Bending Spoons Buys Airtable, Snap Rips, Ads in BMW | Grace Li, Samir Kaji, John Quinn, Nikhil Reddy, Art Levy & Russell Kaplan, Brendan Carr

26:53Anyway, let me tell you about MongoDB. What's the only thing faster than the AI market? Your business on MongoDB. Don't just build AI. Own the data platform that powers it. Well, OpenAI is firing back at Apple. A little glazy, though. They say Apple is one of the greatest companies of all time. What a funny way to kick off a blog post. Firing back at a lawsuit. Apple just cooked. OpenAI just cooked Apple. Well, they say it built a reputation for obsessing over the smallest details. True. And then they go on to say maybe there were some details that were missed. Yes. So what were the key things that they said?

27:32They accused Apple accused OpenAI of ignoring them. Turns out the lawyers emailed the wrong Asian guy because two Asian last names look similar. They claimed you discussed the allegations with OpenAI's general counsel. They admitted that that conversation never happened. Accused an ex-employee of improperly accessing files. They forgot to mention Apple employees were allegedly asking him to access those same files after he left. So there seemed to be some scenario where the guy had left, but he had so much internal knowledge that someone at Apple was just like, hey, can you remind me where this thing is or something?

28:07Yeah. When reading through the initial complaint, Apple made it seem like the employee or the former employee was just running wild through his old laptop. He had sent a message to someone at Apple saying something to the effect, I'm paraphrasing, but I still have access to my computer, LOL. But the reason that in the text messages that they shared, you can imagine the reason that he was there and sending that message. Why would he send the message if he was doing something that he was that he that that that that was wrong that he would feel guilty of? right he was helping his former teammates weird and they say there's 10 other people i could ask you but you're the smartest or something like that yeah um and and so when you have all this context the story looks quite a lot different yeah they're sharing a lot of text messages you can go read the blog post but there's like full back and forth i messages between uh chang liu and apple employees where Chang, whose last day at Apple was January 22nd, 2026, is being asked by his former colleagues to help them locate files and information to assist them with their Apple work.

29:23Note other individual names in Apple confidential information has been redacted. So certainly another wild... Yeah, I'm still just very surprised that Apple, during the middle of a year-long talent raid, would know that someone significant had quit and that would not go through the process of actually taking back their laptop and making sure that the separation was really finalized. People have been saying stories how historically, maybe call it 15 years ago, if you quit Apple, someone would show up to your house immediately and take back any prototypes that you may have had or anything of the sort.

30:16Yeah. I'm excited for prediction markets to get on this, honestly. It was very helpful during the Elon Musk OpenAI case. Currently, Kalshi has a few here. Will the OpenAI Johnny Ive device have a screen? No is at 82%. When will OpenAI release Astra? There's some dates here. What else are they? Will OpenAI increase the cost of ChatGPT? No, at 87%. No market on the Apple lawsuit, because it's still very early. There's not even a court date yet. But we'll keep tracking it, because it's an interesting story. Let's move on to the next story. But first, let me tell you about Railway. Railway is the all-in-one intelligent cloud provider.

31:01User favorite agent to deploy web app servers, databases, and more, while Railway automatically takes care of scaling, monitoring, and security. Um, so, uh, is BMW forcing owners to watch a Spider-Man brand new day promo when they start their cars up? That's the question. A lot of people were upset about this. Jordy this morning is like, this is awful. Uh, there's some nuance here. So BMW, BMW owners are debating the company's latest in car promotion after videos spread at CrossX showing a Spider-Man brand new day animation appearing on their vehicle's infotainment screen at startup. And the reason why this fake news triggered me was back in the day in college, I was getting a Kindle.

31:47And on the checkout page, it was like, do you want to save$10 and get the ad supported Kindle? And as a college student, I was like, hmm, saving$10 sounds pretty nice. and then I had to live with a Kindle that would sit on my bedside table, just blaring ads in my face constantly. And it wasn't like I would have actually appreciated ads. Can't you just flip it upside down? True. Wow. One simple trick. Jordy hates this one simple trick. But it wouldn't be ads for like Spider-Man. It would be ads for random books. Books, right? Yeah, books. And the targeting wasn't good. So, again, people don't like ads.

32:28If the target was good, Anyways, what happened here, John? Okay, so venture capitalist Shiel Monat wrote, quote, When you start a BMW, it shows you an ad for Spider-Man. Really cheapens the BMW, in my opinion. A16Z partner, Josh Ellman, added, Of all the brands I thought might bombard you with in-car ads on screen right when you start the engine, I had BMW pretty dang low on that list. This seems the opposite of luxury and performance. Is BMW a luxury brand? I thought they were premium. Yeah, I think it's a premium brand. Premium brand. Even Paul Graham weighed in, though, reposting Monod's video and saying, I'm never buying a BMW.

33:10He's never buying a BMW. What about an old BMW? They can't show you ads in an E39 M3. Wait, but what actually happened? You have to opt into this. Community notes added important context. According to OneNote, the Spider-Man promotion is an optional startup banner available on compatible BMWs from July 27th through August 10th, 2026. The banner does not automatically play a full screen ad. Instead, owners must tap it to launch a themed animation featuring music and synchronized vehicle lighting. BMW has offered similar limited time startup experiences in the past, including holiday themed animations.

33:48Jordy, you like it? Very, very, very different. You can just see the pop-up there. Surprise! Spider-Man just dropped into your BMW. you and that's if you press the button you have to actually turn it on it it's not yes yes but i'm saying there's a banner ad oh there is a banner it's just a banner look at the video start it over start it over uh let's see let's let's be the judge of this look at this banner it's a banner oh okay and then you click the banner then it plays an ad so it's a pop-up that you click okay and it's like wait what is this pop-up why does my car have a pop-up and And then it plays an ad.

34:23Tucked into a setting somewhere. There should be an icon that's like promotions or themes. That didn't look tucked in anywhere. That was the main. That was the main. Because I'm fine if there's a theme and you're like, I want red lighting in my car. I want blue lighting. I want Spider-Man theme. I want Christmas theme. Go nuts. They're literally saying, surprise, a Spider-Man ad. And they're not even. They should just say, hey, we have an ad for Spider-Man here if you'd like one. Okay, this is right on the line. But this crosses my line. This crosses your line. Because you're like, what does Spider-Man have to do?

34:59What does Spider-Man have to do with my car? And then you click it and you get an ad for Spider-Man. But I just think of the consumer surplus. This is making BMWs cheaper. This is bringing BMWs. Let's look at the price of inflation. Yeah, also not necessarily the best deal. Yeah, let's look at BMW inflation. Yeah. Anyways, yeah, really, really bad move. I wonder how much they actually made here. I think you're just judging it because it's, I think you would feel completely different, completely differently if you saw a banner and it was Nitro Circus. And it would just take over your car. Or if it was just a full takeover of Sam Sulak at the Arnold Classic, something like that.

35:42That would be much better received. It's not a pin. Surprise, Spider-Man, trademark, just dropped into your BMW. Okay. The ultimate driving machine. Yeah. Not super well executed, but BMW's been going back and forth with stuff like this pretty consistently. Aren't they the ones that have the subscription to the heated seats? Isn't that BMW? You know what I'm talking about? Yeah, I remember something like that. They put the wires to heat the seats in every car, and then if you want to use it, they charge you monthly. And this is just like, it's basically just a nerd snipe or like a, I don't know, like a treasure hunt for hackers.

36:28Because if you're a DIY hacker and you can get into that and unlock it, jailbreak it, you just get, well, not furry because you already paid for it, but you don't have to pay the subscription. Yeah, Techno Chief says, wait, I thought we loved ads here. I do love ads. That's true. But I think buying, unless BMW, I think if they gave the option at purchase saying, do you want to buy the ad-supported manual transmission BMW M2? Or do you want the ad-free premium version? And there was a bit of a price difference. Yeah. Then it just feels wrong. They didn't do that. Sort of like a Ferrari tailor-made program.

37:09Oh, like what stitching did you get? Oh, did you go ad-free or ad-supported? like oh you went you went manual cool yeah i went manual but ad supported yeah yeah i got a manual sp3 ad support i mean the ads in an sp3 sp3 driver probably very hard to reach so pretty valuable i would i would love ads there but it's got to be ads for the the most elite products. It's got to be, you're getting your SB3 and it shows you an ad for Amangiri or something. Spider-Man's doing well though, so the ads are working. So, you know, maybe the BMW owner showed up in droves because the new Spider-Man movie scores Hollywood's second biggest debut ever.

37:58That's actually huge. The Sony film grossed$932 million through Sunday, topped only by 2019's 19's avengers endgame that is massive did you realize that this movie was making that much money i mean if you had asked me an hour ago is there a new spider-man movie coming out i would say haven't heard of anything yeah i i haven't seen that much energy about it i've been aware of it but i have not i've not seen like a massive takeover um but also i'm not driving it out supported bmw so maybe that's the problem uh spider-man spun a massive weekend for movie theaters flouting superhero fatigue and giving a major boost to hollywood's summer block uh box office sony pictures spider-man brand new day open to an estimated we got some good ideas here in the chat yeah what we got so ad supported cars that get you free self-driving where they the the the the ads take over the whole entertainment system in the car.

39:05So you're sitting there relaxing, you know, the car is driving itself, but then it's just blaring high volume. Every, I'll take it a step further. Every five minutes, one 30 second. What if there was a whole volume? What if there was a whole company dedicated to building self-driving cars that was funded by an advertising company, like a company that just prints billions, hundreds of billions of dollars in advertising, Their DNA is advertising. And then they go into the self-driving car market. Why has no one done this before? They would have a huge advantage in terms of targeting. Yeah, why has no one done this before?

39:37Yeah. They could even have a video platform where they're making a lot of money running video ads. And they could take that video platform. Oh, almost like a YouTube. Like a YouTube. Yeah, exactly. So you could have a huge ad network, YouTube ads, and then you could have a self-driving car company put them all together. That's synergy right there. And maybe you could spend the company out at some point and raise some venture capital too. the company out wait they secretly still advertising no i don't think waymo will do crazy ads i think i don't know maybe a major streaming executive just text a major streaming executive just texted me and says okay going to get to be to build a car right now you gotta build a car you gotta do it um what else is going on here uh okay let me tell you about CrowdStrike real quick.

40:29Your business is AI. Their business is securing it. CrowdStrike secures AI and stops breaches. The owners of MySpace say they're planning to relaunch the once dominant social media platform. And I feel like this has happened multiple times. I'm having deja vu here, but we'll dig into it. In a recent documentary called MySpace about the company. We got another. App-loving cars. Axle AI. Axon. Axle AI. No, it's a self-driving car, but you have to play mobile games in order to keep it going. That's a feature. I mean, you get a Tesla, you can play Polytopia there. You replace the steering wheel with just a big iPad, and you're just playing mobile games.

41:13Tesla's like 90 % of the way there. If you stop leveling up, the car just pulls over. You got to keep playing. Okay, we're getting somewhere. This is good. So in the recent documentary, MySpace, Chris and Tim Vanderhoek, the brothers who acquired MySpace in 2011 after its decline, said they intend to relaunch the platform with a new vision. There's no launch date that's been announced, but they say they want to build a social network that feels different from today's algorithm driven apps. They don't believe in preference falsification. They think when people say they don't like algorithmic feeds, they actually don't like them.

41:50We'll see how it pans out. So MySpace launched in 2003 and quickly became one of the world's largest social networking sites. It became famous for customizable profiles, music discovery, and its iconic top friends feature before Facebook eventually overtook it in users and became the dominant social platform. At its peak, though, MySpace attracted roughly 150 million monthly visitors worldwide. That's not necessarily people that had profiles, but just visitors you'd land on a MySpace site. So huge for the day, but not huge by modern standards. So the platform's ownership history mirrors its dramatic rise and fall.

