Where Are The AI Startups? — With Rick Heitzmann

27:05But – and then also, you know, NVIDIA is worth so much money that, you know, Jensen can almost say$100 billion is not that big of a deal if we believe this is a generational company and have somewhat of a leg to stand on. Right. You know, and, you know, not that long ago,$100 billion was greater than the market cap of all but a few companies. So the numbers are so mind-blowingly disproportionate, it's hard to really contextualize them. Right. And we should say, again, with many open AI investments, it's kind of funny math, at least to the beginning. It's$10 billion to start with plans to contribute another$90 billion in increments.

27:49And the best part of – one of the good parts of open AI being private is they could do a lot of these deals. Right. Where they don't have to be disclosed, obviously, because NVIDIA is public. They're going to have to disclose that or Oracle or whatever it is that they're able to put up great top line numbers, no different than maybe AOL did in the late 90s of, hey, here's the top line. But it's really a contribution in kind and there's really some milestones to it and there's really some other things, which also is very much a symbol of like a very frothy market of, hey, we're not talking about actual financial metrics or actual gap revenue or actual cash on the barrelhead.

28:30We're talking about a theoretical milestone-based, broader, in cash, in kind dollar amount, which might not be real dollars. Right. I think Jensen has referred to it as a partnership first and investment second. And that's interesting because it would be by far the biggest investment in history. Yes. Yes. But not an investment. Right. Exactly. You've spoken, sat across the table with lots of founders that are trying to pitch you on fundraising. I'm sure there's a spectrum of really grounded founders to founders who will try to sell you a dream. Yes. I'm curious if you've ever heard. And a lot of them are both.

29:09And we've invested a lot that are both. So I'm curious if you've ever heard anything like this. We've talked about this on the show. This is from Sam Altman when he was talking about the NVIDIA investment. He says, the stuff that will come out of the super brain will be remarkable in a way I think we don't really know how to think about yet. Yes. Is that, if someone came and told that to you, that what is coming, what you're investing in will be so amazing, you don't even know how to wrap your head around it? What's your reaction? I'm asking this, by the way, earnestly. I did have a founder a couple of years ago, several years ago, who basically said, I asked him a question.

29:45He said, I can explain it to you, but it's probably not worth my time because you probably couldn't understand it. Okay. And I said, try me. And they said, no, I don't think you could get it. Amazingly, we invested. You invested after that? We made money. So this is a good strategy then. Yeah, maybe it is. Maybe it is. No, I think that is, hey, my ambitions are so broad and my expectations I'm setting. I'm setting expectations so high. Words cannot do the expectations justice, which also is another little canary in the coal mine of I actually, maybe it's my personality. I like concrete things like, hey, we're going to do this.

30:27We're going to be a big company and we're going to be a big company because we think we could sell a billion dollars of this product, given how this world works out. And you'd be like, oh, that's big, hairy, audacious goal. But I could track that because that makes sense to me. When people say we're going to be the biggest company ever because we're going to do things that your brain can't even track. That's, you know, that feels a little bit harder to track. But, you know, given what Sam has done, if anybody has earned the right to say things like that, you know, maybe him, Elon, rare air of folks who could get away with that type of comment.

31:02Definitely. I mean, there's a balance here between like you can appreciate and I certainly do what Sam has done at the helm of OpenAI and continues to do even though they've lost a lot of talent. Yes. The company continues to ship. But then when you're asking this broader question of are things a little frothy? Yes. And you see a quote like that in a story about this$100 billion investment. That's where I start to ask questions. $100 billion or non-investment made substantive. One of the key pillars of the$100 million partnership is they're going to do things that I couldn't explain to you because you wouldn't understand.

31:39you're like, hmm, that might be on the cover of a book of what I saw at the top of the market by a writer to be unnamed in five years. Yeah, I better get pitching that one. But then we should talk about then what it means for the market, right? Because you follow, of course, the private markets, the public markets. And if you think about how much the public market is relying on Sam to do well, Sam to deliver on that promise that he's made. Well, Sam has to do that because they're relying on - Because you have Microsoft, Oracle, CoreWeave, NVIDIA. They are now all relying on OpenAI to deliver. And I don't even know what more, I mean, to deliver what exactly.

32:20And then you think about all those ecosystems. So the energy companies are relying on CoreWeave to build out the infrastructure. You think about all the things that Microsoft's doing that are reliant on some of the things that OpenAI is doing. You know, if just nothing else, the pure valuation that people are baking in, given all the contracts or forward contracts or promises or partnerships or handshakes are done, that it's just escalating the expectation and commitment, which, again, you know, starts to starts to make you feel a bit uncomfortable. Right. And I think the answer for OpenAI has to be that in order to meet these enormous expectations, I just set it up.

