David Senra, Nichole Wischoff, Daniel Yanisse, Ryan Sandler, History of "Golden Dome", Johnson & Johnson Pivots AI Strategy, Google & Meta Facing Legal Threats, EU Delayed Penalizing Apple & Meta Platforms

30:00They do have a heritage there. There's good things you can say about them. There's things where they're falling behind. And Northrop actually had a huge explosion on April 16th. Druva had a post yesterday. I'll just pull it up on my computer, but he said, a real setback for America. This rocket motor plant was such a pillar of national security capacity that Northrop had agreed to be a supplier to Boeing in a competition to build the LGM-35A Sentinel, a key part of the U.S. nuclear triad. So anyways, unclear if this explosion was just an accident or if there was something else going on. These types of facilities are super dangerous.

30:40But again, this is Northrop and Boeing already being a, they were basically leveraging this facility to contribute to the U.S. nuclear sort of defense apparatus. Yeah. It can be dangerous stuff. So more than 180 firms responded to the April industry day, including laser specialist, General Atomics, L3 Harris for space radars. Everyone shows up. Even AWS and Azure, Microsoft showed up, said, hey, we got the data backend covered. And it makes sense. This should be bipartisan. It's like protecting us from nuclear war. This is amazing. And I'm very excited to learn more about this. It's always tough because they are probably not going to tell everyone everything, right?

31:28Because it's going to be classified. Because as soon as you say, this is exactly how it works, well, it's easy to start shooting them down and taking them out and figuring out. what the anti-missile is, right? So anyway, it'll be interesting. In terms of just the history of missile defense in the 1960s, we have the Nike, Zeus, and Sentinel. These are silo-based sites. And so we got to fire it off from the ground. 1983, we see SDI, Star Wars. The tech was premature, but they did create the idea of like this IR sensor and KKV field, which is kind of the modern strategy, I think. I think that we're not reinventing the wheel on that.

32:14We're just using the latest technology and actually being able to get it to scale. And then, of course, the Iron Dome is kind of like the gold standard here until the golden dome becomes the gold standard, hopefully, because it's been combat validated with 90 % greater success. And so, I don't know. I think we should keep following this story. It'll be interesting to see where it lands and how much we learn. I mean, at the very least, it will be, I think it might be more of a business story than a technology story because I think a lot of the technology will be classified effectively. But we will be starting, like, as, I mean, Palantir is a public company.

32:51So if there is a big award, it will show up in their earnings. And that's cool. And that will drive the market. And that's interesting to follow. Yeah, and it's coming at a very interesting time. Obviously, Reagan's Star Wars program and campaign was made fun of in many ways, partly because of the name. Golden Dome will be made fun of, too, because it's kind of a funny name. It's almost. But at the same time, it's coming at a time when the commercial space economy is flourishing. We're putting stuff into orbit almost every single day. So much more. And so the timing feels right. and over time this could replace a bunch of systems on the ground that are very, very, very costly to create and maintain.

33:35Well, if you think the legacy primes are going to do well, if you think Palantir is going to do well, or vice versa, you can go express your opinion, your independently formed opinion on public.com, investing for those who take it seriously, multi-asset investing, industry-leading deals, trusted by millions. You got pretty much every asset on there. Pretty much every asset on there. And we got to do another ad ramp. Time is money. Save both. Easy to use corporate cards, bill payments, accounting, and a whole lot more all in one place. Back to back, baby. But we got to move on to Johnson & Johnson.

34:11We should get a card reader here to just swipe. We have a card reader. We ordered one for a shoot that we did. And I got some very nice cinematic shots with Ben for the card reader. There we go. Well, let's talk about Generative Johnson. Generative Johnson. So Johnson & Johnson is making a shift to focus only on the highest value generative AI use cases and shut down pilots that were redundant or under-delivering. And this is big news because a lot of companies have probably sold huge generative AI transformation projects into all sorts of companies, and we'll see how many stick around. Yep. And so they used to, previously, Johnson & Johnson was experimenting with generative AI pretty broadly across the healthcare conglomerate.

34:59And now they're taking a more focused approach and they want everyone to know. Let's try a bunch of stuff. Talk in the journal about it. Let's try a bunch of stuff. Makes sense. See what's working well today. What could be working well in the future. Double down on what's best. And then churn. Churn. We hate to see churn. Anyways, so Chief Information Officer Jim Swanson said the move ensures the company allocates resources only to the highest value generative AI use cases while it cuts projects that are redundant or simply not working. That was a pivot we made after about a year of learning, Swanson said.

35:30Now we've moved from 1 ,000 flowers to a really prioritized focus on Gen.AI. What a funny analogy. Golden Dome, 1 ,000 flowers. A thousand flower approach involved a number of use case ideas germinating from across the company, which made their way through a centralized governance board. At one point, employees were pursuing nearly 9 ,000 individual use cases, many that were redundant or simply didn't work, he said. And as the company tracked the broad value of AI, including generative AI, data science, and intelligent automation, it found that only 10 to 15 % of use cases were driving about 80 % of the value, he added.

36:10Interesting. And I imagine, yeah, I mean, I'd love to know exactly what they're using. But you can imagine, like, you know, when all you have is a hammer, everything looks like a nail. Let's throw Gen.AI at everything. But there's going to be places that are like, oh, wait, we still have a division that's just transcribing paper receipts or something. It should just get on ramp. Yeah, so here's where it's working. J &J is drilling down into high-value Gen AI use cases around drug discovery and supply chains. Zach Weinberg might put the drug discovery one in the true zone, as well as an internal chatbot to answer questions on company policy.

36:48So, eh, hard to know if this is real. It's like, okay, chat with your company handbook, basically, which that's fine, but I don't think people care at all. You could just drag the handbook into... to enterprise version of chat gpt in your azure cloud and ask it questions yeah not probably something they're paying for a standalone product for sure maybe will long term it's hard to say sure i know there's companies like glean that have you know gotten to uh you know multi-billion dollar valuations doing something like this yeah um anyways so um it's also just funny because you know that like with a company like j &j like mckenzie was like all over this being like with like millions of decks like let's put it in this let's slot it in here let's do all this yeah um and and and then there's also there's just all the forces aligned to do 900 projects because yeah anyone who's at huge j &j and wants a promotion is like well yeah i'm not just a marketer i'm a technology enabled marketer and i my team is using ai so we're going to be more efficient we're going to drive more shareholder value.

37:56Then you have the CEO who's like, oh, I got to tell Wall Street an AI transformation story. Oh yeah, we're firing everyone. It's all AI. It's very interesting. We're not doing it this quarter. We're not firing everyone this quarter, but AI is coming and you can price this into stock today. It's interesting that they used a centralized governance board to lead the thousand flowers AI transformation. It's like the one thing you shouldn't do is just like instead just diffuse the research. I mean, I think the way you actually transform an organization is just say like, hey, everyone, like AI exists.

38:30It's the Toby Lutke approach. It's Shopify. It's like AI exists. Like whatever your job is, like use ChatGPT. If you need to expense ChatGPT, it's the same thing as like Google exists. If you hired an employee and they didn't use Google, you'd be like, whoa, whoa, whoa, what's going on with this person? Like they need to be Googling stuff. Yeah. One example that is working is a rep co-pilot, which helps coach sales representatives on how to engage with healthcare professionals about new treatments. We actually use this to coach our sales reps on how to pitch the show to other people that are listening to other podcasts.

39:02Yeah, and I think we have, you know, our sales team isn't as big as J &J, but it's close, right? Dozens. Dozens of thousands, I think. But anyways. The company is piloting this in its innovative medicine business segment, which develops new treatments for oncology and other areas and is now working to expand that pilot to its med tech segment, which sells robotics and hardware like hip replacement and lenses. So the rep co-pilot, that sounds like AISDR, but not going all in on the agentic motion. I think it's more like an AI sales manager. Maybe, but I would imagine that what works well in sales rep co-pilot is, okay, I just got an email from someone we're trying to sell to.

39:52They ask these questions. Instead of needing to go back to the team and say, hey, going back to the sales manager, how would you answer this question? I guess that's the right term. Exactly, exactly. And so that's just information retrieval. It's LLMs as a knowledge engine and help with copywriting, right? Which is like what we know these things are so great at. Yeah. And then it has a little bit more on the internal chat. It says the internal chatbot ingests information about company policies and benefits to help produce the some 10 million interactions employees have every year with the services team.

40:28And so this is just like, hey, am I allowed to take this day off? I already used 14 of my vacation days. We should actually develop something like this because I'm getting sick of everyone on our team asking, like, how much creatine should I be taking? Like, is it chest day or is it back day or is it leg day? Like, you know, if we could just have a chat bot that they could ask all that stuff, it would really speak. Am I allowed to work on Saturday? I've worked, you know, 10 weekends in a row and I know it's required that I take one Saturday off every 10 weeks. Can I do I have to take it off? Do I have to take it off?

41:05I want I want I want to keep grinding. Yeah, this is essentially more interesting. in drug discovery the company is looking at whether gen ai can help researchers find the optimal moment to add a solvent to turn a liquid molecule into a solid and they're also doing stuff on the supply chain side specifically around supply chain risk which is relevant now given some of the shortages and and you know trade war stuff that's going on so anyways uh the good news is if you were working with J &J and they didn't churn, probably on the right track at least. And so I think this would be a good signal. We need more companies to like overspend and then scale back to figure out like what's actually valuable.

41:52Yeah, it's also unclear to me. Like maybe we should try and find like some sort of like consultant or someone who has worked inside these Fortune 500 companies and kind of seen what is actually working or not. We might need to have them call in like anonymously, honestly. But I'd love to know, for a representative organization that's done like 1 ,000 AI projects, how many of those are just, hey, we had our team sign up for ChatGPT Pro versus, hey, we had our team buy a trial with an enterprise, like an AI SaaS company versus we built something internally. We had our teams implement something. Because obviously a company like J &J has a massive IT team.

42:33They have a CIO who's commenting to the Wall Street Journal. So clearly they have the ability to roll out software and automation that's entirely custom to their business. And I would be interested to see what tools are they using because they probably haven't built their own AI co-pilot for coding. But are they using Windsurf? Are they using Cursor? Are they using Devon? Like what's sticking around? Yeah. It's interesting. but um well if you're looking uh for agi for watches many people have said that bezel is super intelligent exactly uh buying your next watch your bezel concierge is available to source any watch on the planet seriously any watch head over to get bezel.com download the app build a wish list and pick a great watch can't recommend them enough we can't uh we got another headline here the eu delayed punishing apple meta just before trade talks started uh they postponed an announcement that was initially planned for this week uh earlier this week so the european union recently delayed penalizing apple and meta platforms temporary they're just always always coming after our uh big tech i said earlier i will defend big technology you didn't just say that what did you say what did i say you didn't say you would defend them you said you would die for them no i said i would take a bullet okay take a bullet yeah i would probably hold out my arm yeah yeah yeah and just flex as hard as i could to try to you know yeah block it but not yeah yeah i mean i mean that is the goal of like this the the secret service like if sundar pachai was over there and i was wearing a bullet for vest i would dive in front of it for sure that's right that's right diving in front with a bulletproof vest exactly that that's the level of dedication still a lot of dedication totally but you know you're gonna get badly bruised by oh yeah that yeah but you're gonna look like a hero totally for big tech um uh anyways uh what's new eu coming after big technology but um they had initially planned to announce cease and desist orders targeting the tech giants on tuesday and it informed at least one of the companies of that timing people familiar with the matter said what are they they're like hey by the way we're going to send a cease and desist um and slap you with some fines the decision to postpone the announcement was made shortly before eu trade commissioner uh maros uh sef kovic met with u.s officials in washington on monday for his first in-person talks since president trump announced a 90-day pause on some tariffs i think this is a good call by the eu uh there's kind of bigger fish to Fry right now.

45:14And it says, in addition, this week, Italian Prime Minister, Georgia Maloney, met with Trump, who said he would have very little problem making a trade deal with the EU. Yep. Okay. So the actual cases here, what's going on? Meta and Apple, they're both under pressure from the EU for alleged breaches of the Digital Markets Act. This is a law that seeks to make it easier for small companies to compete with their big tech rivals. The commission opened investigations in March of 2024 and issued preliminary findings in both cases last summer. The cases carry a potential fine of up to 10 % of the company's global annual revenue.

45:52Though people familiar with the matter said that they expect fines would be much lower. But can you imagine that? You're vending the iPhone. You're selling iPhones in Italy or something. And because you're not in compliance with the Digital Markets Act that says, oh, you've got to have open app store competition or you've got to let this API work in this particular way so someone can build on top of Apple in a more competitive way. You violate that. They catch you. And the fine is 10 % of your global revenue, which is like hundreds of billions of dollars across these companies. It is an insane amount of money.

46:34But, of course, this would all be negotiated. And there's a lot of leverage because your consumers like these products. Regulators are basically negotiating. We saw the FTC coming after Meta saying we want 30 Bs. 30 Bs. 30 Bs. We see you spending on AI CapEx. We want a piece. We know you're good for it, Mark. We saw that cubitus on your wrist. Yeah. We saw that FP Journe. Yeah. Give us some of that when flexing goes wrong. Yeah. Everyone just goes. Yeah. Anyways, they say European officials say they won't water down their tech regulations in response to US pressure. but some lawmakers in the European Parliament have questioned whether the cases have become political.

47:13I wonder if they've become political as the EU seeks to negotiate a deal with the US on trade. The Meta and Apple cases both relate, and you covered this already. So with Meta specifically, the EU is upset that Meta has a policy of you either have to buy a subscription and pay for Facebook or Instagram, or you have to allow Meta to use data for targeted advertising. And the EU is arguing, this does not comply with the Digital Markets Act. Meta, they said, hey, here's an olive branch. Let's introduce an alternative that allows you to see less personalized ads without buying a subscription. Third option, but they say, that's still not good enough.

47:57We want you to just show random ads all the time, I guess. It's so wild because that's so harmful to small businesses. It's incredibly harmful to small businesses. It's actually okay. Like Apple, Nike, a big insurance company, a big bank, they have billions of dollars to spend on advertising. They can just basically spend money in a completely non-targeted way. And so policy like this over time will just hurt small businesses that you think you're trying to protect. Exactly. Even companies that would go on to compete with these big tech giants are going to struggle when they're like, hey, we have a million dollars to spend on advertising this year.

48:37And all we can advertise to on Google is just this random audience. And so the ads are going to be terribly inefficient. You know, just CAC will go through the roof. And we saw this with the sort of iOS tracking changes. and so anyways these types of app tracking transparency yeah all of this is just absolutely insane to me and well some people hate small businesses and they just want to hurt them it's possible that the EU regulators they just don't like small businesses yeah they want to support that was the most ironic thing about the whole ATT thing was like it just made Facebook stronger because they were the only company that could actually do machine learning based ads and non-deterministic ads.

