Packy McCormick, Not Boring | How writing led to investing in Ramp, Scale AI, Replit, Varda

25:43Subscribe to Sorcery today. And don't forget to subscribe to the podcast on YouTube, Spotify, Apple, or wherever you listen. The link is in the description to sign up. I want to break down vertical integrators. You've written about this multiple times. Most of your portfolio is somewhat associated with it. A couple trends that are going on. Of course, AI is great. It's helping many industries out there. Legacy industries have always been left in the dust. People are saying this is helping them leapfrog into the next generation of technology and actually make their businesses more efficient, get better technology in, lower their headcount, their capex, all that kind of stuff.

26:26Um, so if we break down vertical integrators, like what, what are the fundamentals that, that make a great business there? And what did you learn from that? You were like, Oh my gosh, I got to spend time on this. Yeah. Um, so it's, I think there's like a few different things that are kind of in this same ballpark. There's like deep tech is becoming more popular. Hard tech is becoming more popular defense and aerospace. space. And there's like this particular view of the world. I think deep tech is amazing. And I'm not the guy to like underwrite deep tech because a lot of it is you have to build a particular type of portfolio where you're taking a bunch of like early stage risk on things that like - Yes, but you've invested into many deep tech companies.

27:08Deep tech-ish. You know, like, I'll go for that on a limb in bio because we have Elliot Hersberg on the team who like knows what he's talking about there. There's a lot of like deep tech that I think you're taking science risk. And like, I think with vertical integrators, taking integration risk where there's like five different kind of like cutting edge-ish but proven technologies that you're trying to put together in a system. Um, and you're betting that that system delivers a product that's better, faster, cheaper, and ultimately has higher margins that you can reinvest in the business and grow faster than the incumbents and like hopefully a slope and over-intercept thing over time where not only, uh, not only kind of should they eventually be able to beat them, but like they should be bigger than the incumbents that they replaced because they have higher margins and faster growth.

27:51And so their valuation should theoretically be higher. And I think the case that's happened now, Anderil just raised it to X step up again, and they're at 28 billion. And they're not that far off now. They're like a quarter of the way to the big defense prime's kind of market caps and continuing to grow really fast and what doubled revenue last year and doubled their valuation in line with that. And so I think that's a big part of the thesis, like my favorite example to use base base power company, which I wrote about last year. There's like a bunch of they're doing batteries and doing residential batteries.

28:27Can you go deeper into base? Because I feel like this is a company that's that's hype for people who know about it. Like it's a big deal, but most people don't know about it. So could you share more about base? I think base is going to be a generational company who founded it. Like how much have they raised? What do they do? Why is it so significant? So, uh, founded by, uh, Zach Dell and Justin Lopez, Justin ran manufacturing, uh, at Andrel before this, uh, Zach was at Thrive and Blackstone and had a bunch of good kind of like finance side experience. They have a guy who's building their kind of telemetry and distributed systems who ran the laser mesh network for, for Starlink.

29:05They have the guy who did the Tesla Powerwall three manufacturing is now doing their battery manufacturing. They're just building this like unbelievable team. Their insight is there's this great chart that Justin showed me that's essentially the cost of electricity is not getting cheaper, even though the generation side, like how much it costs to actually produce the electricity, whether that's through solar or wind or nuclear or whatever. Generation is when you're making the electricity up front. That's actually getting cheaper and cheaper over time as you add more renewables to the grid. It actually does get cheaper because there's sometimes in Texas and California when it's so sunny that they pay you to take electricity off of their hands.

29:40electricity is not getting cheaper though because transmission ends up getting more and more and more expensive over time so like getting it from point a to point b there's like long delays on the on the interconnect queue it takes forever to build transmission there's transformer shortages like that whole piece of the puzzle is like completely messed up and so there's one view of the world where it's like oh i'm sure like we'll figure out how to like fix transmission or whatever the other is let's put batteries next to houses and like you by putting batteries next to houses, you can fill them up when things are cheap or when the network's not congested or whatever else you store it.

