DOGE Zoomers, The De Minimis Loophole, Supersonic Corridor, A Healthier America

29:00For the real nerds, about eight micrometers. These images were virtually carved into a mass of tiny slices, too numerous for a person to count. Along with each slice, the scanner picked up infinitesimal changes in density and thickness. Software was then used to unroll and flatten out the slices, and the resulting images looked recognizably like sheets of papyrus, the writing on them hidden. And so these, like the files from the output of this scan are massive. So it's a perfect case for data analysis and AI, an algorithm that can detect tiny amounts of ink on each little piece of scroll fragment, can then combine that data into a unified legible simulation of how the scroll might have appeared back in 79 AD.

29:45It is crazy. It's 2000 years old. That's so, so old. Like even, even finding a book from 200 years old, that's 200 years old is difficult to deal with. And like the paper might be dissolving imagine 2000 and so hard enough to find a original copy of mary meeker's internet report yeah it is really yeah we got to get that original hand printed by mary meeker staple you know that's that's priceless right yeah yeah uh there's only a few copies left it's our scrolls yeah yeah those are the real dark scrolls yeah yeah yeah the drafts that didn't make to the printer. And so this is where Luke Ferretor enters the story.

30:24Luke Ferretor was hooked at, from the start, Ferretor, a bouncy 22-year-old Nebraskan undergraduate who often exclaims, oh my goodness, I heard Friedman describe the contest on a podcast in March. I think there's a 50 % chance that someone will encounter this opportunity, get the data and get nerd sniped by it and we'll solve it this year, Friedman said on the show. Ferretor thought, that could be me. i love that yeah he's good this is this is a guy who's looking to get nerd sniped by opportunities right yes you're not on the level unless you're actively looking to be nerd sniped by opportunities yeah and so there's a there's a photo of uh of luke here uh with his with his hand-built piece i'm sure he's got some graphics cards in there he's grown up a lot in the last year it's looking great looking great um and so uh and and this is an interesting uh twist do you know casey hanmer i've actually met this guy he has a he has a castle in los angeles that he uses for his company terraform labs very cool company right they're uh converting uh they're trying to build i think it's uh natural gas uh conversion from the air using solar so they're going to put out a ton of solar panels and then basically create uh like suck carbon out of the atmosphere, use hydrogen and get natural gas for energy.

31:44So you can use the solar panels to basically generate gas that then you can use and it's all carbon neutral. So very cool. And he has a ton of really interesting blog posts about his thoughts on global warming and energy and stuff and where we go from here. So then Casey Hanmer, an Australian mathematician, physicist, and polymath scored a point for humankind by beating the computers to the first major breakthrough. Hanmer took a few stabs at writing scroll reading code, but he soon concluded he might have better luck if he just stared at the images for a really long time. This is so funny to me.

32:17Eventually, he began to notice what he and other contestants have come to call crackle, a faint pattern of cracks and lines on the page that resemble what you might see in the mud of a dried out lake bed. And there's an image here of all the letters deciphered. And the crackle became a big thing in the Discord. To Hanmer's eyes, the crackle seemed to have the shape of Greek letters and the blobs and strokes that accompany handwritten ink. He believes it to be dried out ink that's lifted up from the surface of the page. The crackle discovery led Hanmer to try identifying clips of letters in one scroll image.

32:57In the spirit of the contest, he posted his findings to the Discord. In June, at the time, fair tour was a summer i love by the way i love how this is a contest but everybody's working together it reminds me of the um the russ olbrick case where yeah everybody wants to win you know everybody wants to like pin ross and like be the guy but at the same time it's uh as much as it's a contest you know especially in the case with this girls everybody's sort of sharing their discoveries along the way and it's not it's not a they're not seeing it as a zero-sum game they're they're playing for humanity right and also the challenge you see i actually disagree with you because in the in the uh in the ross albert case all of the different groups they weren't working together well at all no they weren't money and doing fraud i'm not saying they were working together well but there was some collaboration in this case you could imagine a world with the scrolls where nobody wants to share anything in the discord because i want the 700k totally totally And there's also this interesting thing where in the Ross Ulbert case, everyone thought it was going to be this like crazy hacking data analysis that would win the day.

34:05But just going on Google and looking back at old posts was like a very key part of the story. That was key, yeah. And it's the same thing where Casey Hanmer just looking at it and staring at it for a long time actually helped break the case wide open, which is awesome. So Ferator was a summer intern at SpaceX. He was in the break room sipping a Diet Coke when he saw the first post. and his initial disbelief didn't last long. Over the next month, he began hunting for crackle in the other images. One letter here, another couple there. Most of the letters were invisible to the human eye, but 1 % or 2 % had the crackle.

34:39Armed with those letters, he trained a model to recognize hidden ink, revealing a few more letters. Then Ferator added those letters to the model's training data and ran it again and again and again. The model starts with something that only a human eye can see, the crackle pattern, then learns to see ink that we can't. Unlike today's large language models, which gobble up data, Veritor's model was able to get by with crumbs. For each 64 by 64 pixel square of the image, it was merely asking, is there ink here or not? And it helped that the output was known. Greek letters squared along the right angles of the cross-hatched papyrus fibers.

35:16So it's like the perfect case for using AI. and fortunately because it's not this massive large language thing he can run it on his computer that he built by hand you know he just needs he doesn't need a graphics card and he does need to write some some you know somewhat complex code but he doesn't need a massive data center you don't need to build stargate for this uh which is great it's a really cool cool opportunity so in august ferator received an opportunity to put his software to the test he'd returned to nebraska to finish out summer and found himself at a house party with friends when a new crackle rich image popped up in the contest discord channel as people around him danced and drank ferator hopped on his phone connected remotely to his dorm computer threw the image into his machine learning system then put his phone away an hour later i drive all my drunk friends home and then i'm walking out of the parking garage and i take out my phone not expecting to see anything he says but when i opened it up there's three greek letters on the screen i love this anecdote it's so good amazing Amazing.