33:01I don't know what they're building towards. That wasn't quite right. What they need to do is to automate a tremendous amount of white collar labor. So I want to talk about that and what's happening with Gen Z, who's at the, seems like the spear's edge of this and not able to find jobs right now. I want to talk about that right after this. Shape the future of enterprise AI with Agency. A-G-N-T-C-Y. Now an open source Linux Foundation project, Agency is leading the way in establishing trusted identity and access management for the Internet of Agents, a collaboration layer that ensures AI agents can securely discover, connect, and work across any framework.

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37:12So let's just start broad as we begin the second half here. Are we marching towards technology companies like OpenAI, like Anthropic, basically trying to automate all work, all white collar work, and if they're successful, what happens? Well, I mean, I would say automating all work, right? Because if you think about some of the robotics things that are happening now, some factory automation things that are happening now, it's both blue collar and white collar. I think maybe differently than any kind of automation going back to farming where there's bulldozers and there's steam engines that are automating blue collar work, you know, this has been very different.

37:54And so I do think, and in talking to the bankers and the lawyers who usually hire a whole lot of folks or, you know, entry-level consulting firms, BPO firms, they are pausing or taking a slower approach or a more thoughtful and cautious approach to how they fill in the bottom of the pyramid. And that makes them, you know, rethink their business. You know, I do believe that they're going to rethink their business. I think you're going to lose some people, but those people are going to be repurposed, right? So if you go back to the beginning of the 20th century, so beginning of the 20th century, about 93 people, 93 % of Americans were in the agrarian economy, farmers, basically.

38:37At the end of the 20th century, it was about 3 % of the American workforce as farmers. And if you looked at just those two stats, you'd be like, oh my God, something horrible must have happened. All these people must have lost their jobs. What happened? It was terrible. What happened? Oh, it was the greatest century of an economy, of any civilization's economy in the history of civilization. You know, the American 20th century and everything that happened. So there is a a creative destruction that I think capitalism is really good at. And I think that you're, you're seeing, you saw that repurposement in the industrial revolution.

39:17You saw a repurposement several times, uh, in the automation, the ability to have factories and all the technology, technological advances during that century. I think you're going to see a rethinking about some of those things, especially around white collar work. And, you know, there's a bunch of different things, um, that are analogous to it. You know, word processors came out and they said, I forget what it is. We call it 35 years ago, so I'll be imprecise. And they said, oh my God, this is going to be the end of the legal industry. Now we're not going to need, people are going to be able to print these documents, use word processors.

39:51Since the I have been in word processors, there's four times more lawyers in America than there was at the time. The same thing if you think about spreadsheets and Lotus 1, 2, 3 comes out, there's going to be spreadsheets. And they said, well, we're not going to need all these bankers. We're not going to need slide rules. We're going to have spreadsheets. We're going to automate this whole finance thing. There's more bankers than there were before spreadsheets by a huge, huge factor. So, you know, what is it going to be? Now we're able to automate a lot of white collar tasks. You're able to automate basic business processes today, probably better in the medium term.

40:26And do you believe that Gen Z is going to be creative enough and entrepreneurial enough to reinvent themselves? I think so. I have confidence in that. I do feel for I have friends who are going through recent college graduates, and it's the worst, I think it was the worst year last year since the financial crisis for recent college graduates. I have a son who's a junior in college. He feels anxiety of, you know, what does this mean? Is AI going to take my job? So I have empathy for that, but I also push him to say, well, what could you do that AI can't do? Or what are you thinking about that's thinking about something differently?

41:06Because the best people are going to be the people who understand it a little ahead of time. And we're beginning to see people spin out law firms that their entire associate infrastructure is AI. So they're able to be the partner who's able to add that level of judgment, client interface, all those things. And their back end is AI. And they're not beholden to the pyramid model of law firms to be able to make their business work. So you're going to see entrepreneurship. You're going to see creative destruction. I think that on the whole, almost all of us will be better off for it. You know, I really go back and forth on it because on one hand, it does seem like AI is becoming more and more capable.

41:54And again, you know, I just start in so many times in business, it's worth just starting at the money, right? Yes. The money is betting that all these jobs will be automated. Yes. That's what that money from NVIDIA into OpenAI is trying to do. And then the question is what happens afterwards? And you could have – it seems like if they get there, right, in the time that NVIDIA wants that investment to pay back, there's going to be massive disruption. But then you also look at what happens in the day-to-day of many companies. There's a great – a thought-provoking substack post in this, substack called Still Wandering.

