Are You Ready for Robots Smarter Than You…Everywhere? with Andrew Kang

23:02Raoul Pal:What we're actually building, what the robots allow us to build is scale up the world models that people are trying to work on. So it's not just LLMs because they will have sensory perception, et cetera, sound, vision, navigating the stuff around them. And that creates a much deeper AI experience and much closer to beyond AGI is when you start getting to that kind of stuff. And that's happening at scale. I mean, Elon's got more of that than anybody else. I guess Google have a lot of it with YouTube itself, but it's not in the physical world. But the moment you put robots in the physical world, you explode the amount of data that can be absorbed and put into the model.

23:40Raoul Pal:So it becomes a self-reinforcing loop. Yeah, yeah, exactly. I think what people don't realize is that a lot of these robot models, foundation models, right, they are built off of the vision language models that say like, you know, you have from ChatGPT or from Alibaba or Google as a backbone. That serves as a backbone for the robots to understand the world around them, right? Like we have models out there that can differentiate a picture from a cup, from a glass and understand what it means to turn on a light, for example, right? And now kind of the second generation of these robot foundation models, they're based off of, you know, they're also called world models.

24:19They're based off of video model generation. So the same models that help us produce the content that we see on YouTube or on TikTok, that is essentially being repurposed to develop robot models. Because what these models can do is they can understand the world around us. They have some sense of physics. They understand the causation of actions. right like if i move my hand here and i push a cup like that cup is supposed to move as opposed to go through my hand right there's all these kind of like spatial dynamics that are embedded in these models that are now being used for robots to act in the world around us and and so there's a lot of i guess like compounding effects of all the research that has been done that really accelerate the yeah but that gets to i think the thing that i've been thinking through the most is

25:09Raoul Pal:we all see robots most people when you think about robots in the workforce or around think of like c3po the slightly dumb servant robot that does a job what the reality is is by the time the robots are scaling we will put agi brains into robots so you're now essentially building a new species because you've got something that's smarter than us physically more dexterous stronger than us um and cheaper than us to run who the fuck is ready for that yet but it's coming i mean society is not ready to have a robot that's smarter than you doing your laundry or potentially smarter than you yeah i don't know if you saw but unitary just released a video today of their they call it their superhuman robot breaking the the high jump record uh so yeah they're definitely going to be uh better than us physically in a lot of different ways and i mean it's we well it's like we're similarly not ready for ai being as smart as humans just we're not and but you start to think what it does for society we talk about immigration right that was hard enough you know countries gave up with immigration to try and get rid of the issue of the falling demographic and we're going to bring in super creatures to replace what would have been you know other people you know the whole of politics is going to center around this in the end this is the future of politics is accelerate or decelerate you know and we end up with do we give the robots rights and the ai societal rights in the end yeah i think from like a gaming theory perspective you just like can't ban technology because well some other country is going to go forward with it and they're going to get better than you and it's impossible threat so um you just can't fight it and i think we're going to need societal benefits uh safety as for people and ubi and i was always against her you know i not the biggest i guess like wasn't the biggest proponent of socialism communism whatever but uh i think you do need to provide for people that are otherwise going to be out of a job because we just can't have everybody on the streets and not able to afford food or rent um that's the conversation it's kind of a weird world you think about because let's say there's a billion robots that means you robots are pretty ubiquitous they're kind of everywhere around us and then we've got the other side of robotics which is cars that drive themselves trucks that drive themselves and eventually you're going also to drones delivering everything i mean the the world is littered with robots i mean to your point the TAM is massive, but the other side is that's a lot for people to absorb where suddenly it starts looking like a sci-fi film where the streets of New York are filled with drones delivering stuff, monitoring stuff, doing police work, doing other stuff.

28:04Raoul Pal:The cars are driving themselves with no humans and then walking around the humanoids doing other stuff. It's pretty weird. Yeah. And you know what? You might even have robots driving cars in the future. because we're going to have self-driving cars, but not every car right now can self-drive. And it doesn't make sense for everyone to get a new car. If you have a car right now, why not the humanoid drive it? Especially if you can lease it, right? So there's going to be a lot of weird things happening that I think it's really difficult to imagine. Yeah, because even with trucking, let's say, okay, so you don't need a human driver, but you need to unload, offload, do all the stuff, do repairs.