49:25So they didn't need to track you anymore because they had enough data that they could infer that this person wants a Ridge Wallet just from what they're watching on the actual Facebook platform. And it also doesn't, even on the consumer side, I want ads that are perfectly targeted to me. I completely agree with this. Like, do not show me ads for dementia medication or like, you know, I don't know. There's a million things that I'm not in the market for and I just, it's a complete waste of time to show me. like even just products that are sold to women like yeah i don't need to see any of those um and and all of that's just like a waste of time and i actually enjoy and get value out of having ads if i'm going to see an ad it should be targeted at something it should educate me about something that i'm already in the market for considering buying and every every every once in a while an american vc will go to europe and make a joke about cookies yeah i i in the past I've made jokes about cookies.

50:19But it's still just funny how their high-level tech policy really works. You go over there, and you will spend, if you're just using the internet, I hope you enjoy cookies because you'll be accepting a lot of them. So anyways. Well, if you're traveling, you should find your happy place. Find your happy place. Book a wander with inspiring games, hotel-grade activities, success. Dreamy beds, top-tier cleaning, and 24-7 concierge service. It's a vacation home, but better, folks. And Wander's just been on an absolute tear. They have. Many people are calling it an overnight success, both in the speed at which they're crushing it, but every time you stay at a Wander, it's effectively an overnight success, right?

51:02So we have new data on Apple in China they're losing ground in the smartphone market as local rivals gain. The US tech giant dropped to fifth place with a 13.7 market share. They lost its top spot in the China smartphone market dethroned by Xiaomi as Beijing's consumption boosting subsidies helped buoy demand for cheaper products. The US tech giant's share of China's highly lucrative phone market shrank to 13.7 % during the first quarter from 15.6 a year earlier. That is a pretty big drop. Apple's been facing increasing competition in China in recent years, despite claiming the top spot in the final quarter of 2024 with a marginal lead.

51:47The iPhone maker lost out to local rivals Vivo and Huawei on annual shipments that year. And it is interesting. Have you seen any of these Chinese phones? Some of them, I mean, it feels like there's like a Cambrian explosion. Like I saw iShowSpeed was over there and looking at this, It's a tri-fold phone that basically turns into an entire tablet, but it's almost the same size as an iPhone. They're doing cool stuff over there. The tech is cool. I want a phone that's structured like a newspaper, John. I want it to basically fold up like this, and then I want to be able to unfold it like this. You're sitting in the back of a Waymo.

52:24They're getting close. That's where we're headed. I would not be surprised to see Apple drop out of the top five. even in the next year. It just does not seem like they are welcome there despite having their supply chain oriented around it. And the competitors are just iterating quickly. They have a cost advantage. And there's also a major cultural shift in China about nationalism. Let's buy Chinese-made products from Chinese brands. And government subsidies. Xiaomi's return to the top spot after nearly a decade was largely due to government subsidies. So they're just directly subsidizing. And that is resonating with just the Chinese citizens broadly.

53:11Yeah, I mean, it's funny to compare Apple's experience in Europe, where it's basically like an anti-subsidy. It's like, get out of here. Pay us 10 % of your global revenue. Accept our cookies and leave. And oh, by the way, like what has Nokia done in, I mean, it's the only broadly European phone company. And Nokia is completely out of the game. They're not really producing new phones that are competitive whatsoever. When you go to Nokia.com, by the way, one, they just, the name of the site is just Nokia Corporation, which is not super optimized. Apple just says Apple. But Nokia Corporation, and there's not a single mobile device on the homepage.

53:55yeah I think they're out of the game so it's very odd where you know China has upstart companies that are competing with Apple and they're subsidizing them and being very aggressive to push and win and then Europe is taking the opposite approach where they're like Apple still is China hasn't banned iPhones in China like you can still sell them they are subsidizing their national champions but at least the end result of that will be more technology, better homegrown competitors, right? Yeah. Versus Europe is just give us 10 % of your global revenue and yeah, we're not going to even try and compete.

54:38We're just going to try and tax you. Yeah. It's like, yeah, it's a very, very weird strategy. Well, hopefully Harry Stebbings. Yeah. Maybe someone in Europe will try and build a phone and take some market share, but it doesn't seem like it's happening. Yeah. And so very, very odd decision. But these subsidies are basically oriented towards 75 % of the country's entire smartphone user base. So no matter what kind of product Apple releases to try to hit that lower end of the market, they're going to have trouble competing. So basically, if you buy a phone in China that's under 6 ,000 yuan, the equivalent of$821.92, dollars,$821.92.

55:24Consumers, like the subsidy applies. So consumers can't use the benefit to buy products with bigger price tags like high-end iPhones. And so the whole push will push Chinese consumers to replace their phones with products that cost less than 3 ,000 yuan, a segment that makes up 75 % of the country's smartphone user base. This is also a great industrial policy or or economic policy because if you can get your entire country on phones, on smartphones, you're going to increase finding jobs, doing remote work, communication, economic activity, paying each other, like the smartphone is the backbone of the economy.

56:04And so getting everyone in the entire, even at the lower end of the lower and middle class on smartphones is just good economic policy domestically. It's like, I mean, it's kind of like what we talked about in the US where there's this push to get high-speed internet into rural communities. It was an absolute disaster. Instead, the focus should have just been, hey, let's try and subsidize potentially like smartphones that connect to Starlink satellites. Something like that would have been a much, much more like free market approach. we're getting out out capitalism in china recently we've got to step it up and uh they're good yeah and and europe needs to europe needs to step it up too anyway apple is under threat in china if they don't want to just give up on the market entirely what should they do i'm thinking what you're thinking they should buy some billboards they should get on adquick.com they should buy every bill they should buy every billboard in china uh out of home advertising meet easy and measurable Say goodbye to the headaches of out-of-home advertising.

57:05Only AdQuick combines technology, out-of-home expertise, and data to enable efficient, seamless ad buying across the globe. Thank you, AdQuick. Well, we're staying with big tech. Big tech is under attack left and right. We've big Google, Meta and Apple are under attack in Europe. Apple's under attack in China. And then Meta and Google are under attack in the US for antitrust. And we talked about this yesterday. With Adam. with Adam, which was great. Great segment. You should go listen to it if you haven't already. But the two titans of digital advertising are facing unprecedented legal threats over tactics they use to reach dominance.

57:45And it's wild because I'm sure this will get into it, but basically the FTC and the Justice Department are basically like, let's just divide everything up and you attack and we'll attack and they'll be facing an attack from both sides. So the key points, Google and Meta are facing antitrust pressure, focused on tactics they use to grow into tech giants. Google lost its second antitrust case in eight months. Moment of silence. Affecting its core ad business. Meta faces a trial with the FTC, which is seeking to force the company to part ways with Instagram and WhatsApp. So two things here. One, the case yesterday that Google lost, or is it Wednesday?

58:28Losing a track of time. Is not really its core ad business, right? This is like the sort of display network business that was impacted. And then Meta very clearly feels like they have a super strong case here because they are fighting over something that happened roughly 13 years ago. Yeah, and it all comes down to market definition. And they're trying to define the market as what? It's like Meta versus Snapchat and like WeMe or something. Yeah. What was the other? MeWe. MeWe. We've got to have the MeWe founder on. We really do. MeWe. MeWe. If you've used MeWe. Should we be on MeWe? Should we be distributing the show on MeWe?

59:06Well, it's called the Next Gen Social Network. Oh, we got to get on there then. We got to be socially networked. They've got 20 million people. That's pretty good. Yeah. Congrats. Yeah. But yeah, I mean, the FTC is trying to force Meta to sell Instagram and WhatsApp. And I mean, already those are so intertwined. I feel like Zuck had a pretty good faith offer, half a billion dollars to say like, hey, let's just make this all go away, right? And they denied it, and the FTC is pushing forward. And again, they're trying to ignore TikTok entirely. And TikTok is not necessarily an example of completely organic adoption, right?

59:49They spent billions of dollars on user acquisition. And who knows if you could start a completely independent TikTok and compete. but uh how do you think that would play out if if the ftc forces meta to part ways with instagram and whatsapp like does adam masseri become the ceo of instagram do they try and bring back kevin sistrum are they just like bringing in some mckenzie guy or some hbs search funder no i mean the thing here that's interesting is is zuck made a very concerted effort years ago remember the meta rebrand remember when they started rolling out messaging like you know sort of universal messaging across different products and all of that was in anticipation of uh this type of you know kind of conflict and so um smart move to like get ahead of it and show that like yeah these products are deeply interconnected they have a lot of overlapping users yeah and I would just be very bearish if they spun out Instagram and it went to some manager mode person.

1:01:01some manager mode CEO like maybe it could win if they bring back a founder but I would be very very skeptical of it running well as a business independently without Zuck at the helm like that's the bull case for Meta is that he keeps taking all these risks and building all these different tools and integrating them all in very aggressive ways it'd be very very odd maybe just sell it to private equity and just like try and squeeze as much cash out of it while they wind it down and do it for like an asset fire sale like fire everyone like that would be the outcome like a lot of that the ftc would really want seems like there's a common thread of of uh social network type platforms just internet platforms in general getting a manager mode operator and just being run into the ground yeah i don't know aol yahoo etc um there's there's actually interesting uh so uh zuck inferred that snapchat which he tried to buy twice the second time for six billion isn't as successful as it could have been if meta had bought the disappearing photos app and there's a uh raj vir dropped a little history lesson on the snapchat facebook tragedy of 2013 that kind of backs this idea up so evan spiegel turned down a four billion dollar acquisition offer zuck asks for a counter evan doesn't respond and moves to close a fundraiser a three billion dollar valuation zuck loses hope but makes one last ditch call.

1:02:26Evan hints at wanting$1 billion liquid post-tax. Marc Andreessen. Just pause for a second because it makes total sense. Why not? And it's also very funny. It's great. It's like, yeah, could be interested, but would need to be a liquid billionaire to even consider. Yeah. I mean, we'll go through the numbers, but achievable. Achievable with what he built. Well, he deserved it, in my opinion. Mark Andreessen tells Zuck to buy it at any price. Zuck tells his suits to come up with the cash and presents a final offer of$6 billion. So Zuck starts at$4 billion, raises it to$6 billion. Evans says offer is good, but later turns it down, wants to stay independent.

1:03:09Zuck is upset. Facebook since then, up 900%. Snapchat since then, up 123%. Both sides would have been richer if the deal happens. But at this point, if they owned Instagram, Snapchat, and WhatsApp, and Facebook, the FTC would be even more upset for sure. But here's the actual email that eventually leaked in a legal proceeding. From Mark Zuckerberg, subject, re, Sasquatch update, privileged and confidential. Well, not anymore. It's been leaked onto the internet because of the lawsuit. I delivered the offer to Evan, and he seemed to take it well. He told me that he could get it done and that he'd call me back quickly.

1:03:51Five hours later, he called me and told me he was turning down the offer. He says the offer is what he wants, but he just wants to build the company on his own. I'm disappointed and frustrated by this. I don't know what else to say to him. At this point, we should probably prepare for it to leak that we offered$6 billion for them and all the negative that will come from that. Interesting. Cool to see the actual email. Yeah. but yeah i mean the big question is like where would snapchat have gone if if if zuck had been behind it i think the the easy answer is just uh meta has been the one company that's really really been dominant in the post att era in terms of driving higher revenue from advertising based on the AI-driven ad matching, essentially.

1:04:47And so even if, first off, Snapchat probably would have grown into its own thing and not been as competitive with Instagram over time. So if he buys Snapchat, does he clone stories into Instagram or does he let stories live in Snapchat as its own thing? That might have been some of the strategy. Eventually, stories got cloned into everything. Even LinkedIn, I think, got stories for a while. Remember Twitter had stories for a little bit? Yeah. What were they called? Fleets? Fleets. Fleets, yeah. Fleets. They really didn't take off. There was a three-month period where every social app needed stories.

1:05:27And people were joking, like, now Excel has stories. And it's interesting to put these numbers into context. So Mark was telling Zach to buy it at any price. and with$6 billion eventually being turned down, Clubhouse got basically$4 billion. I believe they got a$4 billion acquisition offer despite not having anywhere near the traction or scale that Snapchat had at that point, which they turned down from Twitter, as everyone knows at this point, and ultimately got cloned. And I don't know the latest over there. What is Snapchat's market cap right now? they are still a 13 billion dollar company so i mean arguably we should have taken mark andreessen's advice and gone back and said seven eight i'm evan come on i know you want to be independent but you must have a buy it now price yeah and they've just really really struggled year to date down 30 they did have a crazy spike right at some point yeah a lot of people were longing it yeah hard in 2021.

1:06:34They were at$74 a share at their,$83 a share at their peak. They're down at$7. $7.88 now. I mean, I still think Evan Spiegel is like a fantastic entrepreneur and has a really fascinating story. And to even compete in that, it's a network effects driven business. Like it's so monopolistic at its core. It's the classic example of like a compounding monopoly advantage. and as soon as that snowball gets rolling it's really really hard to play in that space at all well it's also a company that doesn't get nearly the use that many of these other platforms do among our networks right that's true but i mean probably five years yes but that was because of zuck like if zuck had not had not gone after snapchat so aggressively uh snapchat would have kept growing and had been the app like most most millennials most anecdotally i was aging out of snapchat before you think so it was before it was cloned i think that a lot of it was like you were aging out because instagram was effectively on the defensive and and it was working it was like yeah like like you have a stronger network over at instagram and they have all the same features so why would you open that other app but i agree i went through the exact same i went through the exact same experience where I was on Snapchat for a little bit and then eventually Instagram was good enough for everything.

1:08:01And so I went back and then I never really opened Snapchat again. But well, I don't know. We'll, we'll, we'll, we'll figure it out. It is, it is fascinating that, that, you know, Snapchat was, was able to hold on to the users that they did. It wasn't, it wasn't declining in user base. It was just kind of flatlining. And that's the same thing that happened with TikTok once Zuck really moved aggressively on reels. But they are stuck in this interesting place, which again, it's a$13 billion company. Yes. So at this point, you have to ask the question of, uh, do they get bought by a foundation model company?

1:08:33Interesting. You need more distribution. If you're not like llama is aligned with meta and Instagram XAI is aligned with X and Google has, you know, YouTube and Google search for distribution. Yeah, maybe you take Anthropic and put it together with Snapchat. That'd be interesting. Dario just, no, I just wanted to work on safety. Now I have to work on viral TikToks or viral Snapchats. I don't know. It does seem like it's interesting. It's like floating out there as this pretty solid platform and distribution and they have a lot of tech and a lot of interesting ways to push content out. The other issue with Snapchat from an acquisition standpoint is even if you're a foundation model, let's say you're a massively loss-making foundation model, Snapchat is also losing.