42:28And it was called The Death of the Corporate Job. And the author was trying to track what their friends and counterparts did in their work. Here's what the author said. I keep meeting people who describe their jobs using words they'd never use in normal conversations. They attend meetings about meetings. They create PowerPoints that nobody reads, which gets shared in emails that no one opens, which generate tasks that don't need doing. This post was liked 11 ,000, close to 12 ,000 times on Substack, which on Substack, that's a lot of people. Which means like – It's also funny. Yeah, but it resonates with people.

43:04Funny because it's true. Right. Like the fact that that resonated that way with so many people who are in the knowledge economy, it's just so telling. And maybe AI eliminates that stuff. And maybe this moment where we've had hiring consolidate or stop in many ways is a realization by companies that's going on. There's a great New Yorker political cartoon, which is the same thing of someone types out an email and they say, AI, turn this into a 100-page PowerPoint presentation. and they turn it into a 100-page PowerPoint presentation and they email it to their colleague and then says, AI, take this 100-page PowerPoint presentation and turn it into a short email.

43:40Exactly. So everybody is using AI to automate different pieces. I just think that to have those people who are writing emails that no one reads or creating decks that people only weigh but not read, I think having them not do that is better for everyone. Right. But the question is like what business looks like afterward. So there's like two possibilities. One is that all those people end up on higher value tasks. Two is companies go, oh, my goodness, we need one third of the people. Yeah. And you're seeing some companies already do that. You know, some companies, Shopify increased revenue and took out a fair amount of their employee base.

44:25You're not seeing engineers go away, but you're seeing companies keep engineering flat but getting a lot more productivity. due to all the coding tools. I think you're seeing a lot of kind of business process outsourcing or call centers and customer service things that are getting shrunk due to technology. So I do think there's going to be a substantive job loss in certain fields. You hope that people will do some more meaningful work than, you know, having to go. And I think we're both very fortunate that our job is not writing emails that people don't read or producing content that people don't listen to, I hope.

45:05You're here for a good reason. We have an audience. I hope. Everyone out there. Yes. So I think that you're going to see more people doing different stuff. I mean, part of that is the rise of the creator economy. Right. And you're seeing more people be entrepreneurial in the creator economy. And even as we've talked to folks out there in the creator economy, it's often a side gig. And sometimes either their day job is not very meaningful, not very lucrative, or seems like it's a cartoonish type thing. And they're finding meaning, creativity, and dollars in doing this side hustle. And sometimes that side hustle turns into their main job, and that becomes a more meaningful opportunity.

45:49I think it's going to happen more and more. Yeah. I mean, that happened to me. I started my career in marketing and sales and writing freelance journalism on the side. and then flip that to a full-time career and then flip that into something that's now not just writing but is video, audio, some TV like we talked about, which has been nice. But actually, you know, it brings me back to my first job, which was I would put together media plans that would go through those email chains and the decks that no one would read and eventually someone would approve it or not approve it. And, of course, that process has been disrupted by programmatic advertising where you just automate it all today.

46:25So maybe that would be a new job. But I'm just thinking like that job, that entry level job that I had that got me into the workforce. You could chat to that and be done with it in five seconds. My first job was an entry level investment banker that I was printing off documents and then keying that into a spreadsheet. That's been done for years. I mean, if you look at some of the basic capital IQ things and probably the first couple years of my career are now completely automated due to technology. But even people who are now entering investment banking are doing different stuff and that's becoming more meaningful.

47:03And there's more investment bankers than ever. So I think although it's changing, it doesn't mean it's ending. And we talk about like there's a thriving economy out there somewhere. And then you think about what's happening with two groups of people, Gen Z. who's really struggling, like you mentioned, to find jobs. And also people that lose their jobs or leave their jobs are taking longer than usual to find new work. What is happening? It can't all be AI. Jerome Powell recently came out and said AI might contribute to it, but we're in a slow-to-hire, slow-to-fire economy. And so what is the driving force behind this economy that feels to a lot of people to be doing well if you look at the top-line numbers, But if you're an individual trying to navigate your career path, it feels like everything is just stuck.

47:51I agree with almost everything you just said. I think that the economy is very strong and the fundamentals are strong. And we see it in both our enterprise and consumer companies. So we actually feel good about the economy. The second piece of that is I do believe that companies are slow to hire. And I think coming off of, which was a massively inefficient COVID time, spurred by low interest rates, low cost of capital, work from home, it was basically the perfect way to create inefficiency. That no accountability for dollars and no accountability for performance. So coming off of that, companies now, even five years later, are saying, okay, I'm not going to do the sin I had yesterday.

