would say, the steady state, perhaps even normal level. But VCAGs, it's sadly are not keeping up, but we did have service now go public today, up 50 percent. And the wrath of Lena Khan is officially over. She's out.

1:04:36Andrew Ferguson is in. This looks like a great appointment. Another one by Trump in the column of somebody who wants to allow business to occur and wants a free market. He wants to do basically everything Lena Khan didn't do, which is allow some M &A. Revoi, what's your pulse like here and what you're taking on the venture industry and then we'll go into M &A and exits. So we'll start with just investing. Is it ramping up? You're seeing high quality companies? Well, I'd say that you should cut that data by AI and non -AI and you might see a tell to different cities. My anecdotal experience is there's AI companies where the market's pretty hot, maybe quite a little bit but hot and AI companies with the right team are getting funded, you know, frequently, quickly, et cetera.

1:05:25And then there's not any eye companies. And I think you'll see a very different, you know, sort of chart there. I do think net net, you're probably at a city state that looks reasonable across 40 years, you know, like et cetera. But it would be interesting. And you know, you have to make some mathematical decisions about what's the eye company, what's not. But if you could do that, it'd be interesting to see if the lines, you know, look similar or not. But it's pretty hot. Like people starting companies, founders are optimistic. crypto companies also, you know, are back in Vogue, obviously due to the change in administration.

1:05:56I think a lot of people have been hesitant to start new crypto companies and, of course, in the lead and confidence in the new administration, the SEC, etc. So we'll see if the innovation accelerates, you know, with all the new capital and all the new founders back in crypto. In enterprise software, it had been pretty cool, not an AI -based enterprise software, but, But, you know, like as you mentioned with the IPO this week, creating very aggressively, I think, you know, maybe there should have inspired inspiration there for, you know, more traditional pouring companies. Right. Stripes should go public, but they don't listen to me.

1:06:34So, yeah, you didn't know why aren't they going public? Keith, what's the story with the boys over there? Why don't they're waiting to get disrupted by crypto -stable coins? Seriously, talk about missing your window. Get out there, boys. They bought that crypto stablecoin company for like a billion dollars. Yeah, I personally believe and subscribe to the V to come Is it a public as early as possible on the brew bilgurly? Yes or school thought what amount of revenue? What amount of revenue? 50 million minimum but predictability matters, you know, definitely so that's just 15 like but 50 with line of sight to 100 and knowing 100 200 I wrote a whole chapter and either deals, you know, high growth handbook.

1:07:11I'm like coming should go public as early as possible So I've been on this crusade forever. I like accountability, transparency, discipline. I think they're good things. And there's a critique that like, oh, you're not going to be innovative anymore. If you look at some of the companies we've been talking about, what are some of the most innovative companies in the world, they're public companies. It just takes the right leader to say, I'm going to be innovative and I don't care with the bureaucrats and lawyers. I'm just not going to get distracted with that. And so I like public companies. And so I think you'll see a lot of the companies I am involved in go public at a fairly rapid clip by historical standards.

1:07:47Different founders, though, have different views on this. It's very reasonable. Stripes, SpaceX, for example, found in 2003. Who knows? It's going to be a public company. So you can have a very successful company like SpaceX or Stripe. But my preference is to go public early. And then you have the capital resources equity or capital to be strategic at a pretty point about potentially missing window. Now they were able to transact in that particular case and get ahead of the curve or at least not miss the curve. But sometimes when you're a private company, there are strategic assets that you can't get your hands on.

1:08:24And think about Facebook buying Instagram. We talked about the taste issue. Instagram had tasted the time. Like Kevin had tasted. and think about where Meta would be, how they not been able to acquire Instagram. Yeah, totally, totally different timeline for the public currency to abort what's up? Yeah, what's up? So optionality increases as you have that public currency, if you're a private, buying a private, the acquired company needs to believe that you're gonna get it over the finish line, they're gonna have some liquidity at some point. Whereas with the public government, they just sell within whatever their window is, trim off your thoughts.

1:09:00Well, I was just going to ask you the question, which is what is the game theory behind Stripe not going out? Like, what's the strategic rationale? You know, honestly, yeah, without sharing like, you know, one -on -one conversations sort of stuff, I think the question, the burden, they inverted the burden, which is why should we go public? A lot of that, a lot of people ask the question the opposite way, which is, you know, why wouldn't I go public? I think their first principal thinkers, like, for my point about Trump and I think Truvila, they ask like, why? And they're like, well, what advantages would we get?

1:09:35And I actually think the M &A one is very real. But I think they've been able to construct alternatives to most of the advantages, but not every company is gonna be able to do that. It took a lot of effort, energy. And then the question is, would you something, that energy into something else that might be higher value creation if you weren't to like, you know, creating the alternatives to a public structure. That was a great answer. Freeberg your thoughts here on public markets, M &A, the end of the wrath of Lena Con and what we might see in the new year post January 20th. I think you, I disagree with the conflation of Lena Con into all this stuff too much.