28:43so you might as well have a robot in the truck yeah exactly or right you know if i have a personal assistant robot at home i don't need it for 24 hours a day and so maybe i'm leasing it out to some gig economy that is helping unload trucks right during the night when i don't need it um so it it's it's it's it's going to be like an interesting economic change for the for the world um it's good ways it's not gonna be easy change put it that way yeah it's not gonna be easy for people to digest all of this yeah but you know what maybe we eventually do have robots for everybody in the same way that cell phones we haven't right like even if you don't have a job these days there's programs out there that can get you an iphone and to help you right like eat as much as you want and maybe you're not eating like a michelin level meal every single day but you're eating pretty well for a lot of people in america and so it could be this kind of like universal right that people have to have a robot helper in the same way maybe it's a universal right for people to have access to you know chat gpt and intel intelligence um it's it's it sounds kind of crazy coming out of my mouth but i i feel like it is a possibility as well when you look at what's happened it kind of makes it kind of makes sense

30:03Raoul Pal:that it becomes a yeah like healthcare it just becomes just one of the aspects that the state provides access to compute and access you know to ai and access to robots to help people yeah i mean if i for example right like have five kids or whatever okay even if i don't have a job having somebody to help me around the house and you know take care of the kids would be really really helpful and if I do have a job then I definitely need a helper there's a lot of people like that around the world where they work really long hours they have multiple jobs and they also have kids and it's having somebody else to help around would be really helpful or to help take care of your parents for example right you don't want to send them to home but it'd be nice to have somebody that can help them out and that cost of labor is really expensive in parts of the world like America where it's not as normal, but you look at parts of the world like the Middle East or Hong Kong, right?

31:03Parts of Asia where it is actually really normal to have people at home, right? Have a live-in helper for you and for your parents, right? So I think it's a similar analogy. It's not too far-fetched to think that a lot of humans, you're just going to have a robot living at home with them.

31:20Raoul Pal:So a quick break in your regular programming. If you're serious about your future, grab my free report called Prepare for 2030. I think you've got five years to make as much money as possible, and this guide will help you navigate what's coming. The link is in the description. Download it now. The other thing I was thinking through as well is Elon has another huge advantage here, which is Starlink, because we talked about, you know, the ability for the robots to have memory, you know, scaling the computer of the robots, and Starlink is a very big deal in all of this because he controls the satellite communication system that can a distribute compute but also communication that's right yeah so i i guess what you're trying to get at maybe is that you know there's going to be certain companies or people that have control over infrastructure and you know robots themselves absolutely because a you have a competitive advantage because you have that structure in space but b you control a vast amount of the cars the logistic well just call it logistics overall robots cars trucks all of the things that they work on um it's a fascinating how he's built all of this infrastructure that kind of all dovetails into each other right it's it's a kind of an ecosystem where he's not relying on anybody else and for tesla right they're even getting into mining they're getting into building a lot of the sub components um for their cars and for the for the robots as well right where they're not going to rely on outside vendors or suppliers um and and so he's really like the ecosystem master of his own own destiny more independent than a lot of countries around the world even right just oh yeah he's almost a sovereign state now yeah the closest i've got to him is the british the dutch east india company the british east and india company he's almost sovereign now at this point he is and uh it's it's going to be an truly unstoppable force uh so yeah i mean a lot of the robot companies that are coming up right i look there's gonna be some great companies but i guess there's no no one that's going to have that complete vertical integration that he has.

33:39Raoul Pal:So let's talk a bit about robot strategies itself and what you guys are doing, what you're investing, what you're building, what your vision is there. So is it only humanoids? Is it all across the robot spectrum? Talk us through the whole of robot strategies. It's everything across the robot spectrum. It's humanoids, it's general purpose robots, such as robot arms, cobots. It's companies within the robotic supply chain, companies that build actuators and motors really are North Star as we want to bet and invest in the biggest opportunities possible with the best founders possible. And so that will encompass, right?