48:36I mean, that's companies like individuals are always reactionary to the last phase. So, you know, companies like individuals are always reactionary to the last phase or their last mistake. So I think companies are now thinking about, all right, how are we more efficient? How do we make sure that we're spending that time and money wisely and we're not hiring someone to write emails that no one reads? So I think that's been slower. But at the same time, unemployment remains low. And there is a sense of when I was coming out of school that there is some time. Like they told us when we were in school, like if you quit your job or you lose your job, you need to have a little bit of time because it takes months to find a new job.

49:21You know, in some of the boom times when human capital has been tight over the last 20 years, it's taken hours to find a new job. So I think that you're moving more to historical norms as people are – maybe because the economy is doing well, maybe because the market is doing well, maybe because the managers are being more performance driven. They're moving more towards historical norms around performance. Okay. I want to use our remaining time to lightning round through a couple of your investments. You've invested in some fascinating companies. Thank you. Ones that I use all the time. Great. Ones that we talk about.

49:54Use them more. So let's just go through four of them. If we can, we have about eight minutes. Great. Discord. Yes. What do you think about the fact that so much of the dynamism of social media has moved private, right? Mark Zuckerberg had this pivot to privacy. Everyone's like, he's into encryption. It's like, no, he realizes social sharing is happening in the group chat. And that's where he wants things to happen. So talk a little bit about that. So I think in moving to Discord servers, right? And is that good for us, basically? Well, somewhat it is. I mean, I don't think everybody, you know, the old joke, you know, you don't have to broadcast to anyone.

50:33Everybody you ever met, we had for lunch. That's not pushing forward anybody's life or economy. And you don't need to see a picture of the tuna sandwich. So that's, I think I'm somewhat glad we're out of that phase of social media. At the same time, you know, therefore having servers that are very specific and whether you're in a Discord server for the next world baseball champion, New York Yankees, or whether you're in it for, you know, a League of Legends clan, you know, all of those things, you find that they're there. You know, the negative, as we've talked about, are these are very, some of them are very intense echo chambers around particular beliefs that can spin people up.

51:11So I think there is – I think Discord does an excellent job of moderation to make sure that there's the right level of discourse in those Discord servers and to make sure that works. But that's on the administrator of the Discord. It's on the administrator of the server. So that is true. But I think you're going to see more social media move to semi-private that look more like group chats. And it can be around sports or music or technology or relationships just because I think that people might be a little bit over living in public. Yeah. We love Discord over here, big technology. We have a private Discord server for our paying subscribers.

51:58So if you're interested, scroll down. Sign up and we'll get you a link. And I think it's the best thing that big technology has done in years. That's awesome. Conversation is high quality. It's interesting. And I love being in there. I get a lot of value out of it. Curation has been, you know, for the last 10 years of social media, after the initial explosion, curation has been the most important thing in keeping a good thriving community. All right. DraftKings. Yes. Did Shohei Otani actually bet on baseball or was it his interpreter? I do not know that. Do not know. I'm not sure if they would tell me if I asked.

52:36I think, what do I think or what does DraftKings think? Let me ask it in a little bit less facetious way. Obviously, sports betting has been popularized. Yes. The leagues all promote it. Yes. The players are getting into it. Yes. Is that a problem? Well, you're seeing more and more investigations and suspensions around the use and misuse of gambling. So I think, you know, like any new technology, it explodes out of the gates. It's a little bit of the Wild West. I think, you know, DraftKings being a large public company who is a leader probably has more guardrails around it than maybe prediction markets or some of these, you know, sweepstakes types, gray area markets.

53:20I think, you know, the government always struggles to keep up with where technology is going and is oftentimes focused on yesterday's problem, not tomorrow's problem. So I believe there's going to be more clearer rules around, especially players, coaches, umpires, managers, and what they're able to do on either gambling or prediction markets. Okay, let's talk about Shopify. Yes. You're an investor in Shopify. I am. Is all online commerce going to go from applications and websites to into chatbots? And if so, what happens? So I think that that's, I don't think all, it's never all or nothing. So I think you're going to move to more chatbots.

54:02I think you're going to still need an ecosystem of whether it's, you know, headless stores or whether it's a back-end infrastructure. You're still, whether you're buying a sweater because your AI girlfriend tells you it looks good and you're buying it in a chatbot based on your AI girlfriend's recommendation. That's why I usually make most of my purchases. Yes, yes. Your AI girlfriend is your stylist. That would be a good T-shirt. My AI girlfriend picked this out for me. That would be great. So, you know, there still needs to be a T-shirt, which needs to be in a warehouse, which needs to go in an envelope, which needs to be shipped to you.