36:17Somebody was posting that this is the counterpoint to Vivek saying that, you know, Americans, you know, just are jocks and, you know, don't have the work ethic. He's locking in remotely from his phone to try to inch forward and create more progress, you know, from Nebraska, right? Solving this incredible, almost impossible challenge. So it's just such an amazing story. I'm not going to pretend I understand the Saved by the Bell references, but he's clearly the good character in that show. Whatever that means. So around 2 a.m., Ferator texts his mom and then Friedman and the other contestants about what he'd found fighting back tears of joy.

36:58That was the moment where I was like, oh my goodness, this is actually going to work. We are going to read the scrolls. Soon enough, Ferator had found 10 letters and won$40 ,000 for one of the contest's progress prizes. The classicist reviewed his work and said he'd found the Greek word for purple. Isn't that amazing? That's so amazing. So one, we got to start using, oh my goodness, because it's a great phrase and a great substitute for an alternative. But I just wanted to put it out there for our listeners. This is an example of a great side hustle. So next time you're thinking to yourself, I like my PM job.

37:37I make a couple hundred thousand dollars a month at Meta, but I'd like to do something on the side. Why not just sort of try to crack the code of some ancient scrolls to make a few, an extra 10, you know, 10,$10 ,000 on the side. You know, it's a good, it's intellectually stimulating and just a great sort of, not passive income, but it's a nice, you know, second income stream. Yeah. I mean, there are a lot of stories like this. I'm pretty sure Greg, uh, George hots, the, uh, the, the hacker who broke the PS3, the original iPhone, uh, jail broke the iPhone and eventually went on to develop comma AI and a bunch of other cool stuff.

38:14But, um, fantastic hacker early in his career, he would do, uh, hacking competitions and bug bounties. So he would go to Facebook and say, I, I hacked your entire system. Like I'm a white hat hacker. I'm not going to do anything bad, but can you give me a reward? And they'd say, absolutely like you just saved us millions of dollars uh here's here's 100k or something like that and then was he part of the reason that a lot of these companies ended up rolling out more formal programs around this because probably generally yes part of a trend and then i think there was even there were even startups created that that were just marketplaces for bounties yeah uh at some point or another i don't know if any of them really broadly caught on but um it's cool yeah cool strategy and and i think at one point he won a car because of it or like i i think he he hacked the iphone and uh steve wozniak sent him an email being like this is awesome like you're you're you're an amazing hacker uh and then steve jobs was like this is unacceptable this destroys my business or something like that i'm not exactly sure the story but it was very funny that he was just like you know as a kid he was very young and he was having an impact and making money love to see it uh so ferretor continued to train his machine learning model on crackle data and post his progress on discord and twitter the discoveries he and hammer made also set off a new wave of enthusiasm among contestants and some began to employ similar techniques in the latter part of 2023 ferretor formed an alliance with two other contestants yusuf nader and julian uh schillinger in which they agreed to combine their technology and share any prize money i love this this is the crew that they're building.

39:53And so in the end, 18 teams submit entries for the grand prize. Some submissions were ho-hum, but a handful showed that Friedman's gamble had paid off. Scroll images that were once ambiguous blobs now had entire paragraphs of letters lighting up across them. The AI systems had brought the past to life. It's a situation that you practically never encounter as a classicist. You mostly look at texts that have been looked at by someone before. The idea that you are reading a text that was last unrolled on someone's desk 1900 years ago is unbelievable and you are on mute. A group of classicists reviewed all the entries and did in fact deem Ferator's team the winners.

40:39So he actually won. They were able to stitch together more than a dozen columns of text while entire paragraphs all over their entry. Luke got the email telling him that he won and he just goes, oh my goodness. Oh my goodness. I'm fully taking that term and using that constantly. It's so good. Oh my goodness. Oh my goodness. It's so nice. Still translating, the scholars believe the text to be another work by Philodemus, one centered on the pleasures of music and food and their effects on the senses. Peering at and beginning to transcribe the first reasonably legible scans of this brand new ancient book was an extraordinarily emotional experience.

41:25I love that. They're just like so stoked. It's great. Yeah. It beats slightly changing the color of a button to a different shade of blue and getting, you know one percent increase in conversion uh you know it's close but it's definitely slightly more emotional everyone involved in this story is just so earnest and that's what i absolutely love about this there's just not there's not an ounce of cynicism here and it's just beautiful and that's why i'm so optimistic about his work at doge i think he's just genuinely yeah and that's why the people that are actually sending ridiculous messages hating on him trying to dunk on him making him turn his account private it's like if they just took literally five minutes to try to understand his story yeah i i it's hard to say that how do you how do you position this this guy's a bad person right yeah uh well just really i mean a lot of those people that are that are you know like you know aggressively anti-luke they are not reading this coverage they're reading some clickbait sensational sensational viral article about how you know he he he has right access to the treasury and he's gonna send money all and he's just gonna steal all the money for elon you saw you saw there was this uh i forget i forget which politician he represents somewhere between san antonio and austin texas so texas-based u.s representative he was posting we need to figure out how to fire elon musk like he's we need to use every bit of political power and pressure and every law to get this man fired.

