Ali Partovi, Tim Fist, China's Semiconductor Evolution, NVIDIA's China Business

26:34Exactly. And so in 2019, Huawei gets added to the US entity list. This is kind of the blacklist. China accelerates investments in domestic chip design while Nvidia deepens its relationship with cloud giants like Alibaba and Tencent. And so being blacklisted meant that Huawei lost access to US technology. So they couldn't buy because if you're on the entity list, You can't sell or you can't do any business with any American company. And so that means that it also applies to companies like ASML that use patents that are American. And so if you can't buy a lithography machine from the Netherlands, you can't fab the chips.

27:13And so it's just a major setback when you get added to the entity list. And we've seen the opposite happen where American entrepreneurs are now being added to the Chinese version of the entity list. And they can't buy products from China. Or they can't sell products to China. Not that they want to. Yeah, just to give you a sense of Huawei's scale, they did over$118 billion in revenue in 2024 as a private company. Oh, private, interesting. Oh, private, interesting. Yeah, I mean, they probably don't want to deal with the oversight of being public. Yeah, that's probably what it is. Simply don't want to deal with.

27:41But all these restrictions basically force the high silicon unit within Huawei to be ultra self-reliant because they're just like, we can never count. We're probably never getting off the entity list. It is pretty bipartisan, even though it's like a Trump thing, it's like they're not expecting it to just flip. It's not like Americans are yelling like, Trump is so crazy because he put Huawei on the entity list. Like we gotta get Huawei off the entity list. Like it's not a culture war issue. And so it's just truly not, it's like there's no sign that this would ever flip. And so as Huawei's orders dried up, the other Chinese tech giants stepped in to purchase Nvidia's GPUs.

28:18And so the US, like Nvidia maintained significant share of the Chinese data center market because the Chinese data centers, they obviously, you know, they kind of want to support Huawei, but if Huawei is way on the back foot because they don't have amazing machines to build the stuff, well, these, you know, Alibaba and Baidu, they just need to run servers. They need to do accelerated computing, AI inference, all sorts of different, you know, recommendation systems. And they're like, yeah, like we just need, we just need the best. And so there was an entity list expansion that covered even more advanced chip technology, and this has just been growing and growing and growing.

28:56So in 2020, there's even more U.S. restrictions. The Foreign Direct Product Rule, or FDPR, was expanded to halt Huawei's access to advanced chips whilst China simultaneously launched its second-generation big fund. Big funds. A little size gong for the big fund. Nvidia attempted a$40 billion acquisition of ARM, and it was announced amid all the turbulence in the FDPR expansion. And there was more sanctions on SMIC in December of 2020 that, again, set back China's progression down the learning curve into these advanced nodes and made it even more important that they focus on domestic semiconductor manufacturing and capabilities.

29:44So now we get to the CHIPS Act. This is like where the story usually starts, but we went a little bit further back. But the US Chips and Science Act passed in 2021. This is a Biden administration law. And this had coordinated export controls by key allied nations, and it accelerated the decoupling of the US and Chinese semiconductor supply chains. And of course, this was a multilateral effort. This is almost three years after the US had organized for the arrest of the CFO of Huawei, which was the founder's daughter. Yes. Wasn't that in Canada or something? It was really aggressive. So this feels like a really long time ago at this point.

30:26Totally. But it's important to understand just how serious kind of everybody in Washington was taking this at this point. Yeah, yeah, yeah. And so this is specifically restricting critical chip making equipment such as ASML's EUV lithography machines that's extreme ultraviolet lithography machines the most advanced machines that that can you know place the silicon atoms like as small as possible right and so the US is coordinating with the Netherlands and Japan because Japan also makes a lot of like lens technology and a lot of different things deeper in the semiconductor supply chain. And so all of that is now restricted.

31:05And so China, in response, is doubling down on self-reliance through the 14th five-year plan. And they have extensive subsidies for semiconductor development. Just one more five-year plan, bro. Just one more five-year plan. Please, just one more. No, it's actually, if you're going to be, if you're going to run, do state-run industries, working in five-year increments probably is pretty effective. If they're on their fifth or their 14th five-year plan, the five-year plan model, I would imagine, works. I think it's working pretty well. They like it. And so NVIDIA struggled with delays in its ARM deal.

31:41Our ARM, they were trying to buy ARM. And they keep seeing resilience from the Chinese cloud providers, even as political risks mounted. And so the AI hardware race is just heating up even further. And so in 2022, October 7th, 2022, US export controls targeted high-end AI chips. This is banning NVIDIA's flagship products, the A100 and the H100 to China while forcing the development of workaround products. And so the new rules blocked shipments of advanced chips and manufacturing equipment for nodes below 14 nanometers for logic and 18 nanometers for DRAM, which is the memory. Yeah. And advanced NAM flash.

32:22So what did NVIDIA do? They introduced the A800 GPU, an adjusted version of the A100 with lower interconnect bandwidth to skirt the US limits without fully matching performance. So again, this is like one of those situations where people in the US I think would be like much more frustrated with Nvidia's behavior if they didn't, were not Nvidia shareholders. Yeah. This always struck me as interesting because when you think about the US government regulating interconnect bandwidth on an AI chip, that's like extremely complicated. And this is like, when I think of the government and technology, I think about like, how does Facebook make money?

33:04Like the internet is a series of tubes. Like the lawmakers typically get this stuff like wildly wrong. Clearly they had some great consultants on this project because they actually got to a level where they were able to understand some of the trade-offs in chip design to design a policy that targeted specifically AI training around interconnect bandwidth like they did hit that but at the same time they weren't able to go deep enough to understand that deep sea could like figure out a way around the internet can in the interconnect bandwidth limitation and still train a GPT-4 class model right so they were like 99 % there but not a hundred percent there and like way better than any layman especially at the time, like back in 2022, not many people could just be like, Hey, you know, you, you, you know, a little bit about semiconductors, like what's important right now.

33:55And people would be like, interconnect bandwidth, like, yeah, right. Um, but somehow they make the 800 and Chinese firms just go, Oh, sweet. And they just start stockpiling these things, right? They just start saying like, we'll basically take as many as you can get us. Yep. And so in 2022, in December, SMIC gets added to the entity list, kind of crazy. They weren't on there before since Huawei has been on there for for like years, but this further isolates China from the US semiconductor equipment and technology. They really can't buy anything now. And people start worrying about Nvidia's future revenues in China because of these controls.

34:29As market participants observed these trends, analysts begin to speculate about the long-term feasibility of China's specific products from Nvidia, saying, hey, they have a workaround right now, but how long will this really stick around? there's a bunch of different ways to create limits on chips. You can just do total flops or flops per dollar. Or Jensen in his Blackwell presentation said, we're no longer on chip scaling, we're on energy scaling, which is like the most foundational level of computation. So like not even flops per dollar, but flops per watt is like what really matters. And so you could just limit that.

35:08But then there's a whole question about like, how do you measure that? What are you training on? And there's ways to get around that. There's always like loopholes, but you could, and we're seeing this now that like the definition of what's banned is growing and growing and growing. And there clearly are a bunch of ways to basically just tell Nvidia no. And that's kind of what's happening. Now there's a huge debate over whether or not these chip sanctions should be in place and whether or not they should, they're effective, right? So we'll get into that debate. but let's continue with the timeline.

35:402023, so China is facing persistent export controls and also there's a global chip shortage, remember from COVID and whatnot, and also just increased demand for AI chips. So they continue to innovate with tailored products specifically for the Chinese market, like the H800. This has reduced performance parameters. Innovating for China. Yeah. Sounds bad when you say it like that. It complies with export restrictions. At the same time, like every company, whenever there's like, it's so easy to, if there wasn't the crazy geopolitical thing here, it's so easy to be like, oh, like the, like, you know, the speed limit is 65 miles an hour, so I'm gonna go 64, right?

36:18It's like every business is like, oh, I can't. It's their responsibility to shareholders. Yeah, like every company is like, oh, I'm like, like I can't sell this product in this market. Okay, I just need to find a different product. And this is why over the last couple of weeks, if you're an American hedge fund manager and you're unclear of what's happening in the American market, even if you're a true patriot, you're going to look over at European defense companies and say, you know, this suddenly is interesting, right? Because they're just like, their mandate is to chase yield and put up numbers for their LPs.

36:49And so that's just an unfortunate reality when it comes to these sort of geographic, geopolitical, sort of like hot button issues. And so even though the H800 is lower performance than the H100, which is the popular one in America, Chinese cloud providers are just buying them nonstop because they need advanced hardware and they're willing to work around the limitations there. And so at this time, Ben Thompson writes, NVIDIA on Tuesday, this was yesterday, said it would take a$5.5 billion charge after the US government limited exports of its H20 chip to China. And that's like kind of the main story that's driving the news today.

37:34So in 2023, Chinese tech giants accelerated their own product developments, and this is what we're, this is like the hot topic in semi-analysis right now. Huawei has this cloud matrix 384, and this, the goal here is to challenge NVIDIA's dominance. And so it's described by the South China Morning Post as a nuclear-level product. Sick. It's like Stargate, but for China, basically. Let me guess. I wonder if the South China Morning Post has any ties to the state. I think they're just pumping up their bros. No, no, I agree. Who knows? I agree, I agree. No, no, obviously they're biased. It can be both.

38:15They're biased. But they're talking their book. They're excited about this. So the Cloud Matrix, it's funny because I had never heard, I mean I've heard the nuclear analogy once or twice, but Aaron Ginn yesterday wrote a whole piece about this idea of a nuclear, a cyber nuke, in the form of a massive data center. So the Cloud Matrix 384 utilizes 384 Ascend 910C chips to deliver up to 300 petaflops. So despite outperforming NVIDIA's NBL72 system on raw compute, 300 petaflops versus 180 petaflops. The system is significantly more power hungry and costly, thus highlighting trade-offs imposed by export controls.

38:59So they're like, great, we'll burn more coal. Fire up the three gorges, damn, yeah. I mean, they are adding 20 % energy every year now in China, and we're adding zero, so you play that out, and being power hungry and costly, totally the trade you want to make just to be able to actually run the data center. Of course, there is an economic calculation. If they have an ASI system that's less economically efficient, it's like having a$100 drone shoot down a million-dollar drone. You can only do that so many times. And so if you're running an AI system, it's fighting with another AI system. Oops. John lost his...

39:36I lost my headset. If you have one AI system that's fighting with another AI system, at a certain point, you need to be able to... You need to be efficient. You need to be efficient, yeah. This is the issue we talk about with US military countering drones with missiles. It's like, okay, if your missile costs 500K and you're taking out a drone that costs 600 bucks, like it just, the math. Yeah, that was the whole math behind the road runner at Andruil. You would just like continuously launch them to just sort of like bankrupt the enemy. Apparently, I think a Patriot missile, which is an anti-missile missile, shoots down a cruise missile.

40:11Yeah. It costs like a million dollars and it's not super reliable, so we fire two every single time, and they don't come back. They're just gone. If you sense a threat, two million bucks, and so the Roadrunner, which I think is cheaper, I don't know the pricing, but it can fly, and you only need one, and if it misses or there's a false alarm, it comes back. And so in theory, this economic warfare is important. But China has a huge advantage on power and energy. And just to set the table a little bit on this, what these systems are, the cloud, the NVIDIA's NBL 72. Basically these are a bunch of NVIDIA chips that are racked together, and NBL means an NVLink, I believe, which is a system that links the different chips together so they can communicate kind of as one server.

41:01And then of course you do network them together, but it allows you to store even, it allows you to treat the server as like a single abstraction, I believe. And so the main difference, again, power efficiency, and this is what Jensen has been talking about with Blackwell. He's really focused on energy efficiency, power efficiency, not pure petaflop output because this is becoming more and more of an economic calculation. So 2024, last year, with further regulatory adjustments, 2024 marked the shift where U.S. policy began targeting AI inference chips as much as training chips, prompting a pivot to inference-optimized design.