30:12And then like when there's demand from this house right next to you, you just like kind of feed them the electrons and it all works out. And it's like a more decentralized way of fixing the grid. And it means that you don't actually need as much transmission because you get more out of the transmission that you have or you might not need to add a new transformer because you can get more out of like the infrastructure that you have there. The thing that I love about it is if you believe that renewables are happening or nuclear is happening, or any of these generation sources are happening, you want to have batteries.

30:45They're just complementary to any new electricity source because anything that has high capex and low opex. So even that's solar because the sun shines and it's free, but that's nuclear also because you're spending a lot of money up front and then the actual fuel costs are de minimis over time. Um, because if like, even if you have a nuclear plant kind of going 24 seven, uh, you know, right now that energy is not needed 24 seven, but you can fill up a battery when it's like not needed as much on the grid. And so it's complimentary to that as complimentary to solar as wind and solar make the grid more volatile batteries are more valuable, but also as we electrify everything and everyone gets home at five o 'clock to charge their, their Tesla's batteries also become more valuable to smooth out kind of the demand side of things too.

31:25So like both of these huge trends in terms of electrification and in terms of like the types of energy that we're putting on the grid, both of them like really benefit to have batteries kind of attached to the house. And so base is the one that's doing that. And they're doing that in a way that's like fascinating. They, you know, like I love this example and I use this one of the vertical integration pieces. They do battery pack assembly. And so like there's different things that you could do on the battery. You could try to like figure out a new cell chemistry or something. And like That's like more of a deep tech type bet.

31:56Yeah. They're like, I don't know, we'll just do the battery pack assembly. Cause not only like then we can plug in kind of whatever cells people come up with that end up being the best cells that we could possibly use. And so like, if someone has like some breakthrough chemistry, we just throw that in our pack. They can also design the battery pack to be part of kind of like a larger system where like the thing that they're trying to go for is, is not just like how big the battery is, how it discharges, like how it talks to the rest of the grid, but also how easy it is to install and how fast it is to install.

32:22because like part of their goal is just like how do we get these things installed quickly as part of like you know uh the whole factory that they're thinking about is like how do you make the battery but then get it installed and so they make different trade-offs because they control the whole system that you just couldn't if you weren't vertically integrated they're a retail electric provider so they like are your power company when you install the battery they because of that they don't have to sell it to you they just rent you the battery essentially and they and you pay for the install cost but then they're able to make money trading power and doing all sorts of things And so just being vertically integrated at the right level, not doing everything, they're not doing the cell chemistries, but being vertically integrated at the right level.

32:55They're providing this like unbelievable service to the grid that is valuable to the people starting in Texas, like who are having, you know, record numbers of blackouts and outages. So clear value prop to the customers at a cheaper price and they can make more money off of it than, uh, than somebody who's, who's selling you the battery. Like just everything about the business is just like this beautifully well thought out thing. and then they're executing violently and like running super, super fast against that. How are they commercializing? Yes. Kind of in two ways for now. One, they'll just sell direct to consumers.

33:26So as somebody in the markets that they're in in Texas and they're doing Houston, maybe soon and in and around kind of Austin. Now you can sign up direct. They'll come install a battery. You pay the install costs and then they become your electric company. And so you pay them kind of every every month and then they'll make money by. by storing the energy when it's cheap and when the sun is shining, the wind's blowing, store up the energy and then put it back on the grid when the grid needs it and when electricity is more expensive. And then the other way they're doing it, they signed a partnership with Lennar, which is a big home builder that people can sign up to just get a free battery as part of their new house when they sign up with Lennar to get a new house.

34:06So I think there's another thing that I love about this business is just a million ways to kind of get this thing to market. one of the big questions I think when I wrote the piece, like, which is interesting, I think actually true for a lot of these, uh, vertically integrated companies is, okay, I, you believe that they can do the technical stuff. Like it's hard, but you, like, they can do it. It's all possible. The go-to-market I think is like a harder thing and you have to prove that there's, that there's demand. They've really, really proven that and their wait list is like a mile long now.

