A tour of the tech boom — 5 waves you need to understand

0:00I go pretty regularly, I talk to people in the labs. It's pretty consistent what they're saying. We keep discovering new predictable scaling laws, and we don't see a point where this trajectory stops. Half of global GDP that was not an addressable market before is now an addressable market. Where this leads is that you kind of have to be the best version of yourself in figuring out what you want to get out of all of this, assuming that we have kind of world historical superpowers right at our fingertips. In a way, we do have those amazing machines today. And yet a lot of people don't feel they get an opportunity to express themselves in the best way.

0:33So there is something that is not about the technology that gets in the way, that constructs a sort of consumptive, taker-not-maker culture. It does take some activation energy to say, like, given abundance, how can I go experience the world in a different way than I could have before? I think this is like a real challenge. Instead of like a have and have-nots, it's a know thyself and know thyself-nots, or do and do-nots. You talked about there being a startup in every one of these physical industries that we've ignored. Name an old company that's 50 years old that is worth over$100 billion market cap.

1:03And there's now a credible startup going to attack and hopefully rebuild better using technology. And they're all doing, you know, really interesting stuff and defense and being a modern prime. Obviously, SpaceX, the modern launch company. But I think there's that for like everything. Physical hard things made out of atoms, they have a visceral, tangible quality. And it's amazing to see the entrepreneurial community start to care about that. I can understand why the average person is kind of like, I don't know, what has tech done for us? We get Amazon, which is great. Facebook, maybe good, maybe bad.

1:32You know, there's a lot of stuff that's questionable. If we can start delivering supersonic planes and self-driving cars, delivering kind of physical improvements in people's lives, that whole thing starts to flip and people can feel what technology is. I think, Paki, of you as a writer investor, but most of all as a vibe guy, you feel the zeitgeist. And we've spoken before. It's great to have you back. Longtime Exponential View subscriber, calling in from New York, New York. I was in my home office in Brooklyn for a while. Now finally I'm in office. It is great to be here. Glad to do this with you.

2:09Well, it's fun to have you back. When I say we're vibe guys, I mean, we're both quite broad. We talk to a lot of people. We listen to a lot of people. We are willing to say brave, occasionally unhinged things. Sometimes we're right. Sometimes we're off beat. When we last spoke in 2022, you were vibing around Web3 and new governance structures. You know that I kind of got it in theory, but I never really felt it deeply. What would you say to your 2022 Web3 self? it's a very good question um i say it still excites a lot of me like conceptually and i'm sure we'll talk about it about ai like to me it's actually a little more fascinating than i because it's like messier and there's just like a lot a bunch of different ways that it can go i think what i would say to myself is like the more open a system the more opportunity there is for people to try to take advantage of it whatever way they possibly can and i think a lot of what the bad stuff that you've seen in crypto over the past x number of years and like even now i mean The meme coin stuff is fine, but it's like an open casino kind of situation.

3:12Most people are not as idealistic as my writing about crypto and Web3 is. And so you just need to figure out, I think, slowly, evolutionarily, I thought it would take a little bit less time over time how to build systems that are robust to that. But the more open you are, the harder it is to do that. Yeah, it's definitely moving. I mean, I've seen now when I get reports from the bankers, they talk about gold inflows and bond inflows and stock inflows, and they now talk about crypto inflows. So it's anchored itself in the world of finance. But I also do think that there are things that are going to happen because of the change in the administration in the US that will drive it forward, legitimate it, and maybe take it further down some of the ideas that you and I talked about three years ago.

4:01Maybe. That would have been my view coming in. I think it really depends. It can't be a free-for-all. It has to be well-regulated. And the risk of the Trump administration, which I was very pro on the crypto side that this would have been good, but now kind of seeing it play out live. I think the risk of the Trump administration is that you go to there are no rules and like just a bunch of unforgivable, unforgettable things happen while that's the case. and while there's no referee, such that people are like, you know what? I'm fine with my bank. I'm just not going to worry about all this stuff.

4:31And so I do think that's a risk. But I do think to the extent that the SEC is not actively trying to kill crypto and regulators will actually try to put regulations in place, I think that's a very only thing. Yeah, you speak about that as your experience of having been a banker, right? You worked in finance and I think you've seen what happens when there aren't the right guardrails. Of course. Yeah, I mean, I think this is true of anything. And I think maybe again, kind of the more open, the more there need to be guardrails. But this is like a tale as old as time in in history, the railroad, early stock exchange, like anything that can be manipulated will be manipulated.

