Apple Looks to Anthropic and OpenAI for Siri Upgrade, Senate Passes Trump's Megabill | Zak Kukoff, SWYX, Matthew Prince, Luca Netz, Julia Steinberg, Joel Hron, Mackenzie Burnett

26:39It's not fully like a large transformer model, but it is multi-parameter model for deciding what ads go where and what reels get served to you. So it would definitely be a new... They're working overtime to serve you the perfect reel right now. For sure, for sure. And Apple just doesn't have that scaled GPU cluster that I'm aware of. So they'll have to call up Dylan Patel and some folks to get it done. Call up Jensen maybe. Who knows? If Apple ultimately moves forward, it would represent a monumental reversal. The company currently powers most of its AI features with homegrown technology. It calls Apple Foundation Models and had been planning a new version of its voice assistant that runs on that technology for 2026, but it seems like they're backtracking.

27:21Switch to Claude or ChatGPT models for Siri would be an acknowledgement that the company is struggling to compete in generative AI, the most important new technology in decades. Apple already allows ChatGPT to answer web-based search queries in Siri, but the assistant itself is powered by Apple. Apple's investigation into third-party models is at an early stage, and the company hasn't made a final decision on using them. Marking a change, which is under discussion for next year, could allow Cupertino-based Apple to offer Siri features on par with AI assistance on Android phones, which you don't hear about that much.

27:56I see the Gemini demos on - You know, your friends that use Android phones don't talk about how they're - You know the Lone Ranger's on Android. The Lone Ranger. You know we got one in our group chat. But other than that, it is rare. But even then, I feel like there would be more viral X posts about cool Android features if they had really done well on the Gemini product implementation. And it's just maybe not quite there. But Gemini is great. The models are really top tier. The Gemini app on iOS is not amazing. The text-to-speech is really, really rough. Like you click you click dictate and then it will just stop Dictating when you pause and then just submit their query.

28:42Yeah, and so you can be with chat GPT I love it because I open it up and I hit that button and I think and I say okay I'm trying to do a research on the mag 7 and I want to look at mag 7 their performance over the last decade So go back and pull what their market cap was 10 years ago and then what it was today and then create a table but then if I pause, Google will just submit that. And I'll be like, whoa, I wanted to add more and I wanted to give you more context, but ChatGPT waits until I push the button to finish that. So it's just like minor, minor UI, but that's more important to me than like, does it have 150 on MMLU versus 149?

29:17I care more about the UX of like, did I just waste 10 minutes by sending a query that isn't complete and I know I'm gonna get a bad answer on? And so, I don't know. But again, Android's clearly ahead of Siri here, so it's not even a competition. The competing project internally dubbed LLM Siri that uses in-house models remains in active development. So representatives for Apple declined to comment. Shares closed up over 2 % after Bloomberg reported on the deliberation. So Wall Street clearly likes the idea of one of these deals getting done, but very big question as to the structure of those deals.

29:58and I keep triggering Siri because I'm talking about it on my phone. It keeps popping up. Fantastic. The project to evaluate external models was started by Siri chief Mike Rockwell and software engineering lead Craig Federighi. They were given oversight of Siri after the duties were removed from the command of John Giandrea, the company's AI chief. This was a spicy little trade deal going on over there. Giandrea Federighi. A spicy meatball over at Apple. In Cupertino. He was sidelined in the wake of a tepid response to Apple intelligence and Siri's feature delays. Rockwell, who previously launched the Vision Pro headset, assumed the Siri engineering role in March.

30:42After taking over, he instructed his new group to assess whether Siri would do a better job handling queries using Apple's AI models or third-party technology, including Claude, ChatGPT, and Google's Gemini. Interesting. After multiple rounds of testing, Rockwell and other executives concluded that Anthropics technology is most promising for serious needs. That led Adrian Perica, the company's vice president of corporate development, to start discussions with Anthropics about using Claude. What's interesting is that SSI, not in the conversation here yet. Also, Thinking Machines, not in the conversation yet.

31:15And when you think about Thinking Machines, that recent information article about Mira Morati wanting to do fine-tuning RL for businesses, it's like there's very few bigger businesses than Apple. That's a pretty good client to go win. And so if you have a foundation model, you have to assume she's raised, what,$2 billion? So she can do a - Just a pre-seed, yeah. Yeah, the pre-seed. It could be a thing Apple doesn't really work with a lot of pre-seed companies. Yeah, yeah, yeah. They're like, call us when you're like Series C. I'm sorry. Like, you know, I can't bet my career on a pre-seed company.

31:54Call us if you can get a seed round. Yeah. Yeah. But I mean, I think the fact of the matter is like$2 billion is enough to do a GPT-4 level run, to do a DeepSeek style run. And so if you take all the best practices from DeepSeek V3 and R1, like the reasoning model and you spend the money to go do the training and you pull all the data together and maybe you're not completely stealing the data from the GPT-4 API, but you're getting it somewhat legitimately through these data brokers like Mercore and Scale and whatnot, like you should be able to get a near the frontier level model done. The issue is Apple isn't set up to comp top AI researchers.

32:39Exactly. And it's a skill issue. In some ways, it's not a money issue. They're not willing to spend the money to put together to say, hey, we're getting kind of cooked in AI. We should spend five billion dollars like Zuck just did to put together, you know, an incredible team. But they'll have to pay for it by it sounds like they may end up paying annually to get access to the technology that those types of teams. It's crazy. Built. Yeah. And so you got to pay for it somewhere. It's the CapEx, OpEx switcheroo. The CFO is like, okay, yeah, we don't want to spend a bunch of money up front to reap this award endlessly, but we will pay a billion dollars a year, I guess.

33:17I don't know. They seem not fully AGI-pilled over there. The Siri Assistant, originally released in 2011, has fallen behind popular AI chatbots, and Apple's attempt to upgrade the software has been stymied by engineering snags and delays. A year ago, Apple unveiled new Siri capabilities, including ones that would let it tap into users' personal data and analyze on-screen content to better fulfill queries. I do wonder if Apple is thinking about thinking machines. You have to imagine that Zuck is thinking about buying the company, right? Sure, they talked. It's only a couple billion dollars. And by all accounts.

33:54I think, to be honest, it sounds like Zuck had offered somewhere around the last private market valuation for SSI. Yep. And he probably, even though all the investors had a 1x pref, right, he probably needed to do that to get at least the early investors comfortable with it. But Ilya is a true missionary, true believer, wants to take the straight shot to SSI. He doesn't care about the debt ceiling. Let's put it that way. Mira, on the other hand, is doing reinforcement learning for businesses. So you throw a$15 billion acquihire her way with that team, maybe it gets done. I don't know. If I'm Apple, let's pull up the MAG-7 market cap again.

34:42What are they at? $2 trillion? $3 trillion? They're up there. and Apple is you know it feels like they could afford even 15 billion for thinking machines sure do you disagree? no I mean they totally could but they'd be looking at it as talent acquisition I think yeah because the team is I mean it's such a young company and but if you were in the big man's seat and you were trying to cook You would do that. What would you do? You think Mira is going to be cool just clearing 74 million? She's not going to make more than Tim. You think she's going to be down to sell now and then just make, have total comp less than the average AI researcher going to meta?

35:30I don't know. I mean, the beauty of an acquisition is that, like, you can be structured to make more than the CEO, at least in a shorter amount of time. Like, that certainly was the case with the Beats acquisition, right? Sure. Like for those years when that earn out was active, they made more than the CEO. And that's okay. Anyway, people with knowledge of Apple's AI team say it is operating with a high degree of uncertainty and a lack of clarity. With executives poring over a number of possible directions, Apple has already approved a multi-billion dollar budget for 2026 for running its own models via the cloud.

36:05But plans for beyond that remain murky. Still, Federighi, Rockwell, and other executives have grown increasingly open to the idea that embracing outside technology is the key to a near-term turnaround. They don't see the need for Apple to rely on its own models, which they currently consider inferior. And this makes a lot of sense because Apple is not great at software that needs to be updated 25 times a year. We're in this crazy AI model horse race. You don't want to be waiting around for, oh yeah, at the next WWDC, they're going to improve it when sam allman shipped like 25 up sam's going to have 40 buzzy announcements between now exactly um so uh beats was apple's largest ever acquisition yes paid three billion dollars okay including four million about 400 million of apple stock but beats at the time was doing a billion dollars they only paid like a 3x revenue multiple wow that's intel's modem business, which was in 2019 for a billion.

37:09It was doing two billion in revenue probably. Yeah, probably. Yeah, you look that up. I'll keep reading. They don't see the need to rely on the own models. Licensing third-party AI would mirror an approach taken by Samsung. While the company brands its features under the Galaxy AI umbrella, many of its features are actually based on Gemini. And Thropic for its part is already used by Amazon to help power the new Alexa Plus, which I haven't seen rolling out into the Amazon Alexas. Maybe the Alexas aren't wired up properly and you have to get the next batch, the next revision. Yeah, so Intel's mode of business was doing it over a billion as well.

37:46So less than a 1x revenue multiple. Yeah, basically a 1x. Okay. And you remember in 2018, they acquired Shazam. Oh, yeah. For$400 million. How much were they doing? I gotta ask. I gotta ask. In the future, if its own technology improves, the executives believe Apple should have ownership of AI models given their increasing importance of how products operate. What do you think Shazam's annual revenue was at the time of acquisition? I want to say 80. How much? Waiting. The company is working on a series of projects including a tabletop robot and glasses that will make heavy use of AI. I'm really excited for the Apple tabletop robot.

38:21That doesn't get enough coverage these days. I think that's a really cool idea. So Apple paid$400 million. The app was pulling in roughly$38 million a year. Oh, so over 10x revenue multiple. Okay. So anyways, not a long history of making massive aqua hires. Yeah. Actually, no history at all. Well, whatever Apple's planning, they got to do it on linear. Linear is a purpose-built tool for planning and building products, meet the system for modern software development, streamline issues, projects, and product roadmaps. If Apple wants to be more like OpenAI, one way they could do that is by getting on Linear.

39:00Because OpenAI uses Linear. Oh, here we go. We get to Thingy Machines. Apple has also recently considered acquiring perplexity in order to help bolster its AI work. It also briefly held discussions with Thinking Machines Lab, the AI startup founded by former OpenAI Chief Technology Officer, Miramirati. But nothing really more than that in the story. Apple's models are developed by a roughly 100-person team, maybe two times big, too big, who knows, maybe 50. That's a lot of pizzas. A lot of pizzas. Run by Ruming Pong, an Apple distinguished engineer who joined from Google in 2021 to lead this work.

39:37He reports to Daphne Luong, a senior director in charge of AI research. Luong is one of Giandrea's top lieutenants, and the foundation models team is one of the few significant AI groups still reporting to Giandrea. Even in that area, Federighi and Rockwell have taken a larger role, regardless of the path it takes. The proposed shift has weighed on the team, which has some of the AI industry's most in-demand talent. Some members have signaled internally that they are unhappy the company is considering technology from a third party, creating the perception that they are to blame, at least partially, for the company's AI shortcomings.

40:10They have said that they could leave for multi-million dollar packages being floated by meta platforms and open AI. Yeah, if you are a great AI researcher, the idea of being responsible for just integrating the work of open AI or Anthropic is going to be much less exciting than trying to build frontier models. Totally. And also like, I don't know, just in terms of missionary work, like the idea of building like the most advanced God that you can talk to in this crazy AI, like that is exciting. But there's also something that's like, I think potentially like a really strong missionary pitch for you are going to create, you're going to build models that are used at massive scale by every iPhone user.

40:54And you can actually, you know, surprise and delight the customer to the tune of hundreds of millions of people. I think that is, I think that is actually like pretty, pretty laudable work and very, very cool. I work at Super Intelligence at Facebook, knowing, or at Meta, knowing that, knowing that your work will be integrated into the Meta Ray-Bans, and you're gonna have like a Clue Lee-like experience. That's cool, yeah. Just wearing glasses. Like that is a cool, that is like a new dimension that you can build on. I remember the initial Siri build out, they did a bunch of magical things. Like you could say like Siri tell me a joke, and it would come up with these like funny zingers that were tuned to Apple's brand, but still actually pretty funny, and they hired comedy writers to work on it.

41:41And so I think that there still is a world where you develop the model, you own it, and you're doing the foundational serious AI research, but you're still productizing it in the Apple way, creating something special. You already hear about this with the Claude is different than ChatGPT, like the vibe test. Like we haven't seen the vibes fork out really all that much, but there's definitely a world where the Apple LLM performs at a similar scale and speed and the reasoning and it's doing well in the benchmarks. But then, you know, you're talking to the Apple model and it has the Apple feel to it.

42:18And like that could be cool if you, if you can actually, it could be so cool. It could be very cool. It could be so cool. Yeah. Like if they brought, if they could bring back some of the like flair from the brand campaigns that you remember Apple by, 1984, the original iPod, these things that were just iconic. And if you could think about how to embody that original Apple feeling. It's like Steve Jobs' voice, basically. Yeah, bicycle for the mind. And encouraging that wonder. I keep going back to that idea of what would Steve Jobs have thought about vibe coding? And it's like he would have loved it.

42:58He loved GarageBand. He loved giving everyone the tools to be an artist. Everyone's a musician. Everyone's a programmer. Like these things, this giving someone the ability to do really, really interesting things with Siri, awesome. I think it's very, very on brand for Apple. Anyway, let me tell you about Vanta. Automate compliance, manage risk, improve trust continuously. Vanta's trust management platform takes the manual work out of your security and compliance process and replaces it with continuous automation. Whether you're pursuing your first framework or managing a complex program and head over to Vanta comm and tell them the technology brothers Sent you there are some more trade deals in this in this report in Bloomberg One of Apple's most senior large language model researchers Tom Gunter left last week He had worked at Apple for about eight years and some colleagues see him as difficult to replace given his unique skill set and the willingness of Apple's competitors to pay exponentially more for talent when I'm saying Apple this month also nearly lost the team behind MLX, its key open source system for developing machine learning models on the latest Apple chips.

44:04After the engineers threatened to leave, Apple made counter offers to retain them and they're staying for now. That's dramatic. Wow. In his discussions with both Anthropic and OpenAI, the iPhone maker requested a custom version that could run on Apple's private cloud computer. Yeah, Apple's such an interesting culture because it's counter to a lot of other cultures in tech that are like, oh, I might work at Meta for five years and then go to Google for a few years and then dabble at a startup and then go back to Meta. And Apple, you see more of somebody who's been there for 15 years. But then at a certain point, even if you've been there a long time, you're looking around and you're saying people with my exact same skill set are making five, ten times.

44:50This article highlights that the meta pay packages have been between$10 and$40 million annually. And I would trust you to learn more on that. That feels more realistic than what the New York Times had been saying about$100 million signing bonuses and all that good stuff. Well, you know, the source is not conflicted at all. The guy that hates the fact that these pay packages exist. is quoting them. It's so funny to source a podcast between two brothers doing PsyHopps. Come on, New York Times. Step it up. The company has already internally tested the idea of running these LLMs, other companies' models, on their own Apple-controlled cloud services.