34:37And so it really becomes like a, you know, if you build it and figure out how to install quickly and all that, like the demand is there. And so that was a really big, uh, kind of unlock that they, they've proven since I wrote the piece. And I don't know, it's just, it's just like excellent founders who you expect now to just execute really well. And they've built an amazing team that can actually well too. And so it is an interesting thing about these vertically integrated companies as well, where like upfront, I think people think it's riskier and more capital intensive than it actually ends up being, particularly from the perspective of the equity.

35:10You will need debt and project financing and all that stuff down the line. It's a different asset to what venture capitalists are used to, where it's like, okay, here's like$5 million, build it cheap, get like an 80 % margin, you'll be good, you're going to start cooking, you're going to grow really, really exponentially. With this, it's like CapEx heavy, you really got to prove it out. You're not raising$5 million, you're probably raising like$15 to start, maybe$50, maybe$100, like whatever it is. And then like an inflection point happens and then it's like, oh, that's 10 times more impressive than that.

35:40And like, that's actually really hard. So it's valued more. It's harder to kind of come in and, and, uh, as like a new startup and knock it down. You've actually probably as one of those companies that starts working, like you look at the SpaceX cap table and it's like actually amazing. They've found anybody else who was like willing to find a competitor just because there's so much capital on that, that cap table. And I think, you know, that ends up happening too, where like the ones that start working, it becomes clear that you should be able to pile a lot of money into these. And so larger funds like want to be involved in what looks like the winner, which means that they maybe even wait a little bit longer.

36:11But like once they do, it's kind of game on. If you look at, I mean, SpaceX is such a weird example and it's like a unicorn in like the truest sense of the word, like an end of one company. But I think they're like 50 % dilution over the past 20 years, even though they've raised ten billion dollars of of you know of equity aside from secondaries um and a lot of that's just because like the valuation step ups on these things just like continue to get higher and higher because once you're the space launch company and you have this cash flow machine that is that is starlink it's just like it just works and like it's a true moat it's just a true moat and so like you know you actually it ends up not being very dilutive at all you have you know the government contracts that they were able to they were able to sign early that funded some of it And then if you hit a certain point where like it's just a it's just a good business, like it becomes a real business, I think, very quickly.

37:00Whereas I do think with a lot of software, we're seeing this in AI now, like there's so many businesses that get to ten million dollars in ARR, a hundred million dollars in ARR like so, so, so fast. What scares me is they'll be able to attract a ton of money early on. Are they around and growing really fast in seven to ten years? Like certainly some of them will be. And I think by choosing to like not play in this space, I'm definitely missing a trillion dollar company or two. But I think for the most part, like I think there's going to be like a lot of these types of things happening or even like these types of curves where the growth just kind of like flat means and like people keep using it and whatever.

37:37And it's fine. But it just is like very hard for me to see IPO in seven years or whenever they they need to go public. I could be totally wrong on that. Like it's the fun part about this about this game. But like that scares me very fast growth early on really scares me, whereas like building something durable and then taking off is more exciting. There's like such a psychological component to it, too, because I feel like most of these hard tech founders that have to raise a lot for CapEx are just told they're like idiots. It's not going to work like it's crazy. Like, what are you doing? Like, I mean, look at Elon.

38:08He's been told he's crazy every day, every hour. He's also, you know, a different beast. He's a different beast. In your portfolio, I've noticed this. I'm in LA. Not right now. We're in Matt's studio, which is great. Great studio. Great studio. But in LA, I've noticed this with some of my friends' companies and some of your portfolio companies like Varda, Hadrian. I feel like they've all hit this inflection point in the last year. And the American dynamism trends really helped push them over the edge. And now with the new administration, they're going to the inauguration. They're going to different events.

38:45They're getting involved. and it's not like there's real reason for it because they are the player. They are the one that's going to be chosen. So if you could break down like any more of these vertical integrators, I'd love to understand like how they build out that stack. Yeah. I mean, the really fun part, and I think why I got nerd sniped by these is that they're like all completely different, right? Yeah. Well, they're all, so they're all different and they're all different categories. So how did you like line up like all the different spaces you want to go after? I don't. Like a lot of it is, this is my like big thesis.