41:41As the restrictions on training chips tightened, US authorities announced new export control parameters set to become effective January 2025 that also scrutinized inference performance metrics. In anticipation, NVIDIA began developing a range of China-specific GPUs for inference. And this is the H20, the L20, and the L2, each tailored to meet slightly different performance and regulatory thresholds. And so Ben Thompson yesterday wrote, The H20 is a pretty lousy AI accelerator compared to the H100. It has fewer cores, much lower memory bandwidth, no NVLink support. And this underscored the workaround.

42:17The workaround chips were compromises rather than true performance products. But it doesn't really matter because you need to have the best. Like if you're just thinking about the Chinese chip market, as long as it doesn't matter that you're worse than American NVIDIA chips if you're still the best in the market. And so NVIDIA can go still win in theory until these were banned and make$5 billion. dollars. But not anymore. Or high flyer slash deep seek is saying, okay, we're going to basically train our model on your model that you used all your H100s to make. And the inference is, the inference in theory, if you can do all these crazy workarounds to get the training done and maybe export a bunch of GPT weights and stuff and do whatever you can to get the training done, And the inference is where the economic value is created.

43:03Like you can think about training as CapEx and then the inference is the OpEx that allows you to actually derive economic value from the intelligence, the magical intelligence from the sky, right? Like no one cares if there's just a super intelligent model that you can't actually inference. And so having good enough models, having great state of the art models, open source models, but then being able to pump them out in a way that all one billion Chinese people can use them on a daily basis for all sorts of things to create new businesses, optimize their current businesses. There's a million things that you do with AI that should lead to GDP growth.

43:38That's really important. And so inference is becoming increasingly valuable. And so the phrase I was looking for that Jensen was using when he talked about the power efficiency metrics of Blackwell, it was isopower. And so he's really focusing on the scaling laws as they apply to just energy specifically, not chips. And this is the advantage that NVIDIA has had by always being ahead, is they have the luxury of, yes, they need to continue to innovate. They need to come out with Blackwell, the chip beyond Blackwell, but at the same time, they're able to focus on these things that a second, third, fourth, fifth mover or somebody that's not in the same competitive realm doesn't have the luxury of thinking about energy efficiency.

44:23Yep, and so we're seeing like a bifurcation in the chip market and just the approach to design. So Jensen Wong is claiming that modern data centers, probably just in America, are power constrained. ISO power means delivering maximal compute within a fixed power envelope. Newer generations like Blackwell greatly improve efficiency when you're under that one megawatt constraint, which is kind of where most of the, I mean, I guess a lot of data centers that want to do inference are sitting. Contrast that with Huawei's cloud matrix 384. This sacrifices power efficiency in exchange for higher aggregate compute.

45:03Semi-analysis noted that while its raw performance is impressive, the trade-offs and power usage make it unattractive outside of China, where competitive pressures and cost structures differ. So if you don't have energy too cheap to meter, well, then you gotta go ISO power and deliver maximal compute within a fixed power envelope. So, as there's the preparation for the regulatory changeover in 2024, the new export control Solidify, Nvidia and other firms accelerated development of their next generation products, aimed at circumventing increasing restrictions while meeting customer demands. So they developed the age 20.

45:41Chinese companies including domestic alternatives such as Huawei's in-house designs and Alibaba's T-Head initiative, continue R &D efforts, to eventually replace dependence on U.S. origin chips because they see the writing on the wall. They're not going to be getting any U.S. chips in the near future, so they've got to bring it in-house. So analysts are forecasting that by 2026, AI inference compute demand could outstrip training demand by a factor of four, increasing the strategic importance of these new designs. Remember, just a few years ago, it was all about inference because opening, I would spend$100 million on a training run and then be like, oh, it's a toy.

46:17Or like, oh, some people are playing around with it. Or someone built a wrapper that's like, okay. Now it's like everyone needs to inference constantly. And so as Trump comes in 2025, U.S. tariff export controls tightened to unprecedented levels. Obviously, we talked about this a lot, raising rates to over 100%. There's some internal debate, but the new policies reaffirmed a longstanding US strategy to limit China's access to advanced semiconductor analysis strategies. In April 2025, the US government informed NVIDIA that its H20 AI accelerator would require an export license for shipments to China effectively halting and triggering a planned$5.5 billion write-off.

47:06Triggering a planned$5.5 billion write-off. So NVIDIA is expecting, they're kind of messaging this to their shareholders ahead of earnings, taking the hit on the shoulder right now. And NVIDIA is down 10 % today on the news. Because that, I mean, I think 10 % of their business is probably in China still. And like, now that doesn't exist. And sure, they'll probably make some money selling to Malaysia, which will create a data center that China can train on. And all this just comes down to how it will be material. This comes down to how somebody feels about these type of restrictions on China is going to come down to whether or not they truly believe that we are in an AI war with China.

47:47We've been in a trade war. That much is obvious. We've had numerous cybersecurity incidents with China. um we're clearly in this sort of economic war um and i think that uh nvidia jensen nvidia shareholders are probably super frustrated with this but um it's very possible that this is you know 100 the right decision given how fast ai is accelerating and and um you know even going back to the conversation with uh aaron uh you know yesterday around the u.s needing to take this issue as seriously as we possibly can. And so the dividing line here is whether chip controls are good or not. And Ben Thompson has been against the chip controls.

48:39And I'll kind of read from his position. He says, my heterodox position on this matter is clear. For the same reason that I am against the chip controls, but in favor of banning the the sale of semiconductor manufacturing equipment into China, I think that this is a good thing that the cloud matrix 384 is dependent on TSMC and Samsung because that is a reason for China to maintain the status quo with Taiwan in particular. Semi-analysis is much more hawkish on chip controls than I am. At the same time, the reality is that right now we are in the messy middle. We're not actually stopping Huawei from building a system that is capable of doing large language model training, albeit inefficiently, but we are hurting the fortunes of us ai champions of nvidia by lit and limiting their long-term competitiveness and of course we are incentivizing everyone in china from the government to private enterprise to ultimately remove the point of leverage that we can't even wield properly and so he's is so dylan patel had a different flip on different take on this let me see if i can pull it up um he says uh we might need to have a newsletter goat debate we should we should uh I'm gonna invite them both.

49:48But he basically said, stop focusing on the chips, you have to focus on the entire supply chain, and as long as there aren't expert controls on everything in the entire chain, it's mostly ineffective. And so, what else? Let's see. I think we covered most of this Cloud Matrix stuff. I mean, you can go read the full deep dive on Semi-Analysis, It's fantastic and extremely deep as usual. But let's move on to the other story with Mark Zuckerberg. But first, if you're selling chips all over America, you're going to need to pay sales tax. That's right. Get on Numeral. Go to numeralhq.com. Spend less than five minutes per month on sales tax compliance.

50:37Numeral works with 1 ,000 plus different companies, helping them with sales tax compliance and automation. and we weren't working with Numeral when we got the sample ordered but we got a place for them right here. Right here. Thank you to Numeral for supporting the show and go to numeralhq.com to check that. So Adam Carlson posted some screenshots from a story in the Wall Street Journal but basically it's about how Mark Zuckerberg spent millions trying to suck up to Trump so Meta only had to pay$450 million instead of$30 billion that the FTC wanted to settle an antitrust case against them. This is, of course, about the Instagram and WhatsApp acquisitions and the accusations that Meta is running a monopoly.

51:22And so Meta has offered$450 million to settle the antitrust case. This is far less than the FTC's$30 billion demand. And Zuckerberg has cultivated ties with Trump. FTC sued Meta in 2020, accusing it of stifling competition by acquiring startups. And it is crazy. I mean, this feels like tech history. Like Instagram and WhatsApp, that happened in like, what, 2012, 2015? Like that era. And we're now 10 years later, and we're still litigating this. It is pretty wild. But we went through some of the screenshots. At the time, at the time of the Instagram acquisition, it was a photo sharing app that was not monetizing.

52:01Maybe did they have any monetization at the time? I don't think they did. And so it was impossible to know at the time that this was going to be a historically significant acquisition. And it's very possible that there's no other company in the world that would have been able to unlock the value of Instagram in the way that Meta has, right? And so... It's not just that. Pundits and analysts at the time said, this is a massive waste of money. Why is Zuck spending a billion dollars on Instagram? This is such a big acquisition. He should just build it himself. It's not necessary. And back then, social media apps didn't just immediately copy all their most successful features.

52:39It was like people kind of stayed in their lane a little bit more. You went to YouTube for long form. You had sort of short form iterations over on Snap, on Stories. And so everything has converged dramatically since then. And anyways, all the drama around this is just funny in the context of that we can't force. we have not been able to forge the sale of TikTok despite it being directly against America's national security interests. So the initial offer was 30 billion, Meta wanted to pay half a billion I guess. FTC chairman Andrew Ferguson found the offer not credible and wasn't ready to settle for anything less than 18 billion and a consent decree.

53:25As the trial approached Meta upped its offer to close to$1 billion, and it wasn't enough. On Monday, the trial kicked off. The FTC called Zuckerberg, who privately expressed reluctance about taking the stand to testify for four hours. That's brutal. He had to throw on the suit. He was not rocking. Can we pull up that picture that John posted this morning? I mean, he looks fantastic in the Wall Street Journal photo, but he's not able to wear his dripped-out designer T-shirt. He had no chain today. It's very sad when a tech CEO has to put on a suit. It's always a sign that things aren't going well.

54:02But you can tell the Jiu Jitsu's working. You can tell that he's hitting the weights. He looks extremely strong. His neck is going to clearly, if he keeps growing at 1 % daily, it will eventually be as wide as his shoulders are. Yes, yes, yes. But he is looking in fighting form because he is fighting all the time. Fighting in the FTC courts and also fighting in the ring or the octagon or whatever he fights in. I don't know how it works. Zuckerberg was back on the witness stand Tuesday where he faced questioning from an FTC lawyer over whether Facebook had paid$1 billion to buy Instagram to neutralize a competitor, asked if he would have preferred that Facebook's own camera app would have grown faster.

54:40Zuckerberg responded, I guess so, yeah. A billion dollars is very expensive. Love it. Former FTC chair Lena Kahn told the Journal that the company's$450 million settlement offer was delusional. Mark bought his way out of competing, so I'm not surprised that he thinks he can buy his way out of law enforcement too," said Khan, who was nominated by former President Joe Biden. His proposed remedy, like his market strategy, is let my illegal monopoly keep monopolizing. So, Lena Khan's coming for Zuck. What is she, what's Lena doing these days? Free agent? Associate at a multi-billion dollar, multi-stage venture firm.

55:20I could imagine that being a good spot to move on to. Clip some fees, earn some carry. What's not to like? If she can identify a monopoly with the best of them, she's going to be a great VC. That's right. Think about it. Just flip it over, start printing. And so we can go through some of Ben Thompson's analysis here. I liked his framing. He describes the three Facebook eras. He is very against this case. He says he thinks it's a poor one, and the government's market definition in which meta's only cat only competitors are snap and me we i've never even heard of me what is me we.com the next gen social network we have to buy shares in me we should acquire me if it's competitive with meta one of the greatest businesses of all time it must be it must be a fantastic business i i've now i feel bad because i feel like there's probably an entrepreneur who's working really hard behind me we uh you're welcome to come on the show We'd love to learn about the business.

56:15No, let's have him on. But no offense, but not typically in the conversation with Meta, but good luck out there. I hope you're printing. Probably doing very well if you're being mentioned by the FTC. Is absurd, says Ben Thompson. Unsurprisingly, I find Meta's opening statement presentation, which is particularly focused on the market definition question, very persuasive. What is striking to me, however, is the temporal aspect of this case makes everything a bit of a muddle. To my mind, there are three distinct periods at play. Facebook and the mobile transition, that's 2004 to 2013. Facebook started in the browser, only really became Facebook in 2016 with the invention of the news feed.

56:52And then it was mobile that forced Facebook's hand. Mobile made Facebook more just an app, which was good news for the company's fortunes. The dominance of the iPhone and Android left Facebook no choice but to become an ad company and to give up on its platform ambitions. Remember the whole like sign in with Facebook, Facebook's gonna be everything, unified messaging, like all of that kind of needed to take it back. You know, you go back to AOL. Yep. That was America Online. Yeah. They had platform ambitions. Yeah, totally. And so that seemed like probably the best thing you could do if you wanted to create a lot of value.