43:05And it's just so funny because he's not an employee of the government. You can't fire him. And he's working under the direction of the White House and the chief executive officer of the country right now. And Luke's in the same boat. So good luck firing Luke. As a point of clarification, it came out yesterday, Elon is a special employee of the government. He does have a email address. Um, I, I think the, the, the, the exact structure of Doge is evolving. And I think we'll go through a couple of different, uh, maybe, maybe congressional or legal challenges, but, uh, but it is, it is evolving. But, um, yeah, I mean, obviously there's a lot of people that are anti, a lot of people are pro even on the left and the right, even there's even some people on the right that are like, I don't like that the tech people are in charge.

43:56And so it's developing, but we're here to talk about Luke, the brother of the week. And so let's close out with the goals going forward. Barring a mass relocation, Friedman is working to refine what he's got. There's plenty left to do. The first contest yielded about 5 % of one scroll. A new set of contestants, he says, might be able to reach 85%. He also wants to fund the creation of more automated systems that can speed the process of scanning and digital smoothing so that you don't have to 3D print the case, bring it over here, like bring the CT scan there, dig out better. You need a lot of different people here.

44:33It's not just about the AI. The AI is just one piece in the value chain here. He's now one of the few living souls who's roamed the Villa Tunnels. And he says he's also contemplating buying scanners that can be placed right at the Villa and used in parallel to scan tons of scrolls per day. Even if there's just one dialogue of Aristotle or a beautiful lost Homeric poem or a dispatch from a Roman general about this guy, this Jesus Christ guy who's roaming around, he says, all you need is one of those for the whole thing to be more than worth it. What a fantastic story. What a fantastic story. Amazing.

45:09I love it. I'm so excited to see where the scrolls project goes. Yeah, the only bummer, small bummer, is that Luke was kind of a somewhat of, you know, he's infamous already, but he was a bit more of a secret. And now when he does raise his pre-seed round, it will be 100x oversubscribed. And, you know, we'll all be lucky if we get a thousand dollars slug. For sure, just send the wire now. But it's good. Yeah, yeah. Let's write him a check. Cash it when you incorporate at any terms. Yeah. At any terms. Yeah, we need a pre-incorporation safe that just says, this goes into your first round if you start a company at any point.

45:54Yeah, exactly. Well, let's go to some fantastic analysis from Ben Thompson over at Stratechery. He's talking about the de minimis loophole, and he opens with a quote from Bloomberg. The U.S. President Donald Trump's tariffs on China and other countries are rocking markets and casting a pall over Chinese firms seeking to go public. Take Sheen, the fast fashion sensation. The online retailer founded in China but headquartered in Singapore is said to be working on what could be one of the biggest listings in London in years, potentially valuing the company at 61 billion U.S. dollars as soon as this year.

46:32Trump's executive orders specify that the de minimis exemption for packages worth less than$800, a loophole used by the likes of Sheen for years, will no longer apply. Though Sheen has been diversifying its shipping bases ahead of Trump's trade policies, the full scope of the de minimis changes is still unclear. It's unlikely that the company would be immune to the changes. Sheen didn't respond to a request for comment. Yeah, John, can you break down for the audience? And so Sheen manufactures their products in China. And then instead of sending a single shipping container that would have a value far higher than$800, they send the individual packages from China direct to consumers.

47:16And that's what allows them to get around that. That's the loophole, right? That is the De-Minimus loophole. And the reason that the Day Minimus loophole exists, this is not something that Sheen and Timu lobbied for. And then, oh, they got lucky and they knew that this was going to be a thing. No, the Day Minimus loophole makes a ton of sense. Because if you're some Etsy seller and you want to send someone a$50 package, a t-shirt from Italy to America, it makes sense that having to do all the different customs and tariffs and all the different oversight on that small package, is cumbersome. It actually imposes a massive cost on the government and the ports.

47:57And there's all these extra filings. And so the government kind of wisely at the time said, hey, let's just focus on the big stuff that's coming in, the massive shipments of pallets of TVs or the cars that are coming in. Let's tax those. And you know what? At the time, I'm sure they looked at it and they were you know, if we draw the bar at$800, that's less than 1 % of trade volume. And so sure, we'll lose, we'll lose, if we're taxing something at 10%, we'll lose 10 % of 1 % of our trade, you know, revenue, doesn't matter, not a big deal. But then once this loophole started to exist and became popularized, people figured out how to take advantage of it.

48:38And the answer was, let's ship directly from the factory, an individual package directly to the American consumer, It takes a long time. And so when you go on Timu, I actually went on Timu and it is the funniest e-commerce flow you've ever seen. You open, you go to Google Images and you search for something, you land on the Timu website, you're on mute. And you land on the Timu web view. It really wants you to install the app, but it does one of those spinners, the spinners to be like, what's your percent off? and and i'm like okay like i guess i have to click this to get to the product or whatever uh and and it spins and and you always win 100 off they just figured they realized that like giving someone 10 off isn't as good so just tell them they got 100 off and then it pops up another spinner that's like now you're eligible for a multiplier and it's like 2x 3x 6x you always win the most, the highest, like multiple.

49:41So then all of a sudden it's like, you have won$600 in free stuff, like install the app. And then of course, once you go down that funnel, it's like, oh, well, like you got to pay shipping and all this other stuff. And the shipping is the only thing that costs money. So, you know, it's this whole like kind of scammy, like ultra optimized thing. But I was just cracking up being like, oh, really, Timu? Like, you're just going to give me all this stuff for free. Like, it's such a scam. Well, you remember when we launched our trailer for the podcast at the end of last year, somebody one of the negative comments that i saw was um oh uh tech tech brothers do uh timu's succession and i was like yes this is timu's succession we filmed this video in in basically 12 hours with a two thousand dollar budget you nailed it yeah but it's it's interesting how timu became such a timu you know exploded and and i don't know if if ben has the data here but um it did become popular and it did make it really difficult if you made custom t-shirts at a at a factory in la and you could go on timu and get a shirt that's you know oftentimes something like a t-shirt you're not as worried about the quality if you're just some company that plans to give them away.