1:09:25They lost$700 million in 2024, despite being how many years into the business. And so hard for a CEO that even wants massive distribution among a younger cohort. Still, it's hard to say, is it going to be worth it to have that be my problem now. I mean, if AI allows for better monetization and it turns Snapchat into a stronger engine, part of the reason Snapchat is not monetizing that well is because of things like ATT, app tracking transparency, harder targeting. But maybe you start inserting chatbots into the conversation and driving more personalization, better targeting better monetization through that i think the question just comes down to where is the consumer value for the anthropics the opening eyes the groks etc really going to come from and i think there's a good argument to say it will come from the sort of personal assistant capacity if snapchat is big on college campuses and with high school you know students and things like that is uh snapchat you know suddenly like you know trying to force an llm uh forcing kids to say like hey i know you're in here to talk with your friends but like why don't you use us for your homework yeah like maybe that works or maybe they're just like yeah when i'm on my computer i use chat gbt and when i want to talk to my friends i yeah it's just like i still think like the x x ai integration is actually a pretty good case study for ai in a social context where you see someone post something and you want to fact check it essentially or get more context around it and so you just click a button and so I could imagine you're watching content on Snapchat and then you click a button and you're dropped into an interface where you're discussing that with the LLM and that could be somewhat valuable so you see a viral video for you know a handbag, click on the chat bot, get more context on the handbag industry, what the different options are.

1:11:36Maybe there's a, there's an agent that helps you buy that and you check out all in Snapchat and it's becoming more of an e-commerce engine. Yeah. Not sure. Maybe. Snap's one of those companies that always, uh, and Evan, I would love to get an up, like a proper. It seems like he just loves running the company still. It seems like even though, yeah, maybe financially it wasn't the best decision not to sell like he probably could have gotten a bunch of meta stock and then 10x that 10x that i mean it is the meme exit again if he just got the six billion if he got a billion he could have gotten a billion in in meta stock he could have gotten a billion in meta stock like for sure at the six billion price based on what he owns like he could have gotten a billion in meta stock and then he and then the stock price would have actually 10x and he would have had 10 billion it's crazy um and then he just has 10 that 10x that three more times and he's trillionaire yeah so yeah honestly the math is like pretty simple yeah the math is pretty simple more people should be doing this um but uh no snap's just one of those companies i mean it we got to get the full update from evan sometime yeah yeah uh yeah i reached out to his team to try and get him on the show i i really think that it's a company that has consistently shown so much potential yeah um spectacles vr shopping yep uh you know early ai avatar yep you know uh and uh never has like quite they just haven't hit a home run on any of those yeah it is interesting they they have like enough resources because it is a 10 plus billion dollar company there's a lot of cash sloshing around so they can go and do a vr project but zuck has a hundred times more resources right because he's a trillion dollar company and so it's literally a hundred to one fight on everything you want to train a model well zuck has a hundred times more resources and And so Evan for a long time was, I mean, I think still on his LinkedIn, he puts like, I'm like the VP of ideas at Meta.

1:13:30Because his whole idea is like, he comes up with the ideas and then Meta clones them. And it's like, yeah, but when you have 100x, the money to spend, you can actually win in those markets sometimes. Anyway, you want to read this post from Ryan Peterson? yes Ryan says bull market are N for the number of business people admitting to customs fraud on LinkedIn so a lot of people are saying oh I figured out how to get around the tariffs basically it's like no that's not how it works you can't just figure out a workaround you have to pay the customs I talked to somebody that works in apparel manufacturing and they're like everybody's just working a way to figure out loopholes, a way to effectively show that their cogs are maybe lower than they actually are.

1:14:22So the tariff is not as substantial. So folks, if you are importing products to the United States, why don't you go and just talk to the Flexport team before you think you've cracked the code? Yep. They will help you out. Don't skimp on your customs bill. Don't skimp on your sales tax. Go to numeral HQ. Put your sales tax on autopilot. You would be crazy not to use numeral. Spend less than five minutes per month on sales tax compliance. Go to numeral HQ. Benchmark series A. That's my favorite line to just sprinkle in there. I love it. Well, let's move from benchmark over to Sequoia. Andrew Reed says founder to their therapist.

1:15:07Hey, look, I want this to be more of a conversation than a presentation. Please jump in with questions anytime. Classic meeting. Clearly takes a lot of pitches. Yeah. When you're pitching, I don't think you have to say that to make it a conversation. You should just actually have a conversation. But it is a little bit of an art. I mean, the right approach generally is explain very clearly what you're doing in about three to five minutes and then talk about it. Yeah. I told you about that founder I got on the phone with and he spent, I was eating lunch and I just put myself on mute and he just talked for 20 minutes straight.

1:15:50And at the end I was like, hey, like I'm not an investor. I'm not on the investing team. Yeah. Founders fund. And he just did not understand that. And I was like, I should have jumped in 15 minutes ago. But I was just eating. So I was like, okay, just keep talking. Steak doesn't eat itself. It was wild. It was very funny. So yeah, don't make that mistake. Actually make it a conversation more than a presentation. People like conversations. People hate presentations. Stick to the conversations. Long conversations, short presentations. And Aaron Harris gives a shout out to Sequoia with some best practices for VCs.

1:16:25I think everyone should probably follow this. The truth is, this isn't complicated. One, make the calls you say you will. Two, schedule the meetings you say you will on time. Three, if you ask for a data room, actually look at the data room. If you ask for customer references, do them quickly and promptly. If you want to pass, you have to tell the founder. You can't just whisper it into your pillow. If you want the deal, chase the founder. If you want the deal, don't disappear for a few days. Be extremely responsive. Yeah, if you can't do that, you're not going to be competing. This isn't just a Sequoia thing.

1:16:57I think all the best VCs follow the same playbook. And that, like, I mean, it is crazy how bad some VCs are at passing. They just cannot bring themselves to do it. And it's, like, a pretty easy part of the job. Unfortunately, we're going to – The hard part is picking the good companies. Like, the hard part should not be just saying, like, yes, I have enough conviction to say, like, I'm passing on this round. Like, go find someone else. There's a million VCs. Like, no one's going to be, like, offended forever. Every now and then you'll see some exchange where a VC passes and then the founders basically start swearing, F you, all this stuff.

1:17:33But those founders don't tend to go anywhere at all. And usually founders are going to really respect a really direct, prompt pass. Yeah, of course. Most of the big funds now are very much multi-stage and there's not a lot of value in making enemies. yeah exactly um anyway you don't have a post here from uh architectural digest oh you want to do this one okay yeah let's do it yeah let's pull it up um i just thought this was a fantastic house i wanted to look at this house because i was i was looking for specifically for the bed i want to see if the bed had an eight sleep on it i don't know if the photos just uh doxed the bed that dan romero the founder of farcaster uh sleeps on but he does have a fantastic looking house that's been profiled in Architectural Digest.

1:18:25I did a lot better last night, eight hours and 11 minutes, 100 % sleep quality. The routine's still off because I'm all over the place, but 91. How'd you do? Let's see. And you know, you were talking trash to me. You beat me. Of course. You got 100. Oh, let's go. Yeah, you were talking to me. Oh, just beat me twice. Just beat me twice. You beat me once and then I beat you twice. You beat me once and then I beat you twice. Well, I have twice as many children, right? Or young children. So it makes sense. Okay, okay, okay. You're trying to change up the rules now. I just think like - You have three kids.

1:19:00I have two. Yes, yes. But the young ones are the dangerous ones. Yeah. The young ones are the ones that kill the sleep score. Those are the wild cards. So when you have two young, young ones, that's two extra bad nights of sleep. Totally, totally. And so I think the ratio of good sleep here in between me and you, it's actually completely understandable. I need a button here that just says, Giga Excuse. Giga Excuse. Anyway. Anyways, Architectural Digest did a fantastic feature. This was a really cool story. They bought four houses and merged them all together into some mega compound in Venice. It's pretty cool.

1:19:34I didn't realize Starcaster was in LA. I used to live on this street, same street. And this house just looks absolutely phenomenal. They did an amazing job with it. Dan and his wife, who I haven't met, but she's a new one. Julia DeWall. Julia founder of Antares Nuclear very cool nuclear company very cool I think she was at SpaceX for a long time and they just did an incredible job with this and it's very cool let's hear it for a beautiful house we love to a beautiful house overnight success anyway go to 8sleep.com five year warranty 30 night risk free trial free returns free shipping they got the prod 4 ultra check it out I loved how you turned an AD home feature into an 8sleep ad that was just phenomenal that's all that matters well i have a post here from sean frank yes i believe sean frank is in the youtube chat right now just hanging out really uh he says second order effects talked about this on a call with ryan peterson today but ocean freight out of china is capital d e a d dead prices should collapse right well it is so dead ships aren't sailing they're just canceling the voyage instead of losing money on the cargo so ships are waiting around for weeks waiting to fill up driving up the cost to get on an actual departure.

1:20:51Ironically, freight costs out of China are peaking. So weird second order effects. And this, again, is just A little word play there, peaking. This just Peking, China. Yeah. This just makes it even harder if you're manufacturing products in China and needing to get them to the US. Not only are your actual, effectively, your cogs going up due to the tariffs, your transportation costs are going up as well. Back to three kids in a trench coat walking through TSA security with all your goods. That's the way you get stuff out of China these days. Fly there. Yeah. I don't have 75 iPhones on me. Don't worry about it.

1:21:32I'm all good. Yeah, trench coat with a bunch of iPhones. Yeah. I don't know. It seems rough. I have not tried to get anything out of China. Hopefully, we can manufacture all our merch in America. we did get this giant gong which we have not revealed yet i think it came from china it made it the gong would have been hit hard except there was a gift so yeah um we'll reveal it soon we'll reveal it soon there's a time and a place it's so loud it's way too loud i was dying laughing um anyways we got a post from yassin he says girl science is real manifestation manifestation is real it works what else are girls right about i'm gonna start looking into astrology, maybe I should listen more.

1:22:15Yeah, I've been, I've been long on astrology for a long time. And, but my thesis was like, you can actually get to the same conclusion via something that feels more like boy science, I guess. Which is that, so what is astrology? It's like, if you're born in this month, you have a certain personality, right? And that seems like weird, random, like, why would it be that case? Like, is it really like the moon and the stars and the certain alignment and makes who you are, doesn't really track if you're a science guy. But I always thought about it like, well, if you're born during tax season and your parents are stressed out about tax season and that's your main memory of your birthday, well, could that make you more neurotic about money?

1:23:01Like, probably. What about if you're born during Christmas and every Christmas season you're worried about warmth? Your parents are drinking mead. Yeah, or... Like there's all these difference, even just being born in the winter and spending more of your life in harsh winter conditions and having more rain, more gloomy days be imprinted on you. Could that make you a gloomier person? Like that's certainly possible, right? You might have cracked the code, John. And so I always thought that the astrology thing, it maybe isn't straight up like this moon and this sun and this star at the same time.

1:23:37But just the idea of when you're born, that affects you. Even you look at the NHL, the hockey guys. Many, many of the hockey stars are born right before hockey season starts or something like that so that they're older, so they're bigger on their young teams. And then they outperform again and again and again. and then they get reinforcement on that. And so there's probably like there's more. I remember on my high school football team, the best guy was born in July and was really old for the class and the worst guy was born in September and was really young for the class or something like that.

1:24:17It wasn't worse, but just being a year bigger, a year older is valuable. Yeah, there's a whole strategy if you really care about your children's athletic pursuits. Yeah, hold them back, right? Hold them back. And there's all those things about like, oh, yeah. I remember there's a football player in LA. This guy, I think he went to go play at Notre Dame. But he was like driving himself to peewee football games because he'd been held back so much. So he was 16 in like eighth grade. He was like a 16-year-old eighth grader. He should have been like a junior. But he was like amazing because he was older.

1:24:48And then there was all those debates about the baseball players who came from other countries. And they'd like fake their birth certificates. So it's very clear that when you're born affects how you accelerate in different trades. My parents are doing that with YC. They say, don't do YC until you're 60. Wait until you've accumulated incredible, immense knowledge in a network. Come into YC, get the check, raise$200 million in the first week, and just steamroll the class. Same thing about the Teal Fellows. Like people are always trying to, you know, kind of reinvent themselves at age like 38 and be like, oh, yeah, I dropped out of college.

1:25:31Like, let me go through a Teal Fellowship. Right. And it's all just a ruse. But it's effectively like holding yourself back. If you hold yourself back and you're like, yeah, well, I had a career, 10 years on Wall Street. then I went back to college, undergrad, and then I dropped out of undergrad for a Teal Fellowship at age 36. All of a sudden, everyone's like, wonder kid. He's amazing. This guy is incredible. He has encyclopedic knowledge of business because it feels like he's been on Wall Street for a decade. But he's a Teal Fellow? He's super young? How old is he? Oh, yeah, 24. People lie about their ages all the time.

1:26:12And this is all related to... It's all hearsay. To astrology. Anyway. Wait around it out. I think Yaxin is on to something. Anyway. Well, I'll be right back. And we have our first guest, actually two guests, coming in to the Temple of Technology. We got Daniel from Checker and Ryan from True Work coming into the studio to discuss a very cool merger that's happening, an acquisition. So checker, C-H-E-K-R, C-K-R, checker. Employee background screening for companies. Streamline your hiring with the fastest, most accurate background checks. So you probably run into these background checks, not just when you're hiring for a job, but also this was a huge thing during those marketplace boom of you want to put your house on Wander, for example, Well, they're going to want to see your ID.

1:27:13They're going to want to know who you are. Same thing with your car on Turo. They're going to want to make sure that you have, you know, they know who you are. Even Coinbase is a customer of Checkr here. And so when you go through the KYC flow of Coinbase, Checkr is the company that helps Coinbase understand the ID verification, all the document verification. Coinbase didn't have to build that in-house. Instead, Checker built it and sold that into DoorDash, Fenwick, FIFA, Harrison, Hot Topic, Instacart. Wow, they're really in everything. Domino's uses Checker. That's cool. Anyway, and the deal that was announced.

1:27:55It was announced yesterday morning. Yeah, let's break that down. Checker True Work deal. Let's see. Checker acquires True Work. It was an employment verification roll-up. I'm getting a paywall on Axios. Let's see if there's something else we can do. Big news, Ryan Sandler. He writes, TrueWork is being acquired by Checker. Together, Checker and TrueWork will achieve the vision of a truly one-stop consumer verification product. When Ethan Victor and Ryan here started TrueWork in a back alley office in the Mission in 2017, it was a dream to get to where we are today. Over the past eight years, they've grown as an incredible team to over 100 employees.