57:23Yep. Because ads are a great business model. Yeah. Then he defines the second era as Facebook's monopoly period, 2014 to 2019. Facebook's most dominant period coincided with the worldwide growth of the smartphone market, which was for the company a worldwide expansion in its addressable market, along along with a worldwide expansion in its advertising base, which was predominantly mobile apps. This is when Facebook most definitely, most definitively won the social networking competition. Probably the peak of the company's dominance was in 2016. This is interesting. So in August of that year, he wrote The Audacity of Copying Well about why Facebook's plan to compete with Snap, which is supposedly the behavior that FTC wants to encourage, was likely to be successful.

58:05Yes. And so they were like, yeah, we want competition. We want competition. You're going to compete with Snap directly in stories and all the different features and then eventually reels. And yet it's not enough competition. Yeah. And so he says, the reason slots in very nicely with FTC's current case. This is why it is so fascinating that Facebook is leveraging Instagram in this way. For all of Snapchat's explosive growth, Instagram is still more than double the size with far more penetration across multiple demographics and international users. rather than launch a stories app without the network that is the most fundamental feature of any app built on sharing, Facebook is leveraging one of their most valuable assets, Instagram's 500 million users.

58:48And so Ben says, it's not a surprise that the initial version of this case was filed in 2020, just after this era ended. Unsurprisingly, the FTC hadn't yet caught on to this reality. The initial version of this case didn't even include the name TikTok, which is interesting, which is why the government's arguments are rooted in the assumption that personal and social networking is one, the only pertinent market, and two, defined to be whatever it is that Meta's apps do. So Ben, putting them in the true zone. So it closes out with Facebook's competitive convergence. This era is 2020 to the present, 2025.

59:21By 2015, I was already writing that Facebook needed to move beyond mere social networking from Facebook in the feed, and this is the video slop era where everything converges on the identical feed of vertical video, algorithmic content, comments, like, shares, we saw the photos yesterday. Yeah, the following list doesn't matter anymore. It's just about the app serving you, what it thinks you're most likely to keep using the app. And there's a slide in here, what people want to do today, consume video. And that's why we're doing this. Well, we have an early investor in Facebook coming on the show, Ali Pratovi.

59:58He's announcing NEO and a bunch of fun stuff, but it'll be interesting. Maybe we'll get his take on what's going on with Facebook since he's been in the company and been involved in Silicon Valley and in angel investing for decades now. But until he joins the studio, let's tell you about Eight Sleep. They got a five-year warranty, a 30-night risk-free trial, free returns, free shipping, and Pod 4 has all the signature features you love about the pod plus new groundbreaking updates. It's a fantastic product unless you're up late negotiating. And then you get a terrible sleep score. I got a 54 last night.

1:00:37It's awful. Anyway. Brutal night. Let's see how I did. I actually, oh, I got 100. Oh, you got 100. Wow. Smoked me. Proof of work, eight hours and 13 minutes slept. Oh, well. Two and a half hours of REM sleep. That feels like a lot. Which is a lot. That's great. And you know why it's a lot? Because Autopilot made adjustments to the temperature of my bed to boost it. To boost it. I got boosted. You got boosted. I got boosted. Okay. Well, in the meantime, while we're waiting for Ali to join, I thought this post was funny. Prateek Joshi says, Someone accidentally referred to Eric Glyman as Eric Ramp Man.

1:01:20And as a founder, that's how synonymous you want to be with your startup. I thought that was very funny. And Juwan says, My fearless leader knows no bounds. Synonymous with saving businesses, time, and money. He is Eric Boss King, time money saving man. His last name rolls right off the tongue. Ramp man. Yeah. Eric, it's not too late. You can actually change your name. Yeah. Whatever you're born with, it's possible to change it. Ramp man. And if you're going to go through the hassle of changing it, at least make it an ad. This is the concept of the method entrepreneur. Live your brand. I mean, you're doing it right now.

1:01:55You're living the TBPN brand by wearing all of our sponsors on your jacket. Not all. We're missing a few. Oh, yeah, yeah. Most of our sponsors. They're getting on the next round. Anyway, did you see that someone is selling a Mint Fitbit Inspire 3 on the Bloomberg terminal for$66? Special Situation says, someone got margin called so badly last week that they have listed a Mint condition Fitbit Inspire on Bloomberg Marketplace. The terminal itself costs like$3 ,000 per month. It's rough. I just got to say, we got to get a Bloomberg terminal at the new office. 100%. And I definitely want to, I mean, this seems like just this access.

1:02:34People are selling cars on here. There's a Cayenne Turbo V8 for$57 ,000. They're selling all sorts of stuff. A VW Golf is on here for$6 ,000. Porcelain Jar, 200 years at City for$100. Some of these seem like great pickups. Nespresso. Somebody here is saying brand new Rolex Submariner. Date, skip the queue. Put that thing on bezel. Put that thing on bezel. Your bezel concierge is available to help you source any watch on the planet. Why stick to what's just on the Bloomberg terminal? Head over to bezel. Find exactly what you want. Create a wish list. Talk to the concierge. Get the perfect watch.

1:03:15Don't leave it to chance on the Bloomberg terminal unless you're trying to get a Lexus LX 570 2009 model year for 1975. Very funny. anyway i always find these uh these these um these screenshots from bloomberg like sales are always so funny because it'll always be like oh the market's down somebody's selling their private jet or something it's great but it's a good meme but it's actually going on all the time yeah regardless of market conditions Anyway, did you see this post? somebody in the admin said the golden age of american innovation it's not just somebody in the admin it's michael kratzios michael kratzios sorry i didn't even look at his name uh he said the golden age of american innovation is on our horizon if we choose it today we share the trump administration's technology policy agenda and then if you look in the agenda uh it's got a bunch of it says stagnation was a choice we have weighed down our builders and innovators the well-intentioned regulatory regime of the 1970s became an ever-tightening ratchet first hampering america's ability to become a net energy exporter and then making it harder and harder to build.

1:04:21We seem to have lost focus and vision to have lowered our sights and let systems and structures and bureaucracies model us along, but we are capable of so much more. Our technologies permit us to manipulate time and space. They leave distance annihilated, cause things to grow and improve productivity. And somebody highlighted that this line, our technologies permit us to to manipulate time and space, which sounds really dramatic. I think he's potentially just referencing the internet. I think Kratzios has discovered time travel. Yeah, very possible. He was formerly the CTO of America. He went away for a couple of years, worked at Scale AI.

1:04:58Maybe while he was there, he's tanking on time travel. You never know. You never know. Teleportation. You never know. We're so bad. He's got a clearance. Anyway, we have Ali in the studio. Welcome to the show. How are you doing? Hey, guys. Do you hear me OK? Yeah. You sound great. How are you doing? Great to see you. I'm awesome. I'm so excited to be here. Love the show. Great to see you, John and Jody. Great to have you. Can you kick us off with just a recap of the announcement? What's going on today? Give us a little bit of your background, and then we'll go from there. Yeah, I'm so excited.

1:05:27Today, we just announced that we have raised$320 million in new funds. Congratulations. Thank you. It's our fourth fund on the heels of really successful bets on companies that we were the seed investor in, like Cursor, Kalshi, Blue Sky, and many more. And I'd say more importantly, I'd say this is the moment where NIO is really coming into its own as becoming Silicon Valley's premier community for tech talent and startups. which is uh you know uh i've been a member of a lot of great tech communities and um you know and it's it's very exciting to be building what i think is the you know the next really great source for innovation in silicon valley yeah can you talk about some of your early career investments and how your strategy around investing at the earliest stages has evolved over the last like i don't know if it's been like 20 years of investing for you maybe more how long have you been doing this?

1:06:26Well, I was a CS student at Harvard and started a company shortly after college with two other Harvard grads, a company called Link Exchange that was one of the first advertising networks on the internet. And the success of that when I was 26, we sold to Microsoft. Ever since then, I've been a mentor to other startup founders. And I realized the most surprising and important lesson of my career was the difference that a single individual can make. and I realized there was a super skill I wanted to have, which was the ability to spot talent at a very young age. At the time, it was trying to hire the smartest young people to join my company, but then this kind of pivoted towards being a mentor to young founders and then an angel investor in those founders.

1:07:10And so I was fortunate enough to be really early in companies like Facebook, Dropbox, kind of Airbnb. be. I missed the very early round when Brian Chesky accidentally kind of pitched me in a restaurant. He was not even at my table. It was like a chance encounter. But I invested in a later round. So yeah, also Zappos, Uber, a couple of others. And yeah, I'd say the common theme there was not just being an investor, but helping these companies build their early teams and impressing on them the importance of hiring exceptional people. And in 2017, I started NEO with the really audacious belief that it is possible to identify future tech leaders when they're still in college.

1:07:57And not only that, but that we could build a machine, a systematic institution that identifies superstars and helps them maximize their potential. And today I have to pinch myself that I really feel like we've proven that this is possible and that we're doing it systematically. Neo-scholars have founded companies like Cursor, Pica, Cognition, Chai Discovery, and many more. And at this point, it's an institutional system, not just like one person going around with a knack to make investments. The meme of dropping out of college to start a startup has been fundamental to the history of Silicon Valley.

1:08:36Do you think more students should be dropping out? Is it not enough dropping out? And how early is too early? Should we be dropping out of high school, middle school? Should they get a year in the dorms to get a little bit of - I got a four-year-old if you want to write a check. He's ready. I love it. First of all, when you mentioned meme, I thought you were talking about there was a Twitter meme a month or two ago saying these are the institutions that students would drop out of Harvard and Stanford for. And it showed NEO, it showed the Teal Fellowship, but I loved it because it also showed Zach Frankel.

1:09:10It showed the logos and then just this one guy's face. We don't say that word on the show. We don't say the F word on this show. But no, but no. That guy's a legend. He's a one-man institution. But to your question, first of all, if you have a four-year-old, have them use code.org, which is the nonprofit my brother and I founded that teaches young kids how to code. Literally I started my four-year-old on it. Highly recommend it. But the question about dropping out of college, I think about it all the time. I mean, some of the names I mentioned were dropouts. And one of our best investments of the past year was in Sapien, which was three dropouts who didn't even finish sophomore year at Harvard, Stanford and UT Austin, respectively.

1:09:53Having said that, I think there's way too much of an emphasis on you have to drop out and you're not good enough if you don't drop out. Among Silicon Valley, obviously, not everywhere. But in the tech industry, I think it can be a little unhealthy. what we offer is a gap semester grant so it's like a teal fellowship but much less scary because at the end of the semester you can go back to school in fact that's expected it's just spend this take a semester off but build something of your own experience entrepreneurship and if you strike it big keep going you can then drop out you can then and then would fund you and you know there are some people for whom that would totally make sense.

1:10:35But if that doesn't make sense, I would say it's better to stay in school until you have found the thing worthy of leaving school for, the thing that your heart and your passion is really ready to commit to for years. Yeah. This is kind of the story of Mark Zuckerberg. He takes the summer off and is actually on deferral and then eventually never goes back, but then gets the honorary degree years later. But I have to ask, I mean, I want to go into the present, obviously, but how did you get in the early Facebook rounds? Like, what was that story? I know Brian Chesky, you meet at a restaurant. Was it a different restaurant?

1:11:14My stories as an investor are mostly about what an idiot I am. And I'm really, honestly, I'm not being humble. Brian Chesky, I'm at a meeting with a Wall Street Journal reporter that I thought was an important meeting. Random person at the table next to me pops in and starts entering our conversation. I think the Wall Street Journal guy actually started, asked him a question. And then before I know it, like this guy's pitching me his thing, Airbnb. And I remember thinking, this is such a cool concept. It's batshit. It's super ambitious. But if it works, this would be huge. But I was also annoyed.