50:57Say you're an ice cream shop, you'd rather pay$5 for the t-shirt than$25 locally. And so it really made it almost impossible to compete if you were a localized manufacturer. Yeah. And it's been part of this value chain erosion that's happened where it used to be, you know, like Apple manufacturers in China, they have a massive facility there, a huge partnership with Foxconn. There's Apple employees on the ground. And so it's very much like an Apple designed and made product with the help of Chinese manufacturing then you go to the next level which is like oh an entrepreneur has an idea and they're like I want to just sell t-shirts and they just call a Chinese factory they basically do everything it's very turnkey then and then they list that on Amazon and it's like China's providing like all the manufacturing then Sheen and Timu kind of cut out the the middleman and just went direct and so all of a sudden it went like products come out of the Chinese factory and they go directly to the door of the American consumer.

51:55And to be clear, manufacturers like Apple aren't benefiting from this loophole, even if they're selling a$500 product because Apple is sending, you know, a shipping container with 10 ,000 AirPods in it. And so the total value, even though the individual product might be a couple hundred bucks, ends up being far beyond the sort of loophole based on, because the loophole is based around the shipment itself. Exactly. Exactly. And so Tmoo is owned by PDD Holdings, a company that I'm sure we'll do a deep dev on soon. They rapidly expanded in the United States by offering steep discounts on a variety of products for people willing to wait a week or so for delivery because it comes literally from China, from the factory.

52:37This is another Chinese linked firm that's in the U.S.'s crosshairs. The popular marketplace, which eMarketer estimates will sell$30 billion of products to U.S. shoppers this year became an alternative to Amazon as well as retail chains such as Hobby Lobby, Party City, and Dollar Stores. Like Sheen, Timu has largely anticipated Trump's decision by expanding networks in the U.S. and moving to bigger bulk orders. Timu didn't respond to a quest for comment. American shoppers and companies imported about$48 billion of shipments from the world under the de minimis loophole in the first nine months of last year, according to U.S.

53:13Customs and Border Protection estimates. And so we will show. You can think of what we're doing for technology podcasting, Timu is doing for consumer products, just flooding the market. And the scale is honestly unbelievable. And the obvious critique of Timu and the long-term critique of China has just been that they're manufacturing products at incredible scale, at incredible prices and just flooding the market. And oftentimes, specifically in the case of Timu, if you want to buy an air filter, you can go buy a Timu air filter. I'm sure it costs like 20 bucks. And the critique is that, yeah, you would have had to spend$200 to get a comparable product that was made by a more reputable firm.

54:02And the Timu product is going to just basically evaporate over time, break down and things like that. And so a lot of these products have a pretty short, not shelf life, but just life in general, right? Totally. And so there are two charts in here that we'll show. One is de minimis exports from China over the last six years, from 2018 to 2023. And the bottom bar is going to the United States. But you can see China has ramped up these de minimis exports from about$5 billion in 2018 to$65 billion in 2023. And so this de minimis loophole was discovered and then exploited to great effect. And you've seen, you know, this chart.

54:52So the blue bar is the United States, but the other section and the rest of the bars there are, presumably there aren't. It's maybe Malaysia, Taiwan, United Kingdom, Vietnam, et cetera, adopted similar de minimis. Oh, yeah, yeah. De minimis is a common construct because it increases efficiency of trade. And so other is probably all of Europe, Africa, Latam, like all these different countries combined. and you can just tell that like this chart looks like a startup graph but you don't see types you don't see graphs like this in global trade like global trade typically grows at like two percent three percent ten percent not yeah you know not six or ten x yeah you know ten x over six years like that's very very rare and it's all driven by uh just finding this loophole and then just spamming it basically.

55:47And so let's go into the Stratechery article. Ben writes, now that tariffs are front and center in the news cycle, you may see some commentary referring to the Smoot-Hawley Tariff Act of 1930, which dramatically raised tariffs on over 20 ,000 imported goods in an attempt to protect US industries. So interesting, this stuff is not new. Many commentators feel that it contributed to the Great Depression. One challenge in implementing that level of tariffs, however, was the sheer amount of manpower necessary to inspect every import and levy the appropriate fee, particularly for small items mailed to individuals to alleviate the challenge.

56:23The act included a de minimis exception. And so this is what we were talking about. And here's a quote, that the Secretary of the Treasury be and is hereby authorized in his discretion to prescribe regulations for the administration free of duty articles not exceeding a value. $1 imported by one person one day. So that$1 figure, it was originally$1 in 1930. It's been expanded. In 1962, they took it to$10. In 75, they took it to$25. In 78, there was a lot of inflation in the 70s. They took it to$50. In 1980, it was$100, $288. And then finally in 2016, it went up to 2018. The lesson here, go back in time and buy Bitcoin in 1930.

57:11This currency debasement is concerning. Yep. And so this has been a boon to businesses like Timu and Sheen, which sell Chinese-made products to U.S. consumers and then ship them directly. So now China dominates de minimis shipments. A key part of China's global e-commerce growth has been the expansion of PRC and PRC-tied e-commerce firms into the U.S. market. The U.S. retail e-commerce market constitutes over half of all global e-commerce sales. And so imports under section 321 of the Tariff Act of 1930, and Ben, I don't know if Jordy's not on screen, but you might just want to go to me. Section 231 allows for U.S.

57:57imports under a de minimis threshold to enter free of tariffs, fees, and taxes. In 2016, Congress raised the threshold to$800 per shipment, And that dramatically changed the landscape. And so let's go to this. As China is dominating, this is obviously important, particularly for U.S. e-commerce and its associated ecosystem. But this has also played a significant role in the fentanyl epidemic. Reuters has an excellent in-depth investigation of the relationship here. We will have to read that on the show soon. And so the big question is, how is this affecting Amazon and Meta? And I don't know what happened with Jordi.