34:18We think humanized are going to be huge, but we think there's going to be a lot of other big winners in the robotic space. And so RoboStrategy, just to take a step back, is a publicly traded close-end fund on NASDAQ. We went public around three months ago, and we focus exclusively on private robotics companies. We can potentially do some publics in the future, but right now it's exclusively on private robotics companies. And kind of the inspiration for it is I was doing a lot of investing in robotics prior to launching RoboStrategy. And, you know, I have this presence on X and, you know, I talk about robotics and where the industry is going.

34:57And, you know, I got inundated with hundreds, thousands of people messaging and replying, how do I get exposure to this space? How do I invest in humanoids? How do I invest in, you know, the next big opportunities? And there's just no great place to point people to, because if you want to invest in these top companies, right, you need access. You need to hit these requirements for, you know, portfolio size and investment size, and you have to be relatively sophisticated. And for every, you know, that's not the case for everybody in the world. And kind of coming from a crypto background, we saw the growth of MicroStrategy and BitMine where they were able to raise tens of billions of dollars in a pretty short amount of time.

35:39And we saw the opportunity to go a lot bigger than we were going before. We had previously never taken outside capital, but it was clear to us that the opportunity really did make sense because the power laws were going to a whole nother level. Before, if you were investing in multi-billion dollar valuation companies, there weren't that many outcomes to point to, to say, hey, look, I can still get a 10x or 100x here. But with the event of AI, it enables so much more, I guess, massive companies to emerge. And you saw with OpenAI and Anthropic where they just in the span of three years, just speed run to a trillion dollars.

36:22But they did that in the private capital markets. And it's only until now that they're starting to think about going public. And all the public market investors, they're seeing this and they're like, hey, I want access as well. I want exposure. I know there's a bunch of awesome stuff going on with new companies that are emerging. And there's just no way for people to get access. And the public capital markets are, Elon said this himself, 100 times bigger than the private capital markets. and so we thought hey look if we could if we want to for the first time take outside capital we could go the traditional route and you know spend all this energy and effort raising maybe a billion maybe a few billion dollars uh or we can spend the same effort and energy and right because we're always going to do this at the best of our abilities like if we're ever going to take the responsibility of taking the outside capital like we want to make sure like we are operating like no one else, right?

37:16The bar is very high. And so why not go public and be able to raise magnitude, maybe two magnitudes to a larger amount of capital? And kind of like the way that I thought about it was, hey, look, MicroStrategy, their TAM was Bitcoin. At their peak, they reached around$100 billion in market cap. RTAM is the market cap of all robotics companies in the future. And then I look at Bitcoin, right? It's a trillion dollars. It's big TAM, but now Apple, NVIDIA, Samsung, Microsoft, all these companies are multiple times bigger than Bitcoin. And there's a lot of companies that are coming up, right? That some of these memory companies, they're going to be bigger than Bitcoin as well.

38:06SpaceX just IPA bigger than Bitcoin. I think the AI, total of all AI market cap is going to be at least 10, 20, 30 times larger than Bitcoin, even though I like Bitcoin. And I think for robotics, right, it's going to be the same thing. The opportunity here is in tens of trillions. And so our TAM is an order of magnitude larger. And then when I thought about really like the access or the reason why there is demand for MSTR was because of access, is because there's all this capital managed by RAs and sovereign wealth funds. The Norwegian sovereign wealth fund has a huge position in MSTR and other funds around the world.

38:41They have restrictions. And so they can't buy Bitcoin itself for exposure, even though there's an ETF and there's Coinbase and there's all these exchanges. And so they have to buy essentially a proxy for Bitcoin exposure. And that's a public company. And so we're like, hey, look, if access was the major driver will access towards the best private robotics and AI companies. That is a hundred times, a thousand times more than accessible.