1:28:36pretty big company, raised five funding rounds, called six different offices home, operated in three cities, had two name changes, and most importantly, helped millions of consumers get approved for homes and apartments. TrueWork now services thousands of customers from the smallest family-owned businesses to eight of the 10 largest mortgage lenders in the country, including Rate, PennyMac, and Fairway. We've gotten to the scale only because we are obsessed with giving our customers the highest completion rate and accuracy in the industry. Today marks a major milestone, but the journey is just beginning.

1:29:10I'm excited to see TrueWork and Checker continue pushing boundaries of what's possible. Together, we can unlock endless opportunities from powering Checker's background checks with TrueWork employment data to expanding Checker into new verticals like mortgage and property management. It's going to be an incredible journey ahead. Well, looks like we got both of them in the studio now. let's bring them in and uh i'd like you to kick it off with a little bit of an intro get the background from them and i will be right back sounds great

1:29:41yes okay all good sorry there was a google meet link in the same invite i clicked on the google meet not the zoom that's on me sorry i messed it up how are you guys exciting week yeah great to meet and great to see you Ryan. Good to see you. It's been a long journey why don't you guys give your own kind of quick intros and then John will get back and we can go from there. Great, great Ryan. Cool yeah Ryan here founder and CEO of TrueWork and Jordy it's great to see you. You know we started TrueWork eight years ago grew it to quite a large company and excited to see the vision really continue and accelerate under Checkr.

1:30:25So I'll let Daniel show himself. Awesome. Yeah, hey guys. Yeah, Daniel here, founder and CEO of Checkr. We started 11 years ago. We invented the API for background checks and verifications. And so we've been pretty big in the employment space and verifications for employment, access to marketplaces. And I've known Ryan and the Twork team for many years as well. I was an investor in their B round and been following the journey. And we're excited to announce that our teams are going to join forces and we can continue to build the product and platform together. Amazing. When did you know when you were investing in the B, did you have any idea that your guys' journeys would really intersect at some point?

1:31:15I'm curious when that conversation or that idea even popped into your head. I mean, I love the space because I love, you know, APIs and data products and verifications. I wasn't sure if it will ever intersect at some point. You know, I thought that the challenge that they're taking was great. And then I think it's only in the last, I would say maybe in less than last year that we started thinking that that could align with our long-term data platform vision. Awesome. Talk about, I guess, your guys' opinion in the last few years. I know Checkers, more on the HR category, TrueWork, more of a fintech darling.

1:32:09But Ryan, how was it the last few years navigating all the ups and downs to get to this point? Yeah, we saw immense growth during COVID with home buying sprees. And once the interest rate went up, we definitely had to navigate a higher rate environment that meant lower volumes for mortgage lenders. We expanded into other verticals like property management. That was a little less cyclical, but we were able to keep up really strong growth despite the market that we're really proud of. And now there's a way for us to expand to even more verticals like background check. Can you talk a little bit about the different tiers of verification and kind of like the different pools of TAM that you're going after together?

1:32:55Like I run a – I started a nicotine product company, and we need to age verify. So we do background checks loosely. We do ID verification. But it's sometimes like a$30 checkout. So we need to be under$1 per verification versus if you're hiring some engineer and you need to verify them, that could be hundreds of thousands of dollars in value, essentially. Totally worth paying, I don't know,$1 ,000,$100 per verification. What are the different pools and what's most exciting? What's the biggest TAM and how do you kind of divide up the market? Yeah, yeah. So we're going after over a$50 billion TAM on different types of verifications and identity products, which started in the$14 plus billion employment market.

1:33:47Ryan and Tim, they've been going after financial underwriting, property management, which is also$12 billion plus TAM. We also are going after the risk and fraud market in TAM, which we also size at about$10 billion, specifically competing with companies like LexisNexis in financial fraud and financial risk. And then we also have a nascent consumer offering and product that's going quite well, and that's also a multi-billion dollar TAM. So, yeah, we're quite busy. And once we start to build a consumer-driven profile with verified credentials, identities, employment, work information, that can be used to sort of lots of use cases in different industries.

1:34:37Can you talk about the war between artificial intelligence here? Yeah. I saw a post recently saying, oh, the new chat GPT images, you can generate a fake receipt. You can generate a fake ID. And use that and upload that. At the same time, I'm sure you can use AI to weed some of that out. What technologies are the most interesting to you today? Yeah. So, I mean, Ryan's product and ours, we've been more on the data side, which is a little bit harder to fake by AI. I mean, AI can fake anything. It's just a question of cost of, you know, the bad actors, how much money are they going to spend to try to do fraud.

1:35:18so we're not focusing on taking pictures of driver licenses. I think that's going to become very challenging over time. We're focusing more on verified data sources from government signals like the DMV, from payroll companies and payroll records, from employee records. So we stitch together different verified data sources, also consumer-generated data. We triangulate it, we score it, we verify it. And so that's a lot of our approaches that are a little bit more resilient, I would say, to AI fraud. We also both in our products have, you know, documents based verification and processes in case, you know, there's no data available on different systems.

1:36:05And we also use AI to combat AI fraud on documents. So it's definitely a multi-pronged strategy. And AI, I think, is both an opportunity because it's going to create a lot more fraud and problems for customers. So it gives us a lot more work to do. And at the same time, it's an opportunity because we're going to use AI tools and technology to combat AI fraud. What is it like working with the DMV as a data source? When you hit the API, do they make you take a ticket and wait for the response? Or is it a little bit faster on your end? Yeah, and I'm curious about the evolution. I imagine when Ryan started TrueWork and Daniel, when you started Checkr even farther back, I imagine there was things that you had to do with humans that you maybe anticipated that you could do with AI at some point, but weren't immediately possible just given now we have products like computer use that could navigate systems that don't necessarily have APIs.

1:37:11Yeah, I mean, for us, as Daniel mentioned, similar to Checker, we try to get our data from as automated of sources as possible, directly from the payroll system, directly from your bank account, et cetera. But in some cases where you work at a mom and pop store and there's just no other way to access information, we have to get in touch with the HR department. We have to get verified data back from them. And it's a mix of automation and manual work. But there are some HR departments that just only use a fax machine. for example. They will only respond to Vax, which is crazy. And so we've had to kind of build a lot of automated flows on top of these manual processes.

1:37:48AI, LMs are definitely making that easier. You can automatically, you know, send a fax, email communication, even make a phone call to these teams in an automated way. So it's changing, but there are still a lot of these businesses that are really stuck in the legacy past. It's really funny to be using like the future of technology to like work backwards with like, I mean, that's like every SaaS company, right? Like they all build on top of these like archaic systems. Uh, uh, what's your take on eyeball scanning world coin? This is this, I was going to ask that. I imagine every time you guys see somebody walking around with a, you know, an orb scanning eyeballs, you're like, that's cool, but you can also sort of triangulate personhood, but, um, they're, they're less focused on, on the U S market, but I'm, but I'm curious how you guys think.

1:38:39Yeah. What do you think about the far future of, uh, of verification? No, I think on, on, on identity, I think we're laughing about it, but I think in, in person is going to become important when you want to want to have the best assurance, um, because online will be able to be faked so much easier and cheaper. So I think there's going to be actually more, it depends, it depends on the use case, but if you have some very, very important transaction, like getting a passport or, very important points, you still are going to need the biometrics in person. It's going to be hard to fake that. So I think we'll see more in-person use cases and probably in the identity stack, more solutions.

1:39:20The other thing that I'm bullish on is electronic driver licenses and wallets. You know, like Apple and Google are starting to have your driver license in your wallet like Apple Pay. And I think, you know, and the government, especially in Europe and other countries, they're moving to mobile driver licenses that connect to the government. And if Apple and Google are opening their SDKs and continuing to build them right, I think that's going to be a more elegant solution than scanning your, you know, picture of your driver license, for example. Yeah. How do you think about, like, I don't know, the cost curve on this technology, a lot of people are complaining about like the dead internet theory.

1:40:04All social networks will just be filled with spam and bots. Is there a world where you can get this to a scale where it's so cheap and effective that we can reliably put an end to the bot problem on the internet? Or is that just intractable because it's like a capital fight? No, I think the cost is definitely going down. I mean, just to give you an example, you know the verifications ryan and i were doing they used to cost tens of dollars because a lot of human labor yeah um with ai and automation we can now automate its end-to-ends and bring it to pennies in terms of cost many of them for example do the criminal checks we can do it at very high scale very low cost and that allows us to open new use cases like not just hiring an engineer background check but we can um you know provide safety on online dating marketplaces car car rental marketplaces, home sharing marketplaces for a fraction of the cost.

1:41:01And it's an instant product. So as you, with technology, you can lower the costs, you can make it instant, you can open your use cases. So I think we'll be able to do similar things also on risk and fraud over time. Yeah. We see this with, uh, like, like ramp often looks at like the, the B2B trend report of where companies are spending more money than ever before. Do you have data like that as well? Because I see on your website, you're in gig and marketplace, staffing, hospitality, retail, manufacturing, healthcare, technology. Do you have an idea of what industries are doing exponential growth in verification?

1:41:44I guess ours, quickly, and you had to know, we have a pretty good view of the mortgage market. Sure. Mortgage lenders, thousands of lenders of the platform. So we will see pretty early if volumes are going up or down. I think what's interesting, these other verticals like property management, like we are seeing a huge uptick in using technology here. I mean, 90 % plus of property managers were using very manual processes. Hey, give me your pay stubs, give me a tax return. And you're seeing real momentum in that space of folks bringing on AI and automation. there was this tweet a while back that we talked about uh something like you'll meet your acquirer like four years before the deal gets done something like that how'd you guys originally meet that's been true for us right ryan yeah exactly you know daniel and i got connected i believe by a mutual investor and and um you know daniel's been incredibly helpful which is obviously really close to the space and invested in our series B about four or five years ago.

1:42:46So, um, yeah. And we're both part of Y Combinator. So, you know, we are well connected with YC founders. And so Gary Tan wins no matter what. I, I, again, another, another million dollars for Gary. I love to see it. Um, that's great. It's great. And it's been great to just work with other founders. You know, I think there's, there's lots of small YC companies who, you know, some of them are going to break through some of them. it makes sense to join forces and build products together. So YC Founders, working with YC Founders has been one of the most fun thing for me to do. I think a lot of people don't often get like the inside story of like how an M &A event comes together.

1:43:25Can you give us some color on like how long the deal took? Who were the parties in the room? Was it just handshakes over dinner and steaks and Dom Perignon? Or was this in a boardroom with all the lawyers and you're screaming at each other. What happened? And then I also want to go through the post-merger integration stuff. But let's talk about the anatomy of the deal first. Yeah, we can share some story, Ryan. When did you go on that talk, Ryan? I think it's July of last year. So it's been quite the long process, about 10 months. Overnight success. That's great. And yeah, I mean, how do you build vision?

1:44:02What are the hurdles that you guys have to overcome to kind of get a deal done? I think a lot of founders are open to acquisitions, but what are the parameters that you guys were thinking about and the discussion points that led you to think that this would make a lot of sense? Yeah, I think, I mean, one thing I was really impressed by, you know, Daniel and team approached it is I think it really started a lot with the product. And is this a product that works really well? Is this something that we want to buy? and there was testing of the product and our completion rate and how it could potentially look like a part of the checker environment.

1:44:43I really appreciated that as one of the first steps. So are you both based in San Francisco? Yeah. Okay, so you just went on a walk. Where was the walk specifically? Around my office right here in Montgomery. Very cool. So the deal comes together. What does post-merger integration look like? Like I imagine that there's, you know, teams can work together. You guys can merge offices. You can go into a new office together. What are you thinking? What are the hurdles that you both want to overcome? Yeah, yeah. So it's still very fresh, right? I mean, we literally signed. It was a bit of drama getting all the signatures on Wednesday evening, like less than two days ago.

1:45:24Like at 2 a.m. The last few days were a lot of lawyer calls, like more than my entire life. Like I have enough lawyer calls. I don't want to do more like but on like small details that are not very important like we're both sides we're like let's let's get it done guys you know it's fine it's just like legalese yeah um so it just got signed and then we just announced it yesterday externally and to our employees and everything so it's still very early yeah um we've done six different acquisitions bigger and smaller over the years so kind of trying to learn how to get better at it and And a lot of acquirers mess up the acquisition, as you know, right?

1:46:02Like a lot of companies, it's a failure, mostly because of the acquirer just not doing the best to welcome the team and to continue the growth and the business. So our top priority is to continue what's working at TrueWork. A lot of things are working. We want to accelerate their growth and give them more support. We don't want to suffocate them in a bigger company. So I think that's been early alignment with Ryan and Ethan and Victor and the team. And so also the rationale for the acquisition is both we tested their product and their employment verifications are 10x better than what we have. So their product is going to make our product much better for all of the customers.

1:46:43And we're excited to expand into the financial underwriting space. Sure. So double rationale. Yeah, it's cool to think about. I can imagine you guys are in a much better place to do this extensive diligence because you have such as similar and potentially overlapping businesses over time than even somebody that'd be writing a nine-figure check on the VC side just because who's going to be able to get into the weeds more and really understand the product. So it's a huge vote of confidence in the platform. Yeah. I remember hearing a story from a lawyer about like getting a signature from a VC who was literally, this is not a joke, literally on the ski slopes.

1:47:26And they had to fly someone out with the paperwork to get them to sign at the top of the hill because they were on vacation. They're like, you have to sign this day. This is super important. So I'm sure there's a lot of drama. And I'm sure there's going to be a massive legal bill for you, but good luck. I think it's going to work out. Obviously, it's a lot easier when the companies are growing, right? Because this doesn't become about like, oh, let's chop it up and really cut costs. It's like, hey, we're all growing together. This just will accelerate things. You're both private companies. Is there like an FTC approval process for a deal like this?

1:48:01Or is that just something that doesn't even come into play at this level? Is Lena Khan punching the air, watching two companies merge, even though both of you guys seem pretty happy about this? Yeah. I think this one was below the threshold. We've had it for previous bigger acquisitions. Sure. Yeah. Is there any like regulatory process? How do you even think about that as a startup? I mean, we've all heard the story about like, you know, the big ones like the Figma, Adobe, back and forth. You know, they're still litigating Instagram and Meta right now. what advice would you give to founders as they're growing to think about acquisition and merger and acquisition strategies broadly in the regime as it's evolved over the last few years?

1:48:50Yeah, I mean, I think M &A, and I was talking to the M &A bankers last year and this year and the trends. M &A with the big, big, big four tech companies like Amazon, Google, everything, it's been very difficult, especially in the last regime. lots of deals canceled and everything. I don't know for right or for wrong. I think it is important. We are startup guys. We root for new startups to succeed. I think that's what we like to do. But I think the opportunities are for small and medium startups to join forces and do M &A. I think it's a good M &A market right now. The roads to IPO is longer than ever.