58:39Let's see. I'm still here. I think my camera battery died. You can probably just switch it over to the computer camera. And I think you'll be good there. And we should be able to see that. So Stratechery, however, is a tech newsletter. And the angle I am most interested in is the effect on US tech companies. That list starts with Amazon, which will likely be affected by this rule. And so the information reported previously that Amazon plans to launch a section of its shopping site featuring cheap items that will ship directly to overseas consumers from warehouses in China. So this de minimis exception was such a big deal that Amazon was like, well, we have to compete.

59:22We can't just get left behind here. So we need a Timu competitor within the Amazon ecosystem. And so those orders, they're not going to be prime. they're not going to be next day. They're going to take nine to 11 days to get to customers, but they will stem the bleeding because it's a directly competitive product with Timu. And so it's not clear if these Amazon shipments will be made using a US trade provision that exempts individual packages worth less than$800 from US custom duties. Sheen and Timu are among sellers that use the provision, which some US politicians and trade groups have criticized as a tariff loophole.

59:57So it's hard to understand the point of this new offering if it's not leveraging the day minimus loophole. Like that's the only reason that Amazon would do this is because they're interested in leveraging the loophole. The program did launch last fall, by the way, and it's called Amazon Hall, which I think is so funny. What a great one. Amazon. And that's probably a reference to people ordering a hundred items on Tmoo and then doing these sort of unboxing videos these tick tock videos i'm sure that the thing is tick tock has been using uh they do this warming feature which we talked about on the show yesterday where they will um show your videos to more people if you talk about specific topics so over the week over the last week it's been if you talk about deep seek you're going to get a lot of views and so i'm sure they did a number of things where if you do timu halls you're going to get a bunch of a bunch more views.

1:00:54And so just blatant proof that the Chinese companies coordinate to use TikTok as a channel to influence activity in the US, which is, again, why is the company still operating? I don't know. I'm sure there's deals being done behind the scenes. That's the big reason why Ben Thompson was advocating for Amazon or Walmart to be the logical acquirer for TikTok if there was a divestiture, because that is the ultimate monetization for TikTok, more so than just running ads. And so if you sell it to Meta, is this crazy? It is kind of like anti-competitive. They're building this crazy monopoly. Google doesn't really need it.

1:01:37Microsoft, it doesn't really make that much sense. But Amazon or Walmart could be perfectly positioned because TikTok shop has been so successful. Well, we learned yesterday from somebody in the chat too that Walmart took a shot at social media with their WM Connect product back in the AOL days. So Walmart is no stranger to social media. Yeah. And so Ben is throwing some shade here, putting Amazon in the truth zone. He says, I suspect when Amazon says, we also hear from customers, they mean we look nervously at Timu and Sheen's rising sales numbers. haul interestingly enough is only available on mobile where timu and sheen derive their sales in other words i still believe in my original thesis amazon would love for this loophole to be closed a world where everyone pays the same import duties is one where amazon's delivery network can be much more effectively brought to bear yeah it's it's it is interesting to think about how these companies realize that uh even though u.s consumers basically now demand two-day shipping max, like your conversion rate will suffer if you're not offering competitive shipping.

1:02:45Yep. They realize, hey, if we can get somebody 50 items for what it costs to order, you know, five items on Amazon, they'll wait, you know, they're happy to wait seven days in exchange. Yep. And so Timu and Sheen are not responsible for all of Meta's growth. We're going over to how this does affect Facebook and Instagram. but the two companies combined, it's estimated spent just under$3 billion a year to date. Meta's revenue is up around 11 billion year over year. And so the growth of Timu and Sheen, certainly they're spending more, they're driving a lot of growth, but Meta's growing independently.

1:03:22So it's less of this like existential issue. If Timu and Sheen go away, it shouldn't be that much of an effect on Meta. Moreover, this spend is more palatable and potentially sustainable than TikTok spend was. So when TikTok was spending on Meta, They were like directly stealing users. But e-commerce apps are not a strategic threat to meta. Quite the opposite, in fact. And also lack of network effects to make themselves sustaining entities like TikTok has become. So the subsidies could go away. Macro events could intervene. Meta still deserves credit for figuring out ATT. But Timu and Sheen do make the story a bit more complicated.

1:03:59Because while ATT was kind of throwing all this curveball towards meta. and they were figuring out how do we get the small, you know, mom and pop e-commerce engines going again. Well, Timu and Sheen came in and were like, here's$3 billion to like, you know, keep the revenues up and to the right, which is great. And so this quarter did turn out to be the peak of Timu and Sheen's share of meta advertising around under 7 % on Facebook and just under 4 % on Instagram. And they're down to around 4 % and 2 % respectively now. Still to the extent their businesses are impacted by these measures. And notably, an important part of their hedging has been building distribution centers in Mexico.

1:04:38There may be some impact on Meta's ad prices. I don't think it'll be substantial, is what Ben says. And so very, very interesting discussion of how the Trump tariffs and changes in regulation are affecting tech. He ends with a little bit about AI and abundance. It's worth pointing out that the de minimis exception exists for a good reason. We mentioned this. There are a lot of items that are shipped into the US every year, and it's understandably difficult to examine everything. It's also worth pointing out that any item that qualified for the de minimis exception also gets to use what is known as informal entry, which means much more limited paperwork.