1:10:12She's a big company, break apart kind of mandate. It has nothing to do with tech M &A, small like the typical kind of But I think on the on the general liquidity thing I don't think that the thing holding up acquisitions and IPOs as markets I actually think it's investor and board expectations on valuation Relative to where they put money in the last couple of years. So if you look at the valuations from 21 to 23 You know early 23 so much money went in it's such high prices Those investors can take those companies public today. There are public there's a public market appetite at all times for anything just depends on the valuation And the real issue right now is that a lot of the VCs, the late stage private equities, the ones that did the big markups and the late stage D rounds, E rounds, et cetera, they don't wanna take these things out and take a 60, 70 % haircut on the IPO.

1:11:07They'd rather kinda let this thing sit private and see if they can earn their way back into the valuation that they did the market when they put the round together. So I like the percentage. So I like the percentage. A hundred percent agree with this. Yeah, I mean, there is these overhangs are very real. I don't think the exit liquidity dearth fundamentally is driven by markets. I think it's just driven by the sell side and the investor expectations. But there's also a culture thing. I have to say, like in talking to a number of like the leaders of these public companies, that were very inquisitive and M &A, they are taking the position.

1:11:38It's easier for us to build a competing function, a competing adjacency than do any tuck -ins. They just told the the corporate debt people pencils down and they are not wanting to spend a year or two on a deal when they have a breakup fee, when they see what happens with Adobe, or they just think, well, why don't we just... Those are big deals. Those are big deals. The small deals are different. The small deals are more... The small deals are the fact that over a couple of years, like Google bought a cybersecurity, there are these acquisitions that happen at 800 million that maybe should have been done at 200, 250.

1:12:09And again, it's the same problem that the sellers of the high quality companies demand too high a premium, that the buyers of these rational scaled companies are like, that's not worth it. just like IPO candidate. So I don't know if you've got a experience. I agree. Well, I also agree. So I used to be an antitrust litigator, which I know Jason knows. And I think I hate like, you know, the current leadership of the antitrust division, I called her a fraud. And I think she is intellectually a fraud. Why? A lot of people have said that. A lot of people have said that was false. Like, like, there are, her whole claim to fame is this paper about Amazon.

1:12:42And the data in the Amazon, that data she used in the paper, at Yale was false and intent. She's too smart to have done it accidentally. Benedict Evans wrote a critique of it if you want to read all about the data. Second thing is you look at Amazon, which is this alleged quintessential example. Have you heard of Shopify? Shopify is one of the biggest success stories of the last decade right down the middle of the Amazon. There was nothing Amazon could do. They lost the core market to a competitor that was started and you know went public at a very low valuation and Shopify is dominating D to C Commerce.

1:13:14Nobody builds a D to C commerce brand except on Shopify. So everything about her is like a fraud. 100%. 100%. That said, I don't believe that what she's done has affected, you know, actually it's very much at all. Because like the truth is in high adventure, like institutional venture capital, other than the WhatsApp and like maybe like a plot acquisition or something, you know, one every two years, you don't throw out returns in venture to an institutional venture capital fund through an M &A. Like, like WhatsApp may be the only one that really drove a fund returning exit to a serious fund. It just doesn't happen that way.

1:13:49I need IPOs to return our funds. Our funds are like billions of dollars. You don't get returns on lots of acquisitions at $50 million to $100 million. Yeah, but a $300 million fund. Tell me. Yeah, but most funds have ballooned for lots of reasons. There are a lot of instruments. That's actually led to some of the perversity that David talked about. If the funds get large, they tend to see to do these things also increases. So yes, the seed fund can drive returns on M &A acquisitions that might be deterred in a bad, you know, hostile administration. That's my nature fund of $500 million to $2 billion.

1:14:26Drive returns through M &A. No. No. I mean, they could fill in the first one X maybe. I've been lobbying officials for a long time on this crusade. They come in and they expect that, oh, you know, M &A And I'm like, no, no, no, I could care less. Only my most mediocre companies are quiet. And the IPO window has started to crack open. Just give you a couple more data points gentlemen. We ride the Chinese based self -driving car company went public on the NASDAQ last month, $4 .5 billion market cap, Pony AI, another Chinese based self -driving car company went public in November, Clarna, plans to go public in the US.