45:42Obviously, that's very important for the data privacy narrative. Other Apple intelligence features are powered by AI models that reside in consumers' devices. These models, slower and less powerful than cloud-based versions, are used for tasks like summarizing short emails and creating Genmojis. It's here for Genmoji. Just bake down Ghibli. Just bake down Ghibli, have it be a filter in the iPhone app. Boom, you're done. You have a banger product there, something like that. You can go in and make any photo in your camera roll black and white. You can make it Hollywood like the heel in orange you can make it you know super moody or super cool or super warm Like you can adjust those the contrast the color temperature turn it into a cartoon people will love that everyone will be using that Apple is opening up the on-device models to third-party developers later this year letting app makers create AI Features based on its technology very excited for that very bullish for Apple on that amazing Yeah, which is why the fact that they almost lost the team working on that entirely they need that team badly is would have been crazy if that product stagnates i saw a founder i saw founder i forget their name posting uh hearing that you know the team that you're he was building a product based on mlx and then he heard the mlx team almost left he was freaking out he's like whoa no it's rough so last year open ai offered to train on device models for apple but that the iPhone maker was not interested.

47:11They said, we got it handled. Turns out they didn't. Since December 2024, Apple has been using OpenAI to handle some features. In addition to responding to world knowledge queries in Siri, ChatGPT can write blocks of text in the writing tools feature later this year. In iOS 26, there will be a ChatGPT option for image generation and onscreen image analysis. While discussing the potential arrangement, Apple and Anthropic have disagreed over preliminary financial terms according to the people. The AI startup is seeking a multi-billion dollar annual fee that increases sharply each year. The struggle to reach a deal has left Apple contemplating working with OpenAI or others if it moves forward with a third-party plan.

47:51They said if Apple does strike an agreement. It's so interesting. You can imagine OpenAI being more willing to strike some type of deal because they want to be effectively the next Google, right, in terms of this dominant consumer internet company. But at the same time, OpenAI is building devices to try to kill, you know, Apple. You can imagine. They wouldn't say that. They wouldn't say that. Yeah, they would say it's complimentary. I do believe that consumers, there's like a finite amount of devices that they're willing to have. And so if they wanna compete in hardware, it's a little hard for Apple to get excited.

48:31Although they partner with Google and Google has. I have been surprised by the number of devices that people carry. I'd say like a decent chunk of San Francisco tech people carry AirPods, an iPhone, an Apple Watch, and an Apple laptop basically everywhere they go. That's four devices. That's like a lot. And then, yeah, maybe a VR headset eventually. Well, if they do wind up buying a device, they got to pay sales tax. They got to get a numeral HQ sales tax on autopilot. Spend less than five minutes per month on sales tax compliance. Anyway, in other news, John Mew, the inventor of mewing, has passed away at 96 in his castle.

49:11Rest in peace to John Mew. Professor John Mew, visionary orthodontist and founder of Orthotropics, passed away peacefully in June 2025 at the age of 96 in his castle, a pioneering figure in the facial growth and development. John Mew challenged the status quo of traditional orthodontics, arguing that environment, posture, and function, not genetics alone, shaped the face. His philosophy, orthotropics, aimed not only to straighten the teeth, but help promote healthy jaws, open airways, and confident faces. Though his work was often met with fierce resistance from the establishment, John stood firm in his convictions, driven by a lifelong commitment to prevention, integrity, and science, and giving every child a fair chance at full facial development.

49:58Today, his legacy works on through, lives on through the work of his son. John Mew will be remembered not only as a clinician, but as a courageous truth seeker who dared to ask better questions and never stopped looking for better answers. So, if you're chewing some mastic gum, say, pour one out for John. I wonder how he processed the explosion of immuing popularity on social media. It must have come as a surprise because it was the last few years of his life. Working on it for probably, I mean, he's 96. And somebody probably printed out a tweet for him and said, look, some trad influencer has gotten 10 ,000 likes on your work and a million views.

50:44Anyway, We have some trade deal news. Ring that gong, Jordy. Mary D 'Onofrio has joined Crosslink Capital as a partner and a leader of the Berms crossover strategy. She will be focusing Series B plus venture investments across software categories. She Fortune magazine has the story. She was a longtime Bessemer investor, and now she's heading over to Crosslink Capital to crossover into private growth equity deals. So congratulations to Mary D 'Onofrio. In other news, Mira Morati's Thinking Machines is offering top dollar to technical talent, much higher base salaries than Anthropic and OpenAI. Thinking Machines will give you 500K.

51:25Anthropic, how about a safe 400K. OpenAI, best we can do is 300K. No wonder everyone's jumping ship. I think we're looking at two different things here. This is not necessarily for the top researchers who are these star athletes. This is maybe more for just like the general folks who are joining as like software engineers and developers and kind of like members of technical staff. But it is interesting to see that Mira is offering generous. Yeah, getting aggressive and offering generous pay packages because there's obviously a lot of work and it's a very small team. And even though Thinking Machines has some great great AI researchers on board, they gotta have some folks to chop wood.

52:06And now that Mira is in the business of selling to businesses B2B fine tuning, reinforcement learning for businesses to drive profit, she's gotta get Thinking Machines on Adio. Customer relationship magic. Adio is the AI native CRM that builds, scales, and grows your company to the next level. You can get started for free. Adio.com slash tbpn. You can try it out for free on us. So the 462.5k average salary Thinking Machines Lab offered for technical hires is considerably higher than more established language model competitors. Marathi is aiming to compete with. So the competition in AI talent rages on.

52:45We will be joined by SWIX in just a few minutes to discuss the AI talent wars in more detail. Aiden McLaughlin, who's been on the show, says, posts the survivorship bias photo of the plane with the red dots. And Benjamin, this is in response to Benjamin DeKraker, who says, the OpenAI brain drain poaching by other labs kind of confirms that the smartest minds in AI don't actually believe OpenAI is on the cusp of AGI, but rather that it's going to be a drawn-out slugfest for several years at least, and the economy still matters. In other words, if you really believed that OpenAI was right around the corner from AGI, and once there, AI disrupts the entire economy to a post-scarcity economy, why would you leave that organization right now in exchange for money?

53:33It's a good question, but Aiden is, of course, saying that the true believers are still there. They haven't left. It's only the mercenaries that left and we gotta have continue. We gotta have Aiden back on the show Get him back. That was a really fun conversation. It's fantastic Also in other news, they're saying meta is now preparing a huge pile of cash to acquire sweet baby rays Sweet baby rays. I would love to see that. Identified as a potential acquisition target. Yeah, I mean I wonder what their AI talent pool I mean, Elon sells the Tesla tequila Chamath has tequila. Maybe Zuck. You know, he says he doesn't use caffeine.

54:12Wait. Maybe he just likes Sweet Baby Rays. Sweet Baby Rays. Bands. Ray Bands. Sweet Baby Ray Bands. And that is, there we go. They come with sauce in the glasses. No, no, no, no. When you're barbecuing, that's the ultimate augmented reality use case. That's right. Because it can take a picture and say, okay, I've set a timer automatically. Check the temperature. How long? Oh, how long should this particular steak be cooked? Sets the timer. Let's you know. Starts buzzing. Little reminder when it's ready. This is actually a killer application. The perfect ribs. You can only make perfect ribs with the sweet baby Ray-Bans.

54:51Well, if you're interested in getting in on the action of the Mag-7, the public companies, head over to public.com. Investing for those who take it seriously. They got multi-asset investing, industry-leading yields, and they're trusted by millions. So Elon Musk is starting a new party says Vox Populae Vox Dei 80 % of people voted for a new political party that actually represents the 80 % in the middle Interesting, so we'll see if he actually does it. There is a poly market tracking whether or not he will do it. It has been surging We will be tracking that third parties not very successful in American history, but not yet.

55:28We're in a new era Maybe Elon will chair it. It's unclear if he wants to be the head because he can't be the president because he's not a native-born citizen. So who would he put in charge or who would he back? Andrew Yang was running a third party for a while, the forward party. Do you remember this whole thing? That whole thing. I do remember it at a high level. Yeah. I mean, he had the backing of like Sam Altman, some really big tech people, and he was running as a Democrat. and then he dropped out and kind of was seen as an outsider and then he started the forward party. He said, not left, not right, but forward.

56:05And didn't really get that off the ground fully. Good branding. Yeah, good branding. I wonder what the Elon Musk party will be called. I think it's called the America party. Oh, the America party, okay. That won't be confusing. He said, he called it, that was his words. What Elon Musk's America Party could look like. Yeah, he seems he clearly hated politics. Yes. Got out. But he's angry enough about the state of things that he wants to potentially get back in the game. But one, we're going to have Zach Kukoff on the show in two minutes. He's going to be breaking down the big, beautiful bill for us.

56:48What's happening on the ground in Washington. One thing that was included was the Invest America Act, which got approval from the Senate as part of the bill. It's on the verge of becoming law, the first country on the planet to make sure that every child has a stake in the game, real private account ownership compounding in our best companies from birth. Very cool. So very, very cool. Great work from Brad Gerstner. and otherwise we have some breaking news from tbpn which is that we have partnered with graphite graphite.dev is the website let's pull it up team i've been very excited about this i was a happy graphite customer at my last company my entire engineering team was running on it graphite helps teams on github ship higher quality software faster it is the platform trusted by 45 000 and developers at top engineering orgs like Harvey, Asana, Ramp, Replit.

57:48Who else we got? We got a bunch more. Perplexity, Harvey, Asana. Datadog, Vercel. Datadog? The browser company. I love Datadog. DuckDuckGo. Let's go. A lot of them. But if you're building on GitHub, like I'm sure you are. go and get on Graphite. Graphite.dev is the website, and we'll have to have Meryl, the CEO, on the show very soon. But very excited to partner with them. And, you know, Tyler will be running our TVPN engineering org on Graphite as well. Love it. More to come. Well, we have our first guest of the show, Zach Kukoff. Thanks for having me. Live from Washington. Mr. Washington. Washington correspondent.

58:31Mr. Washington. I even set up. I don't know if you can see that. That's the monument right there. Wow. No way. There we go. Beautiful. Yeah, that's great. We'll just have our production team zoom in, zoom in just on the monument. So you won't be on camera. I'll get out of the way, but you can see the good stuff behind me. That's the important thing. So, yeah, break it down for us. The The Wall Street Journal has a story. Senate passes Trump's mega bill bill after all night session. Tax cuts and Medicaid spending reductions head to the House with a July 4th deadline reachable. What's interesting in the bill?

59:06How likely do you think it is to pass? What are the major reads on this? And then we want to get your takeaway from where the dividing lines are around the bill. Yeah. So there's a couple trip lines. The first trip line, I would say, you guys have been tracking the moratorium, the 10-year moratorium on AI development. This was on AI regulation. This was the first it was in. Ted Cruz put it in. Then it was out. Then it was back in. There was a compromise. There was a five-year agreement instead of a 10-year agreement. And Blackburn has been sort of the key driver of getting it back out again. It's out.

59:40Now it was done 99 to 1 in the Senate, almost unanimous in the Senate to get this out. this was a big win for Dario of Anthropic, probably the number one beneficiary. And by the way, somebody who certainly used a fair bit of political capital pushing for this, that's fault line number one. I would say fault line number two. So really quickly, stay on that. It's a potential ban on AI regulation that was removed. And so the current bill does not have a has a does not have a moratorium on regulation. So it's kind of a double moratorium on federal regulation. That's right. So you can have California, states, whatever, who wants you Marsha Blackburn, her home state, Tennessee, passed last year, something called the Elvis Act, which was cutely named, but basically said, Look, if you are building like a you know an ai audio business you cannot use any likeness of a real performer's sound so if you want to have uh john singing the blues or jory singing the blues i cannot do that without a prior deal that's because in tennessee nashville is a dominant industry the music industry is a dominant industry and so part of blackburn's opposition to the moratorium which would have prevented bills like that from taking effect is that it ended up superseding the work that her home state has done to protect its dominant industries.

1:01:06By the way, net net, this moratorium, the time that they got to a compromise was so watered down, it really wouldn't have impacted Tennessee or California anyway. But it was a very dramatic swing from in, out, in, and now out once again for good. What do you expect at the state level around AI safety going forward? Is the fact that this was removed going to inspire certain governors to make this a part of their platform? And I guess I want to know more about if I'm 11 Labs and I'm training a voice agent and I can't be sure that some clip from Elvis or some Justin Bieber worked its way in there, does that mean that I just turn off Tennessee at like the DNS level or do some geo-fencing?

1:02:00Or is it more risky than that, where I have to comply kind of at the national level and they're kind of forcing me to comply everywhere? Or can I just pull back out of that state? Because we've seen this with Apple intelligence not being available in China, not being available in Europe, for example. But yeah, what would the impact on something like that be? Well, think about states in two categories, right? There are some states that are so large. And by the way, the analog that I would think about here is what happens in the textbook market. So if you're a textbook publisher and you want to write some textbook about biology or whatever, if the largest states in the country, it's category one, pass a law mandating something needs to be in a textbook, suddenly you're going to comply nationally because they are so large, they warp the market.

1:02:45Exactly, you have to. That's right. And so if California tomorrow says, look, we're passing a European style bill to severely curtail, which I think would be a disaster, to severely curtail AI development, That would, in effect, be a national bill. And part of the, in my view, mistake that's happening tactically right now is this self-imposed July 4th deadline is so restrictive that it forces all of these more nuanced negotiating points to fall by the wayside. Right. It becomes blanket. Either it's in or it's out. There's just not time to get to a more nuanced middle ground. So 11 labs of Tennessee has the Elvis Act probably says, look, we just skirt around Tennessee.

1:03:26I don't I haven't spoken to 11 labs. But if California passes, then suddenly you have the whole country warped by this. And Gavin Newsom and the California legislature are certainly ambitious enough to try as they did last session to try to pass something that would impact the whole country. Yeah, wasn't wasn't there news out of California this week or last week around some of this stuff? Yeah, yeah, there was a huge fight, which had an unlikely set of bedfellows where you saw Andreessen and others leading the anti-legislative, anti-regulatory brigade against some other folks who are much more pro-curtailing.

1:04:00By the way, I will just say the other interesting takeaway for tech, not to totally dovetail away from your question, but the other interesting takeaway for us, I think, in this is the deciding vote in the Senate on the overall package, the reconciliation bill, was J.D. Vance. And so if you're a Vance head looking at 2028, right, you already see that Ocasio-Cortez and others, AOC and others, are going to use his deciding vote on this bill, which includes huge amounts of Medicaid cuts that Tom Tillis from North Carolina in particular thought were politically toxic as a wedge against him when he comes and runs for president in four years.