5:07I think that's true in money. I think that's true, you know, like on the internet, that it's just human nature. Even if it's, you know, 1 % of humans have that nature, they will be the 1 % who try to manipulate it. And so I think you just do need those those guardrails. And now it's not, it's not, you know, there's no Goldman screening process on the whole thing to then be able to manipulate. It's just anybody in the world with an internet connection has the ability to do that. And so you definitely need some guardrails there. You know, it's so wild that we're talking about crypto in the midst of this amazing AI transformation that's going on.

5:41And the bit that's getting me really excited is what's happening with AI. And it's not one thing. I mean, last week I wrote that how venture capital needs a platform on which to build. And that's been the history of it. First, it was semiconductors. Then in the 70s, it was PCs. Then it was 80s, it was software. Then it was the internet. Then it was social and mobile and cloud. And then I think we got into this weird spot in 2015 where there wasn't a new platform. And people were casting around for the metaverse or for crypto. And if you're a product person like me, it didn't quite make sense because a lot of other things had to be true.

6:23But they've now got this platform and it's AI. And it's really electrified things. My life has completely changed. I'm curious about you and how excited you've got about AI and what in particular has done that for you. It's interesting. AI is the first time that I felt like the curmudgeonly old guy. And there are a few reasons for that. And now I can see why people would be like, oh, you know, like you blew up crypto too much and all that because it weirds me out how much of it like there's this like call pro or con that thinks like in two years, AI will be God, humans will be worthless, like all of that.

7:01And it makes absolutely no sense to me that like I see no signs that that would be the case. I think as a, you know, I've been calling it like kind of super sass. I think it's like an amazing super sass and I use it every day. I told ChatGPT and ChatGPT is now I think retaking the lead over Claude as my daily driver favorite. Yes, you're unfaithful as well then because I was with Claude and now I'm with ChatGPT and who knows? Deeply, deeply unfaithful here. Whoever gives me the best information. I think there's probably something to building a project over time and one that might make one or the other more sticky.

7:36But I'd say Claude takes more active putting stuff in there whereas ChatGPT just knows me very well at this point. but I told it to that it was the best coach in the world$5 ,000 an hour asked it to give me a bunch of different plans for stuff and I'm like actually following them and they work pretty well so like that kind of stuff I think is like mind-blowingly cool and I think the experiences you can build on top of that it's like mind-blowingly cool and there's a bit of me that's like everybody chill out like I don't know if it's a foregone conclusion that it's had this this nice run where it can now do stuff kind of like PhDs do and all that we're like if there's nothing in the training data that is above, you know, the smartest human level, that it will just be able to intuit that.

8:14It'd be cool if it were. But that's my one hesitancy, is just like how much people are telling us that like humans are pretty much worthless in a couple of years, where I don't think that's the case. Yeah, well, I think that we have to hold these different ideas in our head at the same time. So yes, it's really useful. Some people who are well positioned to make this argument, because they're building the systems, say, we think these are going to get really, really powerful post-PhD level beyond that. But even that's not consistent, right? So Dario Amadai from Anthropic talks about thousands of geniuses in a data center.

8:52Jan LeCun from Meta says, this is just not going to happen. And this is not how it works. The one thing I would say, I would note is I was in the Bay Area last week. I go pretty regularly. I talk to people in the labs, both formally and over a coffee and over a cup of tea. It's pretty consistent what they're saying, which is, we understand the scaling laws. We understand how much you put into what you need to get out. We keep discovering new predictable scaling laws. And we don't see a point where this trajectory stops improving. So I take that largely at face value. I mean, everyone can be wrong.

9:32long-term capital management was right until they were wrong. But I take it at face value. But even if they are right, my perspective is a bit like yours. Things don't change overnight in 2027 or 2028. There's lots of other stuff that we haven't thought about that needs to change. Not everything changes because you can suddenly do research 100 times faster than before. Yep. I think that's what I'll say. And I think for a very long time, I mean, I've written about this little bit. I wrote a piece called Most Human Wins. It really just like looking at the history of when things get commoditized, what happens and, you know, value appears at the next layer, then the next layer, then the next layer.