39:20If you're doing something that looks like this, come, come find me. Um, and that it's either like through investors that are on the cap table or just the founders directly will be like, your vertical integrator series, like, yes, like I'm actually not building deep tech. Like this is the thing that like, this is actually more of the shape of what I'm building. Like, would love to talk to you about it. So a lot of that ends up being inbound. Like, again, like if I'm coming up with like, oh, you know, you know, what really needs a vertical integrator is this like, it's Probably not. It's either too obvious or whatever.

39:47Whereas, you know, something like a Colombian telco that could use that to then like bootstrap to world domination, like not something that I ever in a million years would have thought of myself. Then you meet the founder who read the piece and wants to come talk about it. And you're like, yes, like this is right. You're the right person to be doing this. Like this, this makes a ton of sense. I think JC at Fuse is like another perfect, perfect example of this. Where like, I think I've thought fusion was fascinating. Like most people in the world do. I'm probably more just like kind of by nature and also having studied it, like more optimistic on when we actually get fusion power than most people are.

40:20My one gripe with the industry generally is that they're all like, this is safe, unlike fission and like fission's a disaster. And like, we really need fusion when I think that you guys are all on the same team and like, let's not throw anybody under the bus. But having studied fusion, I was still kind of like, I'm so glad that Sam Altman and Bill Gates and like billionaires are burning their own money on fire, trying to get us to fusion because like this is not an investable category as much as I like love it. Um, and then you meet JC at fuse. It was like, actually, no, it is. If you go with this one particular architecture, what you're really doing is selling radiation by building these power generators.

40:51And you can use that for, uh, rad hard electronics and nuclear arsenal testing and like all these things that can generate money on the same exact path that you need to go to, like put enough pulse power generators on to actually create fusion power. And so you can this like really big business with a call option on fusion power like never in a million years would i have thought of that myself and then you like talk to somebody you study it and you're like this actually makes all the sense in the world and i think there's like a little like you need a little glimpse of like holy jc is special like this is a kid who's a lebanese canadian immigrant who's like started the company when he's 19 years old and every time i talk to him he gets like smarter and smarter and smarter not just on fusion but like how to navigate the government and like you have all these three-letter agencies that are the buyer of this technology And so like by the third or fourth of those conversations, you're like, he knows what he's talking about.

41:37Like, it's probably worth taking it seriously. Then I do the work and like go in and try to understand like how, you know, using what I learned about fusion, doing the podcast, but then also like talking to him about his specific thing and just like doing a ton of research and analogizing, I think actually rightly, hopefully in this case with SpaceX. So like you want to be like his whole thing is they want to be the NNSA, the National Nuclear Safety Administrations. Uh, I think that's the right acronym. They want to be the NNSA's, uh, SpaceX essentially, like, like, uh, you know, like SpaceX was to NASA.

42:12They want to be to the NNSA. Um, so you go do a lot of research, like after you realize like there's something special about this person and what they're telling me actually sounds like it makes a lot of sense. And then I think from there, like that's when I'm like, I can talk myself into this business does make, uh, does make a ton of sense. And I think in Fuse's case, like it really does. And I think investors, you know, they raise an oversubscribed round this last round that they did. And they just like continue to execute. And so those are super fun to be in. Like none of them could be like me market mapping beforehand.

42:44Yeah. Like I think there's actually an opportunity in Fusion if you do this thing. Like I have no idea. Like how in the world would I know that? Are there any areas that you've been cooking on that you're interested in going into or maybe some that, yeah, are there any areas that you've thought about for a while, but you haven't found like the right founder, the right opportunity, but like you would love to see done right? That's really not how my mind works on this. You're like, I don't think that way. It's partially that I don't think this way. Here's a spicy take for the podcast. like when YC puts out the request for startups, I'm like, I can't imagine that anything good is going to be built, uh, against these categories starting now, because you've read the YC request for startups.