42:29In 2005, Rupert Murdoch's News Corp acquired MySpace's parent company for$580 million. It was like, I'm pretty sure it was a fantastic outcome at the time, now by social media standards. It's like, what are you doing? Just six years later in 2011, News Corp sold MySpace for roughly$35 million though. So completely, you know, got racked to specific media. Led by brothers Chris and Tim Vanderhoek, Justin Timberlake invested in the company and became a prominent creative advisor during the acquisition. In 2016, Time Inc. acquired Specific Media's parent company in a deal valued at about$87 million.

43:07Three years later, Meredith Corporation acquired Time Inc., briefly inheriting MySpace before selling its stake back to the Vanderhoek brothers that same year. All told, MySpace went from a$580 million trophy acquisition at the height of the social media boom to a roughly$35 million distress sale. Just six years later today, MySpace.com is still online, primarily serving as a music and entertainment website while its owners prepare what they hope will become a second act. Are you bullish? What do you think they should do? What's the advice for the owners of myspace.com? Nostalgia. You got to call Bending Spoons, right?

43:46Is it making any money? That's the issue for Bending Spoons. You get one Italian teenager to run this whole thing. They're like, if you were making$500 million, we would love to buy you$1.2 billion. But since you're making less than. I don't know if they're making any money. It must be making some money just as a website with some ads on it or something. Who knows? Anyway, let me tell you about Cisco. Critical infrastructure for the AI era unlocks seamless real-time experiences. A new value with Cisco. Our next guest is here already, I believe. We have Grace Lee from Intelligence, the co-founder of Raising the Seed Round from Index Ventures.

44:28Brought you in a little bit. What's going on? How are you doing, Grace? Good to see you. Great to meet you. Thank you so much for taking the time to come chat with us. Please introduce yourself and the company. Well, I'm Grace. I'm the CEO of Intelligence. We just launched yesterday. We've been the team behind Design Arena. Actually, the company started because we were making games. We're trying to make a game engine. We noticed that the models could make playable games, but the games were not fun at all. Like nobody wanted to play them. And we thought, you know, building a harness probably doesn't seem like the right move.

44:57what if we could turn it both into a product for people to build games but also a product for the models to figure out what it is that humans like to play like what are playable games that are fun and then we started that we just one of our friends linked it on reddit he didn't even tell us about it and it got like 3 000 users overnight we're like well that's more than the game engine has ever gotten um and since scaled that to oh man 5.6 million people across 192 countries so So every country in the world except North Korea, we've been told that there are sanctions there, so we can't go in there yet.

45:30And then on the Frontier Lab side, we pretty much work with all the major players to help improve their models and hard-to-verify domains. Amazing. Can you walk me through how Design Arena works, the various incentives that happen to actually get people to review designs for models and just the whole, it feels like a product that would have sort of like a cold start problem. How do you solve that? How do you scale it? How does it function in equilibrium? Oh, yeah. A really good question. So we took a look at the optimal form factor for these cases where users are trying to do something, but you don't really know what the optimal end state is.

46:09So designers, right? What do they show their clients? Actually, they get the client prompt, and then they show the client multiple versions of maybe what they might want to see. That's exactly what the user interface looks like for our users. So they don't actually need an incentive. Because it's a design tool for them that does what they want because they show them multiple versions, just like in the real world. Like how does a singer figure out if a song resonates? It's not that they cook in a room really long to study. They just release multiple songs, right? They see what hits work. How does a game developer figure out what games are playable?

46:41They release multiple games and they see what works. So for the user, they actually don't need an incentive to be on the platform. They want to design something or make a game or make a website. And the form factor perfectly fits that. The models, the intelligence doesn't exactly know what the user wants, but then they'll get multiple versions. And through feedback, you can get closer to the end state. And that just happens to be in the perfect shape that the intelligence layer needs to improve more to what it is that humans want in the first place. The preference signal, the user behavior, et cetera.

47:09A little bit of like a, I don't know, philosophical question, but how do you think about optimizing design for the user and what the user thinks looks good versus what is good for the business? Because I've been like, I've just been bombarded with products and websites that feel like they're horribly designed. But I understand that they are economically valuable. John Gruber was on the show yesterday. He wrote a blog post recently about the Timu app being a mess. And if you go to Timu, it's like so many pop-ups and spinning wheels. It is the epitome of terrible design in the aesthetic sense. But I'm sure every design decision that they've made has been economically justified.

48:01And I don't think that they like never thought to make it clean. Right. And so how are you thinking about those two tensions, like actually instantiating themselves in the work that people do when they go to an AI model and ask for a design? Yes. Very good question. So it is our job to figure out what better means for this person. If you are on the platform to make a beautiful portfolio, then you are going to give us feedback that hints us in that direction. Through a couple of interactions, we can figure out, OK, this person is actually just in it for the visual preference. But if you are on the platform to build a highly performing website, like a team website, for example, you're probably optimizing for dollars converted at the last screen.

48:45And so the end signal that you're tracking is different. The way that we like to think about it is we're almost doing the work of a PM. What a PM does is they sit in the product and they took a look at the analytics of what people are doing and they have an end goal in mind. The PM's job is to figure out what is the right KPI to be optimizing for and then to bring that to the table of engineers and to the resource allocation and to try to get it in that direction. So it is our job to figure out for this particular user, what does better mean for them and then measure those right signals to then label correctly and then provide that as feedback to improve the models.

49:18Jody, please. you gotta follow up yeah i have a okay yeah yeah just following up on design arena um how are you balancing the various downstream business opportunities that come from having a product a platform like design arena because i could imagine you can sort of become a model router in many ways you can do forward deployed work and be an expert and partner to companies that are picking tools. There's services as a software. There's going down the financial stack. There's so many opportunities. It must be hard to, you're sort of stuck in the idea maze longer than usual, even after you have traction and fundraising and revenue.

50:03There's more opportunity. What have you looked at? What's not interesting? What has stuck out as the obvious path? That is the best question, by the way, to be asked me in this space. There are so many downstream opportunities that come from figuring out what it is that people want. What we found to be the most interesting, actually, is an intelligence marketplace. There is some, this is a little bit kooky, but I do believe that there will one day be as many suppliers of intelligence as there are currently suppliers of information. This feels like the early days of the internet, right? Like where anybody can make their own intelligence.

50:39I don't care if that's a foundation lab with a main API or something that's post-trained or something that's totally off the shelf with a skill, but there's like a million different suppliers of information. And if you can be the person that best matches the supplier of information with somebody, a supplier of intelligence, I should say, somebody who's asking for intelligence the same way that page rank for Google search was the critical bottleneck to get the internet into everybody's hands, that is the position that we actually want to be in. So whatever the work it is that we do, we want it to fit into this flywheel that we have, and we want to make sure that we're not just good at value creation, like not just good at improving the models, but also good at value capture.

51:20Once the models get better at design, it's not like our work becomes less useful. It actually means our product can reach more people because they're better at design. So we care about doing things and the opportunities that are coming our way, which we're lucky to have a ton of inbound from yesterday, that it feeds into this overall flywheel, that if the models get better, we also get better. Yeah. Jordan? Uh, almost$60 million of revenue. I think, I think a lot of people were, um, quite surprised. Um, not because the company isn't like significant and at the center of this, you know, explosion of creative intelligence, just because it's, uh, uh, you guys had kind of flown under the radar.

52:00So first I want to hit the gong, uh, for 60 million ish of revenue. There you go. Great hit. Thank you. And a very, like, I like the ratio of the fundraise to the revenue. You know, normally when somebody comes on with this much revenue, they're, like, you know, raising a billion. I'm sure that's up next for you. But I wanted to ask, like, what do you think creative super intelligence looks like? Because with, like, images, I think images are going to be solved, right? At least, like, photo real images are pretty much here. You can imagine with a couple more turns. Like at least making images with AI will be solved and it's getting a lot easier to prompt and harnesses will get better at editing and modifying and getting better outputs and all these things.

52:53But like photo real images will be solved. What does like what is what is creative intelligence look like in one year or two years down the road? Creative super intelligence to us is whatever you can think will exist. in fact things that you can't even have the scope to think of can exist so um one one thing that the distance between an idea in your head and it being in the real world right now it's like very far let's say you have an idea for a new pen what a new pen might look like there's a very long distance that you have to travel you have to know how to design the pen you have to know how to process CAD you have to find a manufacturer to like build like there's a very long there's a And because of that, we have to localize on a couple of pen form factors that everybody uses.

53:44Like it just becomes standardized. But what if creative superintelligence makes it such that you can sustain infinite varieties, kind of like how you can have infinite versions of the same information being represented in different formats? That's the way that we view creative superintelligence, which is any idea that you have, The instant that you have it, it is visible in the real world. And there's no latency and friction between your ideas and them being born in the real. That sounds different than the models coming up with the ideas, which is interesting. I don't disagree. I think you're right.

54:24We were debating this yesterday about will a model be able to come up with an idea before you even think of it? What is the timeline for that? That's the next thing? Yeah, we were talking about this because it feels like, you know, mathematicians have been having somewhat of an existential crisis for a while now, but especially over the weekend. Yes. And I was just thinking, I was joking to John yesterday, just saying like, you know, they're coming to us, right? They're coming for us now.

54:59I consider myself a creative person. And right now, when I look at AI-generated outputs, The ones that really resonate are ones where there was like a fundamental creative idea that then the model did a good job of instantiating it. But it's not like the original idea was that complicated. The example we always use is like Harry Potter Balenciaga, right? Like it's not a complicated idea. but to me to me what will be interesting and i'm surprised no one has like really built some type of like effectively like loop around this which is like combining two random ideas and then creating the visual sort of output and just doing that over and over and over because it will end up mimicking like the full pipeline of human creativity which is like original idea which is combining two things, Harry Potter, Balenciaga, combining these two things, and then just creating the output.

55:55And then once you get that, then you're just running on this loop where already it feels like there's no real new ideas in the world. Like for 100 years, we've just been as humans like recombining different things that already exist. And it's sort of sad that we can't come up with very many new ideas. But then eventually the machines will have just created every possible variation of every idea that there could ever be. and a human will have an idea and then they'll be like, oh, well, actually the machine figured this out like two years ago and here it is on a website. I mean, I think something that's pretty incredible is people don't know what they want until they see it, right?

56:35And oftentimes it's not even the new idea. It's showing it to a dozen people and then two dozen people and then a hundred and a thousand and seeing what sticks. Again, this is kind of the creative process, right? Like you, you will draft up a hundred version versions of the same script and then see what are the gem moments that actually resonate with people and the resonating with people. Like that's the verifier part. Like that's where humanity comes in, right? Like if you're trying to give something to people, you need a way to measure whether or not it actually, it actually resonates with them.

57:05That said, company Simile, who just raised a big round, might make humans unnecessary to even judge what will resonate with humans. we're safe. Every AI lab I talk about is working on this thing called superintelligence. I haven't met a single AI researcher working on room temp intelligence. They're not even trying to displace me. It's ridiculous. Actually, there's probably a neolab called normal intelligence. Probably. Last question. Gaming arena. We got design arena. You have gaming DNA. What about models building games? The games go up against each other. Which one did you play longer? Which one did you have more fun?