10:12And speaking to Tina today, who wrote a great piece on Jevon's paradox as it applies to people. And I think like everybody who's thinking a lot about this, like it's the same point, which is where this leads is like, you kind of have to be the best version of yourself. And it's like kind of cheesy sounding to say, and I think like kind of human differentiation and figuring out what you want to get out of all of this, assuming that we have kind of world historical superpowers right at our fingertips, ends up being the most important thing. So maybe it is kind of beautiful that even if the economy and everything gets abstracted away and is available kind of at the click of a button, there's still more for us to experience and do.

10:49And figuring out what that is is really interesting. I love the way you said that, actually, this idea that we have to be the best people we can be, which in of itself also talks to that process of discovery, right? How do you go about discovering who you are and what you can be? And it reminds me a little bit of the discussion I had with Kevin Kelly a couple of weeks ago, who was a co-founder of Wired. And Kevin said something quite similar to you. I mean, I think it was, which was, people will just be able to express themselves more because we have these amazing machines around us doing it all for us.

11:24But I guess the counter argument to that would be, in a way, we do have those amazing machines today and have had for 20 or 30 years. And yet, a lot of people don't feel they get an opportunity to express themselves in the best way. So there is something that is not about the technology that gets in the way, that constructs a sort of consumptive taker-not-maker culture. You think a lot about this, both in your writing, your personal life. So what do you think is that source that gets people wanting to be makers, finding their best selves? I think it's almost an impossible time. It took me until I was 20, 30, 32 to start kind of writing and going that way.

12:10I was talking to Tina about this this morning. And I think one of the questions that came to my head is like, do you need to be a certain level to financially secure. Like certainly like there's always a starting artist and all of that. But I think there's a lot of people who like kind of get to a point of financial security and then they can figure out kind of how they want to be their best self. And so that's kind of one interesting aspect of it. I think this is like a real challenge though. Instead of like a have and have nots, it's a know thyself and know thyself nots or want or do and do nots.

12:38Like there is, you know, some people are just gonna be like, this is so easy. I can get like clothes at the push of a button and food at the push of a button. And like, I don't know, I'm going to go out and drink and it sounds great. And, you know, to each his or her own. But I do think it does take some like activation energy to say, like, given abundance, how can I go experience the world in a different way than I could have before? And I don't think there's like an easy pat answer that kind of applies to everybody. I think it's really what do you want? And even for each individual person at different times in their life, that's going to be a different a different thing.

13:11I think it also connects to cultural context as well, in the sense that the types of discussion we're having now are very different to the ones that happen in Asia around AI. The discussions around Asia are not bounded in the sense of losing autonomy or negative fears of the risks. They're actually deeply connected to the opportunities that a new set of technologies provides. But I also expect, and I'm going to look into this when I travel around later this year, that there'll be differences, kind of cultural differences as well between the different Asian countries that I'll have the chance to spend time in.

13:52But it strikes me that we're having a very Anglo-Atlantic discussion about this issue. Yes. And I think that's totally right. And overall, I'm super excited by it. But I do think there is certainly a dog kind of chasing the car situation where it's like, all right, we have everything. What now? That would be a great spot to get to, but it's worth thinking about ahead of time. Yeah, well, I mean, I've been pulling up all my books on affluenza and sort of what the historians have said when cultures get to get a bit rich and a bit idle and don't have enough hunger. So I'm in Europe. Obviously, I'm in the UK.

14:31Is it still in Europe? What should we say? We're in the continent. Europe adjacent. And, you know, things have changed here as well. I mean, I'm curious about how Americans see us right now, whether they understand what's going on here. I would speak on behalf of all America and say no, and I would love an update from across the pond. I mean, I saw that Harry Stebbings is trying to kind of reinvigorate investments into European founders, which is great. It seems like there's some real kind of European pride happening in the tech community. But, you know, still in my mind is, you know, Germany shuts down all of its nuclear plants.