1:05:18No needs for a custom bond. Informal entry applies to shipments worth less than$2 ,500. dollars. To that end, it remains to be seen just how much of a difference these tariffs make and exactly how the U.S. Customs Authority handles the onslaught of packages. So, you know, you're doing doge, you're trying to cut down on the amount of government employees. Well, you know, you might have just 10x the amount of work that's going on if you're trying to investigate and tax all these packages. But he ends by saying, I would also note that this seems like a very interesting problem on which AI could be brought to bear.

1:05:51There's a story here about how the internet scale simply crushes a loophole created for an analog world. Perhaps there is a solution in which AI's ability to ingest and understand vast amounts of data could make sense of the chaos in a way that preserves the convenience while solving a problem of abundance. Of course, the chasm between theory and reality is a massive one, particularly in terms of government bureaucracy. But I do think that this is one of the many examples of where AI will have unexpected benefits. And so I, you know, we got to get Luke Faraday into the, uh, into the, um, uh, uh, what is it?

1:06:27Department of Homeland Security. I don't actually, uh, yeah, I don't know. Yeah. Yeah. The, the, at the ports, he's got to go to the port. He's got to open his laptop and, uh, set up some, set up some LLMs to look at every, every day minimus import that's coming in. uh he has a u.s customs and border patrol is the one it's the customs department um and so let's move on to our third story of the day uh a wonderful deep dive so uh that last one was from ben thompson over at stratechery highly recommend that you go subscribe it's a fantastic uh fantastic newsletter in your email three times a week and uh you also get a bunch of podcasts a bunch of great stuff with it so highly recommend ben um let's go over to ashley vance who now that first piece we read about Luke Ferretor, that was with Bloomberg, but he's no longer with Bloomberg.

1:07:15Ashley Vance has moved over to corememory.com, his new media company. He's independent. He's going direct. And he has a fantastic write-up of the boom supersonic test that happened in the Mojave. And he says, take me to bed or lose me forever in the supersonic corridor. The city of Mojave has a population of about 4 ,000 people and sits 100 miles north of Los Angeles. Some people might describe it as a dump, I guess, and they would not be altogether wrong. As the name indicates, the city of Mojave is in the Mojave Desert. It gets about two to six inches of rain a year, experiences extremes of heat and cold, and has gusting winds.

1:07:58California State Route 14 rips right along the city's edge, and if you're not on it or not paying attention, you could drive by Mojave in a flash, missing out on the delicacies offered up at a Denny's, Wienerschnitzel, or Subway, or a fine stay at the two-star America's Best Value Inn. Core Memory has a need, a need for reads. Become a free or paid subscriber and support our battle against nameless faces enemy. Let's go. I love reading the calls to action in the middle of a Substack post. So go subscribe if you're not subscribed already. All of this is to say that I love Mojave and go there as often as I can.

1:08:35What drew me this time is this boom supersonic launch. And so the airport is flanked by Edwards Air Force Base and the Naval Air Weapons Station China Lake. China Lake is a fascinating story we should dig into at some point. That's where they do a lot of like crazy military tests. That means the Mojave has an exceptional, sometimes eccentric aircraft doing wonderful things and that the flying stuff is complemented by stuff that goes, boom the event is catalyzed the event that catalyzed the mojave's position as a special place incorporated all these characteristics it occurred in 1947 when captain charles yeager became the first human to go past the sound barrier in the bell x1 plane in the years that followed the military bases did most of the work pushing the mojave's reputation as the forefront of aerospace adventure tom wolf captured the scene well in the right stuff where courageous manly pilots were turning up in the desert to flex their cojones and young women were apparently all about it wolf describes both groups mingling at the happy bottom riding club run by the iconic florence low pancho barnes with language that i'm not sure mainstream writers would get away with today although labial piping little birds is evocative i think so his writing is uh this is why when Ashley Vance started Core Memory, Legacy Media died because they lost.

1:10:05They lost Star. I think this type of writing makes a comeback with Ashley Vance in the wild. He doesn't have an editor now. He can say whatever he wants. Let's get the flowery language out there. Let's differentiate from the LLMs, the slop. We're not going slop when we're reading Ashley Vance. It's good stuff. Yeah. OpenAI is hitting refresh on corememory.com waiting to ingest this incredible uh flowery language yeah and so uh he uh he's there to talk about boom supersonic last week mojave the city returned to its full glory at least for a moment boom supersonic flew its xb1 jet past the sound barrier for the first time and i got to witness the whole affair and he's making a video about it so go subscribe to core memory uh boom was founded in 2014 by blake scholl and he had nothing resembling an aerospace pedigree.

1:10:56Shoal, a computer scientist, had worked at Amazon and Groupon, dear God, before starting Boom. Yeah, so his LinkedIn was getting shared around because he was a product manager at Groupon right before starting Boom. Yeah. So what an outlier bet. he would have been nicely pattern matched to go start a, some type of, uh, retail, you know, app SAS company, but, uh, not the guy that's getting pattern matched to start a supersonic, uh, aviation, uh, aerospace company. Yeah. And so even with his pedigree, he's still, he went to YC, they gave him a lot of coaching on how to get, uh, how to pull forward like contracts and kind of like, uh, not like real revenue, but like if you make it, we'll buy it.

1:11:39and that de-risked for investors. And so all of a sudden, I think the combination of the background, the YC strategy, the demo day, all that stuff got the business off the ground and got the initial funding. And I love that when people talk about him working at Groupon, he's like, yeah, now I'm just trying to do 50 % off coupons for how long it'll take you to fly from LA to New York. Yeah. Yeah, that's a great one. He's got a bunch of zingers based on it. And so here we are 11 years later, what a journey and boom is still at it. and the XB-1 is not even the aircraft around which it hopes to fly regular folk.