1:04:37So sorry, that was – you asked the question about California, and I dovetailed it back to the federal level. No, that's super interesting. That's the yeah, yeah, that's the big the big shock. So you asked about tripwires. The AI tripwire was one Medicaid cuts, which are politically really toxic, right? Because who wants the idea that you voted for the government to take away your health care? That's another huge tripwire. And then there's a package of things that maybe we care about that are nuanced, like, for example, IRA tax incentives for clean energy, right? Or new taxes on wind and solar from China.

1:05:08These are all things that might enrage the Republican, the very conservative Republican faction in the House, which now has to still pass the bill and now complicates the negotiating posture because the Senate watered down. The Senate preserved the IRA tax incentives and watered down some of the tax cuts, got rid of some of the tax cuts on Chinese imports, which means basically you have a bill that's actually financially harder to pass because it's less balanced. And at the same time, you've now alienated a huge faction of the GOP, the super conservative GOP side of the party who still have to vote for the bill to happen.

1:05:41So it's up in the air if it passes or not. Can you tell me about the EV tax credits? I know Americans are struggling more than ever to buy naturally aspirated V12s. I'm hoping that there's some move there to subsidize things like the Ferrari 12-cylindry, the Dolce Trilindra. It's a multi-hundred-thousand-dollar car. Even if we can't subsidize that, maybe we can just take away the subsidies from electric cars to tilt the playing field in favor of the larger engines, the supercharged V8s, the twin turbos, the G63s, these types of cars that Americans deserve to be driving. So what's the news on the EV credit front?

1:06:21I agree with you that the backbone of the American economy is the Ferrari, right? It's impossible to me to imagine a world. Thank you for the last track. I appreciate that. where a blue collar factory worker cannot own a sports car is beyond me. This bill doesn't address that. I wish it did. It'd be great if it did. It's not going to solve that huge unsolved problem. What it will do, by the way, is continue to drive a wedge between Elon and Trump. Then you saw Elon take the Twitter. I imagine you guys probably mentioned it earlier. You saw Elon take the Twitter and start to really crusade against people voting for this.

1:06:54That is in part because at least the House version of the bill was much worse on a lot of the subsidies for electric vehicles than the Senate version. The big challenge is going to be going into now the conference committee. It's going to be how do they reconcile these two challenges so that they can hopefully tilt the market back in favor, of course, of Ferraris and supercars nonetheless, while also not alienating one of the two power centers of the GOP, at least today in Elon, who could easily primary somebody who votes against. Yeah, that makes a lot of sense. What What about how are the Democrats feeling about EVs these days?

1:07:28Because I used to feel like it was a democratic cause to be pro-EV incentive. Let's save the environment. Let's get people out of the gas cars. I'm joking about the V12s, obviously. But now it's become maybe let's punish Elon. But is this a cut your nose to spite your face situation for the Democrats? I think it's a rough spot. I mean, you guys remember when Elon wasn't invited to the big EV summit under the Biden administration, right? That's part of what kicked off his political awakening is he doesn't use unionized labor. And so he was excluded from this EV summit. There's been a huge polarization, a negative polarization against EVs among not only Dems in office, but the Democratic base too, which is to all the points you brought up, quite ironic.

1:08:10You're not going to find many Dems willing to cross the aisle in support of electric vehicles to save this bill. This is a bill that will live or die by Republican whip count and Republican unity. If the whip count isn't there, it's going to be really hard to get it done before July 4th. What about Elon's America party? Do you think that's real or just exciting? Are those my only two options, real or exciting? There's no door number three. Yeah. I mean, it's obviously like, you know, we were talking earlier, third parties haven't historically done well. Well, he has the America pack. So when you say Elon could primary someone, he could potentially primary a Republican on the Republican ticket with the American PAC.

1:08:56And he could almost like be kind of like a head fake, like, oh, this is part of the America party, but it's not really a third party. Is that more what we're thinking here? How this plays out? Yeah, maybe one historical analog. It's not perfect, but think about like a Theodore Roosevelt, like a Teddy Roosevelt with the Bull Moose party, right? You think about it's a faction within a larger established party, to your point, that can serve as an engine to primary people who are in disagreement. Like the Tea Party. Exactly. Like the Tea Party or, frankly, what's happening now. Look at Zoran in New York.

1:09:26MAGA is also like a wing of the Republican Party. That's right. That's right. MAGA, the Tea Party, and now on the left, the polarization from the Zoran and Democratic Socialist world. All of these folks are new factions in a way that, by the way, we haven't seen before. The same way that 50 years ago, you basically watched MASH on television. That was your only option. And now I tune into CBPN while I play subway surfers and have 30 other things hitting me at the same time. This is the political version of that, right? Where you say, OK, it used to be my options were a platform that I accepted wholesale on the Republican side or the Dem side.

1:09:57Now I can be a MAGA guy. I can be a tech right guy. I can be a populist guy. I'm a new right guy. And on the left, I can be a Democratic socialist. I can be an abundance bro. I have an infinite menu of things. The America Party is more likely, if it sticks, one more menu on the side of the right. Sure, sure. That makes a lot of sense. What what what time what do you expect out of the next 24 hours? So tomorrow morning at nine House Rules Committee votes, that's going to be a key vote to see how this thing does. What I would say is if this gets done by July 4th, the thing that you're going to have to look to is that 9 a.m.

1:10:32Eastern vote to see how much unity is there in the Republican Party. They can barely lose any votes that this thing goes through the House in its current form. But I think it's unlikely that it's going to happen immediately. it'll happen. This will get passed. But on their timeline, I don't know. The next 24 hours, if you see more senators like Murkowski from Alaska who are saying things like the bill is flawed, please send it back to the Senate so we can work on it again. That's a key indicator. This thing may not have the legs it needs the next couple of days. Yeah. We heard about, I mean, everyone's saying like it's the biggest bill.

1:11:01There's all this pork. Are there any like green shoots where there's some random startup out there that's just super excited because maybe it's not a headline grabbing, you know,$10 billion thing, but it's like, that's$100 million that I can go after in energy or in defense or in shipbuilding or anything. Have you seen any of these like, they're called riders, right? Yeah, yeah. It's a good question. Biden was famous for stacking a lot of these, like the Inflation Reduction Act had a million ways you could go participate. This one's got fewer. I'll say one funny piece of pork and I'll say one actual opportunity.

1:11:36The real opportunity, I would say is for fintech folks who are looking at the Trump accounts, right? Which is negative, giving huge amounts of new Americans who are underbanked or not banked before access to capital for the first time. If I'm Robin Hood, I am loving. That's a big change for me. Funniest piece of pork in the bill, Murkowski, who was the key holdout in the Senate from Alaska, got a tax exemption for Alaskan, native Alaskan whalers. She said basically native Alaskan whalers need to be yeah that was honestly big delivery for uh her constituency of people who kill whales let's give it up let's give it up for the whalers yeah they don't get enough attention in well i mean we've we've talked about you know energy is really important for the ai data center race that's right they produce oil that you can burn wasn't it chase who said he would he would burn well he didn't say he would do it he said that the hyperscalers are so desperate for energy right now that they would burn whale oil.

1:12:34It's more fun to think about Chase personally. Launching Crusoe for whales. Crusoe blubber. VCs are the new whalers. Yes, yes. They really are. And the old whalers. And the old whalers. That's true. Zach, this was so much fun. We'll have to have you call in tomorrow or Thursday. Yeah, when there's more news. Please. It's my first wedding anniversary so I'll be around. Congratulations. Thank you very much. We'll talk to you soon. See you soon. Bye. Up next, we're going back to the AI talent wars, talking trade deals, talking$100 million offers with Sean Swicks. How are you doing? There he is with the suit.

1:13:13With the suit. Looking fantastic. You wore a suit last time, and we didn't give you enough credit because you were at your own conference, the AI World Fair. This is a sign of respect. This is a sign of great respect in our culture. Thank you. Thank you. Thank you. And it's always great to catch up with you. How did you process the news over the weekend? What jumped out at you? I saw a couple of your posts. You were breaking it down. But how would you tell the story? How big is this for Meta? How bad is this for OpenAI? How are you feeling about the trade deals that we've seen break loose over the last few days?

1:13:53I feel like people who have been discussing sports trades might be way more equipped to discuss this. This is like relatively new in AI land and honestly just like absurd, you know, like, no, like, get that back, guys. Like, you know, like, I'm happy you're getting paid. But like, also, it definitely feels like for a lot of the AI researchers I talk to, like, this is a little bit sort of like a panic move and in some extent warranted, right? I think that Meta has felt like it needs to do something different than what it has been doing, especially leading up to Lama 4. And this is different. This is very, very different.

1:14:37This is something that only Zuck can do. Just for some extra context, there's new reporting from Kylie over at Wired just now saying that there's been some back and forth. What are the actual offers? Obviously, a lot of them are different, right? It's not just like a set offer that everybody is getting. If you join Meta, you get$100 million immediately. In a briefcase. Hand delivered. I don't think that's what's going on. So apparently some of them are up to$300 million over four years. Okay. With more than$100 million in total compensation for the first year. This is Wired's reporting, right?

1:15:12Mark Gurman was saying it was more like 10 to 40. She said she needed to see an offer letter to put that. But the funny thing here is there's an OpenAI staffer who was responding to this anonymously. and they said, that's about how much it would take for me to go work at Meta. Shots fired. Wow. I mean, they have set the list, right? So now they have, unfortunately, they have set their own price. It is public now. I think there was some back and forth between whether or not Sam appearing on his brother's podcast was a very calculated move and was dishonest. This is not my words. It seems like he might have been honest based on this reporting.

1:15:49It seems that's real. I think, look, it's in that ballpark, right? Whether or not it's exactly 100 plus minus, it is at least eight figures. And that is far and beyond what anyone else had been getting prior, basically. And it is in there, at least in the relative range of what Tim Cook and Satya made all of 2024. Yeah, which is crazy. Also, the 100 million number, it's so round that it just jumps out to you. And I think it's much more viral than 112 or 89. Like 100 is just such a round number. It's such a big amount of money. It's just instant generational wealth. For sure. I think like that's exactly, it's weird that the calculus of like, does this make sense for meta?

1:16:35Yes, it does. Because I think you guys covered my analysis before that like basically they just cut VR spend and reallocate to AI spend and they have the funding. They have the equivalent of Anthropics' entire annual spend. Yeah, and Meta's at all-time highs right now, right? The market likes the aggression. And so it doesn't really matter. If you could move a$1.8 trillion company market cap by a couple points, you're doing pretty well. Yeah, Zuck is no stranger to betting like 1 % of his company, right, to ensure against the future. And he, like, I think uniquely of a lot of the sort of fang or whatever, I think a lot of people are trying to come up with new acronyms for the Magnificent Seven.

1:17:19So I like the one that's Among Us. Among Us, yeah. Among Us is the best acronym. There have been some wild acronyms flying around. I don't know what you're talking about. Zach is uniquely empowered as a founder mode of the trillion dollar companies to actually do this. It's really amazing that the leaders he's hired and the people that he's managed to hire. I would say that, you know, to one part of your opening question, like, how affected is OpenAI? I would have said no, not that affected. You have a super deep bench. Even, like, the people that you don't really hear about, like, are actually, like, fantastic leaders in their own right.

1:17:55And so, like, in some extent, OpenAI is, like, very robust to already sort of departures already. but the email from Mark Chen over the weekend I think was also like I wouldn't say that if I were him I don't know if you guys have the exact knowing that that memo would immediately leak it felt emotional and defensive versus John's phrasing was or at least the way that you said if you phrased this as, hey guys, we have billions of people coming to our website monthly. We have hundreds, we have billions and billions of revenue. We are the category leader in this space. We are doing something different than Meta is doing and we will continue to dominate.

1:18:48And now is the time to rally. This is the fourth time this has happened. Maybe fifth time this has happened. So we survived Anthropic and Dario leaving. Don't forget surviving Elon leaving. We survived Ilya leaving and we survived Mira leaving and there's four spin out direct competitor co-founder companies. This is a couple people leaving. We're going to get through it. Look at the growth chart. We're growing, growing, growing. I would have, yeah, definitely gone from a source of strength there. I don't know. But yeah, what is your thought on the narrative that OpenAI seems Lindy at this point, incredibly resilient able to lose key people and just keep plotting forward with, you know, iterative releases, models get a little bit better, UI on the app gets a little bit better, deep research comes up.

1:19:37They're just always staying on the frontier, just one step ahead of everyone else in that core chat product. And yeah, maybe they might not be able to dominate in, you know, the cloud code ecosystem immediately. They got to make some plays to make that happen. They definitely want to, by the way. They want to. Yeah, for sure. But in terms of the core thing that's clearly dominant and huge and game-changing and profitable, they're doing great and they should lead from a source of strength there because they've been through so much and continue to deliver on that front. And this doesn't seem like a cause for, like the narrative around this leaving is that, okay, Meta's going to catch up to a frontier LLM, a reasoning model.

1:20:24They're going to have great image generation. But does anyone think that, you know, in three years time, people's home screens are going to switch from ChatGPT to MetaChat? No, I don't think so. But what about you? Yeah, yeah. I don't think so. Keep in mind also, Meta has its own institutional issues with AI products. I think they launched this AI chat feature where every chat was public. I still think it's still there. I think it was like a box you had to check. Yeah, people were accidentally sharing it, but it kind of speaks to when you're dealing with a trillion DAUs, you're going to have weird stuff happen.

1:21:04I would say that Sam would be the first of many people to acknowledge that there's such a thing as a 10 ,000x engineer and 10 ,000x AI researcher. But they also have a very deep bench. And it's not just about the bench. It's also about the data. It's also about the infrastructure that they've accumulated.

1:21:22What's their acronym? MSL. Meta Superintelligence is going to have to build up effectively from scratch. because effectively, Jan LeCun has failed in his leadership of meta AI there. And I think that's fine. That's a pivot. That's something that only Zuck can do. But yeah, OpenAI has a very deep bench and I think they're good there. I would say though, that it's really interesting how well diversified this landscape is. Most people, when I talk to, there's often in the AI circles there's discussion of who has the mandate of heaven mandate of heaven meaning they're just most likely to achieve AI of the big labs myself excluded of the big labs a lot of people are mostly saying DeepMind it's actually not OpenAI so I think OpenAI is intensely aware that they're being poached they're being out-competed on pricing I'll be competing on some metrics like Elmsys for DeepMind.

1:22:29And OpenAI is extremely competitive. Whenever I talk to them, I'm so impressed that they're not just arrogant. They're not resting on their laurels. They're actually just like, we will win on every single front. And I think it's just a very impressive company that way. Then let's flip over. I mean, MSL is a very, it's a cooler acronym than LAMA. I always loved LAMA because it's a fun name, but it didn't have the same seriousness. It used to be fair. Fair. And fair felt also just like it's a little nice. It's not a hardcore team. We don't care about fairness. We drop safety from... MSL is like going to the majors.