15:07And, you know, Barcelona wants no American tourists in town. So it does feel like those are the two things kind of competing in my head. But one, things are moving backwards. And then two, there's maybe feeling like there's this little pull to pull it forward right now. We're on the enjoying the bullwhip of the new administration. so in at the start of january i would say the mood in europe was really really funereal it was like someone had died uh and i was at a big event in in munich which is a big kind of tech event and then i went on to uh the event in in davos and it was happening at the time of the administration of the inauguration and the mood was so negative it you didn't even say hello to people you'd say Europe's in dire straits, isn't it?

15:55I mean, there was no greeting with abandoned politeness and etiquette. And there has been a real shift. There has been a flippening in the last six weeks that has been electrifying. I mean, you know, the context for a lot of this, I think, has been that, you know, Europe has become so dependent on the US, but particularly for defense and security. And since 1992, I guess all your life pretty much, Paki, Europe has underspent on defense, about$2 trillion below what it promised, which is a lot of money even for the US government. And I think understandably, and I've written about this quite a lot over the last two or three years, that it was unjustifiable.

16:37And at some point, the Americans would get annoyed, whether it was Trump or somebody else. and that he's got annoyed in the way he has. And it has made them feel so vulnerable. When Musk started to say, well, I'll just turn off Starlink, and then he recanted, right? He did edit tweet in the 60-minute window, whatever it was. They got very, very nervous and they got understandably nervous that their F-35 planes won't fly. And so even, you know, Germany is reconsidering whether to buy those or not. And sleepy Europe in a six-week period really started to galvanize and the leaders started to support each other.

17:17And that's why European defense companies have done a real NVIDIA this year. Rheinmetall is up 100%. Thales is up 73%. And there's this initiative to build resilience and rearmament across Europe with an understanding, which I actually, honestly, it's common sense. I'm a father, a parent. I'm a homeowner. I take responsibility for the security and the physical integrity of my home. I don't expect my neighbor 200 yards away to do it for me. I do it for myself. So this is kind of washing your hands after you use the toilet, use the bathroom kind of stuff that we're now doing. But 800 billion euros that's been allocated is an incredible injection in building atoms.

18:04You know, it is hardware factories and so on. And that's what I think has created this tailwind that you described, our mutual friend Harry Stebbings, putting this Project Europe together to ignite what is quite a small defense tech area. But it is a, you know, teams need a flag, a goal to run towards. There is something about building atoms and building weapons and defense systems that is, I guess, just good for the soul. You know, I'm no fan of war. I think it's something that we need to figure out how to get past at some point here. But reading Freedom's Forge, it's hard not to get excited about what it means to all of a sudden say, hey, we have to all come together.

18:47This is an existential thing that we need to build for. And then to get out there and do it, there's something animating about that that I don't think software can do in the same way. And I think that's a little bit of what has caused a reawakening here as well, is that, you know, defense is cool again. Building things in Adam is cool again. I know AI is one platform on the DC side, but to me, like the most exciting platform is people building, kind of rebuilding the infrastructure of the world. And so there's Anderle doing, you know, really interesting stuff in defense and being a modern prime.

19:20Obviously SpaceX, the modern launch company. But I think there's that for like everything. Name an old company that's 50 years old that is worth over$100 billion market cap. And there's now a credible startup going to attack and hopefully rebuild better using technology what they have what they have done and that's just exciting like you know exciting for the people involved exciting for investors but exciting for hopefully you know i can understand why the average person is kind of like i don't know what has tech done for us we get amazon which is great facebook maybe good maybe bad you know there's a lot of stuff that's questionable if we can start delivering supersonic planes and self-driving cars and i know there's people at sf who don't like the self-driving cars whatever but i think if you start delivering kind of physical improvements in people's lives that kind of whole thing starts to starts to flip and people can feel what technology is so that's what made me super optimistic and it's cool to see that it's happening in europe too it really can invigorate you in like months i think it's starting to happen and you've identified another cultural thread though that is so important so so peter teal had this line which was you know we wanted flying cars and we got 140 characters.

20:28And I think we're finally starting to get flying cars. One of the things that I found really shocking was that the amount of electricity that the US industry was producing had not increased since Jeb Bush was governor of Florida, right? Since before, I think when George W. was elected. I mean, it's an incredibly long period of time for what is essentially the oxygen of the modern economy not to increase. I mean, no mountaineer gets to Everest with the same VO2 max as they did when they were, you know, 300 pounds and lying around watching Netflix. So that was really interesting. And what just happened today in London, you may not have caught this, but our biggest airport, Heathrow Airport, which is one of the largest in the world, is shut because it depended on one electricity cable coming in and the substation that powers that is in a really overloaded part of London and has caught fire.