57:44This feels like the next thing. Is this you? Is this another company. That's you. This is that. So we've actually been working on this for a while. Game dev is incredibly hard to verify. And that's why it's so much fun, right? Because you don't just need a really good storyline. You need a way to verify if something is fun. Like that's impossible to do, you know, without people on the other side. Exactly. And so for a while now, we've been helping companies try to get better at this domain. And it doesn't just involve like a strategy and being able to save game state. You've also got to have beautiful graphics.

58:16because you have good multiple processing. It's a very hard frontier. Yeah, yeah. That'll be a lot of fun. Yeah, very, very interesting to think about like, oh, I'm going to go and review models on gaming arena. See you in 400 hours because I need to decide which game is better, this 100-hour game or that 100-hour game. That's kind of what's going to happen. Yeah, you literally just need to put it like the way to think about it. You need to put it on the equivalent of the internet and you can see if it gets picked up by people. Yeah, yeah. Like the algorithms, like the Steam store, the Instagram algorithm.

58:52These are the final bosses of the arenas, perhaps, in many ways. Very interesting to think about. Well, congratulations on the round. Congratulations on all the progress. Thank you so much for taking the time. Yeah, amazing progress. And thank you for, thank you. I think you're doing a public service, right? If you can get all these AI companies to make better outputs, the world will become a more beautiful place. And I think it's important. Well, have a great rest of your day. Great to meet you. We'll talk to you later. Goodbye. Let me tell you about console console builds AI agents that automate 70 % of ITHR and finance support giving employees instant resolution for access requests and password resets.

59:25Our next guest is Samir Kaji from allocate. He's the co-founder and CEO. Samir, how are you doing? What's going on? Good. Good guys. How are you guys doing? We're doing fantastically. A fun day. Do you drive a BMW? Have you, have you been getting bombarded with Spider-Man ads? I wish. No, I don't drive the BOTM. No, you're lucky. You're lucky. You're lucky. They're all ad-supported now. They're all ad-supported. Yeah, apparently. Apparently, it's not even opt-out. Does Allocate take a couple weeks off in August as a company? Oh, no. No, there's no taking any time off. Like, unfortunately, like, a lot of our clients are taking time off.

1:00:05That's what I'm saying. If you wanted to plan, like, I think it can be good to, at least for smaller companies, to say like, hey, we're all going to take vacation in this general window. Sort of collusion. Yeah. I will tell you, though, I did go to Cafe Venetia the other day. So I don't know if that counts as a vacation, but it was nice to kind of get away. But yeah, no, it's crazy busy right now. As you guys know, so much is happening in the market. So many funds are raising. So many companies are raising. And having been in this market for 27 years, this is like the craziest I've seen it. Yeah.

1:00:39So talk to me. Does that scare you? because obviously it's good it's obviously great for for your business which we should let you introduce but uh maybe maybe introduce allocate first and then i want then i want to get into yeah yeah why don't i get i'll give you the the quick sort of 30 30 seconds sort of you know pitch on allocate so you know having been in you know the venture market working with private funds kind of realized a few things private funds are now more numerous like we went from 3 000 asset managers to 30 ,000 within 15 years. The amount of capital that's being raised by these funds is enormous too, right?

1:01:13Like you had Andreessen raise$15 billion. You had Thrive raise$10 billion. So these companies are staying private so much longer. So the private markets grew from a trillion to 17 trillion. And when you look at that, where's that money going to come from? Well, historically, the funds were capitalized by pension funds, endowments, foundations and then it became clear that they needed to find new ways to capitalize themselves and one way was family offices and high net worth individuals the problem is it's kind of a headache to operationalize those small checks and for the people investing they can't write 10 million dollar you know tickets into a you know name your top fund and so they go through the wealth advisor so we create basically the bridge between the wealth advisory world and private funds and for For the wealth advisors, they have one place where they can discover, access, execute, and report on private assets.

1:02:06So there's$10 trillion of capital being right now managed by these independent wealth advisors. If you guess what percentage is in alternatives? Less than five? 3%. That was great. 3%. Good guess. Well, endowments, foundations, pensions, 20 to 50%. 20 to 50%. Yeah, exactly. Exactly. The Yale model. Yeah. We got to get everyone on the Yale model. Yeah. Well, you know, you got to be a little bit careful on that for sure. But, you know, look, I mean, the reality is like you can't ignore the private markets. You had Anthropik, OpenAI worth almost a trillion. SpaceX goes public for 1.77 trillion. Like, that's crazy.

1:02:48Yeah, yeah, yeah. Yeah. And it would be, it just feels like from just like not even the financial numbers, but just the idea of just being in the American economy. and being bought into the next iteration. There's been this discussion of going public earlier. It's very onerous, et cetera, et cetera. But there is another world, which is just broader exposure through funds. And that's a lot of what's happening here. 100 % agree. Yeah. Okay. Once a week, maybe twice a week, sometimes three times a week or four times a week or even five. There's a company that I've never heard of that comes on and raises half a billion dollars.

1:03:26and they're maybe like one or two years old. I get a little bit wary because I sort of like my career came online, let's say, in 2018. I'd been paying attention to startups prior to that but like really was paying attention in 2018. And we went through this sort of crazy period and then we saw a pretty massive correction. I got to sort of be on that roller coaster. And so now while we're back in boom times, I'm just like much more wary than I was before because I was young and maybe overly optimistic. Right. And so today I'm just when you look at the public markets, there's a lot of a lot of valuation seem relatively reasonable in the private markets.

1:04:15today. There's, you know, we saw Airtable. Um, if Airtable was a, was a, was just like, I know, uh, I know a SAS company that has a tiny, tiny, tiny fraction of Airtable's current revenue that, uh, that is doing a new round well beyond Airtable's valuation. And it's just because they're squarely serving other AI companies when ultimately they're just as much of a software company as Airtable was. And so you see this massive disconnect between exits and private valuations. And so I have a lot of alarm bells going off, but I'm curious how you see it and LPs on the platform are seeing it. Yeah. One of the most dangerous things to say in the investing world is this time is different because rarely is it completely different.

1:05:09So, you know, similar to you, I've had some scar tissues built up. I actually, you know, started my career in 99. I was at Silicon Valley Bank. I was at SVB and I was lending into the dot com. And back then, you know, companies were going public based on one metric, which is eyeballs, right? Like how many eyeballs, how many people are visiting your site? Well, today it's AR, which, you know, as we know, can be a little creative in terms of how people are actually saying AR. What's actually true right now? So I think we have to disassociate, you know, AI as like this technology innovation, which I think is going to be bigger than anything we've ever seen, bigger than the internet, bigger than mobile and cloud, and maybe the biggest innovation since the railroads.

1:05:49The challenge, though, is when you have a new technology of this size and scale, especially moving this fast, the supply and demand for those companies changes. So you You have so much capital being raised. People are incented. Like if you're a VC, you're incented to invest in the next hot AI company, which has grown from, let's say, 1 to 10 million to 100 million in revenues. Knowing that full well that if you catch the tiger by the tail and you get the anthropics or you get the open air, your career is minted. And so a lot of capital goes into these companies. And every single time that I've been through one of these, the companies that do win are bigger than ever.

1:06:27by a massive degree of magnitude. The issue is so many expensive mistakes. You mentioned Airtable. That was like 2021. I think their peak valuation was$11.7 billion. They raised almost$1.5 billion, and they sold to Bending Spoons for$1.25 billion, right? That means common shareholders get nothing. And the people that came in at the end, they may get a return on capital, but that's a horrible outcome. I thought common shareholders were getting something because the actual equity value was$2.something billion. Yeah,$2.2. There's roughly$800 million, but again, it's a tiny fraction of what they would have probably marked it themselves.

1:07:06Well, if that's the case, that's great. But that's not the case for a lot of those 2021 companies that raised that. I was seeing 50 to 100x multiples for these companies. Now, the multiples aren't that crazy this time around, and these companies have grown. The bigger challenge is like which one of these companies is actually durable? Like, I mean, is a big frontier model going to subsume you? What happens with open weight and open source models? It's still too early to tell. So I think you're right in that you should be somewhat nervous. But at the same time, venture has always been a power law industry, right?

1:07:40Six percent of total companies actually return over 60 percent. That's historical. I think it's even more amplified right now. but I'm in the mindset right now that I've been through these periods and people always have short memories. Like 2021 was what, five years ago. And it's almost like we forgot 2022 and 23. Things do not go right when you just plug so much capital with such speed. And so I expect the same thing to happen. I don't know when this changes and when gravity comes back in the private markets, six months, 12 months, two years, maybe it's even five years. Maybe we're all wrong, But I would actually be willing to bet that within the next few years, we're going to see some kind of pullback.

1:08:23And then we'll kind of see what they say when the tide goes up. You see who's wearing the swim trucks. And I think we'll see that next year or the year after. Oh, okay. Yeah, that's a better way to put it. See who's wearing the swim trucks. Well said. Well said. But I want to know how are new venture firms changing in their construction? You mentioned the boom from 3 ,000 managers to 30 ,000. But what are you noticing over the last few years that might look different in the way a new fund gets built? Maybe it's more interns or less banker crossover types or more operators, more founders. Are there any trends that you've noticed that you're seeing?

1:09:12Okay, that's clearly working at certain funds. More people are following this, even in the way they're structuring or the pacing or anything trend-wise around new fund formation. Yeah, and new fund formation has slowed down for sure in the last few years. It was at a fever pitch in 2019, 2021. In fact, everyone felt like it was cool to be a VC without understanding that it takes forever to know if you're any good, to get paid, all those things. Fundraising is really tough. And a lot of it came down to when you have so many funds in the market, everyone's searching for differentiation. And so they create these things, which is like, I'm going to create a talent team.

1:09:51I'm going to create an AI sort of way to vet things. And I think these are all around the edges. But any venture firm at the end of the day, all that matters is, you know, sourcing, picking and winning. And you've got to do two of those three things really well. If you're a really small firm, it's sourcing and winning, candidly. Like, I have no clue if you're a good picker. And there's so many false positives, right? So I think people sometimes lose the plot a little bit and say, let me create something really unique that I can tell my LPs versus focusing on. Am I going to see the greatest companies or the right entrepreneurs in the thesis?

1:10:25and once I see them, am I going to win given sort of the competitive arena? And I think that it's really tough to be an emerging fund. I mean, raising capital, I think it's a great time to start if you have like a reason to win and a reason to exist. Now, big funds are different. They're playing a different game. Somebody raising a$10 billion fund is just trying to get into the very best companies and plug a billion dollars into that company. Mm-hmm. How often do you see someone coming across and pitching sort of a new firm that feels like an old firm in the sense of, we're going to go and compete and win$20 million Series A's and B's or something around there, as opposed to the early fund manager,$50 million, solo GP.

1:11:15They're going to do a$100K check into this and like little add-on that feels more winnable, to your point about the importance of winning. The Mount Everest of winning and picking is probably you're going to go lead that major round without the signal from a tier one. Yeah. I mean, look, if you're going to do a$20 million Series A, which is not going to be like a big frontier lab type of company or one of the big mega rounds, you have to, I mean, to raise them in a fund, you probably want to raise$350 to$500 million, right? And who is going to give you the money? It's people whereby you have a track record somewhere else.

1:11:57So we have seen a few, and this is all public now, but chemistry is an example of one where you had three people, one from Index, one from Andreessen, and one from Bessemer, right? They come together. They are clear Series A will lead, and they kind of sit in the middle between the seed funds. And the big mega shops who are doing different types of Series A's or different types of Series B's. I see very few of those. Because the bar for those is pretty high. And if we look at 10 funds, maybe one falls into that bucket. Yeah. Yeah, it does seem like it's maybe an underrated white space because there's so many funds that can't.