1:11:48Like, don't you see I'm in an important meeting with a Wall Street Journal reporter here? um so I never forgot him but I didn't didn't follow up to my to my regret I invested in a later round yeah Facebook I cannot claim any credit for my twin brother Hadi uh who is absolutely brilliant deserves all the credit for that connection um uh he was introduced to them by Sean Parker when it was a nine person startup and we we referred the very first summer intern to facebook darian shirazi and you know served as advisors but at the time i remember talking to hadi and saying this company seems like a online fraternity are you like i'm not sure i see the business here it seems like it's really cool and i wish i could be back in college and be a member of this you know it was you had to be a college student to be able to use it it had like maybe a million users and i remember hadi saying to me no ali we're not betting on the company it's the person.

1:12:46And this, you know, 19 year old Mark Zuckerberg reminds me more of Bill Gates than anyone I've ever met. And the team around him were stunning, you know, and so if it hadn't been for my brother, I would not have been involved in Facebook. But this was 2004 or 2005 or so and was the germ of this belief of investing in people. Yeah, that is the core of what Neo is today. And Neo today, we discover college students long before they start startups and start mentoring them. We invest in them by investing our time. Yeah, do you think it has been very, like my friends that are investors, I think it's actually helpful if they get a huge win early in their investing career because they, one, know what great really looks like.

1:13:34They know what great operators look like and they have less FOMO in the sense that, you know, when they get pitched an idea that they like, but the founder's maybe not the right fit, it's just easier for them to pass. Do you think, do you find that, do you find that like, you know, getting, you know, big early wins has allowed you to like, you know, be a better risk on even? Yeah, yeah. More, more risk on, but also just being okay. Not like having that sense of FOMO being like, you know, I like this idea, but you know, I'm not going to invest. Yeah, yeah, yeah. um i'd say i still have all sorts of insecurities both the fomo as well as you know sometimes being unsure about what something is the right investment but what i've definitely got incredible confidence about is my ability to spot talent and and um you know when i started neo this idea that you could find future tech leaders when they're still in college this was a you know, kind of a crazy suggestion.

1:14:32Now I feel incredibly sure about not just my ability, but the company's ability to do that. But the other thing I'd say for me, I would say my path as an investor has grown more from my mistakes than from those early wins. You know, I remember when the smartest engineer at my own startup left to start something. He was a contractor, this guy, Max Levchin, who was 22 at the time, started what was called Confinity, which became PayPal. We all knew Max is brilliant, brilliant as an engineer. And we also all thought that Confinity was kind of a joke. It was like an app for the Palm Pilot to send money with infrared.

1:15:12And today, I would just say if Max is involved with anything, whatever involvement, I would invest in it because of the person. Whereas back then as a 26 year old, I had a lot of hubris. I just sold my company. I thought I'm the, you know, bee's knees. And so when you're too arrogant as an investor, you start trying to pretend like you're the smartest person in the room and poke holes in the other person's idea and like come up with ways that would fail. Whereas today my approach is maybe I'm not the smartest person in the room. Let's figure out if the other person is actually the smartest person, even if they're half my age.

1:15:48And if so, and if they're committing their life to something i just want to you know support them and help them and maybe i have wisdom to give or ways to help but not miss out in any way i should say similar miss same time frame 1999 or so my um one of the smartest people from harvard computer science craig silverstein kind of reached out to a whole group of us saying hey i need advice i'm joining as the cto of this startup my stanford phd friends larry and sergey are starting and i remember thinking poor craig he used to be so smart doesn't he know there's 10 other search engines this google company just because they have a better algorithm you know and honestly it was a foolish business idea like if you were to apply kind of mba type is this a good business plan you'd be like it wouldn't make sense What made sense is that the people were freaking brilliant.

1:16:45And today I would, in a heartbeat, bet on people of that caliber, even if they're taking on much bigger companies. Besides raw intelligence, what are you looking for? What's a conversation with you like if you're a sophomore in college? Well, I mean, the one to talk about is Michael Truel, the CEO, now the CEO of Cursor. I met him when he was a rising sophomore between freshman and sophomore year in college when I was interviewing him to become a neo-scholar. And so at the time, today, to become a neo-scholar, thousands of people apply through our website. But back then, I was basically the website.

1:17:29I was like, you know, it was such a grind visiting different campuses and so on. And I would give people technical interviews instead of what's today an online coding test. So I gave him a coding test equivalent to what it would, you know, evaluate whether he could get a job at a big tech firm or so on. He crushed it within the first 10 or 12 minutes, which meant we had the rest of the hour. I let him give me a coding test, which was actually much harder than the test I had given him. And I kind of I solved it, but that ate up much more than the other one. But the real thing I look for, besides, I'd say technical ability is a kind of, it's an important prerequisite.

1:18:14We back technical founders. But I ask myself, how magnetic is this person? The word magnetic, specifically, I'm asking myself, if this person started a company, how many of his or her smartest friends would drop whatever they're doing to join it? you know and you can get a sense of that just from your from the vibe of a person you can also get a sense of that from looking at what else they've done you know Michael Truel had had two startups when he was in high school I wouldn't call them startups but they were like small businesses that he had run and um you know and there's other people you can see where you can see what their role is in campus organizations do they join campus organizations or do they become the president of the campus organization or do they start a new organization and yeah so how magnetic are they and then i'd say the other thing is willingness to kind of not not accept the rules or not accept the status quo i'm not talking about breaking rules or breaking laws but just to see beyond them and just you know to have um such a kind of dogged commitment to what you're doing that if you see a rule or a law or people saying this has never been done before, never been done before, to figure out a way around it, including changing the law or getting the, you know, getting the government approval.

1:19:40So a company like Kalshi, we were one of the earliest backers in, this is, I guess it's a tech company, but I'd say their biggest innovation is regulatory. They have legalized trading on event outcomes, starting with things like pandemics and COVID to election results and now they're um they're now the largest sports within two months or three months of launch they're the single largest sports uh betting market in the united states all legally when everyone told them this is not going to be legal you'll never succeed at this we bet on them because of their doggedness to kind of see beyond those naysayers jordy um how much time do you spend thinking about the future today versus just obsessing over finding talent, right?

1:20:29That's a great question. There's a lot of venture capital firms that spend a lot of time thinking about their visions for the future, understanding markets, right? And that's really fun to do, and it's a strategy that can work. And when it does work, it's amazing, right? We all love these stories where a VC puts out a request for startups, and then somebody kind of goes and does it. It's amazing. But at the same time, like to me, you probably I would imagine you're spending time thinking about the future in the context of what an incredible founder's vision for it is. Yeah, it's a great question.

1:21:06Look, I love business ideas. In fact, you know, I am starting a new business on my own on the side with that. I've got an amazing team that we're incubating now. And I love brainstorming business ideas. But I don't spend time making predictions about the future and kind of claiming that I know what's going to happen. Frankly, I just I maybe it's insecurity or humility, but putting out a request for startups where we say this is what's going to succeed. That's not how we operate. We focus on is the other person smarter than me? We're obsessed with finding the top talent. In fact, I'm I'm dialing in from Stanford University.

1:21:46I don't know if you can see the background right now. You know, like, yeah, I'm in a room at the Huang Engineering Center. You, you, you, drop out, drop out right now. Come over here. Come over here. Take my money. Do you bring check? Do you bring handwritten? Yeah, yeah. He's flipping a sign on campus, but it's just a big check. Just say. Yes. I love it. Drop out, drop out, please. Take my money. Joking aside, what we do, actually, is we come in and not just at Stanford, also at waterloo harvard princeton yale um mit myself and my team members will go in and provide an entire day of office hours if anybody wants mentorship book you know book 20 minutes or 30 minutes and it could be on your career it could be on job search it could be on some startup idea you're thinking of we almost never try to encourage anyone to drop out um we're here to lead with mentorship and helping young people.

1:22:42And by the way, I don't even define NIO as being a VC firm. If you look at our website, we call ourselves first and foremost, a mentorship community. Our North Stars are about mentorship and community. And our business model is investing. But I can tell you, it is so exciting to meet a college student who might be 19 or 20 and to realize I'm talking to somebody smarter than myself, whose potential is to be bigger than myself. And, you know, that's what I felt when I met Michael Truel five years ago, and started investing in him. And what I mean by investing means spending time inviting him to events, you know, inviting him, connecting him to my network.

1:23:23And we introduced him to his first startup internship at a company called Octant, his MIT friend Amon Sanger, we connected to his first startup internship at a company called you.com. And And when the two of them, two and a half years later, their senior year said they're thinking of doing a startup, I started booking time to mentor them every few weeks to help brainstorm ideas. When they decided finally that they're ready to fully pursue it and they weren't dropping out, they graduated. We were like no question first to invest in them. And at the time, it was just two guys and an idea. And they even changed the idea.

1:24:05So we were just investing in the two guys. Do you end up, I'm curious, how many times a year do you end up having one of these founders saying like, hey, can you talk to my parents? They want to know if, you know. This is a story with Michael Jordan. Yeah. Yeah, when they were creating, they went to the family. I feel like this happens a lot. You want like total alignment between, you know, the entrepreneur and the family. Like ideally, it's not necessary, but I'm curious. I'm sure you've had some of those conversations being like, no, I'm going to give your son a million dollars and yes you know they're not going to have a degree but like you know they have a real you know i think uh not not every parent understands uh that you know just getting across the line and raising venture capital is a signal to the market that uh that that's similar quality in many ways to a college degree i what i love about this question is that you recognize the human part of what's going on.

1:25:01This is not just like, oh, how much money or so on. It's not just about startups. These are, we're talking about human beings who have the same hopes and fears and parents as you and I do. And it's, I love that you are in like 20 minutes thinking of the things that it's taken us a few years to think of. But yes, I speak to parents every year, a few one-on-one type Zooms. But this year we actually created an event called Parents Weekend, where we flew out the parents of the neo-scholars, all for like a weekend long of like talks by Scott Wu from Cognition and other, you know, other people who, whether they dropped out or started a company a couple of years after college, leaders that the parents could look to and see, oh my gosh, yeah, I guess my daughter or son could end up being like this person and this is legit.

1:25:54And it's, you know, it's not riskier or less prestigious than getting a job at, you know, OpenAI or Ramp or whatever big company. Can you talk a little bit about the business model right now? I mean, if you take a scholar who is going to do something entrepreneurial for the summer, is that like, we're setting up a C corp for you, we're taking 7 % or something like that. And then if it winds down at the end of the summer, you go back to school, that's fine. But we're set up for the corporate journey and and just putting you on Sand Hill Road and raising a mango seed? Or is it more like Teal Fellowship's a nonprofit, but then obviously once you do the Teal Fellowship, you go out and raise, and plenty of people aligned with the Teal Fellowship have access to those deals, et cetera.

1:26:41But how do you think about just mechanically going through a partnership with you? Yeah, so in some ways I would say we are the signal of finding the great undergraduate talent that the Teal Fellowship once was. You know, if you talk to anyone at top universities, they now, what they'll tell you is, you apply to become a Teal Fellow after you've dropped out and after you've raised three to five million dollars in funding, then become a Teal Fellow. And the majority of the Teal Fellows followed that path. They became a Teal Fellow long after raising money, long after dropping out of college. We identify people years before they might start a company.

1:27:25And the main thing we offer them is not cash. It's the network and the mentorship and the real care and attention to helping them figure out whatever path is best for them. That might be graduate school. It might be getting a job at OpenAI. Last year, OpenAI hired all of their new grad hires through NEO. and it might be a job at a startup. If they want to do, though, like you said, do their own thing, the way we are currently structuring it is a gap semester grant. So it's not a summer, it's a gap semester because we want that person to show a little sacrifice. If it's a summer program, it'll attract, you know, funtrepreneurs who are just kind of looking for a summer camp and, oh, this will look good on my resume instead of interning at Google.

1:28:12You know, there might be other programs that do that, But our view is if we're going to give them a grant, we'll make them take a we'll offer them a chance to take a semester off with other students doing the same thing in a shared workspace. So we provide shared space, community. So you're not alone and twenty thousand dollars equity free just grant grant and and and mentorship on a week to week basis. I'll spend time with them. We have other mentors who spend time with them. But this aspect of being in a shared space and having the other students who are doing the same thing is very different than programs like the Till Fellowship.