43:31Uh, one, cause it, it becomes like, there's just a lot of, like, even if they have the best ideas, it becomes too much attention on that idea and whatever else. But two, like the beautiful thing about being able to write and invest in, write about and invest in these founders is like, you get to talk to some of the smartest people and like most driven people and whatever in the world who have dedicated like every fiber of their being and like all of their financial wellbeing and like everything to thinking about like this particular problem. If they're not coming up with insights that I couldn't come up with or like even opportunities that I couldn't, like something is horribly wrong and I'm like talking to the wrong founders.

44:06And so I think a lot of it is just that. Like if I'm like, I would love to see someone like, you know, do faster cars or something, you know, like there will be, if faster cars are possible right now, like there will be a good founder out there kind of building it. You know, like we'd all love faster travel. And I think that that hopefully, you know, between Boom, what they've been doing recently, but, you know, Ian at Astromechanica, I wrote about like, I think there's a path where we wake up in 10, 15 years and like first it's supersonic private planes and then supersonic commercial planes. And like that is a long path to kind of get there.

44:37But like the technology is there and actually like just batteries back to back to base, like batteries getting better actually like make that possible now for the first time in a long time. And if I'm not tracing that battery cost curve and like what that means for the weight balance in a plane, like I don't know that it's the right time to do a turbo electric adaptive jet engine, but like certainly the person who's like wanted to be a pilot or it has been a pilot forever and has wanted to be a supersonic pilot forever. Like that person is obsessively tracking that curve and seeing like, yep, now is the right time to do that.

45:05And so I think like it is just so particular, the circumstances that lead to there being good opportunities that it's better left to kind of inbound than me. Yeah, it's very particular. You would you would hope with the YC market maps and those requests for startups that there is like some confirmation bias of someone who's been thinking about it for a while. That's like, oh, now I can like now I have an excuse. Go do it. Yeah, it would be very interesting. And I'm like, there's so many areas where I'm like, probably like partially right in the general. And then there's like a specific case that just like knocks me out of the water and like pays for all of the ones that don't work.

45:39And so it'd be interesting actually to go back and look at their request for startups and then what has been founded kind of after that date and like which I'm sure there are going to be a bunch in there that actually like do make a lot of sense um but yeah I just think investors like shouldn't often be the ones thinking of like here's the opportunity like it's just not how it ever works it's like a very obsessed person who's like all in on something figuring out like the specific reason that something might might work. So I want to talk about the downstream capital for these CapEx heavy businesses.

46:13I've noticed that there's not much capital there. Surprise. So what are you seeing in terms of maybe maybe power law dynamic companies are one category and then the rest are another. But what are you seeing in terms of how they're getting their Series B, their their Series C, their Series D funding. Obviously, SpaceX is in a different category because now they just have recurring tender offers and that's fine. But there was a huge dislocation in late stage capital for these companies, at least in the last year. I feel like it might be shifting, but what do you see? Yeah. I think it really depends.

46:52Anderil is in the SpaceX category now where they've also had a very easy time. I think that's one of the most interesting stories that we tell ourselves. And I love Andrew have written about them, invested in them, like all of that. But that like early story that nobody wanted to touch it, it was actually like a pretty crowded round at$100 million valuation. So like, you know, it was fairly obvious if you get that group of people together, like they're going to build something pretty special. And like obviously having the courage to say, like, you know, we're going to take the the heat and the hate for investing in defense at a time when that's unpopular, like that is still a hard decision to make.

47:24But it wasn't like it was like, you know, Andrew's first round got done at five post or something like it was uh fairly obvious so like if anybody was going to build something great in the space it would be this group of people and that's really what i'm like looking for in a lot of these is like uh one is it if anybody's going to do something in this category like is this the team that is going to do something um bonus points if that is like if as somehow that can be like very legible to you and then like you know that it'll be legible to other people but like sometimes to your point like you do have to kind of like just invest in grin and bear it and i wish i had more capital to like continue to support these companies down down the line.