1:12:36They're so big at this point, even though they might be able to win. They're also not that upset if they lose that round because they're like, yeah, okay, we'll just come in with$100 million later and get our position. It seems fine. How did you, looking back, what's the takeaway from the solo GP, I'll call it meme? It's interesting because it was something that became very desirable and it was something that I think LPs were interested in. It's something that certainly people that aspired to be venture investors, I think a lot of people have this idea of like, oh, it'd be amazing to be like a solo founder, solo GP, right?

1:13:17You get all the glory, all the economics or whatever. But it's interesting because it just feels like a solo GP, when it works, it's amazing, right? I think of a lot, you know, gills of the world as, you know, the top of the mountain there. but uh there's so many cases where for lps it's like well it'd be great if you had like a solo gp would be cool but what if you had three or four partners that were all fantastic and it just increases your luck surface area and then for a founder it's like yeah you want to basically pick one partner at a firm to partner with but it's awesome if there's a few other partners at the firm that can maybe make an introduction or open up their network or whatever so it feels like something that impracted like is it was like a cool idea and there was this moment around it but now if you want to win why would you why would you even like brand yourself in that way i mean look i think it's can still work and i'd rather back a solo gp than somebody that you know decides they want to start a venture firm and decides that to raise capital i just need to bring on a partner and they've never worked with that partner because you know the problem with partnerships too, is like, there's a lot of politics, right?

1:14:28Like, you know, do we really, you know, are we aligned or, you know, how does decision-making work? If a deal is not consensus within the partnership, does it get done? And those can actually create, you know, Bessemer, for example, has this great, you know, anti-portfolio. If you go to their website, all the stuff they miss. And I guarantee some of those misses were, you know, one person had a ton of conviction, but they couldn't get it through the partnership, right? And so, you know, solo GPs at least can move really quickly. They don't have to go through a committee. Even Elad Gill, I look at who you mentioned.

1:14:56He has a team, actually, right? So he's solo GP from an investing standpoint. Wow, stolen valor. Yeah. Stolen valor. He has an amazing team, but I can't name any. And also the solo GP branding was very much foisted upon him. He was not like, I will never hire anyone. It was more just something that was fun to talk about. But there is a guy like Oren Zeb, right? So Oren has been doing it. He will say, I'm a solo GP. I have no admin. I have no other partners. I have no one. it's just me and that's what you're going to get and like he's done you know candidly very well for himself you know you've seen everything's public on him and so i look at it and say the bar is higher and a lot of solo gps realize it's pretty damn lonely right so you're you're basically doing the raising you're you're working with companies you're trying to do everything you're running the firm and then you're like four years into it and you're like wait a second um you know my fund is trading at a 1.1x because i went crazy in 2021 no one's giving me money i'm i'm pulling a salary of the$20 million fund that I could probably get in a quarter working somewhere else.

1:15:58And you're like, why bother? What's the purpose of doing this? Have you seen anyone try and tap the traditional venture capital backers, the LP base for something that looks like more competitive with a Thrive Eternal? Like, I'm going to go buy a baseball team and I want to tap Yale for that or something like that. As an example. Not that much. I mean, Thrive is pretty unique in everything they do. I think they're really progressive. And Josh and Seema have done a fantastic job. I mean, DC is also a general catalyst. They've done some pretty interesting things. I mean, they've gone into hospital systems, right?

1:16:40So they've done things like PE and credit. And that is more like private technology finance and going into these adjacent areas to create competitive advantages. is because when you're raising$10 billion, guess what? There's about 15 firms that you're going to compete with. So what is the differentiation outside of your partners? Yeah. Do you think the situational awareness story changes RIA consideration? I don't think so. I mean, look, I mean, you know, that was a very unique thing. I mean, the guy had, I mean, the guy's incredibly smart and, you know, he still is up, you know, overall from the day of on, but when you drop that much and use that much leverage, Like it's going to be a big blow up RIAs themselves.

1:17:22Like, you know, are we talking about RIAs from the asset manager side or RIAs from the wealth manager side? There was just a conversation a while ago about, oh, VCs, like they often have really great deep understanding, sometimes board seats in these public companies. They take the company public, then the stock trades down, but they know that there's a really great thesis. Maybe they should be holding on behalf of their LPs instead of distributing. The RIA sort of sets you up for that. I'm less talking about RIAs as like going long crypto or going long secondaries. I'm talking about playing in the public markets.

1:17:53Someone in the tech community just got their hands were burned. Does that change like the appetite from LPs to allow venture capitalists to play in the public markets at all? Yeah, I don't think most LPs want their VCs to play in the public markets. Obviously, Sequoia, everyone knows, you know, has a long haul only. Then there's crossover funds that do it. But it's just a different skill set, honestly. And like, you know, if we're an LP, right, or somebody else is an LP, you're at the end of the day paying the GP to, you know, invest in private companies and then exit those private companies at some portion where we can make the decision on what to do with the public stock.

1:18:29Yeah. You were at SUV in 1999. Any good stories of venture capitalists using leverage? No, but what people. Because I'm surprised. Guys, we hear John and I were talking about this yesterday because, like, you know, the venture capitalists, or at least there was some that were kind of doing a little grave dancing on Leopold last week. And we were talking yesterday after the show being like, yeah, it's funny that VC funds can't blow up. You know, it's just like a slow death. If they die. If they die. But I'm wondering if there was ever a period in Silicon Valley history that Silicon Valley was like, you know, we should be using leverage.

1:19:11And then some sort of set of events that led to that not being very common. Now, fortunately, not too much, right? So not in terms of true leverage. Now, there are people that have used nav lines, but you haven't been an RA. Most VC firms are exempt reporting advisors, so they're not able to do those things. What we did see, and this is less than 99, but 2008, right before kind of the GFC started, there were some funds that did warehousing. And what they would do is they would go to a bank like SVB and say, we're raising a$200 million fund. We are going to start making investments before our first close.

1:19:46Can you lend us the money to make those first few investments? And guess what? There was a couple that did that, more on the fund-to-fund side than the direct side. And guess what? The market changed. They couldn't raise capital. And they had this huge warehouse sort of facility that they had to pay off with no capital. Interesting. That is a crazy scenario. Yeah, so it has happened technically. Thank you for the history lesson. This is exactly what we were looking for. Perfect guest for our earlier debate. Very cool. Well, it's super fun talking. Great to finally meet. And we're trying to get a pulse on what's happening.

1:20:22We think what's happening in your world ends up sort of echoing later on with a lot of the coverage that we do. Yeah, so we'd love to do it again. You guys do a great job. Big fan of the show. Great guest. Actually, my board member was on your show recently, Carter Rean. Oh, yeah. Oh, nice. Yeah, Carter from M13. Great guy. And whatever you want me back on, I'm happy to do it. That'd be amazing. Thank you so much. Have a great day. Great to hang out. We'll talk to you soon. Let me tell you about the New York Stock Exchange. Want to change the world? Raise capital at the New York Stock Exchange.

1:20:57Up next, we have John Quinn, the most feared lawyer. Welcome back to the show. Great to see you. So we have a video that we'd like to play for you. You want to play this? I want to play it for John. We made a heavy metal song about you, the most feared lawyer. About time. About time. About time. Can we get it up on the big screen? Play the last 45 seconds. This is what John was spending probably an hour last night working on. Burning the midnight oil for this. Here we go. You can turn around. We got the full AI rendering version of it. Let's get it louder, please.

1:21:39Here we go.

1:21:49Go still than the verdict rail.

1:21:56In true heavy metal fashion, it's really lovely. But I think this really captures the spirit of what you bring to the courtroom, what you bring to the legal profession. Just total fear and chaos. Yeah, the first. Of course, of course. Thank you very much. Yes. We'll send it. You can circulate it with the team. So we're going to talk about agentic AI. Let's do it. Law. Yeah, I want to talk about that. But I have some news this morning. Give us the news. Do you mind if I reveal something? Please. The general press doesn't have you? Absolutely. So it's a case that our firm has. Yes. And that I personally worked on.

1:22:38Okay. Within the last two hours, I got the opinion from the Ninth Circuit Court of Appeals. Okay. The case is Amazon versus perplexity. Whoa. And it's a very interesting case right at the intersection of agentic AI and e-commerce. So we represent perplexity. Amazon sued perplexity because perplexity has an agent, the comment, that users can deploy. Go shopping and doing whatever. Amazon didn't like agent's comment going to its website and buying stuff. I think because it doesn't have eyeballs, can't see ads, can't be... can't be upsold. Can't be manipulated. So Amazon sued perplexity under the Federal Computer Fraud and Abuse Act, which you can bring a civil claim under that for damages.

1:23:26It's also a criminal statute. What it requires, the elements are that you access a computer without permission, that you get information, and you cause damage. Amazon sued perplexity saying, your agent is being deployed. We don't want that to happen. We've told you. We don't want your agent on our website shopping and whatnot. Very unfortunately, and they moved for a preliminary injunction to shut it down immediately. Very unfortunately, the district court up in San Francisco entered a preliminary injunction a few months ago. I mean, we lost at the trial court level. But there's nothing a trial court can do wrong that a court of appeals can't fix.

1:24:07And just two hours ago, we got the opinion from the Ninth Circuit. And the Ninth Circuit understood that perplexity is not accessing the Amazon's computer. It's the user. The user. Yes, the user downloads the comet, deploys it, and sends it to go shopping. So justice prevailed. But that's, I mean, it's an interesting question at the intersection of agentic AI. There you go. Great. Thank you. All right. Yeah. Very, very interesting. How foundational is this? because perplexity is just one company that is trying to do this type of thing. I think there's a lot of consumers that want the ability to deploy AI, whether it's self-hosted open source.

1:24:52There's not even a company behind it. They want to be able to do these types of things. At the same time, there's going to be corporate interests that don't want this. Of course. We're at very early stages in trying to understand how traditional legal principles apply to agents and agentic AI. I mean, take this subject to something very basic, contracts. I mean, it's well-known, established that you can establish a contract between electronic interaction of agents. It doesn't have to be a human being. You can have a binding contract. Okay. But things can go wrong. Yeah, of course. I mean, the agent may not follow instructions or optimize for the wrong thing.

1:25:31For example, you tell the agent, go out, I need some cloud computing time. Go out and buy some compute for me at the cheapest possible price. And the agent does that and goes and enters into a long-term contract with a huge cancellation penalty. Sure, sure. I mean, that's a problem. Nightmare, yeah. And just the sheer number of contracts entered into by agents. Agents can enter into thousands of contracts before somebody's realized there's been a mistake. Something's gone wrong. It is a disaster. I mean, what do you do? I mean, if you find out your agent has gone out and entered into a contract that's not what you're interested in, not what you intended.

1:26:10I mean, one thing we know is you can't say it's the AI's fault. It's not my fault. I mean, there's even a law in California, I think, that was enacted this year, Civil Code Section 1714, that says you can't blame the agent. It's your agent. You're responsible. What's the human precedent? because big companies, I'm sure, for a long time have had issues with an employee entering into a contract, signing, maybe they have the authority to sign. It's kind of the same concepts I think that are going to apply in the agent context. That is, did the employee have authority? And even if they didn't have authority, did they have apparent authority?

1:26:47If you deployed the employee, they had a job title, they had the card, seemed like they had the authority to enter into that contract, you're probably going to be bound by that. Similarly, with an agent, I mean, the presumption is the agents out there in the marketplace buying things. The presumption is going to be that the contract they entered into is binding and you're stuck with it. But there is a concept of mistake that can come to the rescue. If the agent goes out there and buys, you know, because of a parsing error or something in the software, buys 10 ,000 of something, which historically you've only been buying 100 of, that may put the counterparty on notice that, well, something's gone wrong.