1:28:48So of the 350 that you just raised, some of that's going to grants and then some of that's going to probably like participation in seed rounds once the C-Corp is set up. But then like, are you trying to do pro rata? Are you trying to concentrate into the best companies as they grow? Or will you set up a separate growth vehicle or is that just not in the cards? We're not planning on doing a growth vehicle. And this has been a very conscious decision because it sounds like you're quite familiar with how VC works. The standard path, if you're a VC and you're ambitious and you want to be number one, the standard path is to raise more and more and more capital, which means invest in later and later rounds and become, over time, an asset collector.

1:29:32You've got to go public. That's the new hot thing in 2025. If you're not taking your firm public this year, what are you doing? Exactly. But yeah, the industry term for it is AUM bloat, assets under management bloat. And we consciously thought about this and said, that's just not us. That's not what we want for our future. We would rather bet on our own returns. We would rather grow in quality than quantity. We'd rather stay small. So the program I mentioned for college students only accepts 20 to 30 neo-scholars a year. We also have an accelerator, which we haven't talked a lot about, but it is aiming to be the most selective program for young technical founders there is.

1:30:15And it offers 600K standard deal to participants. That's only funding 20 companies a year. We want to stay selective rather than ballooning and growing based on volume. and that said we're also very ambitious so we were thinking about how what's our path for growth what's our plan for world domination and it's betting more on our own returns and what that means is this fund even though it's barely larger than our last fund our partner's investment meaning you know my own money from my pocket into this fund is far more than any of our previous funds in fact it's about the same as all the previous funds combined and so we are going to be betting a larger and larger share of our own money into our funds over time and essentially betting on our own ability to identify killer talent and we love betting we love betting on yourself your own fund congratulations on the fund it's been fantastic talking to you thanks so much for coming to see the new scholars and companies coming out of neo yeah and then snipe them and do the rounds before ally can get to them yeah just kidding good luck be wary be wary of you know You don't want to publicize these guys too much.

1:31:28If you get some spies in NEO, they're going to start front running. So you've got to get your cybersecurity up. I am not worried about that because we have such good relations. I can tell you right now who are the college students right now that are going to be future tech leaders. I love it. And there are other VCs who look to see who NEO scholars are. In fact, the Forbes feature we had this morning, Christina Shen, who is an absolute superstar, formerly from A16Z, now she has her own firm. She said NIO is the number one signal that she looks to more than any other program or accelerator for where future founders are.

1:32:07And yeah, so it is hard when we do this and identify someone so young because then there'll be actually competition for who gets to invest in them. But our view is that we want to be their most supportive advocate and mentor and earn the privilege to invest in the tech leaders of tomorrow. Well, your work ethic is inspiring. And the only thing I would ask from you is put, as you leave that room, put TVPN on the TV behind you. Just let it play. I'm going to put it on the whiteboard here right now. Fantastic. There we go. All right. Thank you, Ali. Thank you so much. There we go. I love it. All right.

1:32:48There we go. There we go. That's good. There we go. Thank you so much. Thank you. Have a great rest of your day. Cheers. Bye bye. Next up, we're pivoting back to China. There's a new IFP report from the Institute of Progress all about NVIDIA and the H20 problem, inference supercomputers, and US export control gaps. we have Tim coming on the show to talk about it. Editor's note at the top of this thing. Shortly after this piece was published, NVIDIA disclosed that the US government had informed it that the export of H20 chips violates supercomputer end-use restrictions. As we claim in the piece, we applaud the Bureau of Industry and Security for its quick action.

1:33:32So they posted this. I'm sure they've read the... Yeah, they probably read this. There's probably a pre-print going around. But it's a very, very detailed report all about chip competition and everything we just talked about in the opener and in the deep dive. So I'm excited to get him to break some of this down. I'll read from the summary while we're waiting to get set up with him. The United States is on the verge of repeating a critical strategic error. Despite having the legal authority and technical tools to constrain China's access to advanced AI chips, the U.S. government is failing to enforce existing export controls or adapt them to new threats.

1:34:06As a result, Chinese firms are exploiting loopholes to acquire powerful US hardware, undermining America's lead in frontier AI. The most immediate risk is the pending export of over 1.3 million NVIDIA H20 chips worth more than 16 billion. When we talked to Jordan yesterday from ChinaTalk, he was saying, it's$2 billion, that's a lot. And remember, I was saying, that's not that much, Stargate's 500 billion. Well it turns out that the proposed number was actually more like 16 billion. Jordan very thoughtfully posted and mentioned me to flag this, but it is a much bigger number than people thought.

1:34:43Of course, the chips are worth 16 billion. The economic impact to Nvidia is 5.5 billion, and these chips were gonna go to Chinese tech giants, including ByteDance, Alibaba, Tencent, et cetera. They're optimized for AI inference. One second, we're getting some errors.

1:35:06The team will email you. While we're getting errors, I'll just put this up across the screen. Yeah, I mean it's a great time to do some ramp ads, some ads of all types. What else do we got in here? We've done Numeral, we've done Eight Sleep, but we haven't done Wander. Find your happy place. Find your happy place. Book a Wander with inspiring views, hotel-grade amenities, dreamy beds, top-tier cleaning, and 24-7 concierge service. It's a vacation home, but better, folks. And we can go back to the IFP. So these chips are optimized for AI inference as we discussed, and they're likely to be used in Chinese supercomputers, which violates U.S.

1:35:46export controls. At least one of the buyers, Tencent, has already installed H20s in a facility used to train a large model, very likely in breach of existing controls, restricting the usage of chips in supercomputers exceeding certain thresholds. DeepSeq's supercomputer used to train their V3 model is also likely in breach of the same restrictions. Should I just call him? Let me see. What would be the best? He's having a Zoom issue? Yeah, he's getting an air on his end. Something. Let me see. Could try on his phone, too? Maybe. Let me see. All right, I'm going to keep reading. The failure is part of a broader problem.

1:36:30Broader pattern. Huawei stockpiled restricted chip components, including chip dies and high bandwidth memory before controls took effect. We talked about this earlier, just stockpiling that happened over the last few years. TSMC has facilitated production of over three million cutting edge chip dies directly for Chinese firms for Chinese AI efforts, sometimes in violation of U.S. chip rules. DeepSeek, a Chinese lab-trained, state-of-the-art models using American chips sold legally due to delayed restrictions. The rationale behind export controls remains sound. AI models trained and deployed on the most advanced chips pose national security risks, but the administration of export controls is failing to keep pace with new developments in the field.

1:37:14Inference, once seen as secondary, has become central to training, fine-tuning, and increasing the capabilities of deployed models. the H20 a chip specialized in inference is already 20 % faster than the H100 for inference tasks that's very significant and so this is where they get to like straight-up policy recommendations the US must act now we recommend that BIS should immediately block the H20 chip shipments using its existing authority and so a lot of times these laws are written and people just don't really know how they can be interpreted obviously different companies are arguing for different interpretations.

1:37:50It lands in the courts, but IFP is arguing that there's an existing rule here, 15 CFR 744.23, that will allow them to block H20s, which I think is what happened. NVIDIA must investigate and halt transactions that raise legal red flags under its Know Your Customer obligations. BIS should update export controls to cover inference chips, which is what's happening, and the White House should empower a technical team, ideally within the AI Safety Institute, AISI at NIST, to forecast AI threats and proactively shape control policy. And five, BIS should track chips once exported to high-risk locations by incentivizing industry adoption of chip geolocation features.

1:38:34Yeah, we've sort of referenced this before, but it'd be interesting to kind of get a sense of what the black market chip market looks like. Yeah. Just because you can imagine chips flowing to various countries to presumably an end customer that then get resold and moved across borders, things like that. So very fascinating. X is saying that Zoom is down. Oh, really? It seems like there might be actually an attack all over the internet. I think there is a massive... Spotify and Apple are having trouble today. But you know what? The haters of X. X seems to be working. We're live. We're live on X reporting downages across the rest of the internet.

1:39:18Yeah. And everyone was saying, oh, X is going to be the first one to go down. He can't possibly keep the servers on. That Elon guy knows nothing about software engineering. But the X server stays live. And I think we're still live on YouTube, which is great. I'd love to see it. Anyway, maybe we should do some timeline while we get that set up, settle into this debate all about Katy Perry or space. Yeah, we should. When I heard that Apple Podcasts and Spotify were down, you know what I thought about? Big radio. Big radio. Big radio. We really need a SiriusXM deal. You know the satellites are still cranking out content.

1:39:53You just turn on the radio when the internet's down, in your car. Turn it up. You get three years free when you buy a new car. And TVPN should have its own channel on there. We should do a deep dive on SiriusXM. Interesting business. Yeah. I want to do more of those weird niche deep dives that aren't covered that much. I was reading about Jim Cramer's career yesterday. That was a really interesting one. Even the Johnny Carson show and how that whole industry developed. Have you followed any of the late night wars? Are you familiar with this? So Johnny Carson started the late night or the Tonight Show.

1:40:31It's called the Tonight Show with Johnny Carson. He started that, eventually became the highest paid celebrity in all of Hollywood. And then when he retired, Jay Leno took over. I believe I'm getting this right, I'm kinda doing it off the top of my head. But Jay Leno took over. Jay Leno had another historic run and The Tonight Show was more popular than ever. So Jay Leno buys a McLaren F1, he builds this massive garage of hundreds of cars, he's fabulously wealthy. Then there's this weird wrinkle where he's going to retire and I think NBC owns the whole thing. They say, hey Jay, it's time for you to step down, you're under contract, we're gonna maybe put you on something else, you're gonna go to an earlier slot, I believe, different show, which I think would be not a big deal at all, it didn't go well at all.

1:41:17So Conan comes in, takes The Tonight Show, and that's, I think, kind of working, but there's always an adjustment because the audience is slightly different, the lead-in is slightly different. It's like, because if you think about it, if you're just, the average TV viewer is watching prime time, so they're watching CSI, or they're watching Law & Order, or they're watching, I don't know, whatever is on primetime. I don't watch TV, but these normal shows. Yeah, primetime, you know primetime. Primetime, yeah. What's Modern Family? That's like a primetime show, right? Those types of things. So you're watching that, or The Simpsons, right?

1:41:52That probably comes on at 7, whatever. Then that flips over to late night, and you're getting the news, but in this funny comedy variety way with interviews with celebrities and stuff. But then the second, there's actually several blocks, So there's like the 10 a.m. late night show, then there's 10 p.m., 11 p.m., midnight, et cetera, and it kind of moves through. And so if you're the second show, you can't just repeat all the same things that are on the first show, because then the person might be, ah, but why am I getting repeated information? And so you kind of have to retool the show. Anyway, Conan comes in, Jay Leno doesn't like it, and he's like, hey, I wanna come out of retirement, I actually want my show back.

1:42:30And so he comes back, and that kind of kicks Conan and out of his whole flow because he had a show. And so then he goes off to like TBS and does his own show, starts a podcast. He winds up becoming very successful, but it's like this big drama about like, you know, how that happened. And then I think the final Tonight Show landed with Jimmy Fallon, I believe, one of those guys. There's so many of these late night shows, show hosts at this point. But anyway, we should dig into how that all that stuff works. Let's talk about Blue Origin. Yes. Maria posted yesterday on X, at Jordie Hayes, at John Coogan.

1:43:03Please discuss Katy Perry and Blue Origin on the pod tomorrow. Here we are discussing it. Do you want to give some context, John? Yes. So when I first saw this... First of all, Monday morning on every single mainstream television, every mainstream television outlet was reporting this live or relatively live. Yes. We were in the gym. We were in the gym. And every TV was... It was, as they say, wall to wall. It was wall to wall. But it was very interesting watching because, so Gail King was one of the crew members, right? And she is an American TV personality on CBS Mornings. She co-hosts CBS Mornings.

1:43:46And so CBS was like, this is our girl. Like, we gotta cover this for an hour. And then you'd flip over to what NBC was doing, and NBC was like, this is important, but it's not our girl that's there, So like we're gonna cover it for 20 minutes. And then even CNBC and Fox Business would cover it for like a few minutes just to be like, hey, this thing just happened, it's live. So just like tune in for a little bit, the rocket launch, like give you a little update, but they're not like lingering on it. But anyway, I thought the take that people wanted to hear was just like space travel is cool or like space tourism is cool.