48:01I thought actually that, uh, at the Series A, there was gonna be a ton of competition for these companies. Like it just, I guess from writing about it and like speaking to so many of them, like it became obvious that like this was gonna be a thing. Um, and it's less competitive in a lot of cases at the Series A than I thought. And it often ends up being like a specific thing that downstream investors are like, if you do like this very particular thing, I don't wanna like call out any of the companies investors who've told them, but they're unbelievably specific single things. So there's generally the valley of death where you have to build out manufacturing and all of that, and that's traditionally hard to raise capital for.

48:36And I'm not talking about the valley of death at all. I'm talking about literally if you prove this one thing we're in with a big check and the valuation will double at the next round and all of that, I think that's a really interesting mispricing where I think the chances they actually get that thing done is 80, 90%, and it means a 2X valuation step up and kind of becoming the anointed one if they get it done um and like venture is not an arbitrage game so like you shouldn't like risk on that on that arbitrage in particular i just think it's interesting um but i think actually the b and then the c like once they get to a certain point and do some of those things and it becomes clear to others that like if anybody wins this category it's going to be this company then capital i think actually becomes like really really easy i want to shift over to ai yeah let's do it okay so paki you said ai will not become god or satan because it's software it will become an incredibly profitable super sass what are your thoughts on the future of ai i think that's holding up well i was like i was really nervous i get nervous every time there's a new model release or like you know oh three is like just solved everything and then you like get a chance to play with it you're like oh it's like a slightly smarter version of the last thing and maybe if i were asking like really hard math problems all the time like i'd be super impressed but like a new model like that comes out or you know we'll talk about deep seek separately because i think that's really interesting uh also but a new model will come out and everyone's like i played with it and it is like it's going to change the whole entire world and then you play with it you're like you mean deep research because everyone's talking about how that's changed their lives deep deep seek is separate so my deep seek point is that like this like crack team that I figured out all these algorithms, breakthroughs and whatever, essentially just figured out how to do the same thing cheaper.

50:19Like there hasn't been any leap that I've seen that I've been like, yeah, that thing is alive. And like, I think people want to talk themselves into it. I think there's a lot of social capital on the line, like an SF in particular, and being like the most excited about AI and like the biggest believer in scaling laws. And it just to me does not feel like as a user qualitatively, and I've have pro mode and like I pay the$200 a month and qualitatively it feels like kind of slightly more impressive and it can like do longer context stuff. Like the one that I still like talking to the most is Claude.

50:47Like I think there's a lot just on the product side in in making it feel a little bit more human. But it's a very impressive. It's like it's a super, super impressive thing that you can like ask this in question. It like knows pretty much about anything. And there's not been one experience that I've had where I've been like, holy shit, like that thing is godlike or even Dwarkesh, who I think is like a pretty big like he's like his career is like staked on AI. He's like interviewing everybody. he's like right in the middle of this whole thing, shared the other day a screenshot of his conversation with Dario Modi, where he was like, if this thing is so smart, like, why is it not made like any new research breakthroughs?

51:23And like, you could argue that's like two ooms away or whatever. And like, you just throw more compute and better data at it. And like, we're going to, but like, it doesn't feel like actually like you're on that trajectory. Like it doesn't, I don't understand why like adding more scale gets you to like this qualitatively different thing whereas like every experience that i've had going from like playing with gpt2 which like talks like a baby to gpt3 to like it's really cool each time and no time am i like and this is i don't even think like a moving goalpost thing it just like doesn't feel human like it feels like a computer that was programmed to like kind of talk like a human because it's like read all the things that humans have ever produced and so i don't know like i i think it's going to do like amazing thing i think like companies are going to get more efficient i do think it's going to be useful tool for making new drug discoveries.

52:09I think all of that is going to be true. I think in a lot of these vertically integrated companies, like AI is the reason that a company that might not have been winner take all before would be winner take all now. I think Ramp is a really interesting example of like there might be a winner take all dynamic in corporate cards at some point if like that system gets smarter and smarter and has better data and like can just make smarter financial decisions for companies. And so I think like all of that is true. I called it super SaaS in that like 2025 prediction. And I think it is like, I think it's really amazing.