39:06Raoul Pal:How do you deal with the fact that your portfolio is long time horizon, zero liquidity versus a liquid equity? Well, it just swings wildly from premium to discounts, et cetera. It's not an easy vehicle for people to understand what they get. Yeah, so, you know, it's kind of like the grayscale trusts were, right? We have common stock. So, you know, it's equity in a public company. And we actually, so we actually trade around 15, 20 million dollars daily average, which is, you know, for our market cap around 3 % of supply. So that makes us the number two traded close end fund by volume. and you know of course as we scale in market cap our hopefully our volume would be able to scale as well so i think it's more of a flexion of you know the size of the company yeah but i'm more thinking not about the the volume itself because you know you've only been going three months it's the underlying portfolio is a liquid and you know it's it's the the nav issue as it moves around versus you know because it's very hard to value vc because it's a long time horizon and a bunch of stuff won't work a bunch of stuff will really work um but it's quite hard for the public to try and figure out how to value this thing yeah so so nav is a really nuanced but i think important and interesting concept to understand uh because we do right now trade at a premium to nav um and i think because you're an access vehicle as you said right there's access right there's um right we only charge a 2.5 management fee there's no carry on the fund itself um compared to a VC fund 2 in 20 or SPV 2 in 20, where that fee actually creates significant drag on returns.

40:59There's the fact that access liquidity matters to people. They're willing to pay a premium for something they can get in and out of. They have optionality value. And then there's this factor of, well, things sometimes trade differently in public markets than they do in private markets. And for equities, sometimes it's a premium. Right. Because and you look at all these companies that, right, they were private for a long time, they go public and now they're all of a sudden trading higher. SpaceX before they went public. Right. Like what was their last valuation in the private markets? Significantly less.

41:33But has there been that much that changed? Well, I'd say yes. But then there is also I think like the fact that there's just more participants in the public markets than there are in the private markets. The private VC market, it's these VCs and their network. And it's like 1 % maybe in terms of actual market participants and dollars that are in that market versus the public equities markets, which is significantly larger. And so one thing I like to maybe use as a comparison is there's companies out there like Constellation Software or Transdime, where their whole business model is based on acquisitions.

42:10and they don't have, they have like a little bit of growth from their underlying business, but then everything else comes from acquisitions because what happens is, well, they trade at 15 to 40 X earnings in the public markets and there's all these kind of companies in their vertical. And for Constellation Software, it's software that trade at three to eight X in the private markets. And so they'll acquire them, right? They could spend a hundred bucks and acquire a company. Now it's worth 400 as soon as it hits the balance sheet. So the$300, right? kind of, you know, gain in enterprise value that they get from purchasing these cash flows, which are valued at a higher multiple in the public markets.

42:48And we're playing a little bit of a similar concept for venture capital, which I don't think really anyone has done before. And, you know, so there's that aspect, right, which is that public and private markets sometimes value things differently. Sometimes they did a discount as well, right, for things that people really don't want or there's too much supply of what people really want to get out of, trade at a discount. And the other kind of important concept to understand is that public markets, right, if there's more revenue, if there's more technological progress that's happening, things are going well, typically public markets will price an asset higher.

43:24And with private assets, right, those marks, right, are only from like a last round price perspective, they only change once every 12, 18, 24 months, whenever there's a new financing round. And but stuff can also happen between rounds, right? There can be great progress. If you look at SpaceX, I think they had like one round at 10 billion. And then the next round was 150 billion, right? 15x difference in between rounds. It was the same thing for figure. The last round was 2.6 and the last and the series C was 40. And and but sometimes right, sometimes the multiple can be 2x. Sometimes it could be 3x.

44:03Sometimes there are down rounds, right? Sometimes a company can go to zero. I'm just going to, I have to play both sides of this. But that is kind of the maybe nuance that you don't, the NAV itself doesn't fully capture that the public markets might be trying to price in, right? By pricing it at either a premium or a discount to NAV.

44:26Raoul Pal:Do you issue new shares if you're trading at a large premium to raise more capital? How do you think about that? Yes, we will sometimes do it, but we will be very thoughtful about doing it. I'm the largest shareholder of the fund. I own around 40 % to 50 % of the fund itself. Our incentive is actually on performance of the fund itself, not on being this massive asset manager, even though we want to be very large. But some asset managers, they have a little bit of misaligned incentives where they will dilute people or they will do things that are not as constructive to value appreciation of the LP or of the fund investors themselves.