1:27:24And if the counterparty is on notice that this is a mistake, the counterparty, you may be able to get out of the contract. So that's just kind of an example. So these traditional legal concepts about authority, apparent authority, I think are going to come in play in the agentic AI as well. Yeah. Are there any – what precedents are people drawing on to understand where electronic contracts go? Are there any learnings from smart contracts and the whole discussion around cryptocurrency? Or is it more like what's been built up over terms of service? Because, yeah, this is almost an entirely new paradigm.

1:28:07And I don't know exactly. I mean, I call it the problem of new wine in old bottles. Okay. And whenever there's a new technology, we see this. We have traditional concepts about contract, how you form a contract. Yeah. What is agency? Yeah. And then we have to adopt it to this new era where you have electronic agents that are interacting with each other. Yeah. What do you think the equilibrium is? Do you think that there's going to be a flurry of lawsuits and settlements and then sort of a new establishment of standards, norms, default contracts? Because Silicon Valley has been through a whole turn of contracts where there used to be equity financings.

1:28:47Then there were a lot of convertible notes. Then there was eventually the safe contract, which is a much lighter version of a financing that moves a little bit faster but can still hold some of the weight. And so, like, is there – do you think there's going to be demand for some sort of standard contract that agents can sort of execute that builds on the shoulders of all the contract law but still allows for flexibility? I think we are going to see contracts like that for sure. Yeah. But still, we're always going to have the potential for the rogue agent that does something, that exceeds the permissions.

1:29:24But it's all the problem is what's built into the software. So it's important to build in safeguards like caps, spending limits, and the like. And for important and novel transactions, getting a human in the loop. The transaction can't actually close. Money can't change hands until some human being has actually looked at it. So I think that's very important. And then also people need to audit the history of transactions. As I said, you can have thousands of these contracts being entered into and performed before somebody realizes anything's been going wrong. You need a system where you're actually auditing them and catching those errors.

1:30:01Do you know where DocuSign came from? Was that a legal innovation? Because we think of it as this software company that says a lot of employees, they've built this program for – e-signatures. They have a lot of employees. What would we do without it? But was there a moment where e-signature was illegal, was not binding, and then it flipped? Or did they sort of adapt to the conventions of what counts as a binding legal signature and sort of slot in and then establish themselves? I don't know the specific history on that. I mean, the guy who founded that company, I'm blanking on it right now, is actually a client of ours.

1:30:42Oh, no? So I'm blanking on that. So I don't know what the history of that is. Yeah. I'm just wondering if there's like learnings from like other times when we've had to take something that happens in the real world and adapt it to the Internet. And thinking through like the other foundational cases, maybe net neutrality, these different debates, because you have to imagine that consumers will want AI to go shopping for them. And that's going to happen, but they're going to want it to be safe. And then companies are going to want surprises. They want to realize they've got 10 ,000 toothbrushes instead of the 10 that they wanted.

1:31:18Sometimes that happens just on Instacart. You order one banana and you get one truckload of bananas. It happens. I think there's also going to be issues in tort law. If you deploy an agent that causes harm or causes damage, how does tort law apply to that? Concepts of negligence, products liability. I mean, it's an unsettled question in the law whether software is a product. You know, like we talk about products liability for defective features in cars and the like. So there's a whole body of law surrounding that. Should that apply to agents that go out and do something that causes damage? I mean, we're seeing cases being filed where the allegation is that the agent persuaded somebody to engage in self-harm or the model did.

1:32:08Is that a defective product? That's the question. So concepts of negligence, products liability and the like will apply. And then people, like in this case, Amazon tried to keep the perplexity out from its site saying, you don't have permission. We're not permitting that. But we've all read about instances now where agents have gotten loose, entered sites. So what is the legal ramifications of that? There's a concept of trespass to chattel. Like, you know, trespass on land. A chattel is a thing. Okay. So there's also something called, and this is a traditional concept in the law, of trespass on a chattel.

1:32:48Chattel, whether it's trespass on a server, computer, and the like, hasn't gotten very far, but there's some cases where those types of claims are being raised as well. Okay. Yeah. How have you been processing all the cybersecurity incidents? It feels like these, they haven't, I haven't seen lawsuits filed. It feels like these will be discussed as settlements. Already the CEO of Hugging Face was sort of outlining what a non-legal recourse could look like. Where do you think this all goes? Do you think there needs to be some precedent-setting legal case to create the template for how these things get worked out if they happen more and more?

1:33:27I mean, the way this, you know, we live in a common law country, of course. So we have legislation, and maybe there will be a need for legislation at some point. But until the legislators act, and it's hard to get legislators act in this country, the courts will be deciding these on a one-off basis and establishing precedents. So courts will look to what other courts have done. I mean, the issue that's been teed up in dozens of cases and that everybody's familiar with is that copyright infringement train a model on copyrighted material. I mean, there are dozens of cases that are teeing that up.

1:34:01We have some indications from a couple of cases so far suggesting that that's not infringement, but it's what's called fair use. I mean, ultimately, all these new issues that are being teed up, we're going to have answers to them. But it'll take time. It'll just take time. And it depends on the persuasiveness of the judge's opinions and the precedents. And some things will end up in court of appeals and maybe even the U.S. Supreme Court to make new law. How is the legal industry grappling with questions of liability around AI? If I have a law firm, my lawyer uses AI, is there any nuance there?

1:34:36Or has the legal industry had to grapple with what liability, what the services delivered might look like in a world where there's AI agents that are going off and doing discovery or all sorts of different things? Well, lawyers are going to be responsible for what the AI does. I think there's no question about that. You've heard about these cases where lawyers have filed briefs in court that have hallucinations, cite to cases that don't exist, laws that don't exist, or cite to cases that exist but don't stand for that proposition. Courts don't have – What do judges think about that? They're not very happy with it.

1:35:12It's like when I start reading something and I realize that it's just been just a prompt effectively. No. I mean the lawyers have been sanctioned for doing that. it's something that I think every law firm has to be vigilant about yeah because I mean you can't get the models I mean you can try to tell Claude you know don't make anything up yeah I only want double check yeah make sure the case really exists and it'll kind of be apologetic and say you know I'm just an LLM I can't guarantee that seriously how are how are the lawyers that you talk to at your firms and just other friends in the industry processing just the progress of AI.

1:35:53We had the breakthroughs from one of OpenAI's new models on Saturday that kind of rocked the math world. But I'm curious how lawyers are just processing the models, you know, sort of broad set of abilities today. Look, lawyers are, among other things, wordsmiths. Yeah. I mean, so we have targets on our back. It's amazing how much quicker we can get to a finished product that we'd actually want to use, serve on the other side, or file with a court. And I personally think most of our profession is whistling in the dark, that they don't realize what's going to come. There's a bit of an innovator's dilemma here, because big law firms are doing really well.

1:36:40Yeah, from all these Why change? What's the issue? Well, also, I'm assuming a lot of the most high-profile cases are AI-related. So at least in the moment, it's creating this sort of surge in demand. Yes, there's a lot of cases related to AI, these novel legal issues, like this perplexity case we never would have had 18 months ago, the dispute between Sam Altman and Elon, just on many different levels. It's generating new work in addition to new types of issues. But I think it's fundamentally going to change the legal profession and the way law is practiced. I mean, most law firms bill by the hour.

1:37:23And if I can press a button and get a work product that's 80 % or 90 % there, think of all the time, the hours that have been saved. And that really needs to be passed on. The client expects that. They're expecting to see that savings. You said big law is doing well right now financially? Financially? Yeah. I mean, the law firms, you know, the biggest law firms are doing very, very well. Doing very, very well. What was the hardest year financially for Big Law or Quinn specifically? So we only do disputes work. Yeah. So I imagine it's not very cyclical, right? There's not. It's not. A lot of people think that litigation is cyclical.

1:38:00There's more litigation when there's a downturn in the economy and less when things are going well. I don't think that's true. Okay. I mean, you'll have more of a certain kind of litigation when there's a downturn, distress related reorganizations, bankruptcy related litigation. But when there's a downturn, you know, people can't perform their contracts, you know, so you have those kinds of issues. But when things are going well, and there are profits, companies will bring claims that they might pass on, you know, they'll pick up the nickel, you know, on the floor and say, okay, hey, we're going to pursue that.

1:38:33So, I mean, the disputes world in America is generally pretty good. I mean, we live in the most litigious country in the world. Our legal culture leads the league in that respect. Is that good? I mean, it depends on who you ask. I think that it's a feature of our individualism. It's a feature of people's feeling of entitlement that I have rights. I can get my day in court. I can get a hearing. So those are good things about it. But on the other hand, there's a point of view that it's really a lot of litigation is a tax on doing business. And we know that there's a lot of frivolous claims that are brought as well.

1:39:19So you ask different people, you'll get different responses to that. But right now, you have these gigawatts of compute being brought online. And in a lot of instances, there will be like a hyperscaler that is signing up for a long-term contract. And when you look at some of these NeoCloud businesses, a lot of people like to look at them and say, well, look, this is a contract with a major trillion-dollar company. That trillion-dollar company is definitely good for it. And NVIDIA is back there somewhere Guaranteing performance as well Yeah, NVIDIA is usually Involved, but In actually playing Some of these things out Let's say in the future There's a compute glut And there's I think you should debate when that will happen Maybe it happens in 10 years Maybe it happens in 1 year Maybe it happens in 2 years No one knows, there's a lot of indicators that you're just going to see demand outstripping supply for a long time.

1:40:22But what do big companies do when they're in a contract that they really don't like and they want to get out of it even though they signed on the dotted line and it's a bulletproof contract? Because it's not like the biggest company in the world that people have amazing credit right now that signed the contract, people are like, oh, it's fully guaranteed. But there's a lot of things that companies in that scale can do if they're in a situation that they don't like. Well, I mean, it's tough. They can look if you're if there are big obligations on both sides, big commitments on both sides and one side doesn't want to perform.

1:41:03A lot of times that precipitates a negotiation because they need each other. Right. They each made commitments to each other. Yeah. So if you and I have one of these contracts and I have a problem, then you have a problem, too. So we've got to try to find some way to work that out. And oftentimes that's what happens. But I think a lot of these structures, financial structures, especially for data centers, are incredibly complex. You have an SPV at the middle of it, has a deal with a tenant. You have all kinds of financing, bond financing, securitizations, private credit with cross-default provisions.

1:41:39So if somebody defaults, the whole thing potentially goes down. I think on some of these data centers, we're probably going to see some reorganizations. You know, everything, look at all the money that's going into this and all the data centers that are being built. Are all of them 100 % going to come online when they're supposed to come online and everybody's going to do exactly what they contracted to do? Yep. You know, I don't think that's going to happen. So there'll be some workouts. And the challenges that those data centers face from, you know, I've been told by one neocloud that the biggest problem they face is electricians.

1:42:17Just getting the electricians to do the work. So there's a shortage of everything from electricians to power to chips, you know, to compute. So, I mean, it's not going to end perfectly for everybody. Yeah. But you would predict billions of dollars worth of billable hours dealing with all of that? I think that's a safe prediction. I don't. If you have a trillion dollars of this kind of like complicated CapEx investment, then you're probably going to get at least a billion, a couple billion of billables. Those are a lot. Billions are a lot of hours. I know, but it seems like you have thousands and thousands of these projects.

1:43:04Look, if some of them go into reorganization and the equity gets wiped out, there will be negotiations. There will be what are called liability management exercises. There may be bankruptcies as well. And yes, lawyers will be very involved in those workouts. There was some reporting recently that one group that is pushing back against the rollout of autonomous vehicles are trial lawyers or not trial lawyers are personal injury lawyers who seem to be worried that in a world with, you know, full autonomous driving across the United States, there'd be less accidents. Does that surprise you at all if that were to be true?