1:15:05I think they quietly filed service Titan today. the taping of this on Thursday and sheen, the fast -fashing company. Well, she's going to have some real problems in the new administration. Yeah, right. Tariffs. As we wrap here, that's a good place to wrap on. What do you think of, I guess, two issues, Keith? We'll end with politics as we started there. Two things seem for plexing two people in finance. One is tariffs and how that's going to work. And the other is inflation and what the impact would be on 15 million people being shipped out of the country and the impact that would have on inflation vis -a -vis unemployment rate getting even lower than the historic low it's been in our lifetimes.

1:15:52What do you think of those two issues? Take either one. Well, I think, first of all, the Treasury Secretary understands this. I think Scott actually, from everybody I've talked, I don't know him, but I interviewed about 10 or 12 people that are very successful in Wall Street. And every single one of them universally has a claim for him. And they've all made points to me that these kind of subtleties, he really does grok. And so when he says you can raise tariffs without inflation, he understands how all this substitution works and is running in equation in his brain. He's a very successful trader and that's a really good skill.

1:16:25Pretty awesome. Chimoths, earlier points about darragistic evolution of brilliant people being successful understanding how the economy actually works, he's perfect. So I think you're going to see real tariffs, like especially against China, and the Trump administration is completely committed to reducing inflation, the cost of eggs, you know, and aggressive. And I think those things can be reconciled. I know amateur economists, you know, with random degrees from Wharton, don't think so, but as Trump pointed out in the debate, and you know, JD Vance pointed out with some research. His first administration imposed all these tariffs and there was no inflation.

1:17:03And then JD Vance pointed out that the Fed Reserve has a study that says housing prices, which are primary driver of affordability for a normal American, are inflated because of illegal immigration. So I think this administration - And not making more units. I mean, this administration. There is substitution, right? The price of one could go up. Consumers typically have, I'll like people on this podcast, typically have a limited budget. And at the end of the day, if one price goes up, you have to substitute somewhere else so the net deflation might be negative even. So in any event, this administration is not naive.

1:17:38And the people that Trump has put in place to drive this in Treasury, the National Economic Council, absolutely understand this. And they're committed to driving down actual prices. The hardest area is going to be health care. That is really really difficult and it is a major driver of cost to a normal person and Obamacare's binnage is asked or the question is what do you do about that and I don't have an answer for you right away. I have some ideas. Chimapha your thoughts on tariffs and or immigration and inflation and that seems to be a place where even across the aisle you got people debating.

1:18:12I think Keith said it pretty well which is that we do have a lot of experience with how tariffs can be implemented and that the practical experience is not what the fear mongering is about. That being said, I think the devil will be in the details, which markets for which goods, what is the tariff and why? What I hope happens is that if we can really study the second and third order degree impacts of some of these markets, It's what the tariff does is it acts almost as a reverse subsidy for American companies to compete. I'll give you one very narrow example. If you believe in electrifying the American economy, one of the underlying things that you need are electric motors, right?

1:18:59Electric motors and electric batteries. And just to double click on electric motors for a second, electric motors needs a permanent magnet. If you look inside of a permanent magnet, there are these rare earths that are just required to make these magnets. But as it turns out, it is impossible for any company that is not a Chinese company to be able to manufacture these magnets in an economically viable way. And the reason is because not only can China make it and they can make it in the absence of a lot of environmental controls, they'll also subsidize. So if anybody tries to compete, they'll just inject a subsidy into that economic supply chain where they're always cheaper.

1:19:41So what do you do, Jason? If you can observe that and realize that we want supply chain diversity, what the tariff does is it starts to push back on those kinds of activities because it doesn't allow it to continue to work. Then if you take that with what the United States government already does through the DOE, which is through subsidies and underwriting, this is what I mean by it could be a really amazing new moment for the American economy. And that would please a lot of people, including a lot of people on the left, if they just took the time to understand what's being proposed. I mean, look at rare earths.

1:20:17You mentioned them. We have some of the great deposits in the world in our country. We have one of the largest lithium deposits in the world. It's because of environmental regulations. And it's the same thing with starship going up. But we got a lot of regulations in the country. I understand people want to do the right thing. But we also have a lot of debt. And if we could start mining earth metals here and maybe loosen the regulations, the lithium supply chain is another really good one that's emblematic of all of this. But there are so many other markets. Like I'm sure that if you looked in something that's a little bit more down the middle like appliances, What you would also see is the same thing where world pool will try to make an appliance or Bissell will try to make a vacuum cleaner and the Chinese equivalent makes it almost like Fighting uphill and there has to be a way to course correct that Well, I mean look at B .O .I .D.

1:21:09some of these cars. They're just copying wholesale everything Tesla's done in their design and Feature set and they're half the price and so they're selling really well in countries that allow them and they would decimate US automakers and German automakers. By the way, a different version of this. I wrote this in my weekly newsletter, but I was curious why these Chinese models are so good. And I was like, the training of these models seems to be quite fast. The quality of these models are really good. The Alibaba model, et cetera. And part of what you realize is when they do their training runs, the Chinese models have no guardress in the sense that there's no copyright checks.