1:49:30The bar is higher than ever. I mean, the IPO window just got shut again. And even before that, you know, experts and friends and people are saying like, hey, even$500 million in revenue, it's not strong enough these days. You want a billion plus in revenue, super strong growth, super strong profitability, super diversified business, very high bar. There's very few companies to get to that level. And so even for us, you know, I think the opportunity is like we have a big vision. We work in the data and identity space. what other startups can kind of join the adventure and we all work together to be a bigger, stronger company and qualify over time.

1:50:09Awesome. Yeah, Ev Randall was talking about how he pulled up a screen of SaaS companies with over$500 million in revenue that are public and there's hundreds of them now. And so just as a public markets investor, or like you can kind of satiate your demand for SaaS companies in like almost any vertical. And so the bar has never been higher. I mean, you mentioned that like the M &A markets are heating up. Is that, are you looking backwards towards a year ago when this process started? Or is this what you're feeling even this week? Because obviously there's been some market turmoil. Do you think that the mood in Silicon Valley, the mood in San Francisco has shifted at all around M &A?

1:50:55Because obviously Wall Street reacts much faster with like the IPO window is closed like as of a week ago. Oh, it might be open again. It might be open again. Who knows? It changes so fast. But I feel like in Silicon Valley, the M &A market moves much more slowly as VC funds scale up and scale down. Obviously, there's still growth funds that are getting bigger than ever. What are you seeing in terms of M &A over the last year? And do you think there's going to be a shift this year? Yeah, I mean, I think it's from the seller side, there's going to continue to be a lot of appetite because, again, the valuations were so high in 2021.

1:51:31Sure. It's really hard to catch up, especially when you're like raising at 100 times revenue, multiple things like that. Yep. If the scale is not there, profitability is not there, companies might really struggle to fundraise more. So I think we're going to continue to see companies interested in joining forces and demand on the seller side. that started over a year ago and it's continuing today. I think on the buyer side, I have seen some anxiety in the last few weeks from investors. You know, should we really do M &A or not? You know, it's scary out there. There's anxiety. And so, you know, it's always a big investment.

1:52:07So, you know, people don't want to invest or take risk when things are scary out there. But from our perspective, I'm fortunate. We have a strong financial position, strong long-term investors. And, you know, we continue to win for it. We did that M &A because it's the right thing to do in the long term. So we're really playing the long term game here. Yeah. Love it. Last question I have, Ryan. Is there one investor, maybe besides Daniel, that comes to mind as the most helpful? Somebody that stands out on the eight year journey that you would highlight? Yeah. I mean, it's hard to single out just one.

1:52:45We were lucky to have many really, really great, helpful investors. I mean, all three investors on our board, Alfred Lynn from Sequoia, Keith or Boy from Kostla. Really stacked. Yeah, stacked board. Who is the last one? And Steve Saraceno from Activant. Yeah. Cool. Awesome. Yeah. So they're stacked, incredibly helpful, incredibly supportive from the beginning till now. I really couldn't have asked for a better board. We got really lucky. But gun to your head, Keith or Alfred. Just kidding. No, I do want to know, like maybe last question for Daniel. there's been this back and forth meme about chat GPT rappers, GPT rappers, just we're the AI Salesforce.

1:53:27Maybe we're the AI checker. There's a lot of those companies. Some of them, they felt like they were overvalued and then some of them ramped up revenue really nicely, but they still feel like I wouldn't want to be building one of those companies when there's a active venture-backed company in founder mode building in the same category because I think that they're going to figure out how to wrap if they need to wrap. But what are you thinking about in the early, early stage of AI-empowered disruption? How important is it to do a greenfield project, build something? We're seeing that Windsurf is getting acquired.

1:54:04And I think a lot of people were saying, oh, that's just a chat GPT wrapper. OpenAI is just going to build that. Well, maybe they will buy it. And so what are you thinking about the latest crop of AI-driven startups? Yeah. I mean, I think we are the AI checker in founder mode. So good luck if you want to come in our space. No, but I think AI is just the latest software, right? Like you used to say, we're like the SaaS company to do CRM. We're a cloud company to do CRM. Now we're an AI company to do CRM. I think in B2B, and we're in B2B, it's like what B2B problem are you tackling? Are you tackling sales?

1:54:44Are you tackling underwriting? or tackling HR. And AI is just a way to build modern products. If you think about it this way, it applies to every category, every business. And it's not enough to just be the AI rapper. You have to come in and say, why is AI going to be a differentiator to replace all of the other players? And if you have a strong story on that and the other players are not doing and leveraging what you're doing, I think there's a chance. It's highly disruptive. Building AI products is not the same as building the products we've been building as product and edge people in the last 20 years.

1:55:17The paradigm, the UI, the experience is different. The stack is different. So either there's going to be opportunity because bigger companies are not going to change fast enough. But I'm racing in my company to transform everyone, to be like, hey, guys, we've got to relearn everything from sign-up flow to monetization to buttons and dashboards. We have to rebuild products first. It's different. Have you thought at all? We always say last question, and then there ends up being more questions. But we have one minute left. Have you thought about a world, maybe you've done this already, but integrating with something like a ChatGPT, where if somebody's using ChatGPT at work, and they can say, hey, I have a new hire coming on board, would there ever be a world in the future where you would actually integrate into the agent layer, if you're looking at something like a ChatGPT as an agent or is that not even the right kind of workflow no that that's futuristic but uh it could be it could be you know i think if you look at uh who is it like klarna who's not even using workday and salesforce anymore and just like directly agent to the workflow yeah you could skip some of the traditional recruiting and hiring process and go straight into the agents uh yeah could happen awesome interesting well thanks so much for stopping by congratulations guys very Congratulations.

1:56:41Excited to follow along. Excited to watch you guys dominate together. Seems like it was fate. And yeah, congrats to the whole TrueWork team on the eight-year run, too, and the continued success. Thanks, guys. Thanks a lot. Thanks, guys. Thanks, Ryan. Bye. Really rubbing it in Lena Khan's face. She hates a merger, doesn't she? She hates a merger. No, I'm sure she's fine with this one. Little tech. Little tech building up resources. Future big tech. Future big tech, but little tech right now. Gary Tan at the helm. Yep. One hand washing the other on this one. Well, we are going to be talking about - David Sinner is coming on the show.

1:57:21Big technology. Big Dell. Big Dell. The history of Michael Dell, The history of Dell. Technologies. He asked to pull up a post. Yes. So I will. Most historic runs for a founder. Dell. Are you looking at the revenue over time? Yeah. Is that the one? Oh, man. 1984,$6 million. This is the first 16 years. 1985,$33 million. 1986,$67 million. 1987,$159. 1988,$258. 1989,$388. goes all the way up to 25 billion by 1999 uh and let's bring sendra in um what a run how you doing david what's up brothers what's up you're looking great today i like the suit of course i i i text you last time i came on with a hoodie and it was completely unacceptable so it'll never happen again much better in a suit you look fantastic everybody does before we jump into dell which is a crazy story um can we talk about the fact that larry ellison has now started following uh tpbn say hello larry hi how you doing good to have you and what what i and what you guys called him do you remember the nickname you gave him the big technology father was that

1:58:44he's not he's not a tech bro he's a tech father yeah yeah but i think i texted you guys and then what i love is how fast like you are with it you're like the original technology father like immediately basically created the database basically the mainframe yeah i mean what a fantastic yeah fantastic what what an incredible book the which you covered uh what is it the difference between God and Larry Ellison is that so so there's actually it's funny um because he I think he's gonna be I just did Michael Dell I'm working on the founder of Sony Akio Morita sure uh and I think I'm doing Larry Ellison again I've done three on Ellison but it's been like four or five years so there's three books about him the best one is probably software yep um because he got the footnotes yeah this is so such a funny story tell this please so to get to agree to cooperate with the author he's like you can write whatever you want but i must be able to answer on the same page and like have my like counter argument and so the bottom it's like le writes his initials and you i could almost do an entire episode like i mean you might want to just read the whole book and just read le writes just it's just it's hilarious but um more books like that should exist somebody should go do that for you know all the major tech people today uh with that style because on the one hand, it's like, it's not what journalism is about.

2:00:07Like you're, it's not, it's not, it's not going to drive the same narrative. It's not objective because he's like putting his footnotes everywhere, but it's just an awesome format. I think more people should do that. Yeah. We go back and forth. Like, actually, no, I disagree with it. I was there. It, this is what I think happens. And then there's an even better, uh, so I think I'm going to do software, uh, you know, cause I think the founding story of Oracle's told best in that book. There's a book called uh there's a book written about him called the billionaire and the mechanic and i think when i did that episode i was like yeah it's technically about larry ellison but it's about extreme winners and i think that's when i realized like oh uh larry ellison has probably like more in common in terms of his competitive drive with like michael jordan than he does with like most other like founders and i said something like uh you know if uh michael jordan sold enterprise software v larry ellison like they're just ruthlessly competitive and the there's a fantastic scene in the billionaire and the mechanic because larry elson was best friends with steve jobs and they'd go on long walks and so i'm pretty sure the book opens or maybe open the episode with it with them debating who the greatest person in history was and and jobs went more like gandhi like peaceful and i'm pretty sure if i remember correctly ellison went like conquer like napoleon or something like that it's like all right here's your two personalities you know basically explained in this conversation you guys are having.

2:01:30I hope you can uncover what Allison's longevity regimen is at some point. I know it won't be the focus, but to live such an intense, high-stress lifestyle... You'd take a toll on him, but it seemed like it hasn't at all. This is actually interesting because I feel like every time we come on there, we talk about founder mode. One thing that was striking that missing from that essay is the fact like you know like it's like well there's a manager runs a company one way and a founder runs a company in one way it's like no like the founder runs it based on the personality who they are and so i i was having private conversations about this and it was like well take take two competitors larry ellison and bill gates it's like bill gates was a grinder larry ellison by his own admission is a sprinter he'll work excessively hard for like three weeks and then he'll disappear on his boat with some italian model for a few weeks and he comes back he literally says that during covid during covid he sent an email like everyone in oracle just saying like i'm on the island i'm on he's like yeah we're all gonna work remotely it's like yeah but you're working for an island that you own he only owns 96 of it but but the point the important part was like he was like that it's not really his island yeah decades ago he was like that decades ago it wasn't just now it's like an 80 year old man so like you know he there's there's a lot of different personality types um where bill gates was just like ripping his you know there's this great story that Michael Moritz tells when he, before he was a VC, he was a phenomenal writer, still is a phenomenal writer.

2:03:00I just finished reading his down, his hidden book on down Valentine, which is remarkable. But Moritz tells a story, I think it's Stanford. You can see this on YouTube where he's like, oh, you want to know what focus is? Like, I'll tell you a story about focus. Like I'm riding with Bill Gates probably in the early eighties. And he's like, oh, somebody broke into your car and stole your radio. And Bill Gates said, what are you talking about? He's like, no, I took that out. He said, why'd you have it taken out? He's like, well, it takes me eight minutes to drive from my house to Microsoft. And it takes me 11 minutes to drive from Microsoft to the airport.

2:03:30And he does the math. He's like, so if I had a radio, that means I wouldn't be thinking about Microsoft for those eight minutes or for those 11 minutes. And then I go to work every day. So that's like 40 minutes, whatever the time frame is. It's like insane focus, insane level of grinding. That was not – Allison, by his own ambition, that was not him. He worked a lot, but not like that. Well, the Founders podcast didn't exist back then. No. You might have kept the radio in there and just been hearing you over the airwaves. So I talk about this. We were talking in our group chat that I'm probably going to do an episode on Genghis Khan.

2:04:06And I said there's a fantastic book on Bill Gates, which everybody should read. It's really hard to find. It's a biography of the first 35 years of his life. It's called Hard Drive, Bill Gates and the Making of the Microsoft Empire. I've done two episodes on it. and in that episode i said a line that now like years later still gets spit back to me like every week and they're like uh you realize the similarities between like jengiz khan and bill gates i was like oh uh bill gates is like jengiz khan in a mr rogers costume like he's like dressed like mr rogers but he's unbelievably like ruthlessly competitive would yell like when he lost the contract when young bill gates lost the contract let's say you know uh you lost us a fifty thousand dollar contract he's like you didn't lose this fifty thousand dollar contract It was a$100 ,000 contract because we lost to$50 ,000 and our competitor got to$50 ,000.

2:04:50There's this great – I can't remember which one of his competitors was, but there's a great story that one of his competitors tells that Bill Gates wipes the floor with and knocks the guy out of business where he sees Bill Gates sitting in the corner at a conference one day. And he's sitting in like a foldable chair and he's looking at something in his hand. He's like just really focused, kind of shut out the world, shut everything around him out except what he's looking at. and so he walked the competitor walks over to bill to like say hi to him and talk to him and what he realizes is that bill is looking at a picture of his face

2:05:24it's like if i come to the tp van studio and like i walk in and there's pictures of other podcasters face that you guys are looking at i think we actually have a picture of you up godfather of podcasting yeah but that framed photo around here yeah that's that's a that's a positive thing. I know, I know some other people that you would have like fucking bullseyes on. Um, uh, well, yeah, just super competitive. What do you think about the, uh, the post-economic adventuring of the greatest founders? Uh, what I'm talking about is like, you know, uh, there's a very, I mean, a lot of the, there's like a lot of commonalities between what the founders do when they build their companies and how methodical they are about that but once they're super rich and they're thinking about their legacy some of them start hospitals some of them uh get involved in politics larry ellison is really into sailing i guess nathan merveld at microsoft he owns more t-rexes than anyone in the world he owns the t-rex skeletons and he's my son would love that massive yeah yeah so he he actually put all of his money to go and find new T-Rex skeletons.

2:06:37And I need to bring them back. We need a Jurassic World. I saw a deck for a dinosaur fund. Yeah, yeah, yeah. And William Randolph Hearst obviously built this unmanageable castle that became a museum. I'm kind of beating this drum about we need our elites to go and do even crazier things, just like build the world's tallest building, build the world's biggest house, build a castle, build a library, build a museum. And I'm not seeing it enough. But what do you think about that? What interesting kind of like side projects have you seen from the greatest founders in history? It's interesting. Like what would be the most interesting one that's done?

2:07:14Honestly, I prefer them to do like what Steve Jobs did. You know, if Steve was alive today, he'd be what, 70? So still young. The idea that he wouldn't be still working all the time on Apple to me is just unfathomable. Like I think like he I'm all for charity and all that other kind of stuff. But like, you know, every biography is kind of written like that, where it's like, you know, focuses on the early life. and then the rise, and then gets really boring once they're super rich. That's not relatable to other people. It's like, yeah, I donated a wing to the hospital named after my mother or something like that.

2:07:46I'd prefer them to not have side quests. I'd prefer them to work on what they're working on until they're dead. You want Bezos to go back into Amazon now that Lena Khan's out and the heat's off, cool it with the Blue Origin, cool it with the 70 girls group chat to space. No, that's actually a great example. If you're going to have a side quest, like the Blue Origin, then build another company. Make it a company. But Laisers also has that clock, the Long Now Foundation. Have you heard about the clock? Yeah, of course. Of course. Even Ellison did this. He took his island and turned it into a sensei.