45:10So we have that very kind of different structure where our incentives are very aligned with fund shareholders themselves as the largest fund shareholders ourselves. We will issue shares, but only if we feel it is very accretive to shareholders. And what that means is like, well, when I issue one new share, I can generate accretive value in two different ways. One is if it's at a big premium, that is accretive because I could sell a share that has, say, Nav is$10 and I sell a share at$50. There's a$40 difference and I can take the$50 and reinvest that into other robotics companies that I believe are going to do very well.

45:51And what that allows us to do is it also allows us to increase robotics equity exposure on a per share basis, which is essentially the innovation of MSTR and similar companies, right, where they increase, I think, Bitcoin exposure 10 times from when they started buying Bitcoin to the present day. So increase, multiply Bitcoin exposure tremendously. And for a traditional venture fund, right, you invest and that exposure stays the same. We want to be able to increase robotics exposure, equity exposure on a per share basis. And so like we take into account, right, what is the cost of dilution? And what do we gain?

46:31Which is the kind of the valuation difference, kind of like the arbitrage between the share value and the investments that we're making. and also the future growth of investments from the incremental dollar, right, that we're able to allocate. And so if I don't think there's going to be great robotics opportunities out there, I think everything is really overpriced. Then I think we'll be less incentivized to issue new shares, even if there's maybe some premium versus the opposite where it's, I think there's great opportunities and we're trading at a really big premium, then I think it could make sense.

47:03But we kind of have to play like the Fed here, right? We can't say, hey, So these are the levels that we're going to sell at. Michael Saylor did the same thing and it didn't work out so well, right? Because the market can kind of shred a front run to you.

47:13Raoul Pal:If you have an outsized winner, what do you do with those returns? Do you reinvest so you're continually doing this or you think about distributing returns? We will reinvest. The goal is to be one of the largest robotics investors in the world. We think we've done a really great job at investing in the past to generate outsized returns. We think we can in the future. and we don't think the opportunities in robotics are going to end after five years or ten years. We think the industry is going to grow for a very, very long time. And this is different from a traditional venture fund. We want to just compound and compound the same way that SoftBank has done for decades.

47:55That is one of really kind of like maybe the few proxies or comparisons that you can make in the public capital markets. And what happens if it starts trading at an enormous

48:03Raoul Pal:discount for a long period of time? you know, investor sentiment, sours, or there's excess supply of robotics, whatever it is. How do you deal with that? Or you just don't, you just let it play out in the market? So I think that will be a factor of financial gravity, which if we reach that point, will probably mean we're doing things pretty well, right? It means there's, well, a lot of, right, robo-strategy market cap maybe has gotten high and it's a little bit difficult to sustain a premium. This happened to GPTC and MSTR to some extent, when MSTR hit$100 billion market cap. Well, that's a lot of MSTR out there.

48:47It may be a little bit difficult for the market to absorb all of that, especially because it went up a lot in a very short amount of time. And so at that point, look, I think we just have to take a very long-term view. SoftBank has created discounts for very long amounts of time. most holding companies do most holding companies do over time and they just continue to compound value right they just ignore the short current fluctuations and you know like of course it'd be great if we return to a premium again it could be that things are cyclical like it is for you know a lot of asset classes but even if things don't and say we traded a 10 discount forever there's so many examples of a lot of great holding companies that have just compounded compounded where it doesn't matter, right?

49:30South Bank has hit an all-time high this year after trading at a 20 % discount for many years, I think, over a decade or so.

49:39Raoul Pal:Yeah, super interesting. Andrew, listen, I think it's going to be fascinating to see how this plays out, how your thesis plays out. And I think it's almost impossible for the robotics market not to explode in size. And then it's just a matter of, do you back the right winners, I think. I think that's the entire game. How many, how do you, what's the team like that chooses this, the investments? Yeah. Yeah. So when we went out and decided we want to really focus on robotics, we said, hey, look, I think I've gotten pretty smart. We've gotten decently smart about this, but there's so many corners that you need to see around.