52:35And like in no way Godlike. And it's just like, I feel like I'm being psyoped whenever people are like, oh my God, this is like, this is this changes everything. And like, I'm like worried from the future. And yeah, so that that is that's kind of my general opinion on AI. And it seems like cracks are starting to show now and like people are starting to kind of believe it. I'm like talking to friends and private house. So yeah, it's like it's very cool. It's not like I think people, as I was talking about before, like the question is really interesting. like having a great question is is like really important getting the answer is like actually not that important to people in like most cases and anything where you can like just get a simple answer like isn't super valuable and won't be super valuable i wrote about a couple weeks ago that like when something becomes commoditized we're like it could be answers or intelligence or whatever like there will be value at the next layer of the stack and like that's just how the world works and like whatever we can commoditize it was one scarce like that's a great thing for for humanity.

53:28So like maybe I like I'm optimistic, more optimistic about the world by being like slightly bearish on, on AI, like taking over everything and just like displacing the need for humans. But it just like really, to me, does not feel like that's the path that we're on. And I'm like, we'll eat my words and I'll be like, you know, the Rocco's vassalist, Rocco who like came up with Rocco's vassalist. Like I made this like humans, uh, you know, like the commoditization point and he, there's just like weird group of people and he's one And I think like, if you like, just like if you bought a ton of Bitcoin, like you make that your identity, if you're like thing is like praising the AI God, that's what you're famous for.

54:03And you're like, name is in that. He tweeted something about just like, it's a misunderstanding of economics and blah, blah, blah. And the way that he did it, and I'm not going to get the words right, but it was just like this weird, like anti-human, like coming to the defense of AI thing that I've seen from a few people that like really creeps me out. people are like, oh, like I need to send you some of the tweets and we can flash on the screen. Yeah, it just feels very like almost like like species traitor behavior from people where they're like, oh, you don't get it. Like these things are going to take all of our jobs.

54:35Like it's like, what kind of are you like? This is such a weird, a weird stance to take. And so maybe I'm taking the opposite of that. But again, I just like just going based off my own experience, have not seen anything where I'm like, well, shit, I'm done. Paki, are you just saying AI is a marketing stunt? No, I don't. I think it's a technological miracle and you never bet against a curve. And it is so cool that it's getting ten times cheaper. And it does a lot of really useful things. I think it is like a more valuable SaaS because it can think on its feet. And I think all of that is true. And I also just like I think it's very weird that like so many people are convinced that we just like throw more computer this thing and it like replaces the need for all of us.

55:12Yeah, I think I think one of the biggest cracks that started to show was with the whole Stargate situation. Like that one week was insane. You had the Stargate 500 million dollar announcement or sorry, billion. What am I thinking? Oh, my God. Wrong one. Wrong one. Anyways, so we had that announcement and then DeepSeek came out and then we're like, oh, okay, so this is just a competition because then OpenAI released like five new models after that and they're all named something different and I don't know which one to use at this point. And I'm very confused as a consumer and they're really a consumer company, so I don't know what to do.

55:49But like you started to see like, oh, okay, like I really see what's going on here and like where the dollars are going and no one talks about Stargate anymore. you're not hearing about it. You're not hearing about Stargate anymore. You're not hearing about it. I think something like that will happen, though. I mean, like, it, I do actually think, like, if you can figure out how to make, you know, like, you make the model so good that, that they're really, really smart and then inference cost comes down and then everybody just gets like genius, like, like really good question answers in your pocket.

56:16Okay, so I do, I do know a lot of teams that have, have switched over to Deep Seek. Yeah. They've downloaded it, they're using it, and their costs are much better. they're using it. Like it's like it's commodity business. We all know that. Like we've known that from the beginning. So I don't know why we go through these circular phases of like thinking it's going to change the world and it's like a power law thing. And it's a commoditized product. So whatever, whoever is going to get us the cheapest one, that's the best. We're just going to use it. Like there's really no loyalty there. And that's why there's so much switching.