1:23:04Exactly. It sounds like major league LLM and major league AI training. But I want to talk about the historical analogy because Zuck has been in this position before with the shift to mobile. So when Facebook back in the day was a web browser, they initially moved over to an iPhone app and the iPhone was growing. And they kind of made a mistake going a little bit too far into the HTML5 route, wrapping it in an iOS shell. But they didn't build the app natively and they were kind of falling behind. But then, you know, from 2012 to 2015, Mark was extremely aggressive about acquiring Instagram and WhatsApp, rebuilding the team, hiring some great people.

1:23:52This is when Adam Massari and Andrew Bosworth came in and really, really built out monetization in the feed. So they had more money flowing through the system to actually pay for all this stuff. And then we were covering yesterday. the the zuck did a talent raid in the 2010 era of google because he just wanted to get better at ads basically and then he built the greatest ad engine of all time yeah uh so yeah yeah how are you how are you interpreting like the comeback story and the fact that like mark has also been here before i think that it's interesting how you have like zuck has almost has to fail first and then he overcorrects and goes really, really hard and wins.

1:24:34In contrast, I think VR never really had a failure because it didn't really have that much of a success to begin with. But yeah, MSL could only have happened after the comparative disappointment of Llama 4. If Llama 4 had had proportionally the same traction that Llama 3 had, I don't think we'd be sitting here today. So actually, this is like net positive that we went through that because they were like, oh, like we proved out that we've tapped out in this direction and we just need a whole new team and we need to scale things in a very different way. And probably we just need to poach from the other labs.

1:25:16What do you think? I mean, it's also interesting, though, that their current strategy was their third choice. And somewhere in the middle, either first or second choice was complexity. And that would have led Facebook or Meta in a very, very different direction, more consumer-y than right now, which is building a lab. What do you think the postmortem on Lama 4 is? Is it just that they over rotated towards pre-training, massive model, behemoth, these like, you know, not focused on reasoning, not focused on all the little tricks and tool use and stuff that actually creates a delightful LLM experience or chat experience these days?

1:26:03Or is there something else going on there? How do you tell the story of what they got wrong with Llama 4, if anything? I don't want to bag on Llama 4 too much. By the way, I put in a thing in the chat for people to compare. Scout and Maverick were great. And then the shenanigans around LM Arena were regrettable, but understandable. Genoponis mistake, whatever. But it seems that Behemoth will just never be released. The assertion, again, Behemoth is never released, so this is all rumors, was that they tried to basically adopt whatever that DeepSeek did for their large fine-grained mixture of experts model, and it just didn't work.

1:26:44They didn't put it in enough, whatever. We will never really know the answer. I think there's probably also organizational issues around what data they can use. I know this for a fact just because I've heard issues around... Honestly, like at a big corp, when your lawyers get into the mix of training data issues, that can get very inconvenient. When, you know, I think like comparatively Anthropic, when they won their recent case, they were more like, you know, bend the laws and seek. Founder mode. Founder mode. Ask for forgiveness. I think now that we actually have a little bit of ruling around like, OK, like pre-trading on copyrighted data is actually transformative.

1:27:31Use, therefore it's fair use, therefore it's fair game. Go ahead. Actually, we'll see. Yes, but you the case is still trying whether that you need to buy the underlying thing, which could still be egregiously, you know, it could be incredibly expensive to to acquire the copyright material. Not at all. You don't think you don't think that'll go through? No, no, no. Whether or not you buy the underlying thing is fine. It's actually just the issue of copyright, whether you have to pay per use, pay per inference. Now that that issue is out of the way. Yeah, but I was saying the Anthropic case is still like they had 7 ,000, 7 million books that they obtained through that they don't, that they didn't purchase.

1:28:11And the case is. Oh, the pirated ones. The pirated ones. Yeah. And so it will be interesting if labs have to effectively strike deals with publish, you know, I don't know. It's still in the course. They are doing that. They probably just should do that. It's a one-time cost comparatively compared to the value that they can extract out of the books. The books are just guaranteed to be underpriced because the books are priced as though they're sold to one person. Whereas a model is going to be used by millions. So it's fine, just pay it. The piracy thing is a legacy of Books 3, which is a data set that was created by someone who was very pro-piracy.

1:28:54it was a copy of Books 1 and Books 2 which was actual licensed public domain books anyway so long story short I think those cases will be resolved and I think that Lama and Meta's strategy there would probably be effective at the quality of the data that they had and the fact that they just couldn't they were playing one hand type behind their back whereas all the other labs were not yeah interesting well this has been fantastic Last, one more question. Any reactions to the news that Apple is working with, potentially working on a deal with Anthropic or OpenAI? Anthropic wants potentially billions out of it.

1:29:31Very convenient timing for the open model release, which is rumored to be soon. But no reactions yet. I think Apple, there's a lot of news around Apple that never materializes. I think Apple hasn't shown that it has gotten the memo like Zuck has shown. So until it wakes up, I don't know. I think around the time of the Apple intelligence launch last year, I think a lot of people, I was commenting that basically Apple wanted to be the first layer of intelligence and then it wanted to route. So it always wanted to be Switzerland, wanted to play nice between OpenAI and Topic and whatever other labs, probably not Google.

1:30:13But I think you kind of have to make a bet. I think you kind of have to go all in. Like I'm not that interested in Apple making deals with OpenAI on Anthropic. I still want OpenAI to do an OpenAI iPhone. I don't like the in-ear device. And, you know, I just wish they just went all in and took Apple on head on because like all of these are half measures, man. Like we're going to be sitting here like five years from now and Siri is still going to like kind of suck. Like it's the same deal as like Amazon making a deal with Anthropic for like smarter Alexa. Where is that today? Yep. No, no, I was just asking.

1:30:49I haven't actually seen it in the wild. Great point. This is really good. One more breaking news for you guys. I don't know. You guys probably missed it, but Cursor has hired the Cloud Code people from the topic. What do you mean? What do you mean? Like how many of them? I heard they hired the Notion Mail team. I didn't realize that they hired the Cloud Code team. That's an interesting commentary on what is Notion able to keep its people because the Notion Mail team was, you know, they just launched it. Yeah, they just launched it. Now they have left. but like cursor so cloud code developers have been talking about it non-stop i think people who are like adjacent to developers really pay attention to this one this is as close as anything is to the new being the new cursor it is cloud code uh people are going absolutely nuts and spending a huge amount on it uh anthropics revenue is up 4x since the start of this year um and like cloud code only launched in february wow and now cursor has poached the top two people from Cloud Code, like the creator and the PM.

1:31:49It's breaking news. I love it. In terms of talent trades, this is a really interesting one because it's at the engineering level, not the model level. And it's starting to spread out. It's starting to be extremely competitive here. And I think it's very exciting. Wow. Well, yeah, we'll have to have you back soon since this is the top story every day now. This is real life. Thank you so much for joining. Great to see you, Sean. Great to see you. Cheers. Have a great rest of your day. And next up, we have Matthew Prince from Cloudflare coming in to TBPN. Welcome to the stream. Some huge news from Cloudflare.

1:32:27We'll let him tell us the story. How are you doing? Good to meet you. Thanks, me too. Welcome to the stream. I would love to start with the news today, and then I want to go into some of the history of the company and when you faced similar junction points and kind of turning points in the past. So why don't you kick us off with the big announcement and the big news today from Cloudflare? Sure. So about 18 months ago, we started getting approached by a number of content creators saying that they faced a new threat online. We spend most of our days, most of our business trying to fight cyber hackers, Iranians, Russians, North Koreans.

1:33:10And so I was surprised when the new threat was AI companies. And frankly, I kind of rolled my eyes at publishers. I was like, publishers are always complaining about the next new technology. And they said, just pull the data. Look at what is going on. And it was really striking that over time, you could watch as the sort of deal that publishers have made with Google starting 30 years ago, which was you can copy all of my content and in exchange you send us traffic. that that deal just didn't hold up anymore, where they were copying the content, but because they were providing answer boxes, AI overviews, they just weren't sending nearly as much traffic.

1:33:49And that was the good news. As you looked at OpenAI, it was about 750 times harder than with the kind of Google of old to get traffic. With something like Anthropic, it's 30 ,000 times harder. And the reason why is because people are reading the derivatives. They're not reading the content. It would be effectively like if I asked an AI system, them, you know, summarize what happened on the Technology Brothers show today, I have less incentive to actually go and watch your actual show. And that means that if you're making money through advertising, if you're making money through subscriptions, if you're just, you know, getting value out of the ego of knowing that people are watching your show, that's going away in an increasingly AI driven web.

1:34:27And we worried about that quite a bit. And more and more as we talk to publishers, we realize there was something that we could do about it because Cloudflare runs one of the world's largest networks, a huge amount of the internet already sits behind us. We could partner with literally publishers, everyone from Adweek to Ziff Davis and everything in between to say that let's change the way that the internet works and let's change the sort of model where if you're going to take content, you should actually compensate the content creators for it. And so starting on July 1st, we flipped the script.

1:35:00We made it as a default that if you're using Cloudflare, that you can by default for free block any crawlers from taking your content without compensating you. And I think now the hard work begins where we have to figure out now the business model around how we get compensation back to these content creators and make sure that folks like you who are creating real original content can continue to be compensated for the hard work that you're doing. Yeah. Well, we used to joke saying that the labs are welcome to scrape our content because we want to influence uh the outputs of the model but no it's it's a serious it's a serious issue we were covering one of ben thompson's pieces about this whole debacle a few weeks ago and it was funny because at the time we were like this is there's so many different stakeholders here who could possibly try to figure out a solution to this problem and i obviously the answer you guys are uh a key player in this and you have the scale in order to kind of make changes happen.

1:36:01Can you, yeah, can you, I guess, like break down more kind of like the kind of the market structure between and how you see this actually working out? And who really - Yeah, I mean, I guess what deals have been done over the past year? Because I know, didn't News Corp do a bespoke deal with OpenAI for that exact thing? It sounds like you are more equipped to kind of handle like the longer tail, but also some of the bigger publishers. So talk to me about kind of the state of the art of what those deals look like when they're one-to-one and then what things might look like going forward. Yeah. So I think that, first of all, I think for some time to come, large publishers will do deals with large AI companies where there might be places that people need help or either small publishers or small AI companies and figuring out what has to happen there.

1:36:52But I think even in the case of places where deals have been struck, what the challenge is, is someone like OpenAI is paying a lot of publishers for their content and doesn't actually object to the basic idea that they should pay for the content that they're using. But they do object to the fact that they're paying where all of their competitors are getting content for free. Any market that exists has to have scarcity. And the problem, the reason why there hasn't been a market in this space is that there isn't scarcity. And so what changed yesterday is scarcity was introduced really for the first time.

1:37:31And I think the closest analogy is if you think back to before iTunes launched, we were all downloading music on Napster and all the free pirate services. That's effectively how the AI companies are taking data from any content creators today. And what you need is an iTunes. You need someone to come in and say, OK, let's provide a way where people can pay for that content and they can go back. Now, that's evolved over time. I think our first version of the marketplace will probably be relatively naive and we'll figure it out. We know it's paying 99 cents for songs anymore. We've moved to something that's closer to a subscription model like a Spotify.

1:38:07And I think that that's what we will evolve to have over time. And if we do it right, I think that we can have a large number of sellers of content, obviously, but also a large number of buyers of content, both the big sort of general purpose models, but then also very specific models. And we've got to make sure that new entrants can come into this market and have a vibrant way of participating and competing. And so I think that for now, most of the deals will be one-on-one bespoke deals between publishers and AI companies. You'll need to have some way of enforcing those deals and making sure that if you're charging someone, they can get access, but their competitors can't.

1:38:44And then over time, I think we'll develop something that looks much more like a robust marketplace where content providers can set sort of what their price is. There can be a bid for maybe getting that content exclusively for some period of time or whatever else. And that's going to develop over the next, over the coming months. Is that the correct model to think that the content producer would set the price? I mean, that's certainly what happens on Substack and, you know, the New York Times, the Wall Street Journal set their price. But I've always thought that this might evolve a little bit more like YouTube or like Spotify, where there is a pool of dollars that are going into ChatGPT subscriptions.

1:39:25I personally pay$200 a month. and occasionally I fire off queries that probably land on the Wall Street Journal or the Financial Times and I would be happy for them to send 10 cents or a dollar or split off 50 % of what I'm paying. So you have$100 to kind of be a parcel out in the pool and then you see how much inference pulled, what data from what sources and kind of have it all be driven by the kind of the same volume, like the volume algorithm that you see on YouTube or Spotify. Does that seem like kind of what the long-term outcome might look like? Or do we need to also get to some sort of like ad-driven marketplace because that's ultimately how YouTube prices these things?

1:40:14You know, I think it's going to be, I think that there's a lot that we still have to figure out. I last week traveled up to Stockholm to meet with Daniel Ek, the founder of Spotify. And it was really interesting. He said, you know, the ultimate model that Spotify settled on, I don't want to put words in his mouth, but it was basically like it was sort of the most naive of all of the different options that he had come up with. And it is a pool of funds, and then they divide it up based on basically how many minutes of content you consume. And there are different rates for music versus podcasts versus audiobooks.

1:40:55And it was fascinating to see. So you could imagine a version where Cloudflare effectively negotiates on behalf of all of the content that sits behind us with the big AI companies. People can opt in or opt out of being a part of that pool. the more content that's part of that, the more valuable it is to the AI companies. And then we would look at how we could split that up across how much crawling is actually done across that. I think one of the real keys will be how can we give hints to the AI companies on what is the content which is the most valuable to them? So for instance, if Taylor Swift releases a brand new song, maybe does an interview about it, that's incredibly valuable content if you're a chat bot for lonely teen girls, right?

1:41:40On the other hand, it's probably not so valuable if you're sort of a chatbot trying to be the world's best doctor. You know, maybe there's some value in sort of bedside manner, but largely, you know, that's not going to be a big deal in your care. On the other hand, if a research study comes out on acetaminophen's effects on, you know, different types of chemotherapy, very little value for the chatbot for teen girls, but incredibly valuable for the doctor. And so what we have to do is actually, I think, on an LLM or an AI model by AI model basis, be able to give them signals back that say this is the sort of thing that you should be paying attention to, that you should be indexing, that you should be actually scraping and paying for.

1:42:21And the same way that in the music industry, we've got reviews, we've got different types of music that people are, you know, you might be into country, you might be into classical, and it kind of allows you to compartmentalize that. I think that whole ecosystem has to develop. But once that does, something very much like Spotify could be the right answer long term. And again, I think we're in a unique position to pull it together. Talk briefly about stable coins. I remember in this Ben Thompson piece, people have been suggesting this idea that stable coins could be some part of the solution or a backbone for a new business model for the internet.

1:42:58At the same time, while I'm bullish on stable coins, someone like a Cloudflare can set up the infrastructure to just use traditional financial rails to process payments. So I'm guessing that it's not part of what you're... This was Ben's reaction to the original sin of the internet was advertising and this idea that Mark Andreessen, when he built the browser, didn't build in payments because it was this multi-party discussion to figure out how to actually integrate payments into HTTP. Didn't happen. The first MCP spec, that's the model context protocol spec for AI agents to interact with each other, doesn't include payments.