1:43:49I hadn't heard that, but I guess nothing would surprise me about what the plaintiff's tort bar might do. How would you reform if you had – So no corporations can sue each other? How would you – what kind of reforms would you push for if you were king of the United States for the day? Specifically around personal injury law. Because when you drive around LA, it's honestly very depressing. It's like if you look up, you'll see a billboard that's basically saying, hey, do you want to see someone? And that signal to me is that there's just billions of dollars of revenue. Look, there's no doubt. There are personal injury mills, lawyers that process high volumes of claims.

1:44:43I've never worked in one of those factories, but I sometimes wonder whether there's ever lawyers' eyeballs on what's filed and the discovery and the like. I think a lot of those cases are brought to settle as quickly as possible. So sometimes you wonder whether the client's interests are really number one. But I don't work in that field, so that's my speculation. And it does feel like it would be a very different situation if every automobile accident involved going up against Waymo with perfect camera footage from every angle. There's no testimony of this person said this person, this person said this, this person said that.

1:45:29You have the perfect footage, the GPS, everything that happened in that moment. Well, I think AI, I mean, you know there are early stage companies, early stage, maybe somewhere beyond early stage, that hoover up all the data available. Yeah. Like permits, ingredients. Sure, sure. You know, compliance certificates, whatever. Hoover all that up. Yeah. And they also ingest all the regulations and rules. And they will identify claims and class actions. Yeah. And you can subscribe to this, and they'll serve it up. So, I mean, AI is in itself generating more of that kind of work as well. But I also have the hope that it'll mean that cases are resolved sooner because there's more transparency sooner, as you were saying, like the Waymo situation where you have the record.

1:46:22So people hopefully will be able to identify the merits of their claims. Everything's more transparent. Identify the merits of their claims. you can underwrite the risk and people may be able to get together with settlement sooner. On the next generation of lawyers, do you think aggression can be taught?

1:46:45I don't know if aggression can be taught. I don't know if it should be taught. Aggression in the law and litigation isn't an end in itself. I generally think it's good to be the first mover I mean we have a saying at our firm that The side that figures out first what will ultimately matter wins So as a default position I believe you should try to get ahead and stay ahead Now that doesn't necessarily mean you're aggressive But in some cases you don't want to be aggressive I mean you might want to adopt a rope-a-dope strategy Come get me and let the other side play their cards first. How can you tell if someone's bluffing?

1:47:31If you have a sense of what their case is and what it's worth and what the strengths and weaknesses are, you sometimes get a demand that you think either they're bluffing or they don't understand their case. So it really very much depends, I think, on the situation. How good were you at reading people early in your career? Not very good. And how much did you improve? Like, did you have some sort of like baseline above average ability, you think? And then you got, you know, significantly better. I think with experience I got better. I think as a younger lawyer I was probably too aggressive too often and didn't sort of modulate my approach.

1:48:17over time I think I got better of understanding, not just understanding the other side and reading them but myself as well, where I was coming from and what my strengths and weaknesses were. Thank you so much for coming on the show. Thanks for having me back. Wish we had more time. Let's play you off with the final outro to Most Feared Lawyer.

1:48:56We were playing this all morning. The legend they all revere. They hired John Quinn. The war is on. And the verdict burns right here. I think every one of our guests needs an intro like that. Metal song. I think that might be a new bit for us. First, let me tell you about Figma. Agents meet the canvas. Your AI agents can now create and modify your Figma files with design system context. We've been keeping our next guest too long. We got Nikhil Reddy from Kaizen coming on the show. Let's bring him in. How you doing? What's going on? What's up, guys? What's up? Legendary intro for Dunquin. Yes. hopefully you never have to hire him but if you do honestly i was gonna say hopefully you get a chance yes the opportunity to have him on your side no it's hopefully you don't yeah have him sending you emails that's for sure that's for sure except maybe a client intake form yeah uh well thank you so much for taking the time to come chat with us uh kick us off with an introduction on yourself and the company yeah man thank you guys so much for having me jordy john big fans Quick background on me.

1:50:13I started Kaizen in 2022. Before that, I was an early engineer at Andrel. Joined from the Bay. Joined Andrel right out of school in 2019. Spent two and a half years there as a FDE. So worked on the web interfaces for a lot of the early hardware products that are now flying and doing wonderful things. And before, needed a UI and UX to sort of power some of those assets. And it was an amazing opportunity to just go to a bunch of military bases and build really quickly for the warfighter. And then started Kaizen at the end of 2022. specifically with the fire to modernize all constituent services.

1:50:46I think that experience showed me how broken and disconnected government application layer systems were. But when you think about it beyond the context of just defense, I know we're here announcing a DOW project, but globally across all governments, all public institutions, I think the worst part of everyone's day is that 8.30 a.m. when you go to the DMV and you have to use the tech stack to renew your driver's license or pay for a permit really quickly or do the basic fundamental task. And if you can make that experience 10 times better, an order of magnitude better, then I think everyone sort of leaves those buildings feeling like their taxpayer dollars are being spent appropriately and that they're being taken care of.

1:51:24And that was the vision, was to go to every single public institution and modernize their application layer that citizens and individuals interact with, I think, more in a volume perspective, more than any other their government service and make them 10x the quality. And that's sort of what we've been up to the last four years, selling to city, county, state, and now federal government and announcing a big project with the Department of War. Yeah, congrats. Okay, very cool. A lot I want to understand on that side of the business. But yeah, talk about the contract and parlay this into what you're announcing today.

1:51:58Yeah, so we're announcing the launch of the CounterDrone marketplace that is run by JIDA 401, the counter drone task force within the Pentagon. The problem that we're trying to solve is that counter drone assets are being manufactured by American OEMs, many of whom that you've spoken to and have had on the show. And the threat profile is changing so quickly. The hardware is being manufactured at lights out pace. But then actually think about the process now that there's an amazing OEM product that needs to be fielded out into a forward deployed region of the world. Think about the paperwork, the process, the structure, the 50 different software platforms that someone within the building needs to use to authorize budget for it, get contract vehicles established, then go back and forth with the KO, negotiate that contract, then find the right logistics and management partner to get it on a pallet and get it delivered.

1:52:47You're talking about potentially weeks to months of delay when the warfighter needs that capability and that asset delivered on the pallet tomorrow so they can actually use it in the fight. And that was sort of what for us was the most exciting problem to solve. And 401 put us on contract in nine weeks from a blank slate. We designed, developed, and deployed a true two-way e-commerce marketplace that looks stunning. Rivals whatever you'll see in the private sector where American OEMs can sign on, establish their vendor profiles, upload their products, sell them directly to three different buying groups.

1:53:19Department of War capability offices, people with budget within the Department of War that want to buy now. State and local law enforcement, because think about the intra-government or intra-United States case where you're a state and local law enforcement leader and you're protecting MetLife Stadium for FIFA World Cup. You also need to buy counter-UAS. So it's a centralized platform for those buyers to log in and purchase those assets. And then partner nations. Allied nations want the best technology. American OEMs make the best technology, and they want to be buyers on this platform as well.

1:53:47So it's a two-way marketplace where buyers can come in, register and validate their profiles. Vendors can do the exact same thing with their product stack. And then being able to have the Pentagon have one core centralized source of truth. We've built the entire front end architecture for vendors to post and publish their products. Buyers to come in, purchase their transactions. A ton of agentic tooling where even if you're not the expert, you open up our capability planner. You specify in free text that you're protecting a stadium for FIFA World Cup. Here's my threat profile. Here's how much money I'm willing to spend.

1:54:17And it immediately suggests a bunch of assets that you can purchase. add it to your cart in one click. And then on the back end, we're working to simplify all the tough, difficult, very frustrating procurement processes to actually get hardware on a pallet sent to the warfighter and to end up and running in nine weeks. Uber for drones. As a taxpayer. Sorry. Exactly. Sorry, I had to say that. Every once a year still, I'll see a pitch that's just like, we're building Uber for X. Wait, really? You've seen an Uber for X? Still see that. Wow. Still see that. Throwback. It's going to come back. Every now and then.

1:54:53Dutch East India Company for drones. How about that? As a taxpayer, do I want you to win or do I want a monopoly in software delivery for the government? Because everyone's run the business and they've had a bunch of different point solutions. And there's a different world here where I'm like, this is cool that you're doing this. It's good that I'm happy for you. But also, couldn't this just be one extra module in a Palantir system that's already deployed? Why do we need – obviously, besides the competitive dynamic, just from a technology perspective, is it okay that we're going to have proliferating systems?

1:55:34Is systems integration here not a particular problem? Are you addressing some problem that is too low for other contractors and primes to go after so it would get neglected? And so that's why you're doing this project. Like, help me understand how you fit into the landscape of other prime contractors. Yeah, fantastic question. I mean, like, the answer is actually a little bit of all of the above, actually. From the data layer perspective, our goal is to build application software that is capable of integrating into a seamless, unified, coherent data fabric. I want to write data to a Palantir or a Databricks or an AWS because that fabric is well-built, thoughtfully constructed, secure, compliant.

1:56:20But then you actually look at the market landscape. You're right. Most of the market, I think it's actually dominated by two extremes. When you're thinking about the city, county, state level, largely what we see is super old, janky, private equity-owned point solution for blah that hasn't received an update in 15 years. The engineering team is a bunch of Java developers that found out what AI is. Some of those businesses are real cash flow machines. Okay. So let's not take too many shots. They're good businesses. No, no, no. But as a user, as a user and not a shareholder, I share the frustration with the DMV system every once in a while.

1:56:59As a taxpayer, you're asking yourself, like, what are we doing here? And then on the federal side, most of those platforms are run by a bunch of low margin services companies that are selling hundreds and hundreds of heads and overcharging the government hundreds of millions of dollars. And then we'll spend 18, 24 months trying to build a thing deployed as a pilot, largely accomplished nothing. And I think the model that we're trying to apply is, yes, we should own as many application layer solutions as we can. And that's obviously sort of why Kaizen exists. But our goal is to charge based on the outcome and quality.

1:57:31And I would actually argue if we can make those application layer systems in order of magnitude better for the taxpayer from a user friendliness perspective, easier to use, more simple to log in, adjudicate your information, have it approved by an administrator on the back end. And then for the administrators that are spending eight hours a day logging into these platforms, trying to triage and do all the paperwork for them, if you can make their lives in order of magnitude better. I think we're actually solving the real problem. This is why taxpayer money is appropriated to these kinds of services so that we can actually provide a quality of service for our citizens that they deserve.

1:58:06And so for us, the number one goal is make every application layer product across these institutions as good as possible and move away from the point solution for X model and rather go to our customers and say, what is your need? Are you actually trying to make the DMV licensing process better? Or in Jada 401's case, they need a Shopify-style system for counter-drone procurement, and then we should have the technology stack and the set of modules that we can use to rapidly configure against those capabilities and deploy in 90 days or less. And still, I think you can move very quickly and build very quickly, as we're seeing in the world today, but also hold a high standard for compliance, security, good guardrails, testing.

1:58:46We live in a world where I think you can have both things, And I think that's sort of what's been super exciting about our federal progress. Love it. Well, congratulations. And thank you so much for coming on. Thank you for your service. We'll talk to you soon. Thanks so much, guys. Yeah, I appreciate it. Goodbye. Up next, we have Art Levy, the new vice president of Global Partnerships of Cognition. We got Russell Kaplan, the president of Cognition. They're coming in to the TVP in Ultra Dome. Very excited to have some folks join in. Congratulations. There they are. in the corner office, in the corner office, fit for a new vice president.