2:08:19Four Seasons. Which is this amazing hotel. David might say it's not a mon. But Larry, when you hear this, I love sensei. I think your properties are phenomenal. Yeah, they're fantastic. I'm sure they're excellent. I would expect nothing else. It's also interesting lore. So Larry has six homes on PCH. He's invested heavily in Malibu. Oh, more than that. Well, no, he's got like dozens of properties in Malibu. Okay. And I think there's six that are just in a row on PCH. And I think the fires got to two of them. And at some point, the firemen decided to make like a last stand. and were basically like, the fire's not going past this point.

2:09:02And so a couple of them went down, I heard, in the January fires, but four still standing. And I'm sure he's doing a ton to kind of help with the recovery effort broadly in Malibu. No, I think this is a perfect segue into what I actually want to talk to you guys about, which is Michael Dell. It's like he's 18. He starts Dell when he's 18, 19 years old. He's 60 now, right? um i talked you had uh zach dell his son his uh co-founder on last week we did for for base power i talked to i talked to our yeah i talked to zach uh for a while before i did the episode and you know he's like the idea that my dad is ever going to stop is just never gonna happen he's just like he had so many opportunities like he didn't when he took the company private when he came back public he didn't have to be the ceo it's like he was he's just obsessed with it like you go to his house like he will he's working on his computer he wants to talk to you about the the company like he's completely uh in love with what he's doing and that's probably the the highest and best use of his time as opposed to like another side quest um yeah so i do like i the response for this episode has been really really nutty um in in terms of like everybody knows they've heard dell right they know who he is they've heard his company but the feedback i'm getting is like they didn't understand his life story and just how i think i just tweeted out like i study uncommon people uncommon life stories for a living and michael dell is uncommon amongst uncommon people i'm almost 400 episodes in i can't think of another single comparable founder story to his in the sense that like this guy was a money-making machine since he was like 13 you guys i just heard if uh i don't know if you guys put it up on the screen i heard you talking about it that that tweet that he has where he starts with you know six million dollars the first year break down doing how did he manage i haven't i've been so uh focused on tbpn this week i haven't been able to listen to the episode yet i'm going to get to it this weekend but how do you go from zero to netting six million uh or or grossing six million in the first year like what does that even look like it's even crazier than that where like he started the company with a thousand dollars no co-founder no vcs okay so like this is what i mean like uh i i i've been getting a bunch of text messages and one of them was like i don't think there's another like fucking startup story like this ever i forgot what the text said it's definitely an f word in there and i posted it too um because i i just can't think of another like that successful that fast with so limited means and he's his head competitor was compact which was he's in austin he launches dell in his in his uh dorm room austin's our uh dell uh compact is in houston they raised i think 25 million initially so i think 25 million at the beginning and then in the first early years of dell they'd already raised like 100 million in capital and he smokes them um they wind up getting bought and then you know dell still is thriving and compact no longer exists but one of the things that um is obvious in the story is like he a lot of these outside success is obviously like you have you have to be the right person with the right set of skills at the right time and you know in 84 the personal computer is the first time the first very popular personal computer computer appliance is what steve jobs called it was the apple 2 that's the first computer that i think uh dell was 14 years old when he buys and there's a crazy stories about how big of a hustler he is and the businesses he was making he was making more in high school than his teacher was like just a money-making machine from day one and he buys an apple ii with his own money right you'll love him coogan because he buys a porsche he buys a bmw and then a porsche he gets arrested when he's like 19 for going like 92 and like a 55 and a red 911

2:12:53you'll love him because he was speeding long. I defended Marques Brownlee for speeding. Yeah, yeah. I think it's fine. So he's obsessed with beautiful cars and going very, very fast. But to answer your question, it's like a lot of this is because the market was pulling out. So a long time ago, I think it's episode 50. Have you guys ever read Mark Andreessen's blog archive? Most of it, I think. Yeah. Do you remember? This is a long time ago. So a lot of young founders don't even know this. He was like a prolific blogger before he started A16Z. P Marka, that's like the blog name. Exactly. And I think you go to A16's website now and you can pull the archive.

2:13:35And it's absolutely incredible. And one of the most important things that Mark says in that was very fascinating because he's like, well, you know, a lot of people debate. What is the biggest predictor of startup success? Is it like the product? Is it the actual people, the founders, the team? Or is it market? And he's like, if I had to pick one, my thing would be on the market. And he's like, in a great market with a lot of real customers, the market has to be satisfied. The market will pull product out of the company and the market will be satisfied by the first viable competitor that comes along.

2:14:10And so Dell kind of before he goes all in on it, he travels to England. He's making a ton of money essentially just buying IBM PCs, souping them up and then selling them to rich architects, dentists, doctors and stuff like that. Right. That's how it starts. of the brabus of pc market of ibm pcs the amg yeah yeah uh so and so then he goes to england and he's like wait a minute i thought like all this like there was just like computer fever in texas he goes to england and he's like i'm in these stores that the product sucks uh the sales people don't know anything and yet they can't keep the inventory in stock and that's when he realizes like oh i need to go all in on this he winds up dropping out at 19 telling his parents hey you know if this doesn't work out i'll go back to school he never goes back to school and you see the running goes on technical at this time or was he just a hustler or was no he was no no he was like a computer nerd but i think he was much more like in in the sense of like a hardware he liked his favorite thing to do is to take apart computers so let me give you example another crazy stat that people don't understand he starts a company in 84 88 they go public okay uh by the time he's 26 he's in the fortune 500 26 years old like what i'm telling you right now when you listen to this episode you're going to be like holy shit there's not another story like this so his favorite thing to do um he recruits this older guy because we can talk about the fact that they they he made a lot of money because you know people give him money they were paying on credit cards back then so the customer pays today and then i go buy the parts right um and then eventually he starts selling to governments and businesses and schools and everything else so he needs to get credit and so this where he's like my bank will give me credit i need to extend credit to governments and everything else cannot pay my credit cards so he winds up partnering with this guy named lee walker who is like a 45 year old very successful venture capitalist entrepreneur in in austin and he was really played a really important role in the first like four years of dell um but one of the most uh fascinating things is that uh what What Dell then does, they – how would I – like let me back up real quick.

2:16:20Lee Walker is the one that has the relationships with the bank to get the credit that Dell needs to start selling to all of these – like to issue the credit. Like they're selling to like the US government and Monsanto and all these different companies. He's also the one that helps Dell go public. So Goldman Sachs recommends they choose Goldman Sachs to take Dell public. They say, hey, let's do a private placement first. This is going to answer your question, Jordy. So the private placement, there's like a couple hundred private placements that are in the works on Black Friday, which is the stock market crash in 1987, which we talked about last time I was on here with Sam Walton.

2:17:01Lee Walker goes in and is telling a young Michael Dell, we're screwed. like they're going to cancel our private placement they the stock market drops in 23 i think it's 23 in a single day and he goes in to to dell's office and he finds dell to tell him this bad news and what's dell doing dell's like i was taking apart the the computers of my competitors to see how we can improve so i don't know if he was technical from a software perspective but more hardware perspective he was he understood how they worked he liked putting them together he like kicking apart, putting together, making them go faster and perform better.

2:17:35Yeah. The concept of a computer nerd almost like died off, right? In some ways, but it was just way more of a thing. And then it became like, well, if I'm really into computers and I'm just going to make software. He talks about now they're way too complicated. You used to be able to take away the first Apple to the IBM 5150, which I think is the first one he gets. You could take it apart and actually understand what every single component was doing. Now it's impossible to do that. Yeah. Can you compare Dell to Jobs? Similar revenue ramp at Apple, actually, although a little bit slower in the first year.

2:18:15I think Apple made under a million dollars the first year, but that was 1997. By 1984, Apple was doing over a billion dollars in revenue. So Dell comes in with$6 million, the market's a little bit more established. And then if you look at what Dell's done today, they're selling servers for businesses. That's about$40 billion revenue. And then laptops for often computers, personal computers, but for business workers, another$40 billion or something in revenue. He seems much less focused on product design, brand, all the different things that Steve Jobs is known for. um is yeah for sure so private equity financial mastermind is that what makes him special no he's definitely he's this is the weird thing too where again not really comparable to any other people he was upset he was a computer nerd like he'd get in trouble in high school because he'd just sit in the back of class and read like bite magazine and like was just stuff with computers but his parents were successful in business and so every single conversation they'd have when he was a kid like this dude was reading fortune and force magazine at 12 years old and then we didn't even get to the point where like he does he takes dell private by the time they they go off on this crazy run by the time uh they start hitting a lot of headwinds like 2005 by the time it gets 2012 2013 they're real big trouble and so he takes this huge risk of doing the lever the the the uh the biggest technology leverage buyout in history with silver lake partners so they take dell private in 2013 okay the story gets even crazier so he understands he was actually preparing for the age of ai like 10 years ago and so jensen i talked about this in the um in the episode where i found an interview with jensen wong and michael dell and jensen's like well there's only one company in the world that can actually build these data centers at scale and give do every single thing from the storage to compute everything else and that's a dell and that's why they're such an important partner to us and dell was like moving into storage and servers and stuff a long time ago, way before AI, like the proliferation of AI, I should say.

2:20:21And the most interesting is like, so he does the largest technology, they buy out Dell, they take a private of$24.4 billion, if I'm remembering correctly, okay? Two years later, while he's still a private company, he does the largest technology acquisition ever. The MC, right? And I was at dinner tonight, and we were with our wives, and I had to apologize. I was like, listen, I don't mean to be vulgar, but I have no other way to say this. It's like Dell's got balls the size of watermelons. Like the guy is a private company. He buys EMC VMware, right? $67 billion with like$4 billion of equity. So it's like, there was like a special dividend or something like that, but they wind up borrowing like$50 billion.

2:21:06He's like, Hey, I'm going to take this risk. I'm going to go$50 billion into debt to buy this company. There's a great story I talk about on the podcast. It's emc is i think a boston company uh the board of directors a little older a little different and so dell's coming there saying he's pitching this as a you know merger not an acquisition but you know it's more of an acquisition i would say but merger acquisition whatever you want to call it and uh he brings jamie diamond with him right and there's a great story in the book where the boards he's talking about what his vision for emc what he wants to do and everything else and then they're like okay and they lean forward this old guy on the board he's like but michael we're talking about a lot of money here.

2:21:43Do you have the money? And Michael is about to answer. And Dale goes, or Jamie Dimon goes, they have the money. It's like the guy running the most valuable bank in the world is telling him he has the money. We got the money. We will get you the money. So yeah. And then what happens? He buys that for$67 billion. They spin out VMware. This will go back to your question. He's obviously technology, but he's also really gifted at business. He He buys EMC VMware for$67 billion. I think in 2022, they spin out and they sell VMware by itself for$61 billion. That's insane. Wow. That's insane. And then EMC, I forgot the dividends.

2:22:23It's in the book. They were making like$6 or$7 billion a year in cash flow anyways every single year. So it's one of the most successful acquisitions of all time as well. And the foundation for building all the AI and everything they're doing now. um again i just i've never i'm almost eight years nine years into this project 400 biographies written i just cannot think of another comparable to dell um now if you want me to contrast him with jobs yeah jobs was much more interested in you know the the there's a great uh there's a great clip that just went viral on twitter the other day where it's like steve jobs back in 97 sitting there with tim well i think you want to mute good share yeah and his whole thing was like no no i I'm not worried about market share.

2:23:06I'm worried about building products that I could be proud of. So yeah, completely different. Much less acquisitive. I mean, Apple's never really done that opportunistic acquisition thing generally. And it seems like it's still in the DNA of the company now. They buy some IP. They buy some foundational technologies. But they're not just going to go buy a VR headset. They're going to build their own. And then if you look, I've been told by people that know way more about finance than I do that Dell's family office is the most financially successful family office in history. He's actually built it into a firm and some of the things they've done around that.

2:23:35So it's like every single thing this guy does, he's just an extreme winner. And then he just owned, I think when they went public, he owned like 73 % of Dell the first time. When they went private and they went public again, he wind up owning like something like 45 % personally. So huge ownership. And then I think he personally profited from a friend of ours that I can't mention who that knows a lot about finance told me this. Where it's like you have to also look that when he sold VMware to Broadcom, he took a shit ton in stock. and if you look at the acquisition date and Broadcom stock, it's up like 3x.

2:24:07So Broadcom buys VMware for$61 billion and then the stock is up like 3x from that since then. And a lot of that was his own personal money from what I understand. So it's just like the guy just can't help but win. It's crazy. What's the backstory on his broadcasting company? Did you follow that at all? He started OTA Broadcasting in 2011, which seems like maybe kind of a... No, so the book has actually a weird structure. So I read his first kind of autobiography. It's called Direct from Dell. It's published in 1999. Then he publishes during COVID, Play Nice But Win. So Play Nice But Win is the one I wanted to focus on because I think it's actually like any – he like reads the audiobook.

2:24:46It has a very interesting structure because the first chapter is him fighting with Carl Icahn. He's trying to steal his company from him. It's about to take private at Dell. Then every chapter alternates, right, between the fight to take his company private to the startup of Dell. It's a very interesting structure for an autobiography. And then the next chapter will go back to the fight. And then the next chapter after that will go, okay, now we're in 84. We're now in 87. It weirdly stops in like I think maybe 99 or 2001. He talks about the troubles they were having in 2005, 2007, 2011, the first chapter of the book.

2:25:23But no, I don't even think that's in the book, if I remember correctly. Yeah, that makes sense. It's crazy to see where Dell, imagining if he was still running the company today, it trades at two-thirds of their, like the value today, the market cap is like two-thirds of their revenue last year. Wow. Which is just, you know. $60 billion company. What was it like? $100 billion in revenue. Yeah, what was it last year, though? uh well they did like 95 billion dollars of revenue last year yeah yeah but it was over 100 yeah 100 billion right what was it uh or two years ago yeah yeah it was it was the stock was at 118 stocks at 84 today down 30 over the last year so yeah they were around 100 billion uh uh last year um and it's pretty it's pretty fascinating comping them to apple like they Dell was significantly bigger than Apple for like a decade.

2:26:23Like 1999, Dell's doing$25 billion in revenue. Apple's doing$7 billion. 1998, Dell's doing$55 billion in revenue. Apple's doing$6 billion in revenue. Apple also went through like this really rough period of transition in the late 90s, early 2000s before having the breakout success that they've had now. And now they're up in like that$300 billion revenue. and of course traded a much higher multiple. They also invented the most successful consumer product of all time. And then they also built a very, very high margin services business around that. And that's something Dell has never been able to do, build like this high margin locked in monopoly on top of the technology in the software.