21:27So the two, three hundred, four hundred thousand people who would have shown up in Heathrow today and the same number who would have left are not because we don't invest in infrastructure. We don't invest in resilience. I mean, I have two internet connections in my house and, you know, Heathrow, which depends on electricity, thought we'd just have one power supply. And I think This is the flip side of what you were describing, which is that physical hard things made out of atoms are real. They're really interesting. They have a visceral, tangible quality. And it's amazing to see the entrepreneurial community start to care about that.

22:07I mean, you've written about electricity being a technology. And being an energy source, it's a technology. And it's amazing. And we could spend the rest of the time talking about this. But I think just to your point quickly, like talk about the cultural shift across the world. Ten years ago, it's not just like we were making less energy. Energy was bad. You know, like the poor energy we used, the worst. Solar wasn't quite good enough yet. Nuclear was for, you know, whatever, not whatever reason, a bunch of historical reasons, persona non grata on the energy side. And so the idea was to grow and to grow your energy usage meant like inevitably, invariably killing the environment.

22:44And so we made less of it. We tried to focus on efficiency. And that's just not how things work. And I am, of anything in the world, most excited about the fact that we want to produce and transmit and store and whatever, do all of those things with electricity now and rebuild the economy around electricity and batteries as it's kind of an animating force. I think that is incredibly, incredibly, incredibly exciting. There should be a thousand base power batteries sitting next to Heathrow, just making sure that nothing goes wrong. Wow. That was exactly my thought today. I was thinking, how long would you need?

23:17What would you need to make this happen? But you talked about there being a startup in every one of these physical industries that we've ignored for 30 years. From the ones that you see, because you see so many, what is one that you're really excited about? Well, the one that I just mentioned, I think is really exciting. It's a company, Base Power Company, based on Texas. It's started in Texas because Texas is unique in America, where it's the only state with its own energy grid. There's pretty much like the East Coast, the West Coast, and then Texas. And so it means that it's more volatile and messy in the short term, but it means that you can also innovate faster and there's more incentive to because it's so volatile.

23:55So BASE essentially is your electric company. They install batteries on your home that they still own. They take in energy when the sun is shining and the wind is blowing, which happens an awful lot in Texas. It's like right in the cross of where those things happen. And so you can get really, really, really cheap energy and discharge it at times when energy is expensive. By doing that, you help kind of balance the grid out. A huge problem that we have in America, and I'm sure there too, is transformers are backlogged. It takes forever to get new transmission lines put in. So you kind of have to figure out how to do more with the same amount of grid that you have right now.

24:32And one way to do that is to make sure that the lines are kind of utilized more. And so when demand would be low, otherwise you charge up batteries. When demand is too high, you discharge those batteries at the source. And so I think, you know, if we think that electricity is kind of at the root of everything, there's been a ton of cool stuff happening on the generation side. There's nuclear, there's geothermal, there's fusion stuff starting to happen. But that has to get somewhere and actually be usable. And I think base is a big step in that direction. Yes, I mean, the US grid, I think the loading is about 53 % on average, which means that you could probably take it up to 75 before the safety engineers get a bit upset.

25:08So there's loads of room in there. So in the case of BASE, they effectively are doing a kind of time arbitrage across electricity in some sense. So can you just talk us through how does that work? Do they buy the batteries? Do they rent them to you? What's the model for the homeowner? Yeah, so they're pretty much vertically integrated on everything above the kind of cell level. So they'll buy cells and then they'll do their battery pack assembly and manufacturing and design. and they're kind of designing it as a whole system, including how quick it is to install in your house, you know, the ability to provide kind of full home backup.

25:44So, you know, the line can go into the battery and then the battery can go into the panel and just power the whole house. You don't have to do a bunch of electrical work. But the way it works for consumers is you sign up for base, they become your electric provider. So every month you pay the bill to them. The base team will come, they'll install a battery right next to your home. You know, again, battery that they've designed, but cells are what you should not. Somebody else else. That was a much bigger, like huge, huge, huge scale. They'll do that. And then you pay a monthly kind of fee for the battery.