56:48And I kind of believe in more like the platforms where you can just choose from whichever one and turn on the dials. OpenHeads are what, like$15 billion? dollars and they're doing great they're doing phenomenal i'm not bashing them at all they did their super bowl commercial and like this was crazy to me because like my son my four-year-old like when he has a question that i don't know the answer to i'm like i don't know let's ask gpt and it starts with like the little black dot and then like turns into the blue dot and as the black dot came on he was like oh it's a chat gpt oh my gosh and he's four and like that is a brand that like yeah he might be with talking to chat gpt for the rest of his life you know or like some version of it.

57:24And so I do think there's real value in brand. I think actually like, and this is not an interesting point either, maybe. But like, I think brand for like a lot of these, like now nuclear is like getting, and I like, I'm so happy. Cause like, if you told me a year ago that like, I've been pitched like four SMR companies in the past week, like new baby SMR companies in the past week, which is awesome. And I think like nuclear ends up coming down, will end up coming down to like brand, like who got something working early on and like, you know, nobody ever got fired for buying like reactor company X that is good enough and cheap enough and whatever else and safe enough and like that nuclear, something that technical and crazy would be like a brand thing is wild.

58:12That AI might end up being like kind of a brand thing because it's commoditized below ends up being pretty wild. And there's probably some iPhone thing with ChatGPT now where like you want to pay like it's a veblen good where you want to pay more for your intelligence. And I know Gavin Baker has talked about on podcasts before, like that you'll want to just pay like a shitload of money for your iPhone. That is just like really, really, really smart, knows a ton about you. And I generally believe that. But I think as everything becomes like easier to make from AI to SMRs, like brand ends up playing a big role.

58:41This is another. And I know I sound like Paul Graham with my four year old now. And this actually happened. my son has become obsessed with building worlds like a planet uh and he was like well we can't spacewalk uh because it's way too slow i'm like totally bud like definitely and he's like well how would we like what rocket should we use to get there and i was like actually i've just met this really cool company they're doing single stage to orbit and like actually that might make more sense than a normal rocket because then it can come back down and he was like no we should do spacex because they've you know they've done more launches i was like that again is like this weird you know like thing where like so you're talking to your kid about this yeah that's insane it's insane because we like watched you know it's a fun thing to watch the starship launch and all of that uh and so we've we've done that and like they love watching the videos my daughter loves like the robot videos and she's two and paki you're raising geniuses i'm raising like kids who are equally obsessed with this this stuff that i am more than than geniuses and probably like imposing my my view a little bit too much but all of that was just not even have to say the genius part more to say like it is crazy that star that starship and spacex have a brand again with like a four-year-old that i think like actually like there's probably a lot of grown-ups who will make a very similar decision where it's like we're putting our payload into orbit like i know that this one actually like could be cheaper or like it has this like little advantage but like the flight heritage on starship is just like far superior and like nobody ever got fired for buying starship so there's all these categories that are so technologically hard that like brand will end up becoming like a really important thing and so there is like a real value i think to being first to market and like just being fast in a lot of these categories.

1:00:11As you think about this next year, what are you most excited about? Just as I mean, the intersection of kind of like writing and investing, like I think it's just a vein that I can keep tapping for a while. Like really, like how do you like how do you become as much of like a Carol level journalist on the companies that you're excited about as like humanly possible to understand them better? And like through that, understand where the world is heading and why the future is going to be good and like how to make the future. Like all of those types of things I think are like, I'm still trying to figure out like what my central question is.

1:00:46But I think it has something to do with like, how can you use storytelling and writing to like really figure out like where we're going and how to make that, how to make it good. And I think the more that I can have tools that help me in that, like the better. But it's actually, again, like just more, how do I spend more time with people that I think are really interesting and have good perspectives. lives and um yeah the human thing I think is just like never going away have any large funds tried to poach you for sure every time yeah uh I think not as much now um but for a while there for sure it was an advisor at a16c for a while um but not as much anymore now I'm doing my own my own thing okay well we can continue to watch you build the not boring Empire and your boring news Yes.

1:01:33Paki, thank you so much. It was great. Thanks for having me. This was fun.