1:44:21First of all, space tourism is cool. It's cool to see these big celebrities going up and it not just being another guy who sold some company in the 90s and wants to go to space. Yeah, you mean Jeff Bezos? He literally was on the first track. Jeff Bezos did it, but he did the whole thing. But the history of space tourism is usually a technology brother who just really wants to go to space, figures out a way to get it done. It's not as high profile. I mean, that's the story of the new NASA administrator. The new NASA administrator did the first civilian spacewalk on SpaceX. Like he went to real space.

1:44:53So Blue Origin takes you past the Karman line, which is like 300 nautical miles, I think, something like that. And so you go to space, but like just barely technically and it's not nearly as risky or aggressive as being like on the International Space Station, like way, way up there. And so what was the, first of all, one, space is awesome. I thought they handled themselves very well. Just a really cool story. Bezos was looking absolutely diced. He did fall right next to the capsule, which was unfortunate. But he picked himself right up. He's clearly in the gym. He doesn't skip leg day because he popped around.

1:45:29Maybe he just wanted an opportunity to kind of push up. For sure. For sure. Off the triceps. But what was the controversy surrounding it? A lot of people came out and said it was faked or certain aspects of it were faked. Yeah. I'm not going to put on the tinfoil hat. No. Because I don't. Well, I think that there's an alleged conspiracy that they never even left earth, I guess, which is very funny. but I do think that there is a conspiracy here that we should get into. So this is a viral post that got 44 ,000 likes and 11 million views. Here's definitive proof that the Blue Origin mission was faked and it all centers around the fact that when they landed, the door opened and Bezos is there with like one of the hosts or someone and they kind of say like, hey, close that door.

1:46:18And then they wait and then they open the door and everyone comes out. And so there's this question about like, how did they open the pressurized door without knowing, right? And so, but the interesting thing, oh, you just want to put the thing in here? Okay, cool. Just up here. Hey, Tim, how you doing? Not bad, how are you? I'm good. Are we in the midst of a major cyber attack? Yeah, what's going on? Spotify was down this morning. Apple was down. Zoom's down now. Remote workers are in shambles. Yeah, it's a disaster. I mean, I guess everyone else is just taking the day off. I appreciate you guys have a backup plan.

1:46:55This is great. Yeah, it's great. Well, can you give me the high level on the report? It seems like you published right before there were some changes. Give me the high level and how things are developing. And in all, half joking, half serious, but do you deserve some credit for the shift here? Yeah, it seems on the credit side, I don't think we can take much. It looks like there was a lot of things happening behind the scenes. I will say the fix that we have now is just a short-term thing. There's a lot of long-term stuff that needs to happen. But to, I guess, back up as to what's actually going on here.

1:47:29So, yeah, it's been a pretty whirlwind 24 hours for the AI chip export controls. So you guys might know, in early 2024, NVIDIA launched this new AI chip, this AI GPU called the H20. It was specifically designed for the Chinese market. so it was designed to stick within the computational limits that were defined through export controls. But it turns out that the H20 actually had great performance for doing inference, so running AI models as opposed to training it. And this resulted in a situation where actually it was really good at inference and even better than some chips that are already banned.

1:48:05And this all happened during this sort of 2024 trend of inference for AI models becoming way more important for capability growth through, you know, models like O1 and DeepSeq using test-time compute as well as other techniques like synthetic data generation, RL. So basically a bunch of these like sold like crazy. Over a million were shipped in 2024. And so this is like a really big deal. We had inference compute flowing freely from the US to China during this period where inference compute was becoming the key strategic input to AI development. And people like myself were going, wow, Washington should really be reacting to this.

1:48:37But they were really slow to react. and it became sort of a couple of things that we learned last week. One, there was a meeting between Trump and Jensen, the NVIDIA CEO at Mar-a-Lago, which is apparently a$1 million a head dinner. And after that dinner, the White House reportedly reversed course and he plans to control the H20 chip. And then last week, we also learned that Chinese companies had placed massive new orders for these H20s, so over$1.3 million so far this year. And this is like recently over just the last week prompt to this. A lot of calls, including from us, to stop these orders going through.

1:49:12And yesterday, yeah, it became clear that BAS is actually, BAS is the Bureau of Industry and Security who does export controls, has taken action on this. I just threw a lot of info at you, but that's just where we're at now. We can talk more about sort of what we think should happen next. But yeah, it's a pretty crazy situation at the moment. I'm curious, what's your broad stance on NVIDIA at the moment. Jensen has obviously been in a tough space of being an American, yet at the same time needing to represent the interests of NVIDIA and its shareholders. China's a massive market. And do you imagine that everybody just needs to move on from China and focus on servicing demand in the U.S.

1:49:55and our allies? Or how do you think it should be approached at this point? yeah it's a tough situation for nvidia i think the line that they use is you know if you set the uh speed limit at 60 and we're going at 55 that should be fine right like we're just trying to stick by the parameters that you set in these export controls and sell chips that are compliant and then you have the government sort of uh you know making these big changes to sort of after nvidia has designed these chips and is like ready to start selling to the market making these big changes that like prevent their market access overall uh so you know if i'm a big nvidia shareholder i'm like pretty annoyed about this right i'm like okay let's uh let's have like better proactive policy making around this stuff like i'm pretty sympathetic with that perspective um but yeah i think realistically uh you know nvidia is a publicly traded company that access to their revenue they want to sell chips into china they're not sort of seeing the same national security concerns that a lot of people in washington now seeing and to be frank a lot of people in the AI industry directly as well.

1:50:56Whether, yeah, I think there's some question marks around whether they have been fully responsible with sort of doing their due diligence for shipments that are going into China and ensuring that like control chips aren't being smuggled and that they're sort of complying with the letter of the law. Yeah, overall, I think we just need clear up policymaking ahead of time so it's easier for them to make these decisions. Do you have a sense of what the black market for GPUs looks like? I imagine, you know, you guys made a recommendation to add sort of like geolocation to these high performance chips.

1:51:30And I'm curious if you have any insight into how chips are flowing around the world in a way that may not be aligned to US national interest. Yeah, so we've been checking this for the past couple of years. So we put out a report in late 2023 that sort of looked at this question of okay we've got these chip export controls now uh what sort of scale of smuggling should we expect and at the time based on sort of news reports mainly the sort of cases that were being surfaced were just sort of single digit number of gpus at the time so at most sort of like you know a single server like a gpu is being smuggled at once um and now uh sort of like a bunch of reports came out last year that this is now just a huge industry um some estimates is there's sort of around 100 000 gpus went into china um last year it controlled gpus some people think it's much more there's individual cases that have been uncovered where there's uh over 20 000 gpus being smuggled at once and so this is some pretty serious shipment sizes like going into the hundreds of millions to billions of dollars um and there's likely a lot we just don't know especially for these large orders which is sort of happening through professional operations behind the scenes um and in as much as it is happening this you know shouldn't be a surprise.

1:52:39You know, China has a long history of smuggling controlled goods despite sanctions and export controls. And, you know, it's proven that they were instrumental in helping to smuggle chips to Russia over the last two years to support the war in Ukraine, despite sort of US sanctions. So this would be like pretty on brand with the China playbook for this kind of thing. How far behind do you think that China's domestic chips really are, right? You know, We just did an entire backstory on SMIC and Huawei and things like that for our audience. And we had Aaron get on the show yesterday talking about how the gap in capabilities is maybe not as significant as companies like NVIDIA or TSMC would have people believe.

1:53:25But I'd love to get a sense from you of how wide the gap, the capability gap is. Yeah, so I think there's two dimensions to this. First is the quality of the chips themselves. So if we look at that, you know, how many flops are you able to get per second?

1:53:47The bad news chips that are coming out now are sort of three to four years behind the best stuff that's available from NVIDIA. But, you know, that has been a move towards catching up over time. I think export controls are the one thing that could reverse that trend as these have only really just become effective over the last year or so. The other, and this is sort of the, a really important factor is not just how good each chip is, but how many they're able to produce. So, you know, in AI especially, it's not so much a matter of quality of chips that that is important. It's also very much quantity, like how many you're able to produce.

1:54:20And there is where they're really constrained. So being able to produce, you know, high-end chips by the sort of millions like TSMC is able to do is a very serious manufacturing operation. And China doesn't have that level of scalability. And because we have export controls across the stack, with tooling and fabs as well. That is one of their key bottlenecks. What do you think Chinese state investment into semiconductors looks like today? It's obviously they've had 14 separate five-year plans, I believe, around the industry. So at this point, I don't know how many hundreds of billions or who knows even dollars have gone into the industry, but I imagine this is, you know, one of the, you know, we'll just continue to be more and more important every single year.

1:55:10Yeah. So the way this has been described...

1:55:18Hello? To revitalize the American domestic semiconductor manufacturing industry

1:55:28over time, China is doing this sort of equivalent amount of funding roughly every year to support a domestic industry. Tim, we keep losing you, by the way. You're kind of cutting in and out. Maybe the cyber attack has shifted onto your personal mobile device. They really don't want Tim talking right now because he's dropping bombs. But could you repeat, I think we have you now, could you repeat what you said your potential estimate was? Chip Insurance Act in the States, this big landmark piece of legislation to revitalize the semiconductor industry here, that was about$52 billion as sort of a once-off package that's being distributed over a few years.

1:56:14Best sources I've had say China is distributing this equivalent amount of money roughly every year to their own semiconductor industry. How do you think Huawei is reacting to the tariffs? They're a private company, so I feel like we have a lot less information on a lot of things. But are they approaching some of these other nations that are facing tariffs specifically with basically trying to take advantage of the situation? Yeah, I didn't use it. I'd be doing in this situation. So similar to how Huawei managed to outmaneuver the United States with 5G, installing base stations all over the world and sort of surpassing the U.S.

1:57:01in that technology, a similar play that they could be executing now is trying to do the same thing on data centers, especially if U.S. equivalents are becoming much more expensive. But now they don't have comparable technologies on the AI chip side, but they certainly do on the lower end stuff. you know, Alibaba Cloud, like Huawei, they all have their own data center offerings that they're sort of pretty aggressively courting the global market with. Makes a ton of sense. What else are you thinking about right now in terms of, you know, now that the news came out that the order is being stalled?

1:57:36What do you think the admin should be focused on, you know, over the next weeks and months? Yeah, so I think that one big lesson from all of this is that we keep making the same mistakes in the sense we keep acting too late to really be effective. The thing with export controls is you want to act early because there's always the risk of things like stockpiling, like if there's a room that export controls are coming and they don't happen for another six months, it just gives a huge opportunity for companies to take preventative action, then you can completely ruin the effectiveness of what you're trying to do.

1:58:11This has already happened with HBM memory, so like high-end memory that's really crucial in AI chips. The rumor was leaked that controls for this stuff was coming, and Huawei reportedly stockpiled around 2 million chips worth of this before the new rules came into place. We've also been caught blindsided by DeepSeek, finding out that they trained their models with US chips that were sold before the restrictions and policymakers being like, wait, what's going on here? the sort of SMIC when they came out with their seven nanometer breakthrough in 2023. It turns out that we're using secondhand DUV machines, which we have since controlled, but they already got their hands on them.

1:58:47There's been a bunch of cases like this. And really, yeah, we've just been much, way more reactive than we need to be. I think if you just had a team within government who is technically competent and will actually see what's really important, going to be really important for AI technology in six months, you could actually be doing much better proactive policymaking. So one thing we're advocating for is just setting up this kind of situational awareness capacity within government So we can get it right next time Yeah, that makes a ton of sense. Well, we should have you back on when we have Under attack apparently Google meat is down as well I don't know exactly what's going on but story is still developing But I mean, thank you so much for taking the time we really I really do want to have you come back for a much deeper dive into all of this because it's fascinating.

1:59:34Yeah, let's get it on the calendar today. Absolutely. We can do this properly, but thank you for making it work, Tim. And thank you for following the situation so closely and trying to get us on the right path here. All right, guys. Catch you later. Cheers. Talk to you later. Bye. Awesome. This is crazy. Everything is down. Everything is down. Down Detector is showing that not only is zoomed down, but Google Meet is down as well. I thought we could shift over, but we will have to figure it out. Let me message the rest of our guests. Zoom down, BTW, Google Hangouts, too, working on a fix. Pretty crazy time.