1:43:37But he was kind of saying that it might be on the horizon, but would love your take. Yeah, you know, I think the answer doesn't have to be 100 % one or the other. And so I would guess that there are going to be very traditional kind of traditional financial rails that will be ways to pay people out. But there will also likely be something that is blockchain based or stablecoin based. And again, I think we're looking at all of the different providers that are in this space, including potentially creating our own stablecoin that would be part of how these transactions. you know, take place. And I think you're exactly right that there's a natural extension from what we're doing here to how we figure out around what the payment rails look like for MCPs.

1:44:22Because as your agent is going around interacting with things, that's also going to be something that is either, you know, charged for or that you actually get paid to do. And there's got to be a way for those transactions to take place. And to the extent that you can reduce the transaction costs for those transactions as far as possible, then that's a pretty interesting way of being able to process very high volume, low dollar amount transactions. So I think that's right. My only one quibble is that I think that the original sin of the internet is not that it didn't include payments. It's that there was no privacy built into it and your IP address reveals far too much about you as and who you are we don't even have to get to cookies but that's another story no we totally can what about we we've talked about content creators publishers what about uh the the apps of the world the ubers the instacarts that actually have really meaningful advertiser businesses you know businesses built on top of them uh do you expect there to be any type of this functionality rolled out to them over time or is that something you think they're thinking about quite a bit.

1:45:34Because if I can go into ChatGPT and that's my default daily assistant, let's say in a few years from now, and I'm like, hey, order me groceries and order me this Uber, you know, I'm not in the app seeing ads potentially, you know, being upsold. And that could be a problem for those types of companies. Yeah, totally. And I think that, I mean, you know, robots don't click on ads. And so the sort of model that part of the revenue stream to support these services has to come from somewhere. And if today, you know, Uber is able to monetize the time where I'm waiting for a car to come by showing me an advertisement, that means that they can effectively charge me less for the ride.

1:46:25And so it may be that if that ride is booked through an agent instead and they don't get that advertising experience. And again, I don't know enough about Uber's business model to know how important that is to them. But if they don't get that, then maybe it is that there's some sort of premium that an agent booked ride receives versus a human booked ride. And again, I think that that's just we've got to figure out what that looks like. I think that's going to be less up to Cloudflare. I think it's going to be, you know, our job will be how do we provide those payment rails? How do we provide the systems?

1:47:02How do we make it so that we can have guardrails on as agents interact with applications that are there, that you as the application provider can set those rules and controls, and then agents can interact within that system. And MCP is sort of the leading candidate for providing that. But you're right that it's a sort of draft version of that specification. And there are a lot of things that have to mature in order for that to be something that is the real kind of agent-to-agent system that is likely to run what will be an increasingly AI-driven web. Yeah. Can you talk about any previous crucible moments for either Cloudflare or just like the internet history broadly?

1:47:45This feels like a moment where you're potentially trying to, I mean, deal with a shift in the overall internet structure or the incentive structure. But it's a reaction, but it's also an action that should reshape the relationship between different parties on the internet. Are there different moments in the history of Cloudflare or the history of the internet that you think we could draw on as historical analogies to learn from to see how this might play out? You know, I think that Google really, 30 years ago, defined what was the business model for the web, which was you create content, search drives traffic, and then you monetize that content through advertising or subscriptions or ego.

1:48:40And ego and monetization, not quite the right thing, but you drive value from it in one of those three ways. And that's held up for the last 30 years. I think that this is the first time that I've seen something where I thought, wow, there are really going to be very, very, very fundamental changes to the structure of how the Internet works if we move from a search-driven model to an AI-driven model. And I think that what I hope is that we can actually make this something where what gets rewarded is not what gets rewarded today, which largely is, you know, who can write the headline that produces the most, you know, sort of inflammatory response in all of us?

1:49:30You know, who basically drives the most cortisol, you know, gets the most clicks and therefore the most ad revenue or the most subscriptions? like that's that's not a that's not a healthy way of looking at the world i think you know the alternative is if you imagine that kind of all of the ai models together are a good kind of assemblage of an approximation on human knowledge if we can identify where the holes are and then create incentives for content creators to actually fill in those holes that actually is going to move humanity forward it's going to make the ais better it's going to it's going to be a much more interesting thing.

1:50:05And that's, I think, how we're going to be creating it. I can't think in the last 30 years of a seminal moment. I think there are some things that are along the way. I think 2016 was a really big turning point year for a lot of reasons. It was sort of the year that technology went from being able to do no wrong to being able to do no right and sort of rise in populism around the world. You have Brexit in the EU. You have the first Donald Trump election. You've got Xi and Modi consolidating power in Asia, the Filipino election. And I think that that was a point in time where, you know, also driven by Snowden shortly before that in 2015, that a lot of the world lost faith in kind of the U.S.

1:50:50model of internet governance. And it wasn't quite ready to adopt the Chinese model, but that's definitely been a shift, which is substantial. And I think we're still watching that play out. That, I think, it's probably still remains the biggest threat to the overall internet but this shift to ai as well you know again i think is is is a real challenge but it's also an incredible opportunity if if again we can make the rewards incentives for content creators not be who can produce the most most cortisol but who can produce the biggest sort of incremental improvement in human knowledge um that that would be an incredible win and uh and something that that um you know i i don't quite know how to get there yet.

1:51:31But I think yesterday or today, and, you know, we took in July 1, we took a real step in moving in that direction and making sure that content creators can be compensated for really producing information, which is valuable to advance human knowledge. What do you think about the future of investigative journalism? There's been a big shift in just content creation into independent creators. But a lot of that is actually downstream or separate from the type of work that investigative journalists do. I'm thinking of like Seymour Hersh hanging out at a local army bar for a year before he gets one scoop that he can write a book about.

1:52:13And these investigative journalists, they tend to, you know, John Carreyrou was on the payroll of the Wall Street Journal for years. He was writing stuff, but then he blows the Theranos case wide open, eventually a book and then a movie. And I imagine that with artificial intelligence, the value of a scoop could actually go up because you could use an LLM to read through the clickbait repurposed version of the article to find, wait, they're sourcing actually, this person posted it on the internet earlier. They're the one that actually did the hard work to get the scoop. They should get 90 % of the value and 10 % should go to the repurposed rage bait version as opposed to the economic model now, which is maybe you get 90 % more clicks on the viral repurposed content and the scooper actually gets 10%.

1:53:02Do you think that's possible or how do you think that investigative journalism will evolve? Yeah, I don't know if this is an answer to your question, but I thought it was interesting. As I said, I met with Daniel Ak up in Stockholm, and he told me, he said, you know, we were talking about this, and he said, you know, one of the things we do at Spotify is we actually surface all of the different queries that are sent to Spotify that we don't feel like we have a really good response for. So if somebody searches for, you know, I want a song to a reggae kind of beat with, it's all about how much it sucks when your sister steals your car and your dog.

1:53:47Not to get too specific. I don't know what these things are. But there are musicians who take this list and they actually write songs based on what people are looking for. No way. And that they make tens of millions of dollars a year doing just exactly that. And there's something about that that I think is really beautiful, as opposed to the alternative of just, you know, just trying to do a little more me too of what everybody else is doing. Like taking a different twist, using signals from the market in order to go find that. So, you know, again, that's not investigative journalism by any means.

1:54:24But I think it is actually advancing kind of the sort of good of humanity where it's taking a place where there's a missing need and it's filling that missing need. And so I am hopeful, you know, and I mean, I'm a relatively optimistic person. And I'm hopeful that if we get this right, that we might be on a golden age of content creation where people actually are rewarded for doing things that advance human knowledge as opposed to just doing things that produce as much cortisol as possible. Yeah, the idea of a knowledge bounty, right? It's like, hey, there's groups of people or a single entity online that will just pay you to produce really high quality information around this specific topic.

1:55:08And the internet always did this sort of organically, but it would just be somebody spinning up a blog or maybe an Instagram account or something like that. And they would just start blogging about something that was niche. And then an entire network would form around it and other people would contribute to it. So I think there's quite a lot of precedent, but it would be exciting to put that reward out and not saying, hey, you have to do this and then maybe you'll get some ads associated with it later. But basically the pool of capital is here and you just have to deliver that knowledge that people already want.

1:55:41And we know it because they're searching it on LLMs and things like that. I think I'll tell you the sort of black mirror kind of dystopian outcome. if we don't get this right, which is I don't think that I don't think journalism goes away. I don't think that research goes away. But you could imagine a world in which we go back to something kind of like the Medici's, where there are five big AI companies, and they basically employ each of them, all of the journalists, all the researchers, all the academics, to be able to do the research to feed their systems, because you're still going to have to have original content, people are still going to have to be able to produce that in order for the AI systems to, you know, fill in the holes in their kind of effective block of Swiss cheese that is their model.

1:56:26But I think that that's a pretty bad world where, again, because you then probably have like the conservative AI and the liberal AI. And I mean, all these things that we've kind of, that the internet kind of broke apart, you could imagine AI as a system that is just this massive consolidator in the future. And I think that's a bad outcome. And I think a better outcome is if we can figure out how can we reward people for, again, driving knowledge, but not get to a place where all of them have to be employed by one of the five, you know, big A. Yeah, I actually talked to somebody very high up at one of the labs who said that, was saying that, like, if you take the total salaries of all the journalists in America, it would be a fraction of what the AI labs are spending right now just acquiring data.

1:57:15And so it's not a financial question. It is a political, cultural question. It's interesting. But that's also the argument why I think that, and I've been really positively surprised as we've talked with, because we've talked with all the big tech companies, all the AI companies about this. And they all, like with maybe one or two very small exceptions, they all say, yes, we understand over the long term we have to pay for content. And so they get that. What's key, though, is it has to be a fair playing field. And that fair playing field, everyone sees that slightly differently. So if you're a new incumbent, you want to say, well, Google can't be advantaged.

1:57:54If you're Google, you have to say, well, we have to be respected for the ecosystem that we've helped build and flourish and we should be able to do this. And so everyone's got a slightly different take on this. But I'm actually encouraged that the dollars are there, that there is an acceptance that this is something that needs to happen, and that if you ask them, everyone says, yes, we need to do this as long as you can create a level playing field. And again, that's where I think our role comes in is how can we create that level playing field? How can we create scarcity? And then how can we make sure that content creators are being compensated for the hard work that they're doing?

1:58:32Yeah. Zooming out just for a second, what is the state? How's the internet been for the last few weeks? It's been a busy month in or last month in geopolitics. And I know that makes your job a bit harder, or at least I would imagine things get a little bit busier. It keeps it interesting. I mean, whatever you see sort of in the sort of kinetic side, the physical side of a conflict is usually replicated in the cyber side of the conflict. And so, you know, we as the hostilities ramped up between Israel and Iran, first of all, we saw very clear signals that that something was coming ahead of time, which is it's interesting how there's sort of a digital residue, which shows when there's going to be kinetic action taken.

1:59:22And so and so we were watching that that pretty carefully. The big attacks targeting both Iran, one of the largest banks was hacked by what looked like a group of Israeli hacktivists. The largest cryptocurrency exchange in Iran was hacked and all its funds were drained. Again, looking like it was either by the Israelis or Israeli sympathetic attackers. Iran has tried to do the same thing against Israel. Israel's cyber defenses are much stronger. But we're starting to see that Iran is targeting other, largely U.S. financial services firms, critical infrastructure firms, to try and strike back from what is, you know, how do they strike back against the U.S.

2:00:13in a way that is harmful but doesn't start World War III. And I think that increasingly, unfortunately, cyber will be a big piece of that. And so we're, you know, we're doing everything we can to stay in front of that, make sure that anyone who needs it has protection and that we can keep the lights on everywhere in the world. Last question for me. There's a number of larger overarching tech narratives. I'm interested in if you're losing sleep over any or tracking any in particular focus. the AI talent wars and kind of pay inflation for top performers. Is that an issue or something you've been tracking?

2:00:52Or the difficulty to build larger data centers and infrastructure, the GPU sort of the chip wars, any of those topics kind of particularly relevant to you or your business or we're kind of keeping you up at night? Yeah, you know, I think we're not trying to build a foundational model LLM. So we're not as much competing for the bleeding edge AI researchers. I will say that I've been really amazed at both from an academic side and then also just pure talent side, how many people are interested in working on that problem of something like how do you score content in order to be able to create a marketplace.

2:01:31And so that's something that's been pretty exciting. We're very excited about the people who are coming to apply to work for Cloudflare to work on problems like that. Like today has been a record applicant day for us. That's awesome. Congratulations. Record. Sorry, I hit the air horn for you on the record applicant day. But it's good. It's good news. And then, you know, I think, you know, we tend to put a little bit of equipment in a lot of places. And so we don't tend not to have kind of massive multi. Yeah, you're not running into like power constraints or rare earth element constraints or water constraints.

2:02:09We do, but in kind of a micro way where, you know, you put GPUs at the edge of our network. We have to live with a power envelope that we're given by an ISP. And so we're doing things to try and figure out how to just get the best power efficiency out of the GPUs that are there. The answer to, you know, more and more need of GPUs can't be everyone has to turn up their own nuclear power station. So I do think the place where we're pushing suppliers and AMD is doing some really interesting things in this space. Qualcomm is doing some interesting things in space. The fruit company down in Cupertino is doing some interesting things in space.

2:02:42Or how do you focus on, yes, performance, but performance per watt? And we've seen this game before with Intel saying, oh, that doesn't matter. Just get the most performance possible. You can water cool things, all kinds of things. That tends to not be the winning strategy over the long term. And so we do think that there will be a renewed focus on just energy efficiency around GPUs. And we're really pushing that in a way that because because, again, we can't build our own data centers in the business that we're in. And then and then chip shortage. The chip shortages are funny. Like it's there's never been a chip shortage in any time in the history of silicon that doesn't turn into a glut because it's.

2:03:24Hey, but this time it's different. Yeah, this time it's totally different. So I think that I think you're going to see both. You're going to just see shifting demand. that's there and a lot more. NVIDIA is not going to be the only chip supplier of GPUs. There are some really, again, great, great other providers that are out there. Yeah. Well, thank you so much for stopping by. Yeah, really enjoyed the conversation. Congrats on the launch and come back on again soon. Yeah. Yeah. Thanks for having me on. Good luck filtering through all those job applicants. We'll talk to you soon. See ya. Bye. Really quickly, I got some breaking news.

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2:04:32So we're very excited to catch up with him. It's his second time on the show. He came on during Crypto Day. Fantastic conversation. And now we're excited to have him back on to talk about the state of crypto. How are you doing, Luca? Good to see you. I'm doing good. How are you doing? I'm great. What is that behind you? The igloo. Is this part of the Pudgy Penguins Expanded Universe? Yeah, the holding company that holds Pudgy Penguins, Abstract, and a couple other companies we get to announce that we've acquired is called igloo. So everything lives within the igloo. That makes sense. Is anyone riffing on the meme of selling ice to an Eskimo yet?