2:27:07I remember in the early days of making the podcast, just how disorienting like the success, the outside success of the iPhone was because I think it's one of the first episodes I did on Steve Jobs and I've done like 10 or 15 or something. And they made the point that like Apple makes more from the iPhone if they just had the iPhone and nothing else than like Disney does from every single thing they've ever, like everything, all their theme parks, all their movies, everything else. It's like that one single product. Yeah, so I mean Larry Ellison is 80. Dell is 60. He's got another 20 years in him.

2:27:44No, no, there's not. he's not he's gonna be enough step him down or anything so uh i mean larry ellison is in the conversation to buy tiktok now uh you think dell's got like a second third fourth fifth act coming up i got a great i got yes i got a great text message uh somebody yeah uh they said dude when you said he's only 60 i had to google it real quick because he's so young there's going to be another edition of the book for sure he has another era of domination coming for sure uh yeah I think there's going to be for sure. Like I, okay. So we've talked about this last time I was on here where it's like, Oh, people say, if you love what you do, like you'll do it for free.

2:28:23And I was like, no, there's actually another step to that. It's like, if you love what you do, people couldn't pay you to, no, people couldn't pay you to stop. Yeah. Yeah. He Dell takes it another level in the book where during 2012, uh, when he's fighting to take the company private, they're like, why are you doing this? Like, it was very painful. He could have lost control of the company with his name on it. They're like, you've already made so much money. like just go retire to Hawaii or why don't you start a new company and he goes I don't want to retire I don't want to start a new company I want this one with my name on it and then he takes it to another level he goes I will care about this company after I'm dead legend founder no and then hold on I do have to say one I do have to say one even And again, a lot of the people I cover on the podcast are kind of cautionary tales.

2:29:14They're like obsessed to the point where they destroy everything around them. No, Del seems great. Seems like a great life. I think it's really important. First of all, it's a much longer episode than I normally do. It's really important to get to the last few minutes of the podcast because like I save what I think is the most important lesson for the very end. I'm not trying to like hide it. In fact, when I talked to Zach and the way he talked about the way his kids think about him and how they look at their father, he's a hero to them. He was talking about Dell's running one of the most complicated, largest companies in the world.

2:29:50And yet anytime his son calls him or his kids call him, he'll drop everything for them. He's a legitimately great dad, still married to the same wife. This is what I mean. He's just uncommon amongst uncommon people. I cannot think of another single comparable to him. That's fantastic. Absolute legend. I think you kind of compare to him, actually. I often think of you as the Michael Dell of podcasting. No, one thing I will say, he's got excellent taste in podcasts. Michael Dell, a year and a half ago, sent me the best DM I've ever got. He says, your podcasts are A +, and a little trophy emoji. I was very proud of that.

2:30:24And then today, he wound up tweeting. He's like, you're very good at what you do. I was like, it's fucking crazy that you're saying that. Real recognize real. Real recce, it's real. It's wild. It's been great. Thanks for coming on, hanging out. It's always fun. Jordan's got something queued up on the soundboard. Let's hear it. That's brother behavior. Brother behavior. Thanks for the invite. Great to see you, David. I love you guys. Love you. We'll talk to you soon. Have a good rest of your Friday. And Nicole Wiskoff's got some news, right? Wiskoff? I mean, she put out a post. She's in the waiting room.

2:30:56It's brand. Nicole, welcome to the show. She said yesterday, spent two full days with institutional LPs can safely say that 98 % of them are fed up with venture funds are too big, especially for new fund spin outs. No one does math anymore. No liquidity. Godspeed to whoever is out raising. You don't need to do math. We have AI now. Intelligence is too cheap to meter. Yes. Yeah, that's true. We have to take AI to meetings and let them speak. And then more funds will get raised, I think. Yeah. Break it down for us. name names who's who's the dumbest venture lp in the valley no no i wasn't even nsf but i don't want to throw it in under a bridge um so i was in a big money hub if you will less probably tech companies but a lot of capital um and i did so i tried to every six to nine months just to to like set the stage here i try to just go to the lp tour existing lps uh as you guys probably know you want to get to know institutional folks years before they invest, or that's the expectation that they know you for a super long time.

2:31:58So I do my, you know, Grandel tour across the U.S., you know, twice a year. And this was one of those. So I took six like hour long meetings in person over the last two days with like endowments, pension funds, you name it, all of which are largely pretty active in venture or have become increasingly so. And so, yeah, just setting the stage there, but happy to either you guys. Yeah. Let me know what's most interesting. Yeah. Break down the post. There was kind of a lot in there, but the idea that, you know, venture is clearly an important asset class, or at least we would always like to believe, even though it's a small percentage of actual dollars allocated.

2:32:42I'm curious, the quote, no one does math anymore. To me, that stood out as potentially, you have a$200 million seed fund, you start running the math and you're like, wait, we need to back six unicorns at seed to deliver a 2X fund. And then is that what you're kind of getting at there? It's just like... I don't want to butcher some quotes here from meetings, but I think it was along the lines of fund managers come to raise funds. And what I should caveat is it seemed like a lot of the house cleaning was done on the existing kind of blue chip relationships with a lot of these institutionals over the last few years.

2:33:20So I think that the negative sentiment was actually towards maybe newer funds or like the funds that are on fund three and fund four, but going out and still trying to raise these aggressively large, like over$300 million funds. It seemed less, I think they did some house cleaning already when they were frustrated with the big funds that they've had in the portfolio for over a decade and did some house cleaning there. And so I think that feels like it's sort of settled. They've picked the folks they want to concentrate with. And then, but I think the new relationships are getting a little bit blurry.

2:33:52And so from that perspective, it was a lot of how are we supposed to invest in like the next generation of the blue chip funds and like being in their fund two and fund three, when we have these folks coming to us who don't have a portfolio construction model trying to raise over a hundred million dollars, which may seem small to folks, but it's a lot of money. And then they're saying things like, I forget exactly what the CIO said to me, but something along the lines of like, yeah, so I'm asking like what returns the fund? I'm like, oh, we expect, you know, of our like 25 to 30 positions that like five will be decacorns and like five will be unicorns.

2:34:26And that like, it's just, I don't think you guys get it from there. And so it's like, wait, I'm sorry, can you please back me into the math? And so they were saying that like, you know, 80 % of the meetings they take, and these are folks on fund two and fund three, like clearly have never like opened up a spreadsheet and like walk through portfolio construction. But I think they've been able to get away with that for their past few funds. Um, and so part of it, part of it is that, uh, math is not commonly used in venture. Cause you're kind of trying to predict outcomes 10 10 years down the road, but then that CIO is getting pitched by some traditional private equity fund that's basically saying, we are going to invest in six companies, a fund, and they need to do, we're going to exit within four years.

2:35:12And all we're really aiming for is to just consistently get sort of an 8 % return on - Well, there's two different types of math a VC can do. They can do math about the market size and, and, uh, you know, DCF on the value of the company they're investing in, but then they can also do math on the portfolio construction side. And it feels like vibe investing might be okay. Just find the insane founder invest in, oh, it's one on 10 or it's two on 20, whatever that might not matter. But if you're not thinking about the portfolio construction at all, you might turn away some LPs. And then simultaneously, the other thing that i think is interesting is is venture and private equity we're always under the same in the same category yet they're starting to like overlap more in different ways i mean i felt like one cio that manages like like i think they're around 15 billion was saying to me that like she's like i would just rather i'd rather just do private equity all day she's like the ir is better she's like i have a window into like liquidity that is not that long.

2:36:12And so they're obviously safer investments. I think where people are, I would say that the net takeaway is that folks are just sitting on their hands. And I think frustrated that they're still sitting on their hands as in there's no liquidity. So there's no, no one would say this, but there's not a lot of fun that's going on right now. Like no one's super excited about like these massive exits where they've got to think that the problem that they're thinking about is where do we deploy this cash? Right? Like most folks go into every year and they have a five-year plan and they know we're going to deploy a billion into venture this year.

2:36:39But I think that's just been the other takeaway was from really large folks that are active in venture, I don't know how everyone else is still investing in these funds when no one has any cash. Like they're like, I just don't understand. There's been no liquidity for any of us. We don't have a lot of money to deploy right now. Like, I don't know where this like cash is coming from. Um, and so it just seemed like some of the bigger, I think more legitimate folks that have been around in venture for a long time, don't understand maybe the newer entrance. Um, hasn't always been driven just by shifts away from other asset classes, like, you know, large LPs rotating out of real estate or treasuries or the public markets, like, like, anytime there's a boom in venture, it's always dwarfed by the other asset classes.

2:37:20So we're just looking at like, if they take, you know, 2 % of their equity or the public equity strategy and roll it into venture, that will like double the size of venture, right? Yes. Yeah. Yeah. I know. Maybe they're tapped out. Yeah. But it's hard. I mean, right. This is all, this is just all cyclical, right? Like we're going to be in a world, I bet in 24 months i hope that i'm on the show and we're talking about this and everyone's going to be like wow we like tripled our exposure in venture and everything's going fantastic and like poo poo on private equity and like you know so i do foreshad like i foresee that happening i think that just for right now it's just been like three plus years of crap and i think everyone feels like they're taking this beating so no one's optimistic well is the three plus years of crap coinciding with a boom in AI, you know, 58 % of venture funding in Q1 went to AI startups.

2:38:12Is part of it, or do you feel like LPs are like, yeah, well, we had to stretch ourselves a little bit thin effectively so that we could get as much exposure here as we wanted? Or like, yeah, how do you think they're like yeah i'm curious like in many ways you could you would imagine that i think over time it will become clear like yeah deploying into you know ai startups from 2022 to 2025 was you know yeah there were some overvalued companies but like some generational winners i would hope Yeah. What does seem to be true is that, especially with AI and there's so many unknowns, right? Like how much capital these companies actually need.

2:39:01We're seeing record-breaking seed rounds, for example, and insane prices like Mira's company, two on 10 billion, like goodness. this, you know? So I think a lot of it right now is it is actually making more sense to me that I think the data last year was that like, what was it like 75 % of VC funds or maybe North of that went to like 10 funds or sorry, capital raised for venture funds went to like the biggest ones, the GCs, the Andreessen's. I imagine a lot of it is that one, they're clearly master storytellers. So they're able to say like, here's what we estimate will happen in the market and how much we need to deploy now.

2:39:32And maybe those vintages will be fantastic. I think what is really confusing and some of the conversations I was having. And I actually got this data. I sent DST to this presentation for some of my portfolio companies a month ago. And it was, they wouldn't give me the slides, but I have like burned in my brain, which was like at growth, what's super hard is that for growth funds is that they've traditionally underwritten companies to say, great, if you're a DST, you've got 30 billion plus in AUM, you're typically a growth investor. You're looking at a company and your timer starts for their year over year growth once they hit 2 million in ARR.

2:40:03And so like from 2 million in ARR, is that if you grow and it's kind of nuts and I might be butchering some of this, but we can like verify it. But it was like, if you're growing, uh, only 200 % year over year from 2 million in ARR, then it will take you like, I think it was like 29 and a half years to be a$10 billion company. They're not going to invest as like forever. Uh, if you're growing 300 % year over year, that I think that number was around, uh, like 14 and a half. And if you're growing 500 % year over year from that 2 million, I think it was like seven and a half years. But what happens when that window from like one, like that, that 2 million right now, companies are going from like zero to what was it like 70 million.

2:40:39I just saw in like a year or like two years. So the entire underwriting model of like a great business for growth funds is broken. So everyone now I'm sure from an LP perspective is like, are you YOLO in cash? Like, you know, like what is the new model that you guys are underwriting to you? Like, what does a great exit look like? And what is the, the big question you get in venture is like, how do you identify a great business? Like, What are the metrics that make sense for you to deploy 50 million into a business? And, and like, I shouldn't speak for DST, but they were like, they talked to all the other growth funds and all the guys that run them.

2:41:09And they're all sitting around a dinner table wondering like, well, how do we underwrite these businesses? So I imagine as an LP, you're thinking, shoot, I'm going to trust the guys that have made us a bunch of money over the years versus these net new, let's say AI funds where no one knows. Right. They haven't proven that they've done anything in the past. on the AI stuff, maybe on the venture side, do you think with a windsurf rumored acquisition by OpenAI changed the conversation? There was a big meme, don't build a chat GPT wrapper, GPT-5 is going to steamroll you. Well, it looks like Sam might be opening up the piggy bank and shelling out for some companies that could be described somewhat as wrappers.

2:41:48And if that trend continues and all the foundation model companies are buying a ton of consumer products that are built on top of them. Well, those could be some really great exits. What is your take on the conversation? We don't necessarily know. We don't have details on that acquisition. It might not be a liquidity event, right? It might just be like, you know, our WindSurf investors getting rolled in. I'm sure there's people are doing great. They're getting votes in the nonprofit. Yeah, yeah, nonprofit. I have too many questions there that I have answers, right? Like I actually don't even know who most of WindSurf's investors are and how much.

2:42:21It's a Green Oaks deal, actually. green ups to the seed and the series a um of course you'll bet uh that's amazing no that's amazing look i i hope i hope that people make it look we are all incentivized to see cash right like to see some liquidity i think i would summarize all the sentiment to being just like obviously as you guys know lack of liquidity and so people are looking for new reasons to get angry like i was hearing even things like i hate the 2 and 20 model it's such bs and then big funds ask for more than like 20, you know, if they hit like over a 3X net, you know, then it becomes 30.

2:42:53And like, I feel like a few CIOs were like, F this market, you know, but that sentiment's going to change as soon as they see liquidity. And then it's going to be like, oh my God, it's amazing. Our exposure is like tripled. And so I just can't wait for that to happen. I just think people are grouchy. Grouchy. Are you telling an AI story to LPs that mirrors cloud or mobile or fire or electricity around AI? You kind of pick your metaphor and depending on how bullish you are, you pick a more extreme metaphor. Look, I think me co-founding a business to build next-gen AI data centers shows where my head's at.

2:43:30It's in the infrastructure, like the physical infrastructure and the power. And so like, and that's obviously non-Wishoff Ventures related, though I've told you guys, like I gifted my shares into the funds. But I think that like that, that's, but that's like a non kind of LP pitch from that perspective. I think the, from a Wish Off Ventures perspective, I'm very bullish on the vertical AI applications. I think I can't, I don't know who can, I can't really predict where everything goes at all on the AI front, whether it's horizontal, it's foundational. Like I don't know. What I will say is the more specialized you are in your vertical and the more you can enable a home services business, for example, to, you know, hire less people and bring in more business.

2:44:09I think the more like, you know, insulated you are, it's harder to rip you out. And so I'm really, really all in on like these vertical applications where folks are specialized and they can kind of walk their users to this type of automation. I think people like really, really like don't think deeply about how hard it is to get people to adopt this. I know the idea is to like decrease headcount, but like no one understands this stuff. No one knows how to implement. No one knows how to think about it. And so I just think it's like down to the folks that know how to like tangibly articulate the value of an offering and being an SF and it's kind of why I'm grateful not to live there though.