54:38There needs to be a payment process. There needs to be fraud around that payment. So I think the commerce infrastructure is not going to go away regardless of who initiates that transaction. And whether you're getting that T-shirt on Teespring versus your AI girlfriend chatbot versus the gap, it's all going to happen. So I think it's somewhat disruptive on the front end, more to customer acquisition and the front end of stores. But I think the commerce infrastructure is only going to continue to grow. And I don't see any way that e-commerce is going to slow down in any foreseeable time. Right.

55:16So the interface might be a chatbot, but everything could be managed. Everything can be managed. You're still going to – yes. You're still going to – again, just all those little pieces of flows of transaction processing and fraud prevention and where that goes. And is there a return? And if you say, hey, you break up with your girlfriend and you don't want that T-shirt anymore, can you return it? There's a lot of things that have to happen besides just the front-end store. I think Shopify, since we invested in the Series A, has built out, whether individually or through their ecosystem, all kinds of things that are very hard to replicate.

55:51Okay. And then finally, Airbnb. Okay. Is New York's decision to ban Airbnb the greatest own goal in municipal history or something close to it? What do you mean by the greatest own goal? I thought just a terrible, shoot yourself. There was a great quote. Let me. let me uh it's own goal like when you kick it into your own net in soccer i just heard a quote from a from a jets player yesterday he's like other teams shoot themselves in the foot yeah and then we shoot ourselves in the head yeah yeah it's like sorry yeah great so sorry i just didn't catch it so when i ask the question again i'll respond to that again was okay you invested in airbnb yes was new york city's decision to ban airbnb one of the greatest disasters in municipal government history.

56:39Yeah. I mean, it's definitely an own goal. If we want to use that format, that you want to have a great vibrant ecosystem that allows free trade, allows people to stay in places, but you want very little regulatory capture. If you want a fervent place for New York to be open for traveling business people, for tourism, for everything that happens, and you don't want the regulatory capture from the hospitality and hotel industry. So I think that's it was silly. I think a lot of the large municipalities have played with it. But I think in the hope in the long run, cooler heads prevail and everybody winds up doing the right thing.

57:20I understand the concerns that the rents might be too high and you don't want to have residential properties being converted into hotels. But there has to be a balance. And the fact that it just got banned, you know, effectively turned a hotel stay in New York City from something that was affordable. So if you had guests, for instance, into something that's now$700 a night, and that drives me nuts. And it's not like people are – they should fix the underlying problem. You're right. There's a housing issue in New York City. There's also a hotel REVPAR issue. So you need to be able to do both. You hope that by providing incentive, you could get people to do that.

57:54And whether it's incentive that, hey, we're limiting the regulatory boundaries to get housing permits to be able to build more housing, especially affordable housing. or you're doing things to open up to make it easier for people to build any type of residential properties here, that should have been the goal and not trying to do regulatory capture. All right, Rick. First Mark has a podcast you want to talk a little bit about if people are interested in our conversation today, where they can follow you or the podcast. Sure. Shout it out. So we do a bunch of different podcasts. You can follow me.

58:29Simple X address of just at Rick. At Rick. When did you get that? It's a long, long story. That's probably for chapter two of our conversation. So I'm at Rick on Twitter X. You can find me there. I actually have a very clean and deliberate Twitter, largely about what I think is going on in the markets and what we're seeing. and hopefully be more clear about that. And then, you know, First Mark, we have a full parade of podcasts you should follow at First Mark Cap on Twitter and Instagram. But also my partner, Matt, has a very large podcast called Data Driven, which talks about what he calls the mad landscape, machine learning, artificial intelligence, and data.

59:14And that's really been on the forefront of AI with some of the best thinkers in AI on over the last actual decade. So I think we produce a lot of content around data, around financial technologies, around a lot of things we do, even OK Computer. That's part of the risk reversal ecosystem about what the state of the private markets are. So find me at any of those places, as well as on our friend Scott Wapner's closing bell on CNBC. Which you're about to go to, so we'll get you to set. Rick, great to see you. Thanks for coming on the show. This was awesome. Thank you very much. I'm happy to be back anytime.

59:45Definitely. All right. We'll have to get the story of at Rick. So we will have you back for that and much more. All right, everybody. Thank you so much for watching. And we'll see you next time on Big Technology Podcast. Thank you.