1:21:50No. There's just none of these things that otherwise slow down an American company to make a useful model. They don't have any of those things. So that's another example where maybe there's not an economic tariff, but there has to be a simple reciprocity and in the absence of reciprocity, I think it's reasonable to say that there needs to be checks and balances. Freiburg, you had anything to add there on tariffs or okay, four. You're mothpolling in hapotia your chairman dictator the Sultan of science and new sacks Better BMI hates dictators. What's your take on Ukraine? Maybe we can fire up

1:22:34By the time you have me back hope for that solved hopefully that's not day one. We're gonna solve it on day one Okay, keep your excellent You're a tremendous Keith Roy excellent husband very very effective great great American great host great awesome on you may have heard of two words all in okay You may have heard of it David sacks brilliant crypto. I mean we need to dive into crypto. I mean People are going a little bit on this crypto. What do you think about all this crazy crypto going on here key? Everything spiking back up, XRP, Bitcoin. What do you think of a seller? I know the seller fans are like obsessing about him coming on the pod.

1:23:17What do you think of a seller taking these loans to buy Bitcoin and other people are following suit to put it in their treasury? Well, a short version on crypto generally is, I still think the primary use case is speculation. And not that there's anything wrong with that. People speculate on stocks, retail trading, people speculate on football games, gambling. Like the natural tendency for humans to want to speculate is very real. The art to me is because everybody's now a node connected into these crypto, let's call Bitcoin, you know, can you build an application on top that would have too much inertia, too much friction to start for scratch, but it has real value.

1:23:54And I think it's possible because so many people are now connected based upon speculation initially. So that's what's exciting to me. But, you know, we've watched speculation before in crypto markets and, you know, it's very volatile. So hopefully someone builds real layers of productivity or utility on top. It takes advantage of the network. It's a little bit like back in your days at Facebook, Jamal, you had the social graph and you'd say, you know, exiled applications on top of the social graph. But if you had to create a social graph from scratch, that was a heroic effort and nobody else was gonna do it.

1:24:26I was like literally the Facebook monopoly story. And so I think that's true of crypto. There's lots of nodes. Someone's got a social graphic. And there's no Zuckerberg to rub pull and say you can't use it. Someone's got to build the open. And then it'd be extremely exciting. What do you think, Freeberg? You were monitoring this sailor situation, the Mr. MicroStrategy. The way it seems. Well, I think the way the sailor's financial structure is set up is it looks a lot like a synthetic call option on Bitcoin, you get a convertible note, so you're in a coupon on the note, and then you have a conversion price, which is a premium to the stock price, which you can translate.

1:25:06If you look at the book value or the net asset value of the stock, that's how much Bitcoin there is. And the premium that the conversion price is at tells you what Bitcoin needs to be for you to have equity upside. So it's effectively convertible note you're in a coupon and then you have a conversion premium That you can kind of convert to equity which basically gives you a call option You're saying the premium you're paying is the price for the call option Effectively and you're earning this kind of coupon in the meantime So it's a way for some people to kind of trade the price of Bitcoin seems like this guy said a lot of hedge funds And I don't know if you guys saw the CNBC article that it's kind of like or Bloomberg It's like the hottest credit in hedge fund land right now is to buy up these convertible notes that he's issuing.

1:25:53So if you actually were to sit down and do the black souls modeling of the value of the synthetic call option that he's selling you with the convertible note, there's a reason people are paying for it. They think that there's value there. So there's certainly something to the structure that makes sense. All right. So for your Sultan of science, the dictator and fit sacks. Fit sacks here. Hello BMI, hello heart. What's the heart rate at right now? 40 to 42, like measured by eight sleep typical day. Oh, eight sleep. What do you think of our next, by the way? Ooh, so good. We'll see. I don't know if I would have made that trade, honestly, but for all of the towns, really.

1:26:33Yeah, fascinating. He's playing so good. I know, but like I think you had the chemistry all dialed in and hopefully they could build back better. You know, I'll like five different things. All right, listen, we'll see you all next time don't worry, sax is in going anywhere. Where is your settlement with Busy right now? There's a transition going on. Sacks is transitioning and we'll see. The pod will transition as well. We'll see what it looks like in the New Year. We have a good lineup of co -hosts. We're gonna do eight weeks. It's gonna be all in idle. All in idle is a current. We're rotating people in and you get to vote.

1:27:08That was great. Thank you. You did great. Thank you, Tom. Thank you for joining us for Fun Show. Really nice to see you. That's great, guys.

1:27:38Love you boys. Love you boys, bye bye.

1:27:51We should all just get a room and just have one big hug or two because they're all just like this like sexual tension that we just need to release something