1:59:23It is a corner office, yeah. Are you guys in SF for Bay Area? We're calling from Austin. Yeah, calling from our Austin, Texas office. Austin, Texas office. We got a great team out here. Yeah, super excited to be having Art on the team. Okay, what is a global partnership? Does it have to be global? Is it just a sales deal or is there a deeper partnership that happens with these companies like AWS, Apple, Slack, Nivon, Oracle, Capital One? Break it down. John, you nailed it. Global partnership means it's not just a sell to deal. It's something where we're both selling to the business. Potentially, there's an investment.

1:59:57Potentially, we're co-selling to their customers. We're selling to them. We're selling to their customers. We're doing co-marketing. We're doing a press release. Potentially, there's a product integration. It's about deeply connecting two businesses who share a common goal around acquiring the same customers, or we build inside of them a product that is just better for their customers. And then both parties win. You know, classic partnerships, one plus one is three. I think of Cognition as an AI lab, maybe a Neo lab, a harness developer, a consulting firm in some world. I think of it as a source of geopolitical power.

2:00:36Yes. That's just me personally. It's birthing a new God as well. But what is the conversation that you're having with Fortune 100, these huge companies? How are you positioning your role in the AI ecosystem, in the business ecosystem? What is this full scope of the value that you can deliver to customers? Yeah, I think as we've grown up and evolved, I think we've really realized our role is to be the independent agent lab. And so we're an applied AI lab. We're focused on building agents and we want to give every company the best possible agents to go solve all of their software engineering problems.

2:01:16And so, you know, whether it's a Fortune 500 or it's a, you know, it's a small, fast growing startup, you know, people have a lot of needs for software. And Devin from the beginning has always been designed to work with all the other tools you already use. Right. It shouldn't be, you know, it's the Devin way or the highway. Like Devin should join you like a teammate. And I think that's one of the reasons I'm super excited that Art is joining. Art built an amazing alliance and partner ecosystem at Brex over his very long career there from employee 30 to chief business officer. And we see an opportunity to bring not only, you know, it's not just, hey, here's a tool, go figure it out.

2:01:57It's like, how does this work super well with every piece of technology you have inside your organization? Are large corporations that are maybe they don't have an in-house AI lab, are they generally of the view AGI is real, AGI is soon, but we're going to go through a sort of slow takeoff? Diffusion adoption will be a big problem and cognition can help sort of realize that thesis. I think the pace of progress in artificial intelligence is dramatically over the pace of progress of internal organizational redesign, for sure. And so, you know, and by the way, this is true not just at the big Fortune 500s.

2:02:41Even the sort of startups or tech companies we would consider as fast movers, everyone is asking, you know, do I really need to rethink everything now because of AI? And I would say it's actually one of the things that's been lucky for us at Cognition is we only incorporated in January of 2024. So our internal team setup and structure, it's very AI native. But every company is trying to figure this out for themselves. And I think if you froze capabilities today, you have at least a decade of crazy progress in the full enterprise world just to get this stuff really rolled out and operationalize.

2:03:17So what are, like, when you're talking to an enterprise, is it better to position as the, you know, you're going to help with this diffusion, this value creation? Or are we still in that sort of, maybe it was like May, June, July, like, whoa, we went a little bit too far with the token maxing. Maybe Cognition can help me rein in this budget, actually make sure that we're getting ROI. What's resonating there on the cost of benefit? I think it's both. I think it's a third, too. So first, all the models have been getting better, right? And so as the models get better, the capabilities keep improving.

2:03:59People are starting to ask the question, hang on, do I need to drive the Ferrari to the grocery store? Can I use an open source model for parts of these workloads? Can I use a cheaper model, faster inference? And so that's definitely one angle. Don't tempt me with driving a Ferrari to the grocery store.

2:04:16But continue. If only we could all be Jordy. But, you know, I think that's one part of it. I also think there's a separate thing that's emerging, which is if you actually want to have true frontier capabilities, you know, different models have different spikes. Right. Like we've seen, for example, we've seen the open AI models, for example, are the best in the world right now for recall of security vulnerabilities. If you want to catch as many as possible, the OpenAI Molitor is as best. There might be others where actually the Anthropic ones are a little bit better on precision, getting it really, really tight in.

2:04:53So I think in addition to the price and performance angle for enterprises, there's this element of, well, how do I use the best tool for the job, for each job to be done? And then there's the people change side, which we try to help with, too. I'll give you one story on this. we had a customer, global 2000 customer, tens of thousands of engineers, and they deployed Devin across the entire organization and they were seeing crazy productivity gains. But one organization they deployed to was the product management organization. And so every product manager now had Devin. And what they were doing was this organization's job is basically taking customer requests and turn them into Jira tickets, roughly.

2:05:34It's like scope out what the customers want, turn them into Jira tickets. So they were using Devin, they took those requests, and then they had Devin actually go prototype the fix. And then once Devin prototyped the fix, they had Devin say, Devin, can you summarize this fix in a Jira ticket? And then they deleted all the code. And we asked them, guys, what are you doing? You already had the fix. And the product manager we talked to said, that's not my job. I'm part of the product management organization. I'm not part of the engineering organization. And so I think for really large companies who've been doing things the same way for a long time, there is like a total rethink that needs to happen.

2:06:09It's just literally how do you design, you know, how do you design your structure? Yeah. How are you guys thinking about M &A? You bought Poke recently. I think it was surprising, but made a lot of sense. It was surprising to me because I figured someone like an Apple or something would see Poke's, you know, talent and their kind of consumer insights and all that kind of thing, try to pick them up. Um, but how are you guys thinking about MNA from like where the value really comes from? You guys are very good at building software. That's your whole pitch, right? Is we help you build software. So I can imagine a world where product acquisitions are like less interesting because you're looking at your own roadmap and you're looking at what someone's built and thinking like, well, how quickly can we build this ourselves?

2:06:59Is it, is, are we, should we expect like more sort of like talent style acquisitions? what's your general framework and maybe what's share as much of your mandate as you can Art? Yeah, I mean I would say all of the above, I mean we have today in Cognition 97 former founders working in the company, two and a half year old startup and we're like acquiring or hiring one team a week probably right now so if you're a strong founding team and you want to be part of a rocket ship, get in touch, we love bringing on founders but we also think there's bigger companies out there with products, with distribution, with learned insights that are really useful for us that we'd want to bring in as well.

2:07:42And I think how you do that successfully, a lot of companies screw up M &A. We kind of learned it trial by fire, acquiring Windsurf in the course of a weekend as a company that was four times our size from first call to executed reading from Friday night to Monday morning. So it's something that I think we're only going to get better at. And one reason I'm really excited, Art is here, is to help us kind of level up that process and be the best destination in the world to be acquired by. Yeah, I think one of the things I've seen work well in my career is a lot of times partnerships can be preempt an M &A.

2:08:18So a bit of a try before you buy, you make sure that the cultures really make sense, that do companies build an integration or a partnership? And then suddenly in those conversations or after you delight a few customers, you both decide, hey, actually, maybe it'd be better if we work together. And I think given the scale of cognition or rate of growth, the impact that founders can have when they come here is really going to be generational. So I'm really excited to talk to a bunch of founders and hopefully bring a bunch more of them onto the cognition team. Awesome. What country internationally outside of the United States is punching way above its weight in terms of AI adoption, AI diffusion?

2:08:57You always hear that story about Estonia rolling out high-speed bandwidth to the entire country, and they just went way, way forward in terms of GDP per capita. What country are you having, like, surprising success in? Japan. I would say Japan, number one. We love Japan. We're a global company now, so we have people all around the world. We have customers all around the world. But I got to shout out Japan in particular. you know even from from the beginning of when devon first became available self-serve when when cloud agents were like just at the edge of possible uh we had an enormous uptick of users in the japanese market and i think there's a few i think there's a few reasons i think one of them is um you know our japanese customer base everyone is incredibly conscientious and detail oriented and whenever we get a support ticket from japan it's a very thoughtful essay of every single issue that has been tried every piece of debugging information you would need.

2:09:53And like, they just found a bug. They just found a bug. If they could have solved it on their own, they wouldn't. And so I think the user base in Japan is super sophisticated, really early adopters. And it's been exciting to see all the growth there. I prefer the American style of just fix it. Fix it. It seems like really beneficial. Sorry, you were going to say something? No, I was going to say as I'm digging in, also ironically on the channel sales side, we've actually had the most success with sell-through with partners in Japan who seem to just deeply understand the product and the value prop and be able to sell it to their customer bases.

2:10:30Interesting. Do the Japanese love otters by any chance? Could that be a factor? That's a good question. We definitely have a lot of otters fighting around. Yeah, we got a lot of otters fighting around. There was a big debate in Japan of the right honorific for Devin. You know, is it Devin San, Devin Kuhn? And then we learned that the community in Japan has settled on Devin Kuhn as the right honorific, you know, your friend, your bud, your sidekick who's helping you out. I think it's a fitting name for Devin. And that came from the community. This was not internal? Came from the community, yeah.

2:11:07We were informed. We were informed. Ground up. That's amazing. Okay, well, thanks for breaking it down. Love it. Well, I'm excited to see everything that you guys do together. Yep. Deals, deals, deals. Very excited. Awesome. We'll talk to you soon. Great. Hang on, guys. Congrats. Goodbye. Let me tell you about Codex. Codex is a powerful workspace for getting work done with AI agents, whether you're writing code, analyzing data, creating content, or automating business workflows. Codex helps you move projects forward from start to finish. We have Brendan Carr from the FCC joining the show shortly.

2:11:44It's his first appearance, but we met years ago. I've always been fascinated by his perspective on everything that the FCC does. They're obviously expanding 5G. We can talk about satellites and space, Internet, what it takes to launch a rocket. I know you've been thinking about the TBPN satellite cluster. He's the guy to talk to. Perfect. TBJ over on the X chat says literal art of the deal right now. Wow. insane nominative determinism of the deal um while we are waiting for uh chairman brennan carr to join um we got to go through this crazy historic analysis from ed zitrin uh he ed zitrin july 29th 2024 gave sam altman the perfect roadmap he said i am hypothesizing that for open AI to survive for longer than two years, it will have to.

2:12:42And then he laid out pretty much exactly what happened, exactly what went down. But looking back on them, they did seem like crazy, crazy things that had to come true. I think Ed should join an AI lab and help maybe as like a chief strategy officer. Maybe. Because he's imagining everything that could go wrong. But through that, he's imagining everything that could go right. Well said. And so if he put his optimism cap on, he might make a great chief strategy officer. Maybe at a deep mind, something like that. Maybe they could pick him up. That'd be great. Well, Chairman Brandon Carr is in the waiting room.

2:13:19Let's bring him into the TVP and Ultra Dome. How are you doing, Brandon? I'm doing great. It's long overdue. Thank you so much for joining. How are you doing? I'm so glad to be with you guys. I love the show. Love what you're doing. I dressed down a little, no tie. I kept one extra button compared to you. I didn't go the full. there you go you know preview but take three down the coogan preview the coogan preview that's that's an amazing line as a bureaucrat you know as someone that regulates broadcast airwaves not you guys but broadcast airwaves you know decency still matters where i come from so we wanted we wanted to have you on because we wanted to push for podcast safety yes we think that uh we think that it might be a little bit irresponsible for the u.s government to allow just anyone to grab a microphone and get on the airwaves.