2:05:12I feel like I know that you're good at doing deals with old line retailers, but can you sell ice to an Eskimo? I can sell ice to an Eskimo. I can sell fish to a penguin. I can sell land to a mammal. Yeah, what is the latest? I mean, we caught up on Crypto Day a couple months ago. What's the latest in your world? How are you feeling? We've been in this kind of kangaroo market for the high-level L1s. Prices are up, prices are down. Everyone's kind of waiting for the next big crypto catalyst. But maybe that's the Genius Act, the Market Structure Act. Maybe that's legislation. But what else are you tracking?

2:05:52Stablecoins have been really hot with the Circle IPO. What's been top of mind for you? Yeah, our big thing at the Igloo is actually like we feel like we are one of the most well positioned organizations for consumer and culture in crypto. And it was actually a little fascinating because I actually felt like I missed a piece in terms of what I felt like was needed for this consumer crypto revolution. And I think it's really prevalent around this genius act, which is I think you're going to see crypto breakthrough mass off the backs of stable coins. Because if you look at all of the consumer crypto applications and really their barrier and bottleneck, you know, I thought it was product builds.

2:06:36And I do think that is true to a certain extent. But I think the product builds are a byproduct of the current environment that rewards builders for building in. And I think that gets completely flipped on its face when average consumers are now transacting in dollars that are on chain. It opens up a whole new vertical of product builds that I think are more oriented around maybe providing a service or an experience and not providing a scheme to return your dollars two or threefold as like a financial mechanism for you to kind of speculate on. And so I think like the Genius Act is quite literally going to kick off the consumer crypto revolution.

2:07:20And that is really apps that are built around, I think, the best properties of blockchains, which is like on its face. I think a lot of people listening specifically around your audience, like maybe look at blockchains as like maybe speculative vehicles or like programming languages. But I think the best frame to look at it as is like a blockchain is a censorship resistant version of a Stripe or a PayPal that taps into global composability and global liquidity, which basically means that like anybody with an internet connection can transact, you know, using these payment rails without some sort of intermediary.

2:07:55And that at scale, if you actually understand like consumer product builds, you know, every guy that I know that's building an AI or building consumer product goods at one point has had their account locked up or their funds withheld or are paying a huge premium on these transactions, whether it's 3%, in some cases, 5 % to 8 % if it's a higher risk product. And I think this, you know, blockchain is very useful when you think about removing that middleman for those applications. I think we've just been pigeonholed as an industry around like these builds that are solely around speculation and making the end user more money, right?

2:08:33Like I go buy this, I should return a 2x or a 3x or a 5x. And I think we're slowly transitioning into more traditional builds where it's like, hey, consumer crypto is really around this idea of removing these layers that I think today make it so hard to build, you know, fun and robust applications that are, you know, segmented either from a geography perspective, whether it's certain regions, etc. And I think it's kind of transitioning to like more real product builds that I think more serious entrepreneurs are interested in. So the Genius Act, I think it's going to change everything because the floodgates for stable coins are here.

2:09:14And I think that was the missing piece to the consumer crypto revolution that I think crypto very much desperately needed. Okay, I want your reaction to this older analysis by Ben Thompson during the first NFT boom, where he was talking about the value of NFTs as a disintermediated membership program, essentially. So basically, the link I see to stablecoins is if you have a community, and your creator, you might not want to have someone have a super fluctuating financial interest in your community. And so when I think about the folks who are big on Patreon and it's $5 a month or$10 a month, but when I pay$30 a month for the Wall Street Journal, I get access to wsj.com.

2:10:07I can comment there. There's a bunch of other things that you could imagine, but I can't really go around the internet and carry my Wall Street Journal login to the their YouTube account and get custom YouTube videos, like the videos have to be embedded on the Wall Street Journal website, so it can't really follow me around on the web. And Ben Thompson was talking to Adam Masseri at Instagram about this idea that Instagram might be open to a bring your own membership type of integration with Web3. And so I think that we were almost there, but there was no one that really broke out into mainstream adoption where both, You you got to get YouTube and you got to get Instagram to say yes, we are we are you know integrating this membership card as a Native as a primitive on our platform to allow you know creators to create You know subscription level content instead we wound up with every social media app has their own subscriptions So I can go get YouTube YouTube premium subscribers who subscribe to me pay me five dollars then on X I can have subscriptions five dollars.

2:11:11They subscribe to me there but you got to follow me around. You can't just subscribe to me as the creator. That felt like something that Web3 could do, but we weren't quite there with stable coins. Is that something you think is a reasonable dynamic that could play out post-Genius Act? Is there still some sort of countervailing force where the big tech companies might just not want to give it away because, hey, they're earning a cut on those membership revenues directly? How do you see that playing out? They're definitely not going to want to give it away, right? Those guys are pretty good at capturing and trying to keep revenue.

2:11:43I think like one of the big, you know, bull cases around web three is like these universal logins and identities, right? That like follow you all over the internet. Like that, that's going to take a lot of pieces to put together, but like things like the genius act, right. And everyone transacting and stable coins makes that so much more possible and feasible that I don't know of anyone who's really mastering that build just yet. And to the point of NFTs, I think there's two bulk cases for NFTs. One, which is the one that you referenced, which is access. Right. And that is a more mundane, probably less exciting, but probably bigger TAM because you could replace the entire ticketing industry and OnlyFans and Patreon, like you'd mentioned, and Info, right?

2:12:24The WAP guys can go and plug that in. And so I think there's that. And then there's also the TAM of digital collectibles, which is physical collectibles today have a total addressable market of about$600 billion. One percent of that$600 billion is digital. Yet digital collectibles have a slew of pros that physical do not. They have no friction when buying or selling. They have no insurance issues. They have no storage issues. They have no inauthenticity issues. Right. And so I think there's a there's a gap in value to capture in terms of, you know, in a six hundred billion dollar market. It's kind of like gold to physical gold, the digital gold.

2:13:01You know, Bitcoin's captured 10 percent of it. I believe that digital collectibles are, you know, whether you argue what side of the spectrum they're on, they're not one percent. They shouldn't have one percent of that market share. And so I think there's going to be value to capture between that spread. The other thing that stands out to me as just an observer is that I think when people are frustrated with the NFT market broadly, it's frustration with 90. It's basically saying like, yes, 99 % of attempts to create new IP are going to fall flat because it's really hard to create IP that is actually like it's easy to create IP.

2:13:40it's hard to create valuable IP. Yeah, and most people don't see the random scripts that are floating around Hollywood. Like 90 % of scripts in Hollywood don't go anywhere. Fall flat. But 1 % of them become Star Wars. But with crypto, it's like they just hit the chain and people assume that there should be some value tied to them. And so I think it's just very possible that NFTs become bigger and bigger and bigger, but it's just a handful of really select projects that become these sort of centers for gravity and get developed in all these different ways. but you're not going to have 100 ,000 projects that each have movie offshoots, video game offshoots, you know, physical toys attached to them.

2:14:21And that's exactly the way it happens in the real world where people people in Hollywood, like you said, will spend their entire life trying to develop a cartoon that actually turns into a franchise. And many people will try and fail. And the difference with crypto is like the expectation is immediate value creation. and I just don't see that happening. Yeah. The tokens, whether it's fungible or non-fungible, there's a superpower behind it. It's a kryptonite and it's a superpower depending on how you harness the power. The financial alignments can be your greatest weapon or your greatest weakness, right?

2:14:58And how you harness that, right? Like us being able at Pudgy to galvanize this group of 10 ,000 people to go and hit algorithms. Our big breakthrough at Pudgy was I told all of them that Walmart had turned us down, that we were going to go live on Amazon and that I needed everybody to buy. And if they bought it, right, all at the same time, we would trigger Amazon algorithms. We'd be number one across all of these different categories. And that would give me a lot of leverage to go do a deal with a major retailer. Well, what happened was exactly that. We launched within, you know, 30 minutes of launching on Amazon.

2:15:34I'm number one across basically every consumer product category. every play category. And then Laura Rush, who was the head of merchandising at the time at Walmart, pinged us and said, we want to stalk you. You've got three months. We're going to put you in a pallet in the center of the store in 2 ,000 locations in quarter four. And that was like the big paradigm shift for Pudgy, where people were like, oh shit, these kids came out of nowhere and did it. And the rest is history. We've basically carried that momentum up until where we are today. But that was our big breakthrough. And that was because I think of that alignment and that incentive, everyone was incentivized to go and create this headline in this moment for Pudgy, at least the core community members who had quote unquote bags or collectibles or tokens within the ecosystem.

2:16:18And if you can harness that and if you can respect that, it can be a superpower. It can be your greatest kryptonite as you've seen a hundred times over. And there's plenty of horror stories, which we won't get into. Bit of a wild card question, but I don't know if you saw OpenAI has a deal with Mattel to make a chat GPT-enabled Barbie, potentially? We don't really know the shape of the deal. How many LLMs can fit in a pudgy penguin? Yeah, yeah. That's what we wanted to know. I mean, reaction. Can fit a lot of LLMs in this bad boy. I mean, you're in some ways in the toy business. And what is the next generation of toys look like?

2:16:52What are you optimistic about? What will change? What technologies do you think will be integrated? What considerations will drive actual success instead of just like, yeah, we slapped AI on it. Like we tried that with every toaster having Bluetooth, didn't really work out, but the Nest Thermostat, pretty popular. So yeah, how does this play out? It's a great question. I saw this coming two years ago and I basically jumped for joy when I thought of it. And I told the guys, because for those who are not familiar, the toys that we sell have the QR codes. So it's not just like selling toys that are IP related.

2:17:27We're actually putting NFTs in the hands of regular people because you buy this toy, you scan this QR code, you redeem these NFTs through a gasless experience. So it's like a whole crypto funnel, which is basically our product, our physical toys. But I jumped for joy because I was like, dude, what if these characters that you bought and these NFTs that you created then became like your AI homework or helper, right? And this was an idea I had two years ago. And Lorenzo, our president was like, you know, dude, you know, if there's a 0.01 % chance this homework or helper tells a kid to kill himself, it's not worth it because we'll get deshelved and it'll create a bunch of chaos.

2:18:01And we weren't, you know, AI guys, but we actually are doing a toy with Curio who recently raised pretty big over in the whole, you know, AI crypto or AI, you know, startup Twitter land, X.com land. And that whole place. Yeah. We're familiar. We've dabbled. That's great. Yeah. How, who's the, who's the musician that's involved? with that? I don't know. I mean, yeah, I'm super bullish on this. You know, I have kids, and I mean, I was thinking about this with the Rabbit R1, like, yes, the safety and security stuff is really, really important, but safety interpretability research and the ability to run an extra LLM just filtering, is this a harmful response from the LLM?

2:18:50That seems to be getting better and better, and I'm pretty optimistic about having a watered-down LLM that can't explain everything, but is really good at identifying plants and animals, that's going to be a big product for kids, I think. So I'm very happy. The trick to CPG is all about providing value for the customer. Like Walmart will tell you, if you're trying to stock, like they're always optimizing for the best deal. And so my mind frame is like, how much bang for your buck can you get for this purchase? Well, if you can buy it and redeem some NFTs that could be worth some digital dollars, maybe you recoup your costs on the physical item, and then it's a net free good.

2:19:24And then maybe you can go in and ask it questions. and now it's a value add. And so I think this stuff is just changing. It's a complete paradigm shift. I think no one's really ready for how I think the world is going to change. But in terms of a value add, you can plug in an LLM to a lot of physical products, just alpha for the room, and create a ton of value for your end consumer, which is ultimately your goal as an entrepreneur. That's awesome. Well, thank you so much for stopping by. Always appreciate your perspective. We got to have you back when there's more breaking news and we'll keep catching up with you.

2:19:55Good to see you, Luca. Cheers, Luca. Have a good one. Bye. Really quickly, let me tell you about adquick.com. Out-of-home advertising made easy and measurable. Say goodbye to the headaches of out-of-home advertising. Only adquick combines technology, out-of-home expertise, and data to enable efficient, seamless ad buying across the globe. If you're going to be in Walmart, if you're going to be selling toys, you've got to get on adquick.com. Anyway, our next guest is here, Julia. Hey, how are you doing? Doing well. I like the intro music. Yes, welcome to the stream. Welcome. We are professional newscasters, as you know.

2:20:27You're one of a handful of people in the entire world that has actually visited the Temple of Technology. You've been into the Temple of Technology. Yes, the capital of capital. Yes, that's right. Give us the latest and greatest in your world. New piece in Palladium. What was the thesis? What inspired it? Take us through the high level of the piece. Yeah, so something I've been thinking about for a while. It was actually sort of conspired by this freshman at Stanford who I was talking to in the library, very, very sweet girl. And she was like, what are you doing post-grad? And I said, well, I'm working for this magazine called Arena.

2:21:04They want to do books, so I'm going to be helping with that. I'm super excited. And she said, that's a 1930-ass job. And I was like, well, why is it a 1930-ass job? Well, it's like, you know, most people are like consultants or software engineers, but you're making like this very real thing that's like you can touch. I was like yeah like maybe it is a 1930 ass job I guess people a lot of people in the 1930s didn't have jobs but there were some people who were writing books and publishing books so I was sort of thinking it's like well how do we get to this point where it's like you it is sort of like this weird thing for people to be doing something real and tangible and then I think it's also just you know I sort of feel like graduating from Stanford in 2025 in some ways I'm like out on the last chopper out of nom like chat gbt was only like super ubiquitous really my senior year like sometimes you just walk into the library and everyone had chat gbt on their screens and it was just you'd go to section and the section leader would be like please like i know it's really easy to use ai but it would really make me sad if you used ai to write your weekly reading response and then sort of just like all these things that were just like you felt like you're more practicing, like acting like a college student because just AI was just making a lot of the day-to-day like obsolete.

2:22:25And it's also just like, there's a pretty good chance that like AI is a better writer than I am. There's a really high chance AI will be a better writer than I am in five years. And I think it's like, well, if what I wanted to be as a writer and that's going to be obsolete or AI is going to be better than me, or like if my friends who want to be lawyers are just going to be replaced by Harvey and my friends who want to be software engineers are going to be replaced by Cursor. Like, what does the future look like? And I think I was also guided by this conversation I had with a wonderful professor at Stanford, Jennifer Burns.

2:22:58She's in the history department. She has written biographies of Milton Friedman and Anne Rand. I took a really great class with her in the fall called Thinking About Capitalism. And I had a lot of conversations with her just because I found her work really interesting. And she asked me, she's like, you know, you're sort of like pretty like enmeshed in like the current, you know, right wing intellectual moment. Who is like the defining like economic thinker? And this was back in like October, November. And I was just totally stumped. And when I when I sort of published the piece with Palladia, my senator, and I was like, this is sort of my answer to like what what is the economic thought of Gen Z or really of the 21st century?