1:12:14Rather, the XB-1 is a single-person jet that Boom has used to test out some of its ideas, materials, and team when it comes to handling the pressures of supersonic flight. The plane that could end up taking people from London to New York in a zip is called Overture and will need a few years and tons more money to create and clear for safe travel. We've obviously been here before with the Concorde, but it had the weight of the British and French governments behind it. The XB1 has been built on the back of venture capital. And when it went supersonic last Tuesday, it marked the first time an independently developed jet had done so.

1:12:48So yeah, they did that with a, with a 50 person team, right? 50 person team on the, on the XB1 project. They do, I think they have 140 employees. A lot of those people are working on Overture and other stuff, but still the fact that you can fit 50 people in a shot with the plane is incredible. Crazy. Coming off the back of a recap that a lot of their investors had to say, hey, we're going to basically double down, triple down on this thing to make it work. Incredible timing. And I'm imagining this success of this latest launch or flight should attract some more capital and allow them to continue to hopefully thrive.

1:13:34100%, 100%. So after the flight, Shoal groused on X that neither the New York Times nor the Wall Street Journal had bothered to cover the event. That's warranted grousing. Calling them out, Ashley. Don't let up. But then again, I'm glad that we have core memory. I don't know if I want to read a New York Times write-up. Oh, it's annoying that they went fast. I don't like it. Slow down. Slow down. Too fast. Okay. So he says, yes. Okay. Boom had already flown XB1 about 10 times from Mojave at sub supersonic speeds. Scholl will tell you that the company has learned most of what it needed to during these test flights.

1:14:13And there's also a degree to which the XB1 busting through the sound barrier was simply symbiotic. But also WTF. There are pragmatic reasons this test flight was such a big deal. Boom is one of our last best shots at getting supersonic commercial travel. Concorde retired in 2003 because it was too expensive. Afterwards, people were inclined to deem affordable supersonic flights as an impossibility, which is ridiculous. We have a couple major supersonic bets going with Boom and Hermes, big fans of both companies. But they're both battling away in a horrifically hard and costly business. And if they fail, we might not see anyone take a swing at supersonic commercial flight for decades.

1:14:56Maybe you like being wedged in a seat for 11 hours going from San Francisco to Tokyo. I don't. Yeah. I'm with you, Ashley. Yeah, no, it really is wild to think about just cutting, even cutting in half, being able to get to Europe from LA in the time that it takes to get to New York would be incredible. You're shrinking at a time when, in many ways, looking at the trade war story and things like that, Peter Zihon was right in his prediction that we're going through this period of deglobalization. But supersonic flight would have an opposite effect in that everything would become closer, right? Being able to get to Tokyo in a couple hours, very cool.

1:15:40Sam Altman would love that. He'd get to go hang with Masa a lot more regularly and go car shopping as well. I love it. I love it. And so Ashley's waxing poetic about the impact of this. He says, on the far more visceral front, boom, doing this test flight was not just cool, but important for all the historical context reasons I laid out earlier. Some of the U.S.'s best engineering achievements have taken place in the Mojave because of the culture built up in the Mojave. It's a special place and it requires tending and fuel to keep on thriving. The U.S. is a rare country. The U.S. is that rare country to even have a supersonic corridor and to have supersonic-ready objects to shove through it.

1:16:28It's good to test such engineering limits and be reminded of what we're capable of and to maintain the need for speed. One of my favorite Mojave aerospace types is Ben Brockert, who went on to work at Astrospace after a stint at Masten. I wrote about him in my book, When the Heavens Went on Sale, and include a tribute to Ben from that book here. Having pined to get into aerospace since he was a kid, Brockert bought a$500 very, very used 17-passenger van and drove it to the Mojave Desert to begin knocking on the doors of space startups. It took months to find a gig, living out of his van and trying to fill the days as best he could.

1:17:06I managed to get a library card and read all the books I had not read, he said. I also spent a lot of time bombing around the desert and trying not to die. Through a stroke of luck, A position opened up at Mastin and Brockert soon established himself as an essential part of the zombie team. He continued reading aerospace books and learned a ton on the job over the course of three years. Mojave is like a new space penance, he said. It sucks, but you put in your two to three years and then you go do something somewhere else if you're good. And so what a fantastic anecdote about just like, if you want to be in AI, you probably got to go to SF.

1:17:39If you want to be in defense tech, you're going to be in the gundo. If you're going to be in supersonic stuff, you got to go to Mojave. And I love that. It's not so, it's not so bad out there. I'm sure you've driven through the desert at some point. It's got a kind of a, you know, a super galactic vibe out there. I, uh, I'm, I'm bullish on the Mojave. We should do some on the ground, on the ground reporting in the Mojave. Ashley, next time you go, please invite us. We'll tag along and whatever news you're covering and breaking, we'll front run you a little bit. We'll break it live, but then we'll still cover your article the next day.

1:18:18Yeah. Well, let's move on to some back and forth we had on the timeline with Patrick Collison, the founder and CEO of Stripe. We reacted to his fantastic post about two different types of phone booths. You might a beautiful building, which I think he has his eye on. Maybe. I don't believe this is the actual Stripe headquarters. It looks somewhat AI generated. Uh, I couldn't find it on a Google image, image, uh, reverse image search, but, uh, I think he got the right idea, Patrick. I want to see this. Uh, I want to see this in action and, uh, keep making everything beautiful. Like what you're doing is so important to tech.

1:19:03And I just, uh, I mean everything from like the blog and the fast. He has a whole documentation of all the different projects that have been done very quickly. He's an incredible thought leader, I guess you could call him in tech and just an inspiration to everyone who's building and wants to make beautiful things. And so happy to have a back and forth with them on the timeline. Yeah. And this is a great example of a founder with incredible taste who now has the resources to go out and instead of building the Apple loop, whatever, what do they call their campus. He can build this structure that looks like what maybe a bank would have looked like during the Roman Empire, right?