50:16There's so much unknown unknowns and nobody's going to know all of them except for true robotics experts, right? Guys that have founded companies in the field themselves. And so that's what we did. We hired two former founders and operators, Scott Walter on our team. He's a 40-year robotics veteran. Even though he's a lot of experience, he has more energy than me or anyone else on the team. And he's an encyclopedia. He's got a little bit of a mini celebrity in the humanoid space where pretty much all the CEOs know him. A lot of the mechanical designs of these human beings have actually been inspired by some of the content that he's put out.

50:50And, you know, in terms of experience, he's founded and sold two companies. The last one he sold to KUKA, which is one of the largest industrial arm manufacturers out there. And so we have a great mix of, I think, both technical capabilities and also kind of commercial business sense, like, you know, experience evaluating founders and what makes a good decision maker and someone that can really inspire and recruit the best talent in the world. that is kind of like the skill that we've honed of investing in venture capital for the past, you know, now it's close to six, seven years now. But there's a lot actually outside of just the investment team, even though like that is, I feel like in a really amazing shape where a lot of founders have actually said publicly, hey, look, RoboStrategy, we've talked 100 plus VC firms, RoboStrategy is the most sophisticated, understands the robotics space, the best out of all the VC firms that we've talked to, which is, I feel very proud to say that, right?

51:47Like, even though we've only been operating for a short period of time. And then, but the other side of things is that like, we're building a real institution, right? Like the kind of firms that I look up to or have been inspired by are firms like Sequoia, Thrive, Ron Barron's Fonz, where they've done a really great job of building this brand in prestige and rigor and thoughtfulness around their investments. And, you know, what that goes into is like it means they do a lot of really deep research. And because we're doing a lot of deep research in the robotics space, we're actually going to start publishing it.

52:20There's no there's no semi-analysis for robotics right now. There's a ton of really interesting questions that we're answering, right? Like, where are the bottlenecks going to be? What is the supply curve going to look like over time for these bottlenecks? How are they going to be addressed? Like, who's going to address them? And, you know, we think that'll be a great resource for founders out there that are building this space and also to kind of help cement our brand and distribution awareness of RoboStrategy. We recently made a big policy hire. We had hired Bill Hughes, who was kind of heading up policy at ConsenSys, one of the biggest blockchain organizations out there.

52:57Right. There's a lot that America can do on forming a real national robotics strategy in terms of regulation, but then also driving capital into the space. You know, we're happy to give our input there and help our portfolio companies get a seat at the table. There is, you know, institutional sales and business development effort. Right. If you look at micro strategy strategy, around 30, 40 percent of their holders are institutional. And, you know, all that wealth in the RA and private wealth space is, I think, going to be a great potential kind of investor base for us to tap into. Right. These guys are going to want exposure to leading robotics companies that are going to up and up.

53:38And, you know, for marketing, right, like we want to show the world what these companies can do. It's a lot of fun. Right. Like it's for something like AI or yield or even Bitcoin. It's like a little bit nebulous. It's not like a physical thing that people can touch. But you can see these robots in your home, cooking, cleaning, in the factory, serving food, whatever, right? And it's like an infinite white space of content that you can create to like really let these like, people go wild with, you know, creating educational and just like awe-inspiring media for people to consume and for people to get smarter on robots strategy in the robotic space and where it's going.

54:19So there's a lot that we're kind of cooking up outside of making good investments.

54:24Raoul Pal:Fascinating. Well, look forward to following the story as you go along and let's see where it gets to. So great to see you. And thanks very much. Yeah, thanks for having me on. It's a great, great time. Great. So there you go. Fascinating conversation. The robots are becoming reality and they're going to be around us everywhere, whether we like it or not. There's a lot of adjustment to do. There's a lot of money to be made. and there's a lot of ways we need to think about this, what it really means for the economy and for us as humans. Anyway, see you next time. You obviously enjoyed the episode because you're here with me at the end.

54:59Raoul Pal:But listen, don't forget to go to realvision.com forward slash join and grab a free membership. It's an incredible community packed with alpha, great investment ideas and the research that you need to help you unfuck your future. So get started now. Go to realvision.com forward slash join.