2:44:45I love it, not knocking it, but like you just kind of get sucked into this, like, oh my God, of course it's like so obvious, like everyone's going to adopt and pay a million dollars for this. And enterprise value is like going to balloon. And like, we're forgetting that there's a whole world out there that's never even heard of like gpt um and so yeah maybe are you staying away from consumer ai i talked to a founder yesterday that pitched me like a what was like a great idea and application of the tech but i just like immediately he was like tell me why i shouldn't do this and i was like i believe that this is like not something that open ai has like explicitly said is on their roadmap but it's like an obvious thing that agentic you know like an agentic uh system would just do automatically yeah and so how are you thinking are you feeling like you know a lot more confident in these like sort of b2b verticalized applications versus like a lot of consumer right now if if it's not like anime filter was not on the open ai roadmap but they crushed it just by working on images long enough right like nfts they come in and they're so cool for like five minutes and then it's like wow we spent a lot of money there i mean that's probably not fair and if watch nfts come back in like 12 months like i think that the uh honestly i don't know i mean i toy around with a lot of this stuff like the great thing about consumers that i can just mess with it and like try and figure it all out um i don't know that i i found anything even personally sticky enough that i'm like every day like you know like messing around with it and i guess it's not fair like obviously like open AI, like Claude and perplexity.

2:46:23But I think like on the everyday, I haven't really, I always have an open mind. Some of the YC companies I've seen have been super interesting, but I haven't really found longevity for myself using them as like a, you know, personally. But maybe my mind's not open enough. I just try to think, I realize this is a pretty irrational business, but in some, you know, like I try to take more of a rational lens around like, could this make it 10 plus years as a direct business? You're hiring in San Francisco, looking for two to three folks that are operators. Why did you settle on that language operators?

2:46:56We've talked to VCs who have been top of their class at Goldman, come in and just work the spreadsheets for a decade and put up historical runs. Also founders, but operators specifically, why do you think that's the key to success in venture? Look, I think for my style of what we do and like where we try to like add value to companies is absolutely saying like, Oh, been there, seen that, like, here's what worked for us. Here's what didn't. And like, just being fast to that response because things have to get done. Um, I have hired, so I have Neil on my team as a senior associate and who he comes from venture doesn't have operating experience.

2:47:29And so this July, when it's quiet of DC and Neil is full-time at one of my portfolio companies in LA as on the biz ops team operating, like that's important to me. Like I'll cultivate it. Like that's the thing I want in our DNA. If you don't have the operating experience, I don't want to lose you to it, but you're going to go get it. And so I want to keep that DNA. I think it matters. In SF, we need exposure there. Over half the deals done last year were in California. We do a ton of deals in SF. We see a lot, but I want folks that are boots on the ground. It's sort of kind of like to start, I want to hire someone there full time, but for now, sort of like scouting people that are excited about venture, but still really like operating that are writing small checks, but I want to pull them in.

2:48:11So unlike scouting now, where you just source and then ideally get some carry, I want them to see a whole deal through. They source a deal that we do it. They're joining every call. They'll learn how we underwrite the deals, how we do the work. And then eventually they can put that on their resume if they want to, but we'll see. And ideally I can hire one that's fantastic. But just an approach I want to take. I don't know how these venture firms do their thing and do their scouting stuff. I don't care. But it's something that I just want to test out and see how it works. Very cool. Jordy? No, this is great.

2:48:39I wanted to just get a, get a gut check for, I mean, we have a lot of managers that listen to the show that maybe aren't fundraising right now. Hopefully they're having, you know, doing little mini checkups, doing some math, doing some math, open up that calculator app. Answer the question. How do you return 50 million, whatever your fund size is, you know, like, like literally, and then walk through tangible examples. And apparently no one does that or can do that on the fly. You just need one trillion dollar company in the portfolio. Exactly. Just get out of the unicorn, decacorn thing. Just buy 10 % of the next Facebook for 100K.

2:49:16Yeah. It's easy. And the other thing that was interesting is a lot of, I was actually, I didn't mention this, but I was asking about spin outs. There's a lot of great people, I think, right? You know, spinning out of notable funds and raising funds. And I think what's confusing for them is they were like, look, a lot of these guys took the strategy, even though they, even the blue chips do this. And this is why they're so active in seed. And this is coming from the LPs. They're so active in seed because the individual investors are like, well, hey, if we take 30 million and divide that out by a ton of two, three million dollar checks, if we lose a few, it's not such a blow to the reputation of that partner at the firm versus taking a 30 million dollar check and putting it into one company and saying like, hey, I'm a pretty good picker if that works out.

2:49:58And so I think it's made it really, really hard to underwrite these guys because they've just done whatever they wanted and candidly haven't taken a lot of risk or maybe been able to. So it's going to be interesting to see specifically. I think right now we're seeing the most probably good quality spin outs. It sounds like over the last six months raising funds. But I think it's also I thought that like shit, it's just hard for me because I've never been in venture before and I'm trying to do something substantial. But it turns out that like even the folks that spin out are still getting kicked in the teeth.

2:50:26So I think to what you were saying, go meet LPs really early and be able to answer these like tangible financial questions. I mean, it seems obvious it's not, but like it really, that matters. Yeah. It's funny to look at if you just ignore, like, you know, looking at a spreadsheet of portfolio construction and you just look at somebody and you look and you say, if this person has a hundred million dollars to deploy in the next three years, do I think they're going to be able to give back hundreds of millions of dollars? when you really just like look at somebody and just like ask yourself that question.

2:50:57Sometimes I, sometimes I look at a manager and I'm an LP in a fund, uh, here in LA, uh, uh, run by this guy. And you didn't do any math. It sounds like that was a vibe LP investment. It was a vibe LP investment, but I look at, you know, I'm talking about a buddy of mine, uh, Jack, uh, Dreyfus and like, he's got a$30 million fund. I look at him and I'm like, yes, I believe he's going to get back around a hundred million dollars to his LPs. And like, it's not like it's purely vibe space, but the guy knows how to, you know, knows how to do deals. Um, and so the other, yeah. And I'll leave you guys this, I know we're over as like, so I was talking to, um, uh, like a managing director at a pension fund that's got like over 55 billion and they're super active in venture.

2:51:40And he was actually saying, he's like, go after the pensions. Cause he's like, endowments will actually leave you. Like they will turn, but he's like, pensions don't. So if you get in, it's like pretty sticky, but they do have a high bar for like emerging folks. But he was like, I almost, he's like, I could make a killing if I left here and just advise managers that are trying to basically institutionalize because he was like, the hard stuff are things like when to exit. He's like, you could be, you could have great access. You could actually pick the right deals and you could just never exit at the right time.

2:52:05And he's like, that is just like a lot of what we see. So there's just an art to how do you institutionalize your firm that he's like, a lot of folks miss. So if emerging managers are listening, that's like the big chasm that is really hard to cross? Like, have you hired appropriately? Even if you're a solo GP, like you have - Wait, but when you talk about when to exit, are you talking about, let's say, a breakout company in the portfolio is raising around at$5 billion and there's a lot of enough demand for the round and you're saying like when to exit those positions or what did you mean by that?

2:52:34I would say that largely most folks, especially emerging managers, at least as far as I know, are tell LPs, and this is what I do as well. I'm not a public markets investor. When my companies go public as soon as we're out of lockup, like that that's ideally around the time that we sell. And then it's your responsibility to do what you want to do with the shares. So I think a lot of it is on the way there, especially, I mean, and this is probably a lot of what we're seeing because of 2021, a lot of folks should have probably sold secondary on the way up because people got priced at like sky high valuations and there was secondary happening all over the place at an insane premium.

2:53:06And I think they're referring to VCs never selling secondary. and then those rounds go from being a$5 billion series D where they could have sold secondary in 21 to like a billion dollar company right now. And they're sitting on these and it's like just still on the books. And so I think it's a lot more of that that never happened, but that's hard. Well, that's another reason to keep your fund small because if you have a$50 million fund and you get an opportunity to sell a secondary, that could return the fund potentially. But if you're you know,$500 million fund, it's hard to ever figure out an opportunity to sell secondary that's going to like meaningfully, you know, you know, uh, return the fund or, or, or anything along those lines.

2:53:48That stuff can haunt you too. Cause I'll hear stories of people selling Facebook when it was like, you know, 20, but I think I heard the craziest story from tiger once, which like, I don't actually nevermind. I was like, I don't even know if that's on the record. They love doing PR, actually. Tiger loves just like, they're open book, those guys. I was like, that is not my story to tell. There's definitely not a book about them where all the names are changed floating around. Actually, no, it's got to be public knowledge. They sold, oh my God, they sold so early on Facebook. That's all I'll say.

2:54:16It hurts because they didn't believe - Plenty of people sold. I mean, Sequoia sold Google and we've talked about this, IPO, and then they just distribute. And it's like, oh, they sold Google at like 50 million or 100 million or 500 million. way way way too early finally i have no idea that look i just think it's the it's the angle that's the approach you want to take if they want to take that capital and the returns they made a right back in then they should do that but yeah yeah awesome guys anyway this is great uh thanks for squeezing this in and have a great weekend y 'all too see you soon thank you talk to you soon bye let's go to zach kukoff he says know your audience chief of staff edition in dc they're either 24 or 45 and they're the second most powerful person in the room they run the show in San Francisco it's a new grad glorified associate best case or EA base case and they run the slack it's funny very real SF stole the title chief of staff they co-opted that language yeah and made it extreme in the opposite direction they did yeah gotta bring it back Sheil says thoughts and prayers for our glasspreneurs the business is down 75 % SF otters Gary Tan is cooked so hard it's incredible that glass is not getting broken so san francisco auto glass shops are now suffering as car break-ins plunge uh it really does seem like san francisco is cleaning things up there's a new mayor there's a lot of new investment and obviously the ai boom but i think just a general vibe shift uh not even around the federal election but just around uh enough is enough and so yeah they're they're mixing things up there and seems like good progress and also anytime anything bad happens somebody tags gary tan he's batman i kept telling friends who live in the bay i'm like you realize that like like 2023 was the time to be buying an sf yes the vibe ship was happening yes homes were when i when i compared home prices in prime central sf to like suburbs outside of la yep i was like how does this make any sense the only reason it makes sense is people had gotten so depressed there was not a lot of people saying, certainly less people going, I'm going to move from Austin to SF.

2:56:29But people did get dramatic with the moves out of SF. It's like, you could have gone to Marin. You could have gone to Atherton. But instead they were like, I need to go to Mogadishu, Somalia. I have to leave the hemisphere. I have to be so far away from San Francisco because it's so bad. I have to go to North Korea. I would rather be in Pyongyang than Incline Village in Tahoe. there's so many good options even when even if san francisco the city is rough like sunny vale is fine like there's so many places in the bay that are great uh you can go to sandhill road you can go to menlo you can go to palo alto uh none of those places were ever bad but it got really really dramatic for a while anyway um uh here's a rumor from tech crunch expense management startup ramp is being considered for a charge card pilot program by the u.s government's general services administration well we're gonna take a little credit for this did did they plant this in our head and then we joked about it or did we joke about it plant the in their head i don't remember just joking about it we were joking about it joking about it in a serious way yeah and then and then we got a a deep dive on it uh eric put out a longer post started taking it more seriously and it sounds like it's actually being considered which is crazy But you love to see it.

2:57:47And it would be very cool. I mean, we always have the question of like, where does the money go in the government? Why not have some insight in that? Why not have the receipts actually categorized? That makes a ton of sense. Makes a lot of sense. There's some debate over whether or not. Instead of having to set every card to a dollar, like what they've been doing recently. Yeah, yeah, yeah. Very, very bizarre functions. And I mean, you can just imagine that if there's no oversight, there's going to be more like just looser spending. And that hurts the taxpayer. So very excited about this. I hope it happens.

2:58:15anyway anyways let's move on we talked about the golden dome um anything else in here we should talk about should we close out with willmanitis talking about don valentine don valentine don valentine he says on pricing and 25 year old uh entrepreneurs valentine says uh maybe maybe we should go back and forth here um i'll be valentine i guess can i make an observation before we switch Sure. Absolutely. Because John and I were talking about this in the car, and one of the great things about that venture business is that you're in an opportunity to learn constantly. One of the large number of things that were brilliantly recognized and executed was the pricing of the product.

2:58:55We have, in general, at Sequoia, lots of trouble and difficulty in persuading 25-year-old entrepreneurs that you've got to price the product higher. And our agenda for that conviction was the fact that a 25-year-old cannot run a company on 35 % or 40 % gross margin. They need 60%, 65 % gross margin in order to compensate for the mistakes that we know they're going to make. Not specifically know, but in general, we know they're going to waste a great deal of investment capital. That's a great insight. They're going to overhire. They're going to get over their skis on CapEx. They're going to be excited and say, oh yeah, let's just pay up for this talent.

2:59:36And if you are making a lot of money, you can afford to make mistakes. Yeah, it's fine. And Cisco was early on, and no influence from me or other investors, able to recognize the need of, first of all, pricing the product very high, sustaining a very high price, and continuing to make enhancements to the product that provided them with the opportunity to continue at a high gross margin level or increase the high gross margin level. So one of the miracles of the launch of Cisco was the creation of an enviable cash flow that was early on very positive when most companies are negative. And I remember conversations not seriously had but not often had either about what we were going to do with all this cash we're accumulating.

3:00:16Now startups do not have accumulation problems. They have the opposite problem. So they need to persuade the founders. Yeah, and I love where Will pulled this from. Cisco Oral History Panel Part 2. I love it. Just like the most esoteric Valley PDF. Big PDF guy. But I think that's a good place to end the show. Yeah, this was fantastic. Hope everyone has a fantastic weekend ahead. Thank you to Polymarket. If you're trying to monitor the news in real time over this weekend, head over to Polymarket. They've got a bunch of markets to check out what's going on. Yeah, the Polymarket news platform never stops.

3:00:55I shared earlier this chart, the largest company end of April, and Apple and Microsoft were neck and neck, and then Tim Cooked, and Apple is now sitting at 92 % with almost a couple weeks left in the month. So who would have thought that Apple would be still on top in a trade war with China, their primary supplier. You're doing great. But Tim is goaded when it comes to supply chain management. So anyways. We were in one of those interviews. I just looked over at that stupid giant gong and we started laughing. When we roll out this gong, it's going to be insane. We keep going to the wide angle, and the gong is not even, it's too big to fit in the shot.

3:01:43It's such a tease. Anyway, have a great weekend, everyone. Happy Friday. We will see you soon. Goodbye. Looking forward to Monday. Cheers.