2:14:06I want a multi-year approval process for new RSS feeds, ideally. And maybe like annual, you should maybe need a million dollar fee annually to sort of maintain that license. TPPN is doing so well, we need to build a moat around you guys. You don't make it harder for others to do this. Yeah, I think they call it regulatory capture. That's what I want to do. Let us work for it. We're not here to talk about podcast regulatory capture. No, we are here to talk about robots first or where do we want to start? China, different supply chain pieces. What's newest in your world? Well, probably some of the newest stuff we've done.

2:14:42When we started, we stood up a new council on national security. We've been doing top to bottom review of all bad actors, foreign adversaries. The most recent thing we did just a couple of days ago was we added to our covered list. So the FCC, there's no piece of electronics that you can use without going through FCC processes. Putting it on the cover list means new models of that thing can't be imported or sold in the U.S. So we've added a couple of things to that. We did advanced robotics. So think humanoid robots. Think those quadruped robot dogs. And the idea is if you look to the future, those advanced robotics are going to be key to our economic security, to our national security.

2:15:23And President Trump is looking around the corner and saying, you know what? But probably a good thing if we don't become dependent from a supply chain perspective on a foreign adversary nation or a bad actor for that stuff. So we're trying to onshore that. We've done similar stuff before with drones, for instance. At the end of last year, we added all foreign-produced drones. But it's a balanced approach, meaning it's new models. So we're not going to take anything out of your hands right now. You can still buy, quote-unquote, new versions of existing models. But it's a way of signaling to the market, like, it's time to adjust, guys.

2:15:54We need a safe domestic supply chain. So it's good from an ATSEC perspective, but it's also great for investment in jobs in terms of onshoring domestically as well. Yes. So you said it's good for the market or the market will adjust. I'm interested to know what is your process for assessing the capability of the American supply chain to actually step up to the call when there's, you know, basically there's going to be a gap in the market around drones, humanoids. Fortunately, it feels like we're not in a situation where I'm talking to entrepreneurs who say, look, I set up this business years ago.

2:16:32I am dependent on buying this particular thing from China or internationally on an ongoing basis. And this ban is going to throw me way, way off like what might happen with other pieces of the supply chain. So there are there isn't a whole industry that's dependent yet. But what are you doing to actually understand how quickly and how capable the American industry is to fill the gap that will be created by this? Well, there's a couple of ways we take that into account and I'll walk through them. But just as context, for instance, when we added drones to the covered list, we saw something like five billion dollars flow newly into U.S.

2:17:15domestic drone manufacture. Actually, they're not making drone motors at scale in the U.S., which we've never really done before. But the balance approach is this. So, again, if you're buying a motor or a battery from overseas today, you can still continue to buy that because the prohibition is only on new models. And the companies overseas can continue to produce the old ones. And then, again, there's also an exemption process. So, for instance, on drones, we went through – the relevant agencies went through and exempted toy drones, for instance, from the ban. And so it's balance that's forward-looking.

2:17:49Let's not develop too much dependency. Okay, maybe there's a couple thousand of these. Not a huge deal. We don't want a couple million. So the entire regulatory structure allows for exemptions plus transition. And then, look, we can come back afterwards and remove the, quote, grandfathering for existing models. And in fact, we're doing that now for things that were added to the cover list before 2024. So things like Huawei, ZTE, that type of equipment. Again, one, it's not consumer facing as much. But two, you had multiple years to adjust to where we think the market's going. Do you have any optimism around these frontier AI models have incredible cybersecurity capabilities?

2:18:29I could imagine a world where before there was a lot of fear, uncertainty and doubt about certain pieces of electronics that are made internationally, potentially having backdoors or spyware. And if you can hammer one of these systems with every possible test, are we going to wind up in a world where we can more confidently say yes or no? Does something have a backdoor? Or is this just everyone will just be stuck in a never-ending race and we'll be back to where we were? I do think it's helpful from that perspective. Obviously, there's telco companies that are on the early release lists for a lot of these models to help identify any patches that might be necessary.

2:19:13But we're doing a couple things that are new as well. So it used to be if you wanted to sell electronics in the U.S., you had to go through a lab, and the lab would test it for power levels and interference, very basic technical stuff. We're now inserting national security checks in that lab process. In fact, we stood up something called a bad labs proceeding because it turns out that something like 70 percent of all electronics that ultimately arrive in the U.S. are tested at labs located inside China. And some of those labs themselves were linked or controlled by or tied to the PLA. So not necessarily the most trustworthy.

2:19:49So we're kicking many bad labs out of the testing process. And again, it's helping to onshore some of that testing process. So we do want to make sure throughout all of this that there's much more trustworthiness checks along the way. That's very interesting. Jordy, do you have anything else on this? No, I was very excited to see the news from last week or maybe it was the week before just because even processing the drone industry and even the consumer drones personally, I think drones are great. I've seen drones that have captured some cool footage of snowboarding or surfing and all these things.

2:20:26But the idea of having millions of, you know, if you could ask any foreign adversary government, hey, would you like to have millions of, you know, flying cameras in one of your geopolitical adversaries within their borders? They would say, like, absolutely. That sounds great. Let's do that. And so the idea that we were going to let the same thing happen, the thing that we let happen in drones, that we would let that happen with humanoids, which are much more of a risk to me. They can actually have, you know, they're not very significant today, but they can have a real effect on the world. And the idea that we would allow, you know, millions or eventually even billions of these into our borders just was very concerning.

2:21:15So personally, I'm glad that you guys took action. I'd love for you to explain the E-Rate program, what's going on there with school internet. I think it's an under-discussed story. It sounds very good on the face of it. You want students in America to have internet. How are things changing? What's the history of the program? What's the story going forward? This one's interesting. So this country over the last couple of years, I think we really experimented with going all in on screen time for kids. And the results of that are starting to show themselves. And the results aren't great. I mean, we have actually gone through one of the most significant losses of sort of human capital from a learning perspective that we've basically ever seen.

2:22:03I mean, going back to almost the dark ages, when you look at some of the decline in test scores. And to some extent, I don't know if it's correlation or otherwise, but it coincides with this big uptick in screen time. And the FCC has a role to play. We fund Internet connections and to some extent internal connections at schools all across the country, multiple billions of dollars a year. And so we've done a top to bottom review of our program to make sure it reflects the current research on screen time for kids. And it's not just us. Obviously, you're looking at a big movement around the country, different states, different school districts.

2:22:37are all starting to say, you know, maybe put the smartphones away, maybe put the screens away. I mean, you got young kids, kindergarten, first grade, they're just swiping all day. You'll love this. You'll love this. A school nearby me, an elementary school in PE, they spend more than half the time on iPads looking at physical exercise, like diagrams. I'm like, these are children. Maybe just let them run around outside. studying exercise yeah um gone too far get us up to speed on what's happening with uh starlink and other space-based internet connectivity programs it feels like uh to much to the benefit of the american internet consumer uh the the race is heating up there are more companies launching constellations what are your kpis what do you want to see is it faster approval times for new constellations, clarity around who owns what spectrum, smoother auctions.

2:23:41What is on your to-do list for the next couple of years? Yes, a little bit there that we're doing on every of the points you hit. So for one, President Trump came in and gave a very clear direction. He said he wanted the United States to lead the world again in technology and in space in particular. We're now seeing that. So there's this new technology called direct-to-device, where you can go straight from your smartphone right to a low Earth orbit satellite. You don't even need that little Starlink mini or other satellite provider dish near you anymore. It's just starting to emerge. But we're putting the regulatory framework in place at the FCC for that to succeed.

2:24:16One, that means more spectrum. You need new airways for that technology to work. We've been facilitating many transactions to do that. Starlink now is a big chunk of spectrum. Amazon is buying another company called Global Star to basically take their spectrum and use that for their own version of direct to sell. And then inside the FCC, We're taking our Space Bureau, which historically processed applications for a lot of this stuff, and they would review individual applications and long narratives and be very subjective. We've scrapped that entirely, and we've replaced it internally with an assembly line where we give you clear rules of the road.

2:24:50If you hit these targets, your applications will be on the fast track, and you're going to go. Because, again, look at the launch cadence. Look at the amount of mass going into orbit. We've got to keep up with that. And this is someplace that I'm just super excited for the country, this hard tech area, these, you know, the kids from the gundo that are now everywhere outside the gundo as well. I mean, what they are doing right now is, I think, a huge part of the future of this country. And we want to make sure the FCC is not sand in the gear when they continue to innovate the way they are. Does the FCC have any other roles to play in that?

2:25:24I mean, we've seen like every day there's a company, a startup that's coming on to announce an LOI or some sort of deal with a different piece of the government. Are there any other ways for the startup ecosystem or the tech community to interface with the FCC beyond, okay, I got approval for this thing? Yeah, we're working across the board to make sure that, you know, whether you're big or small, medium-sized company, that you can get a yes or no answer from the FCC. And part of that is just getting rid of dead wood. So we started this proceeding at the agency called Delete, Delete, Delete, which is about going through every single page of our rule books and getting rid of anything we don't need.

2:26:04We've obviously sort of resulted in thousands of words being taken out. I think 400 pages have been removed from our code of federal regulations already just so that whether you're small or unsophisticated, it should be much easier to engage with the government. We've cleared the application backlog in space, you know, by about 50%. So we're seeing some good results there for everyone to engage with the agency. That's very exciting. Jordy, anything else? Not for now, but let's do it again soon. Thank you so much for coming on the show. Have a great day. Honor to have you. Have a great week, and we'll talk to you later.

2:26:35Good to see you guys. Thanks. Good to see you. Cheers.

2:26:41SpaceX had earnings. Oh, yeah. How'd they do? Let's see first-ever earnings as a public company. Uh, I... Up 10 % right now? Nope. Down... Down 5%. Well, it was up 9 % today, but down 4.5 % after hours. Okay. First up, SpaceX announces a new partnership with NVIDIA to design its StarMind AI1 payload, bringing data center class compute into orbit. That makes a lot of sense. Let's find some actual numbers. So revenue was$7.81 billion versus$6.93 billion expected. Loss per share was$0.09. Average analyst estimated a loss of$0.26. Revenue jumped 92 % from$4.1 billion a year earlier. So huge, you know, you're even at this scale still doubling the revenue.

2:27:42And it's the first time Elon Musk's reusable rocket maker will face Wall Street in this capacity. And investors are jittery. SpaceX stock has dropped 16 % since opening at$150 a share on June 12. And SpaceX lost$4.9 billion last year, largely due to heavy investments in artificial intelligence, which we've discussed. The company merged with Musk's XAI in February. CNBC reports saying that at the time the vision was to build data centers in space, but the launch business, which counts on large contracts from NASA, is losing money. Most of SpaceX revenue for the year and its only source of profit came from its connectivity segment, which consists of its Starlink Internet service.

2:28:28Starlink is sold directly to consumers. So here's how SpaceX performed in the three key segments. For space, they brought in$962 million versus$835 million, which was expected. So they beat in space. On connectivity, they brought in$4.29 billion. So the Starlink business is more than four times the size of the actual launch business. They brought in$4.29 billion versus$3.83 billion that was expected. So they beat there. And on AI, they brought in$2.56 billion versus$2.18 billion expected. So beats across the board. And very interesting to see that the thing that they started doing, space, of course, launching rockets, is now their third largest line of business.

2:29:20Connectivity is, of course, bigger. And also AI is bigger. Everything is computer, John. Everything is computer. That is a good summation of it. and that's a good place to end our show let's play you out with the most feared lawyer john quinn leave us five stars on apple podcasts and spotify sign up for our newsletter at tbbn.com we'll see you tomorrow at 11 a.m pacific goodbye A little flashback.