2:00:22I don't know if there's anyone actually reporting on what's going on. All I'm seeing is that apparently. Well, I have some reporting. OpenAI is buying Windsor. Yeah, I was about to say, we should just talk about that. Maybe we just do the timeline. And we get the guests to come back tomorrow and just do a stacked meeting. Because it seems like we are absolutely under attack. Yeah. And hopefully it resolves tomorrow. But we had two interesting companies coming on. Captions is launching some stuff today. That's the app that actually Ev Randall over at Kleiner invested in. And I use that app all the time.

2:01:04Anytime you see me post a video that has some captions on the bottom, always captions app. I love it. And then Dec announced a big fundraiser today, something like$12 million. And we were excited to talk to them. But instead, we might just talk about the timeline. Because nothing's working. So yes, this is a scoop from Bloomberg. OpenAI is in talks to buy coding app Windsurf, formerly known as Codium, for around$3 billion per source that's familiar. It would be OpenAI's largest acquisition to date. They haven't been super acquisitive, but it makes sense. It's like if they need a wrapper in every single space, maybe they should just go and acquire them.

2:01:45We've been hearing rumblings about like a code-first model, something that's really, really trained. I mean, it seems like OpenAI on the API side has become, at least this is the vibe on X is like, oh, if you're gonna use cursor, you're gonna use clot, right? And for most consumers, they're still, yeah, ChatGPT app, I use 4.0 or whatever. But for the developers who really care about the quality of the code, that little extra push is what's valuable. And so having both a model that's trained by OpenAI to be specifically good at programming, And then also having something that's popular, like the wrapper built on top of it, all the integrations that you get from Winsurf, makes a ton of sense.

2:02:28So Zach DeWitt over at Wing VC, I believe. Yeah, partner at Wing VC. I clocked it. Good memory. He's an incredible outcome in four years. They did a seed$3 million on 26 posts by Green Oaks. Another billion dollars for Green Oaks. Another billion dollars for Green Oaks. Yeah, quick plug for Patrick's latest episode with Neil Mehta over at Green Oaks. You can go find the episode Finding Future S &P 500 Companies on Invest Like the Best. Go check it out. Yeah. Then they did a Series A,$25 million on 215 post, again by Green Oaks, doubling down. Then Kleiner comes in for the Series B,$65 on 510 million post.

2:03:13and then$150 million Series C at 1.25 post by General Catalyst. So founders and the team likely own 55%. So that's over a billion dollars in liquidity to the founders and the team. And at 20 % of$3 billion, Green Oaks will be just shy of that billion. Yeah. So, you know, a small size gong for a mere$600 million. I would assume they own, do you think? Oh, maybe they did like ProRata and stuff. No, but I just assume they bought, you know, they continue to buy up. So I don't know. I mean, 0.25 of 30. What was it? 3 billion, right? It's 750 million. So something around there. Not bad. Not bad for a$28 million investment.

2:04:02Yeah. To go from 28 million in to 750. Yeah, it's interesting because you often see green oaks doing some of these later stage rounds. Yep, they're known for growth and being very analytical. But doing this one from Seed is... They got into Seed and the Series A. You'd love to see it. Very impressive. Your jacket is going viral right now. People love it. Yeah, we should just... Since our video stream is still up and all the other platforms... Yeah, let's just do more ad reads for the rest of the hour. The back. Yeah, the back is great. I love the Lucian ramp. We put our sponsors on here. We also just put companies we're affiliated with.

2:04:39We still have a message. We still have space. This is going to be a - That's legacy. So that's, yeah. So yeah, I mean, if you're in the audience and you got some dough, maybe you want to get on the jacket. Now's the time to email Jordy. We're almost pretty much out of inventory. Get out your ramp card and sponsor us. We are 100 % corporate backed, by the way, just so you know. That's right. We will never ask our audience for a dollar. We're not audience captured. we do what's in the interest of the corporations that sponsor us. Independent media is dead, corporate media, as I call it, is the future.

2:05:15That's right, free media for all. Anyway, speaking of corporate media, the media around Blue Origin, we should go back to this because we didn't get to finish the conspiracy theory. Can we play the video? Yeah, we can probably play the video if it's up. We'll have the team try and pull that up. But, so the door opens to the Blue Origin capsule as it descends, then they say, hey, don't open the door, close it. And then finally they open it up and everyone comes out. And so this was seen as proof that the mission was faked. And there is a conspiracy theory here. But my conspiracy is a little bit more anodyne.

2:05:53It's that they wanted all the cameras to be turned on before they did the big reveal of like getting out of the spaceship. And so they opened the door. Yeah, you can see they open the door and then they close the door. Not yet because NBC is here, but CBS hasn't arrived yet with the truck. Because these capsules, they come down. You can't just be right there. They don't know exactly where they're going to land in the desert. So if you watch the zoomed out feed at the very beginning, I think, at the very beginning of this, you'll see all the trucks are driving. They're scrambling to get to the landing site.

2:06:23Bezos was clearly just the first one in the chase vehicle to be like, I'm going to get there first, make sure my wife's okay, check in on the girls, the girls to the girls chat as they said girls group chat yeah he sent the group chat to space um sent the group chat to space uh but oh bezo's falling down the hole but he gets right back up he gets right back up that is crazy oh my gosh that is a big drop i hope he's okay drop i hope he's okay um but isn't that what brian johnson is deathly afraid of falling like a fall oh really I didn't know that. I thought he does leg press. I think it's because.

2:07:00He doesn't do that much leg press, so he's worried about it. So Andrew Cote. Cote. Cote says, can any space nerds help me understand how the blue origin capsule came back down without any reentry burns? Was this a trajectory thing or some kind of superior material used? Falcon crew capsule for comparison. So Scott Manley jumps in. He says, it only flew at Mach 3 fast enough to reach space for a moment. And to be clear, Andrew is trolling. He knows what's going on here. He's baiting the timeline to make it be like, oh, it's a conspiracy. But he, everyone's like laughing like this is like S-tier bait.

2:07:35Because he knows that when this mission, I mean, they've done these missions all the time. And they never get burnt because they don't go that fast. And so that's what Scott's enumerating here. He's laying it out. Scott says, it only flew at Mach 3. Fast enough to reach space for a moment. Not fast enough to stay in space. For that you need Mach 25. As you can imagine, there's a huge difference in the kinetic energy between those speeds. And so the real conspiracy theory here is that this was a fun space tourism thing. This is marketing for space tourism. But it's marketing for Blue Origin. They did a great job of puzzling together what is the crew that would probably go the most viral.

2:08:13So it's not just Lauren Sanchez, because that's probably not newsworthy. You gotta put Gayle King on there, so CBS has bought in. But then also throw in Katy Perry, because throwing Katy Perry, you create an even wider audience of, you know, she's a global celebrity. Everyone needs to know about Katy Perry going to space. And it just seems like it's a lot of fun. So I would definitely go on one of these. I think this seems like a really fun trip. It's only a quarter million dollars. So I was thinking. They're basically given space trips away. They are. They are. I was thinking like there might be a trend of like send the girls chat, the group chat to do something extravagant like this.

2:08:47We might be seeing this with other tech people. Maybe you don't own a space company but maybe you just yeah guys out there if you want to have a boys weekend yeah send up a girl's wife and her friends yeah to space to space but then they're only uh up there for 12 minutes yeah 12 minutes i mean still needs to be like uh how about uh you know cross the ocean on a sailboat then the boys can go do the nurburgring get them a wander for a month Get him a wander. I don't know. This was funny. Jeff Tang highlighted. Oh, yeah. This is amazing. So this icon, we had Kenneth Davidson on the phone before on the show.

2:09:27He is a funny guy. He put out a competitor landing page with a comparison page, and it was pretty hilarious. As every competitive sort of comparison page should have, icon checks every single box, including 100 % money back guarantee, script writing, and creative briefs, audience research, video ads, static ads, creative storage, asset tagging and splitting, lip sync UGC videos, creative analytics, competitor ad spying, ad manager upload, tier one investors, tier one engineering team, seven day work week. And he did not give OpenAI credit for tier one investors or tier one engineering team. Which is brutal because they have the same investors.

2:10:07Well, and they're probably, Icon's probably using various ChatGBT products. Oh, for sure, for sure. And also like, yeah, it's like Founders Fund is in OpenAI and Icon. And so it's just such bait to be like, yeah, we're the only one with tier one investors. Like no one else in the AI category has tier one investors. That whole AI thing. Like this is true in other categories. Like we talked about general matter. Let's pull up the website too, because I actually think it's - Icon? I think the icon.me website is like fascinating in general. Yes, yes, yes. Pull it up real quick. So the story here is that obviously Jeff Tang is very much like trolling, trolling Kenan being like, this is a ridiculous comparison.

2:10:51I love comparison pages, competitor comparison pages, because this is hilarious. And then Kenan says, what a lame comparison chart. This seems to be the website. And so he's like dunking on his own thing just to link to his own website because he just wants the traffic. He's like a total like just drive the bottom line doesn't matter if it's embarrassing just make the money and uh jeff tang uh okay so look at this website oh my god this is the most conversion optimized this is hilarious it's actually so it's actually so chaotic it's so good investors tier one team tier one engineers i've never even heard the term tier one and tier one before um and but look Look how optimized this is.

2:11:32Wow. Us versus them. There it is. Hey, they changed it. They updated it. They updated it. They put OpenAI tier one investors. Wow, they must have gotten some feedback on that. They're selling the product as you can become a founding advisor. What? To Icon. What? It's like almost like MLM coded. It's like a pyramid scheme now. I don't know. I don't know. But they also sell. They sell. You can just sign up for this, right? You can go on the pricing page. Just click, I'll send it in the chat. Yeah. This is the most chaotic SaaS website I've ever seen. It's honestly - So funny. This guy is wild. Well, look at the pricing page on here.

2:12:09They basically built it like an e-commerce. Yeah, it looks like checkout on e-commerce. Wow. Limited offer, only four spots left, ends 418. No, no, no, for a SaaS product. And scroll down, they sell a premium banana, which is - Wow. I guess a banana you can just check out with Apple Pay. This is so hilarious. I mean, at this point, it seems like with him retweeting these and engaging these, he's in on the joke. And so it's gotten way funnier. If this was just, oh, he's really, really serious about all this stuff. He really thinks that he has two or one investors and OpenAI doesn't. They got Saquon Barkley in here, too?

2:12:47Did they? Who knows? That is the thing with this comedy landing page. I don't know what's real anymore. Hopefully, the product is real. Hopefully, the product is real. I mean, we did talk to the Ridge guys. They said they were using it. It was pretty useful. I think obviously it's an early stage company. Kennen is trying to get some eyeballs, get some attention, and just kind of break through the incredibly crowded market of like AI tools, right? And so you've got to make some noise to be able to just get through. But we'll have to put that whole site in the truth zone, figure out if Saquon's really in icons.

2:13:26So far, to our knowledge, he's in Anderil and Ramp. That's what he's disclosed. Pretty good two-company portfolio. Yeah, but he could be ripping checks all over the place, all over the valley. We'll have to figure it out. But speaking of Ramp, time is money. Save both. Easy to use corporate cards, bill payments, accounting, and a whole lot more all in one place. Go to Ramp.com. Switch your business to Ramp.com. Switch your business to Ramp. And Ryan Peterson had a good post. He said, a 1 % daily improvement compounds over a year to a 37x improvement over the entire year. But I think he's thinking too small.

2:13:58So I asked ChatGPT, what does a 100 % daily improvement compound to over a year? If you compound by 100 % every day, you're doubling each day. That's exponential growth, baby. That's right. So if you start with one as a base and double it every day for a year, by the end, you will be 1.52 times 10 to the 109th power better than you were at the start of the year. That's one followed by 109 zeros or 1.52 novemdecillion in the short scale. Doubling every day for a year gives you 1.52 novemdecillion times your original value. This is absurdly huge. A classic example of why compounding growth explodes with even modest periods.