2:23:39And it's economic nihilism. Nihilism. So, yeah, are we cooked? Where are you most bearish? It seems like you're worried about a lot of different trends. Is capitalism cooked? Is democracy cooked? Is technology the problem here? I used to get an anecdotal job market kind of update. It sounds like we got breakfast last week and you were saying that somebody, some of your classmates got offers from, what was it, like Timu or somebody? Yeah. To work in like a warehouse and they were all like super offended. Yeah, it was Shein. And it was like become this like Shein warehouse manager. And I was like, actually, that sounds like a really interesting job.

2:24:22Like if I didn't have something lined up, maybe I would apply to be like a Shein warehouse manager. And there's this app called Fizz, which is sort of like Yikyak 2.0. It's an anonymous forum for college students at particular campuses. And people got so mad that Sheehan dared ask Stanford students to stoop to their level to become a warehouse manager. And I think it's sort of like a paradox because Stanford students believe that they are entitled to certain jobs. And this is true of sort of like all IVs or elite universities. But there are a lot of jobs that people aren't willing to do. And I sort of wrote in the article for Palladium, it's like the line used to be, well, the hardest part about Harvard is getting in.

2:25:07And now I would say the hardest part about Harvard is getting a job that your peers deem elite enough to not feel any like social backlash or to feel comfortable in the rat race. And I think it's Peter Turchin, who's a phenomenal historian, has written a lot about how conflict rises in societies when there are more elite aspirants than there are elite positions. And I think especially as class sizes at these schools are expanding and the Internet is democratizing access to education and democratizing access to power in some ways, I think that these schools are in a really tough place because it is no longer a guarantee that you can go to Stanford, you can go to Harvard, you can go to Yale and be upper middle class.

2:25:56Are there really not that many jobs at McKinsey, Bain, BCG, the Wall Street banks, the big tech companies, the PMs? It feels like we're hearing a lot of nervousness about job loss and not hiring, but it feels like also McKinsey's printing a bunch of money just writing slide decks about AI transformation in the Fortune 500. or has the actual shift in what is a high status job changed? And if it has, what is the high status job? Is it entrepreneurship now? Is it YC? Where are we sitting with that? I think it's VC. I think it's entrepreneurship just regards to - VC? They want to go straight to venture capital?

2:26:36Yeah, this is the golden ticket. Just kidding. We support venture capital. I think anecdotally, it seems that big tech is like, that used to sort of be like, okay everyone told you to study cs and if you study cs you'll have like a 200k post-grad salary and now that's not really happening anymore like yeah it's i think there's definitely a shortage of or especially in like more big tech firms which offer more security than like startups sure it's a lot harder to get those positions now than five or ten years ago i think that's more of a hangover from COVID and kind of Elon showing that he could run X at one fifth a head count versus truly AI disruptive to like replacing workers?

2:27:22I think it's probably both. I think there's like the zero. Well, there's a time in 2021 where just people were throwing money at anything that they could throw money at. And I think we're in very different times now. But I think about it less in terms of just like, oh, what's the market like now? And more in terms of like, how has the social contract changed? And I think for a lot of late college students, the sort of social contract was for a time like, okay, if you study like these three things, then post-grad you will have like, and you don't fuck up in college, you'll have like pretty easy access to these really important high paying jobs.

2:28:03But I think we've seen now that it's like maybe a job at Goldman Sachs as an analyst isn't that important. You're just like changing thought colors for 110 hours a week. But also just we're seeing underemployment rates in these sectors. I think the computer science underemployment rate is one in six, which is insane considering that pretty much every authority figure I had from ages like eight to 18 told me to major in computer science. Yeah. Yeah.

2:28:34Sam Alden wrote this post about the soft singularity and his kind of thesis was that if you went back to 1930, they would think we all have fake jobs. And so we will maybe create new fake jobs. Are you optimistic about that at all? Yeah, I don't think the fake jobs thing is necessarily going away. Like I'm in LA right now, that's where my parents live and every third person is an influencer um so it's not hard for me to see for the influencers you know the hard working content creators it's very hard to go slaves to the algo yeah but i think what we're gonna see is just there's a lack of what we're sort of seeing it's like they're they're having fake jobs for i don't know maybe probably not eternity but for like recent history and what we're going to see is just the fake jobs.

2:29:30It's just the work becomes more and more meaningless. It's like I don't know what the fake jobs of like five years, 10 years from now are going to look like, but I think like a key thesis to my article was that like Gen Z is simultaneously like hyper-careerist, but like there's no career at all. It's just sort of floating around from one job to the other and because there's so much like hopping over from one company into another one firm to the next, there's never really any real expertise that's developed. And there's this shallowness in the work. I think it's like my parents, especially my dad, who just retired, he worked at one firm for the vast majority of his career.

2:30:10He was an expert in that field. And that wasn't anomalous for people of his generation's boomers at all. But I think now with Gen Z, it's just like, okay, you have one job for six months to two years, and then you move on to the next thing. And these big companies have like incentive structures built in like McKinsey that has search time. It's like, okay, well, we're going to, after one year, we'll give you six weeks off so you can go and look for another job. And I think in sort of doing that, it's admitting that it's a fake job because it has no real tie to its employees and no real tie to their employees sticking around.

2:30:46Yeah. For some of the new grad roles, at least the big three, they'll very much encourage you to go take two years off to do an MBA, which feels like, I don't know, it just feels odd to me to lose an employee that you could be just nurturing internally and growing and stuff. What's the reaction on campus been to the big AI trade deals, these massive offers? Most of those folks who are getting$100 million offers, they have PhDs, they're published papers. maybe the new advice should be don't just get a CS job and then a CS degree and then try and go work in big tech maybe it should say actually stick in academia longer yeah I don't know I can't say just because like I'm not a CS major in fact I never took a single CS class at Stanford yeah but I also think the people who go into CS PhD programs just like love the subject and I think like the Stanford in particular is very good at getting people to major in computer science because they just teach the intro courses very very well but I think that's a very different demographic the people you just sort of want to check out for college have like an easyish major that a lot of people around them do so they can have a cohort versus the people who are like I'm really into systems like the thing is like if you met someone at Stanford who was like a systems concentrator rather than an AI concentrator.

2:32:11They were like really in it. Oh, you're a systems guy? Name every system. This is symbolic systems? No, symbolic systems is a fake major. It's like the systems crack in the CS. I also did a fake major, so I'm not... That's so funny, it's a big major. The realest major is art history, higher employment than CS. Symbolic systems is like literally every first employee at all the big tech companies who's worth like a hundred million dollars now. I think they're all so much. It's like they probably have a higher average income than the average comparative literature major, which is what we did. Oh, well.

2:32:44Well, thank you so much for stopping by. Jordy, do you have any other questions? Let's make this, you're new, you're our Gen Z correspondent. Oh, gosh. Okay. We need you. I want more updates reporting on the Stanford class of 2025. Where are they landing? We got a fake job for you. Gen Z correspondent on a live stream. Yes. New fake job alert. I had a funny idea when I was editor, but never got around to doing it. And so one last thing was that we would compile the names and photos of everyone who got a job at Goldman Sachs. And it was just black and white portraits of all of them listed like vertically.

2:33:22And it was titled Our Best and Brightest. So something like that for you guys. There we go. Let's see it. Love it. Well, very, very excited for you to be at Arena. Who's going to take the company's public, if not Goldman Sachs? I don't know. Who's going to issue the massive debt to back these corporate titans, if not Goldman Sachs? Well, they are best and brightest. They're doing important things. They are. Anyway, this has been fantastic. Fantastic. Thank you so much for stopping by. Great to see you. Thank you. Cheers. Talk soon. Up next, we have Joel from Thomson Reuters coming in the studio.

2:33:56He was supposed to be on AI Day. He's buddies with Swix. He was introduced to me by Sean Swix, who's been on the show earlier. we're going to dig into how Thompson Reuters is using artificial intelligence and what's going on in the enterprise. Welcome to the stream, Joel. How are you doing today? Guys, how's it going? It's going great. Good to meet you. Would you mind kicking us off with an introduction on yourself? And then I'd love to know a little bit about the shape of Thompson Reuters' business. People are obviously familiar with the brand, but on a day-to-day basis, what's actually going on on the technology side?

2:34:29Yeah, you bet. So I've been at Thomson Reuters a few years. I joined via acquisition as a CTO of an AI company, TR acquired a few years back, and have been with the company since then. I think a lot of people know Thomson Reuters from the news business. Obviously, that's the most public-facing part of the business. But from a revenue perspective and a technology perspective, it's really, I would say, a relatively small percentage of what we do. You know, we're one of the top two or three software providers in the world, in the legal industry, in the tax industry, compliance, audit and risk. So we really cover, I would say, a pretty broad expanse of the information services industry.

2:35:17For a lot of years, we were really seen as a as a content provider or an information provider within these businesses. But software and in particular, like search has been sort of a foundational piece of the technology that has kind of underpinned delivering that information to customers again across across the sectors, legal, tax, compliance, etc. Okay, so walk me through, of those verticals, which one is seeing the most acceleration from the current suite of AI tools? Which one's kind of maybe next up at bat and not really, the models aren't really having as much impact as you expected so far.

2:35:59But where are we getting the most leverage in AI? Yeah, it's a great question. You know, if you look at all of those industries, you wouldn't necessarily look at anyone and immediately say they are particularly eager to adopt technology or aggressive in that sense. But, you know, for the last two, two and a half years, the legal industry has been on fire. And I'm sure you guys have talked about it. There's a ton of capital coming into that to the legal tech industry in general. But really, the customers, too, have been extremely hungry and eager to use this technology, and it's having profound impact on the way those professionals think about doing their work and operating their businesses and underlying business models themselves.

2:36:47I think you're starting to see more progress being made in industries like tax, though. I think sort of the quantitative capabilities of the models kind of lagged the language capabilities of the models. But I think that's improved. But I also think if you look at like the tax or the audit industry, that particularly workflow kind of heavy. And I think, as agents have really taken off in the last, you know, six to nine months, and the tool calling capabilities of the models have improved, it's really opened the door to, you know, deliver like real true automation and productivity with some of these agentic frameworks and reasoning based models.

2:37:33Yeah. Talk to me about, I mean, I imagine you're not focused on pre-training a massive model to get to the frontier. You're probably a buyer of that capability, but we're seeing a lot of deals get done. Open AI's fine tuning models for clients above$10 million. They have even cheaper offerings. Palantir is doing fine tuning work now. We just heard Thinking Machines. Mira Mirati is doing some fine tuning. reinforcement learning for business to business applications. What are you a buyer of right now? What are you focused on building internal applications around? Where do you want the various pieces of the building blocks of a great artificial intelligence enabled product to sit?

2:38:19Yeah, this might be a little bit of a long winded answer. I would say first and foremost, when we look at shipping product into the market quickly, we're certainly a buyer of these models and we're close partners with Anthropic, OpenAI, Google and others in that regard. You know, when those companies are working on their next versions of models, a lot of times they come to us to help them evaluate and test certain capabilities of the models, because the type of work that's done in the legal industry in particular is challenging. It's not a simple rhetorical response. It's a deeper level of reasoning that happens in terms of the types of problems that we're solving.

2:39:05So I would say first and foremost, we're buyers of the technology. We have done fine-tuning engagements with several of these providers. super excited about the sort of rft uh trend that may be coming with many of them in terms of being able to apply more rl based methods to to that fine tuning um but we're also i would say builders in some sense we're not you know pre-training models of the size of of uh gpt4 or claude uh sonnet but um but we do engage in that so about a year and a half ago we acquired a small company with a couple folks from DeepMind who have come and really built up our deep learning expertise and deep learning training expertise within our team.

2:39:55We've got about one and a half trillion tokens of our own proprietary content in legal and tax and news. And like I said, that's been sort of one of our defining assets for a long period of time. As RL really becomes kind of the main mechanism for driving further improvements in the model. We see our talent, you know, our 4 ,500 domain experts across legal and tax and otherwise really being pivotal in that process of driving performance into the model. So we're certainly a buyer, but we're definitely trying to exercise the data and the content that we have proprietary to us, but also the human experts that we employ.

2:40:41Can you give me some extra color on all the different value kind of on the table with one of these deals between a big company and a foundation model provider? Because it can seem so simple. It's like I'm buying an API, but there's actually a lot more to it. And we were talking about this in the context of Apple potentially partnering with Anthropic or OpenAI. And there's actually kind of an odd relationship there where if Apple's sending a bunch of users to ChatGPT, that could improve the model. And that could make their business stronger. They could wind up servicing ads in the responses like Google does.

2:41:22And you could wind up with a situation where Google is paying Apple, not the other way around. You could see ChatGPT eventually paying Apple for the right to be on the Siri button. But in your business, you have over a trillion tokens. That's pretty valuable data. There's a question of, you know, what value are you bringing to that side of the deal? And so how are you thinking about doing a great deal that sticks and is aligned economically over the long term with a foundation model provider? Yeah, it's a really hard question to answer. And certainly you have to kind of like have some crystal ball to project out what the next two years are going to look like.

2:42:00And it's hard to project two weeks to do that effectively. We got one right here. We actually have a crystal ball in the studio for this exact reason. It helps quite a bit. It helps a lot. Yeah, it's important. I'll borrow that next time I'm out there. So, you know, for us, I think, like I said, our people and our experts and the data that they create ultimately, I think, is sort of core to our identity and core to what we believe is valuable to us. And we try to really hold on to that and extract as much value from it into our IP as we can. I think where there's mutual benefit, like I said before, is we provide a lot of insight and direction to these foundation model providers in terms of like what the models are failing at and sort of what kind of capabilities.

2:42:51You know, they have these public benchmarks that say, you know, every week one model is better than the other. but they don't really represent the real world. And in particular, they don't represent the real world of like how professionals do work on a day to day basis. And we spend a tremendous amount of time building real world evaluations into those kinds of things. And not only that, but we spend a tremendous amount of time and energy grading and evaluating those on like real world rubrics for how a lawyer would interpret this. So it's not like it's a right or wrong answer. Is it helpful? Is it harmful in some way to a lawyer?

2:43:28These are types of things that require a tremendous amount of just domain understanding to do well. And so that insight is super valuable to the foundation model providers to understand how they need to adjust their data sets. And it benefits us on the flip side because we get more performant models out the back end that are better suited for our tasks. How much time are you guys spending just on preventing hallucinations when you talk about domains like law and tax? You know, it's not uncommon for a lawyer or a tax attorney to hallucinate themselves, put the wrong number somewhere, have the right.

2:44:12But usually there's hopefully checks and balances in terms of someone else reviewing it, client reviewing it, making sure that it's getting to the right place. But that feels like the number one of the bigger issues kind of holding back LLMs from, you know, unlocking the full value. So I imagine it's a big focus for you guys. But what are your thoughts? Yeah, I mean, all the time. I mean, I think that that's one of the core things that we do. You know, and you're right that hallucinations existed before AI was involved here and they exist now. and no matter how good these models will get, they will exist in the future.