2:14:45You won't understand exponential growth until you experience it. just do 100 % daily and then you'll just be so much better off. So much better. Risk off. It's great. Soundboard is not broken. They haven't cacked the soundboard. Yeah, it's been our most chaotic show to date. It has, it has. We're facing cyber attacks. Yes. We have a new soundboard. Yep. Zoom is down. Google Hangout is down. You're not in a suit. I'm not in a suit. I think it's a more relaxed show. We're just having fun with it. It's OK. It's OK. The show must go on. That's the most important thing. Well, you know what service is not down, John?

2:15:20Getbezel.com. That's right. Go to the App Store. And the Bezel Concierge. Download the Bezel app. They're working overtime. Your Bezel Concierge is available now to source any watch on the planet. Seriously, any watch. Pick up a... You know, they're not going to hack your GMT master, Batman. They're not going to hack your Submariner. Yeah. They're not going to hack your Paul Newman Daytona. I'd like to see him try. I'd like to see him try. Your Patek Philippe cubitus is still going to tell time after the AI overlords have destroyed all of the data center infrastructure in this country. We'll see.

2:15:55Should we pull up this post from Josh Kushner? Yeah. Sure. He says, so we talked about this yesterday. Yes, yes, yes. Somebody asked, do VC funds invest in competitive companies? Kyle Harrison pulled up a chart that said evidence would point to yes, showing how many of the big venture capital firms have invested in multiple or at least a couple foundation model companies. And Kushner over at Thrive Capital has, I don't even think he's on the chart because he's only invested one. And he's invested in a very important one. And he likes, I think, staying off of charts like this for the most part.

2:16:35I think Jeff Lewis and the team have also just gone all in on OpenAI. So there's still quite a few. But again, I think that this is an evolution of venture capital, and it is a natural evolution that firms will invest in competitive companies. And I do think that firms generally do a great job of keeping firewalls up and not, you know, sharing information that would be, you know, damaging to any of the individual companies. Yeah, it's interesting. I mean, I think that obviously there are secrets in these foundation labs and there are algorithms and just even just, you know, the path down the R &D tech tree.

2:17:28Like reasoning models came from Ilya Sutskiver, working on Qstar at OpenAI. When he leaves to start SSI, you know that there's gonna be a reasoning component, a reinforcement learning component on top of LLMs. There's going to be self-play. Like this worked well at OpenAI. He takes that and you can't patent that idea of like a reasoning model or applying reinforcement learning on top of LLMs. And so not only can you not control that or patent that or keep that out of the hands of Grok or Thinking Machines or Mistral or any of these other companies, but I don't think that the VCs are the vector for these types of leaks.

2:18:08I think it's like the AI happy hours and the parties in San Francisco where people are talking and they're like, oh, did you see this paper that someone just published? Or somebody re-implemented the open source version? And I think this is founders in the early part of their career, well, I've seen them be worried to pitch a firm because they were invested in something that was competitive or adjacent to what they're doing. And the reality is, is your competitors are gonna find out about what you're doing generally. Yes, that's not necessarily your moat. It's rarely your moat. like the Coca-Cola formula rarely applies, but at the same time, it is reasonable to say, if I'm really partnering with a firm and they're gonna take 20, 30, they're gonna build a big position, they're gonna be on my board, do I really want them to have this weird incentive?

2:18:56Yeah, this weird conflict where they find a great VP of engineering and they're like, well, I could send it to you or I could send it to your direct competitor that I'm also invested in. Any sort of value add does kind of get spread thin. But I guess it gets back to this idea of how commoditized is the foundation model layer and how different will these companies look over time? I mean, Andreessen here is in OpenAI and XAI. Those two companies seem at each other's throats. Like OpenAI is launching a X clone, XAI bought X, and so they're really direct competitors. But at the same time, if OpenAI is buying Windsurf and developing more consumer products, and then SSI is saying, hey, we're staying out of that entirely, and then Mistral seems to be focused more on B2B and government implementation, and Anthropic is very much on the API side, for example, you could imagine that the foundation model just becomes like cloud.

2:19:59And at that point, you wouldn't be that upset about investing in a Salesforce and a PagerDuty and a Twilio. These are very different companies over time. Versus if they'd be cut. Yeah, it's clear the end state is not just 10 chat apps. Yeah, so it's like the foundation model layer may commoditize, but that doesn't mean that the companies are going to commoditize. Lyft and Uber are true, true supplements to each other. They are not complimentary, and in any way, you're either spending money on Lyft or Uber. They're very similar experiences. Now, one might be way better than the other. For a long time, it was a capital fight.

2:20:34Because people would open both apps. Exactly. Yeah, it was a capital fight. Which is faster, which is cheaper. Yep, yep, yep. But if OpenAI winds up looking completely different than Thinking Machines or SSI or Mistral in a few years, there could be winning companies that are very different but just built on the same foundational technology. Yeah. And I assume that we'll see even some of the foundation model companies merge. We're yet to see that because they're still extremely well-funded. Was it Sequoia that did Intel and NVIDIA? I mean, they're like a decade apart. But in theory, they're both like chip companies, right?

2:21:17But they operate in very different spaces, and they have very different models now, Fabulous versus integrated. but there are some funds that have stayed the course. Josh Kushner over at Thrive is a serial monogamist. Delian also chimes in to say, sorry, can someone explain to me why we're on this if we only have one arrow? Doesn't that mean we're not spraying and praying? Managed to stay off the list. Founders fund was not as lucky. It was clocked on there. Yeah, but it is weird that this is, I mean, I guess this original diagram was just to show what funds are in what foundation model companies, but then very quickly became, oh, they're investing in multiple, and then it makes less sense for FF to be on there.

2:22:05Anyway, did you see Black Flag launched today? The founder sent me this. It's an incubator for hard tech companies, and they are split across a variety of different industries. John, I'm actually launching an incubator for incubators. So I'm going to reach out to these guys and see if they want to be a part of my incubator incubator. The meta incubator, I think that's just being called the LP. But Harpoon Ventures is the main firm behind this. And they're in collaboration with ShieldCap VC, who we've talked to before. And Incutel is an investor, which is the CIA's venture fund. So that's pretty fun and good news.

2:22:44I mean, I think that there's a lot of folks that, you know, I think you could say like YC is the incubator for defense tech and YC has been open to this. But at the same time, like there might be some benefits to having an incubator for like specific hard tech companies. So, you know, you maybe amortize the cost of some like CNC machine or some like, you know, shared hard workspace or some CapEx stuff. But I don't know if they're planning to do that. Yeah, I think it's awesome. I just want to see more of these. Just more of this stuff is great, more competition. Companies are now going through multiple programs.

2:23:20I mean, we talked to Ali, and it seemed like some of those companies had done NEO, and then also done Teal Fellowships, and then Teal Fellowships of all the Z Fellows, and then they also raised YC. It's like, yeah, there's an overlap of these. There's just like, at the end of the day, it's just like money. For Black Flag, I don't know anything about it other than this graphic, but what's cool about specifically defense and aerospace and anything government-related is that there's an entire, they can provide a very clear benefit to founders that maybe don't have a defense aerospace background, but they can really accelerate that knowledge and networks and things like that and allow people that maybe were building in SaaS to come in and play in a new arena.

2:24:10Yeah. Well, if you wind up with 20K from one of these incubators and it's no strings attached money, why not throw it in public? That's only Neo, by the way. Neo is the one that - I mean, we've heard stories about Teal Fellows investing their money if they're profitable. Yeah, yeah, yeah. Because it's kind of no strings attached money. So you're not recommending venture dollars. These are basically grants. But I mean, why don't we have an accelerator for hedge funds? Like you go in, they stake you. I know they exist, but the first high-frequency trading shop from YC, that's going to be a banger company.

2:24:45Come in, it's like, your demo day slide is just like, we started with 500K from YC. AUM's 5 million now. We 10X that. There we go. We got a couple more 10Xs. It's a billion-dollar company. Get in now. There we go. Here's the LP agreement. We're not doing safes. No safes here. That'd be funny. Anyway, you know about public.com, investing for those who take it seriously. they got multi-asset investing, industry-leading yields, and they're trusted by millions, folks. Anyway, I think we've been through most of the timeline, most of the great posts. Yeah, this was great. This was a chaotic show. I'm excited to figure out why all of our internet services are down.

2:25:23We need a polymarket on this right now. We need a polymarket. Why did Zoom and Google Hangouts meet video, whatever they're calling it these days? Why did all the services go down? Was it a cyber attack? Was it not? I want to know about it on Polymarket. That's our other sponsor. So go to Polymarket and check it out. We'll try and get a market up ASAP. And I just want to say, I think I've gotten at least 30 individual messages about the TVPN jacket from people who are wanting it. That's amazing. We weren't even planning to release to sell these. Yeah. Should we tell them? It's$9.99, but financing it will be available.

2:26:03You can buy now, pay later. it's 12 payments of$99 if you want one so that's just kind of what the market will bear yeah and we're going to donate the profits to All In which doesn't run ads no no no we're going to donate the profits to my next watch on Bezel that's right okay get bezel.com folks they got concierges they'll find you a great watch John loves watches so much he's running two bezel ads on the same show but thank you for tuning in folks I'm excited for tomorrow's show we want to talk about who's coming on We're coming back. We're going to bring on tons of people. We're going to stack it.

2:26:36Maybe we'll do a six-hour stream to make up for the lost half hour. I feel like if you lose a half hour, you owe the fans four hours. That's right. Right? Every half hour, it's four hours. No, I mean, we got a great show tomorrow. We got Delian coming on. We got Sham Sankar from Palantir. CTO of Palantir. CTO of Palantir. First Ford deployed engineer. He's been the company for like 20 years. It's incredible. I was hanging out with him. He was a public company. And I was like, so what's next? Like, you're a public company. like what's your goal he was like oh we got to get into the fortune 500.

2:27:07that's an insane goal i've never heard anyone like frame it like that and then like a couple months later i had to send him a congrats message because it was like they are now officially in the fortune 500. that's sick congrats uh and then we're also gonna have some robotics ceos come on uh work on a couple different robotics companies and talk about those uh and of course we'll we'll be bringing you to the news talk about whatever's top story i think we covered the nvidia stuff pretty well but I'm sure there'll be more developments. I just realized we completely missed a major story. What's the major story?

2:27:36Figma. Oh yeah, the S1 dropped. Did an S1. Congratulations to everyone who's been working on Figma. Amazing milestones. I mean, it is one of those rare companies where it is an overnight success. It's been like, what, 14, 15 years but. Overnight success. But congratulations to Dylan Field and all the folks over at Figma. what a roller coaster ride, years in stealth, back and forth with Adobe. Wasn't it like four years basically. Before they shipped a product? Something like that. And they were still raising money. It was sheer force of will, classic overnight success. Classic overnight success.

2:28:12And you love to see it. And we're gonna be diving in deeper to Figma. We should tell the whole story. We should do a whole deep dive on the company. This is a fascinating story. And we will be at Config. Yes, we will. We're gonna be doing post-game interviews from Config, interviewing some of the greatest designers in the world, some entrepreneurs, some investors, all sorts of folks in the design world. That should be fun. I'm newer to the design world than you. I'm not a Figma daily driver like you, but I'm excited to learn a lot about it. You're a creative athlete, though. Yeah, creative athlete.

2:28:46Yeah, a little bit. I mean, there's creative stuff all over. Design is in everything in this world. Anyway, thank you for watching. All right, folks. We will see you tomorrow. Fantastic afternoon. We are going to call up Tim Cook, David, Daniel Elk from Spotify. ECK. Try to get these services back online. And Sundar, because Google went down. That's unacceptable. I think our SLA says no downtime. And who's the Zoom CEO again? It's Eric. Eric. Yuan. I just know him by Eric when I text him. I just say, what the hell is going on, Eric? We'll put them all in a group chat, and we'll say, let's get it together, guys.

2:29:22Let's get it together. Let's step it up. Now is the time. You can't be slacking off. Yeah. You can't be slacking off, guys. Every minute of productivity counts. It does. All right. Have a great afternoon. We'll see you guys tomorrow. Bye.