2:44:50I think there's some element of like that that will be the fact. I mean, foundationally, the way the models operate, like it is a propensity and it can happen. But we spend a lot of time trying to build guardrails, trying to build methodologies to prevent that or at least mitigate it in as many ways as we can. I would say this is where though the UX of the applications really becomes like more and more critical, like creating the environment where a lawyer like knows what they need to validate, knows how to do that validation and can do it quickly and efficiently so that they're still saving time in whatever they're doing, I think is a critical part of the design of the applications and how they operate.

2:45:39And as much time as we spend on the science side, trying to build algorithms that prevent that, we spend just as much time on the design side, trying to make sure we build experiences that allow lawyers to build that confidence and trust that they need. Very cool. Well, thank you so much for stopping by. We'll have to have you back when there's more news from your world. And we hope you have a great day and have a happy July 4th too. Yeah, appreciate it. We'll talk to you soon. Cheers. Jordy, how did you sleep last night? I think you might have me beat. I was a little rougher. I got an 81. But how did you do?

2:46:16Go to AIDSleep.com slash TBPN. Get a pod five. Actually unbelievable. Did I beat you? Did I beat you? Play the sound effect. You know the reward I get. 81. What did you get? 80? I can't believe it. 52. 52? Oh, my gosh. Wow. I said. For what it's worth. You have put on a fantastic performance this show. I would have guessed 99. I thought you were locked in. I think you've done fantastically this show. I need to hire a new head coach. I'm going to have a call with Mattel. We've got to have Brian Johnson back on the show. He's down to come in the studio. He can give us a coach. We'll bring Andrew Huberman back too.

2:46:56Andrew Huberman was saying there's a drug that can help you sleep better, something like that. I might need to get on PEDs to actually beat you. Then we're going to have to drug test because if you're cheating and I'm natty sleeping. This is not going to fly. We sleep. We focus on our sleep to make the show better. We do. We should be able to do any type of drug available. And there's no better place to sleep than a wander if you're on vacation. 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.

2:47:27We are going to be launching a video of us in a wander. Get ready. Get ready for that. I can't wait. Get ready. We have our next guest coming into the studio. I'm going to let you take the intro. I will be back in just a second. Mackenzie coming in from Ambrook announcing some news. What's going on? Welcome to the studio. Hey, thanks so much for having me. Quick intro on yourself and the company, and then let's get into the news. Okay, sweet. So I'm Mackenzie. I'm the CEO, one of the co-founders of Ambrook. Our mission is to help American family-run businesses become more profitable and resilient.

2:48:02And yeah, the way that we do that is we're starting in agriculture. So building out financial management software. So accounting, like the full bundle. So accounting, payments, banking cards for America's farmers and ranchers. How did you land on this idea? Where did it all start? Yeah, it was a pretty winding path. But we actually started during the pandemic, helping a lot of producers try to get access to working capital. And if you talk to a lot of producers about their problems and sort of what they think software can help with, it almost always has to do with all the way up the Mazda's hierarchy, so getting access to capital to take more risk.

2:48:42But the more that we dug into it, we helped a couple thousand producers access a couple million during the pandemic. But when you really dig into it, it's just kind of it kind of gets down to like accounting and financial record keeping like it's just accounting all the way down non-existent yeah it was one of the issues you're like trying to underwrite a business but there's they're like well I have this piece of paper and I have this piece of paper and and you know yeah it's actually it's a huge range like you can imagine um but a lot of um you know you have farmers that are running multi-million dollar businesses on pen paper um and of course you have folks who are also um using you know standard fmb accounting software too um but a real the real issue is just that farming is actually so complicated like you know i don't know if you guys have ever been on a dairy or how to do or how to do not a lot of content farming content farming uh no i i grew up i grew up in the country and wine country, so I had some exposure.

2:49:50I also have some portfolio companies that have some end farms as customers. So I feel like I've had some exposure, but certainly not an expert. But from my understanding, I think the challenge is, one, you're actually on a farm, and historically, some farms, maybe I'm sure there's a lot of Starlink adoption, which maybe is a catalyst. We've talked to some farmers about that. But at the same time, you're not at a desktop computer, So the explosion of mobile helped in farming because you could be updating a database or even sending an email. But all that is relatively new. And I don't think the big accounting software providers of the world were necessarily actually on the ground talking with farmers being like, what software do you want to run your business?

2:50:35Totally. Yeah. We ended up, so a lot of accounting and FP &A software is built for office workers. So it's built as if they assume that you're going to be in an office, you know, eight hours a day. And we actually ended up flipping that very early on and building workflows that were built for folks who spend more time in the field than the office. And so from the very beginning, we had like cross platform across mobile and desktop, like sort of web based. Um, but over 50 % of our users use the mobile app as their primary device to do a pretty complex bookkeeping, accounting payments, uh, receipt management, and, uh, you know, understanding their, their analytics and reports.

2:51:21And, and I think that speaks to kind of what you were talking about there. How consolidated is the industry? I feel like there's this narrative of like private equity is rolled up every farm and there's like a few mega farms and the certain like billionaires own all the farmland in America. But then at the same time, it sounds, it seems like there's still, I personally know folks who have family farms that are still in this like single digit million, maybe tens of millions. Yeah, there's a little under 2 million farms in the U S and only, uh, only, only something like 12 to 16 ,000 of them do more than 5 million a year.

2:51:57And it was very long tail. Yeah. Okay. So super long tail. Yeah. Yeah. So, I mean, yeah, that's the market opportunity for you. Talk about the new financing you guys announced today and maybe what was the inflection point that you that that made this round kind of possible? Yeah, totally. So we just announced 26.1 million Series A. Who's it from? So it's led by Josh at Thrive and Dylan Steel, the Steel Ventures. Congratulations. He's on a tear today. Our guys. He got a trade deal done. He got a new deal. It's been a busy, busy day for Thrive. All three of you. Yeah. Busy day for Dylan, too. Yeah.

2:52:42I don't even think you caught this, but they released S1 just like an hour. Oh, yeah. That's right. More breaking news. But anyways, back to Ambrook. No. Yeah. No. Super. Yeah, so the inflection way for us was that we just sat, you know, I think once we realized that we actually did need to, because I mentioned earlier that we at first were just trying to solve this paperwork problem with getting access to working capital. And once we realized we actually had to just rebuild QuickBooks from the ground up, that is a long build. Non-trivial. So non-trivial. And so we ended up sitting with a group of pilot customers, a couple dozen farms across the U.S.

2:53:24for about two and a half years before we ended up releasing it and actually starting to market it more to the public. And so it wasn't until last year that we launched early last year. And that growth basically catalyzed this round. so that's awesome and and well is the goal for working capital to still be a core part of the business in the long run but you just had to solve the underlying kind of ledger first yeah totally and actually i was i was what pushed me to this decision too was just i ended up talking to a lot of these big ag tech players uh that a lot of the executives there that were uh doing a lot of ag financing and i asked them whether or not they could standardize it by pulling on quickbooks and they just said it was a garbage in, garbage out problem.

2:54:13And so they couldn't even, like they weren't, they themselves were going in and doing pretty specialized underwriting that was one-off basically per operation. I figured if we were going to have any shot at getting a lot of these folks, our customers access to not just commoditized financing because a lot of these, a lot of ag bankers actually drive to the farm to put together - Boots on the ground. We need boots on the ground. Yeah, which is, I mean, the face-to-face relationships are really important, but what the cost is that it means that more capital can't flow into this ecosystem, right?

2:54:48And it's really a lot harder to do really interesting niche financing as well if you don't have that level of standardization. And so a lot of what Ambrook has been focused on is first just solving producers' problems, so making it easier to file taxes, making it easier to manage receipts. But now what we're starting to do is a lot of our producers, for example, are for the first time understanding their managerial costs in real time and able to make a decision. Like one of our producers, you know, realized that actually replacement heifers was a much more profitable enterprise than his hay enterprise.

2:55:22And being able to make those decisions in real time and either, you know, because hay equipment is pretty expensive. And so he basically needed to increase the amount of income that was flowing through the hay enterprise to offset the cost or essentially stop growing his own hay and instead buy it. And those are the types of decisions that actually in real time affect profitability in the long run and build a more resilient operation. And that's just not something that, again, farms are pretty complex. It's one of the only industries where oftentimes for manufacturing, you're usually assembling things actually with agriculture, disassembling it.

2:55:59So like, what are the cogs on that? It's exciting because to me, it's like you can level the playing field. And like if you're a farm and you don't have access to capital in the way that these big, you know, sort of, you know, mega corporations have like really efficiently run businesses, plenty of access to capital because they're running sophisticated financial operations. is just so much harder to compete. And with a business like farming, where I think a lot of, you know, there's a bunch of different subcategories, but so much of the revenue comes in waves seasonally based on harvests and things like that.

2:56:36And so it's, if you're getting paid a couple times a year and you can't really have consistent access to capital, it's like very challenging to actually run a business and stay in business and not be forced to just sell your land or do something else. So it's very exciting. Yeah, totally. There's I mean, there's a huge the big trend that everyone talks about ag is just the generational transition, right? 70 % of land is supposed to change hands the next 15, 1015 years, the average age of a farmer in the United States is 57 58, only increasing, right? And so a lot of these operations are looking at generational transitions.

2:57:12And there's a knowledge gap there, as well, because if everything is in, you know, it's everyone's in someone's head about how all the finances work and how the operation runs, right? Like that's fine. But what happens when, you know, what happens when you need to pass on to the next generation? And so a lot of what we think about is democratizing access to that knowledge, democratizing access to capital, to knowledge, right? I think this is also our thesis on AI, which is AI should actually be the great, you know, it should be actually like the democratizing wave that the computing revolution promised, but ended up just actually hollowing out the middle class.

2:57:49I think you're actually seeing that come back in a real way where you're able to tap in, you know, folks who don't necessarily have, you know, specialized skill sets or like have a, you know, are a CPA or something can actually understand more about their books in real time. They don't necessarily have that background. You can get at least access to the intelligence of the average McKinsey associate, but for, you know, the cost of Amber, you know, you don't, you don't have to go hire McKinsey. So yeah, awesome. Well, super exciting. Thanks for coming on the show and come back on when you have news.

2:58:23Yeah. Yeah. Congratulations. We'll talk to you soon. Awesome. The breaking news, of course, is that Figma has filed publicly filed their S1 with the SEC today. The printer is the printer. The printer is going. Let's go. OK, they have applied to the list on this. Oh, don't don't don't. There we go. Boom. They have applied to list on the New York Stock Exchange under the symbol FIG. Love it. It's got a great ring to it. That's a great ticker. FIG. Congratulations. The New York Stock Exchange, one of the best stock exchanges, if you ask me. Preliminary. I said gone. John, I called you gone. Gone.

2:59:09Gone. Gone. Anyways, the other interesting data point, Arfor Rock called us out. There's 70 million held in Bitcoin ETFs on the balance sheet with board approval for another 30 million BTC purchased via USDC. So a little bit of a BTC treasury action going on. What else? I would not have expected that. Also, Bill McDermott, who was formerly at Xerox, transformed SAP, and is now leading ServiceNow, is joining Figma's board of directors. Congratulations. Bill says, Bill is a legend. In addition to his wisdom, I especially appreciate his humility and authenticity. So great addition to Figma's board.

2:59:55Well, you're heading to the New York Stock Exchange. We'll have to have somebody on. You got to get a watch on Bezel. Go to getbezel.com. Your Bezel concierge is available now to source you any watch on the planet. Seriously, any watch. Yes, this is very good news. Should we run through some timeline? Get out of here? What do you think? Some timeline. We got another trade deal. Another massive trade deal. Jeff Bercovici is joining The Wall Street Journal. Starting July 28th, he'll be heading up Wall Street Journal's San Francisco team as deputy tech and media editor. Absolutely massive news. Congratulations to Jeff on the trade deal.

3:00:28We have another trade deal that we posted on the timeline. Sameh is moving to Thrive Holdings to build exceptional businesses designed to compound over many decades. Massive signing from Thrive. Massive signing. Our friends over at Thrive. I mean, we're hearing the rumors. Maxed out probably four years. Guessing a one-year cliff. But we'll wait for more details. A veteran of ramp. An absolute dog. Congratulations, Samantha. And in other news, Public, our sponsor, has the IRA triple play here. 1 % match. Plus 1 % match. Plus 1 % match. That's 3%. So go check it out at public.com. The absolute dogs over at Public.

3:01:08Do it again. Yes. Wilmanitis has a new law. New law alert. We got a new law. Oh, he's coining. He's coining. Citadel's law. Any industry with sufficiently high stakes will end up nearing the culture of hedge funds. Massive cash comp for top performers. Bid away dynamics where entire teams walk together. Extreme litigation of non-competes. Hard work 24-7 culture. Short 10 years. We are at most six months away from PE style midnight recruiting coming to AI, at most 12 months away from undergraduates pre-interviewing for the job they want after a two-year stint at a frontier lab because they even start.

3:01:49There's an incredible Hawaii Sagaponic paratrade here. It's fun to be aghast when Bally Asney or whoever pays$100 million to bring some PM an unknown quantity of their loyalists. That's portfolio manager, not product manager. Yeah, my favorite is when portfolio managers have their… Squad? No, no, no. The LinkedIn gap where they'll add like, I'm gardening. Gardening. It's like gardening for six months. Yeah, because they legally couldn't go work at another hedge fund after a six-month cool down, of course, over. but this is actually much purer expression of the kind of thing that is being attempted in the Wong FB Nikita Z deal but this is actually much purer expression.

3:02:31This at the margin I think makes the capital environment for funding independent big AI things much worse. Not worth underwriting a team if you know they can do R &D on your dollar and then walk. In the same way my sense is fund staking terms got worse. Not better post pod shots. he's getting in the weeds there but it's a fun fun post yeah cut but yeah but this is the long term impact of the ai telling yeah i i do think it's accurate to say that you know a lot of people over the last 24 hours have been saying oh nerds being treated like athletes i would just say this is tech is this is ai researchers being treated like pms in in the hedge fund world yep totally And then the last piece of breaking news, I think you mentioned this briefly yesterday, but Andrews and Horowitz is back in the mix to acquire TikTok, joining Oracle and Blackstone in talks to buy the United States business.

3:03:26It'd be fantastic. I would love to see that. Be great. Well. Would be absolutely fantastic. End of the show. Folks, please leave us five-star review on Apple Podcasts and Spotify. And stay tuned for tomorrow's show. If you leave a review on Apple Podcasts, we will read it on the show. On the show. You can put anything you want in there. You can put an ad for your business. Yes. Or your venture fund. And we'll read it on the show. Have a great day. Have a great afternoon. We'll see you tomorrow. See you tomorrow. Bye.