1:19:46Yeah, yeah. It is very funny. I mean, they're not technically a bank, but they do a lot of, you know, FinTech is banking. Financial institution, right? Financial institution. And yeah, we love Stripe. Stripe helped us incorporate Technology Brothers LLC, see, which was very helpful. Certainly did. So shout out Stripe Atlas. Give Patrick Collison a call. Tell him the technology brother sent you. Go incorporate your next business on Stripe Atlas today. We love Stripe. And thanks for engaging with us, Patrick. We love to have you on the show. You're welcome anytime. Let's move on to some breaking news.

1:20:23Jason Carman has launched his new company story back he's back he took a little break he was working on just one 90 minute movie no big deal uh stopped posting the weekly documentaries which were already insane and and crazy high production value uh in many ways and let's just be honest in many ways uh john coogan walked so jason carmen could fly right for sure he kind of uh he kind of came in he was like Like, hey, John's a little distracted with the podcast. I'm just going to launch a series of highly produced films that will go on to live on, I'm sure, Netflix and Amazon Prime and all these platforms.

1:21:06So it's amazing to see. The guy sprints everywhere and incredible energy, unrelenting drive. He says, this is the company I've wanted to build since I was nine. and I'm so glad he landed here and doing this. Obviously he had a ton of different opportunities. He was in-house at a startup for a while. This is such, it's just a perfect fit for him. He's gonna be able to make science fiction films as well as documentaries, corporate work, you know, stuff on Netflix. I saw his camera. He's able to post behind the scenes now. He's running the Sony Venice too. This rig's like 100K. He is beyond the requirements to deliver to Netflix at this point.

1:21:49All of his gear is ready to be shown almost in IMAX. It's that level of production. And tech has never seen anyone who's this much of an artisan and craftsman care about this type of media in this way. It's always been a side project. But this guy, this is his life's work. This is clearly what he's doing. And he's gone full send. And we're happy to support him here at Technology Brothers. Yeah, and it's amazing to see this rise. I think when you think about legendary filmmakers of today that built their careers across 20, 30, 40 years, you would get to see their films, but you wouldn't get to see behind the scenes in the same way of seeing their journey.

1:22:28Maybe it's an interview with The New Yorker or they do a talk at Sundance, but you're not getting this sort of daily seeing the progress and seeing somebody build a career, which is amazing to see. So congratulations, Jason. Congratulations, Jason. Keep up all the hard work and keep making incredible content. Keep posting. Keep posting. We have an update on a post from yesterday. Mateo over at Eight Sleep. Absolute dog. We both sleep on Eight Sleeps. We highly recommend Eight Sleep. The pods were delivered to Doge. I hope this will supercharge Elon Musk and the incredible team to shape the future of America.

1:23:09Let's go. and so they packed these up they ran them through the metal detectors through the scanners the x-ray scanners and they got them in the building and incredible quick turnaround i didn't even know how they got them out of the out of the factory that fast or out of the distribution center but they were there in dc in less than 24 hours delivered and so uh enjoy it luke enjoy it the rest of the doge team i hope you guys get high sleep uh luke for the four hours luke is sleeping a night it's going to be the best four hours of sleep of his life uh and uh yeah if you don't have if you don't if you can't invest a lot of hours in your sleep you definitely got to be on an aid sleep yeah i mean aid sleep also sponsors f1 these elite athletes you think about luke he is an elite athlete of the thing government the thing too that i don't think uh i don't think people realize about eight is is that the cozy element is crazy so a lot of people think about the chilling, which is nice.

1:24:05You know, maybe you get into bed and you want to be a little bit cooler, relax, but that more, you know, turning up the heat a little bit in the morning, it's like being next to a warm fire. So it warms my heart knowing that Luke, you know, is going to be in the depths of the federal government, you know, bureaucracy, and, uh, he's going to be able to be cozy if he wants, and, uh, maybe even use it as sort of an alarm feature. It's like, as you start sweating, it's time to hit, it's time to hit, uh, you know, hit the trail, new CSV, pull out a new stack of PDFs, start organizing, start digging through the treasury docs.

1:24:39Let's see. We got some more massive breaking news. Cali Means has posted about RFK. Let's be very clear. RFK is the most important cabinet confirmation in American history. Bobby and President Trump have gone up against the largest and most powerful industries in the country and are winning. That'd be the food and drug industries. The result is a chance for a healthier future for our kids. And a good friend with Callie, love Callie and everything that he's done to popularize health and wellness and spread a lot of just very interesting and contrarian ideas. I'm sure you've met him. Can you give us some background on Callie and his business partner, Justin?

1:25:19Well, John, Callie's an absolute dog. Co-founder of TrueMed, co-founders with Justin Mares, former brother of the week. uh tru med makes it easy to use your hsa fsa funds to buy products that you're already buying which is a super um super important because uh hsa fsa benefits are are already cool but it's not historically hasn't been easy to spend that money on consumer products uh we got a chance to hang out with cali and justin at hereticon a while back last year and uh cali even then was spending hours every day working on the Maha movement, which is an interesting, make America healthy again is something that we should all get behind.

1:26:02It clearly was politicized in many ways. Totally. But I'm glad to see this get through. And there's so much more to, you know, this is not a political move. This shouldn't be political at all, right? We're trying to make the average, you know, American healthy. There's a lot of aspects of our sort of way of life that simply aren't. And yeah, I mean, what they went up against here is insane. The pharmaceutical, the drug industry spends billions of dollars on advertising with legacy media. They spend tons of money lobbying pretty much every single politician in Washington and at the state level.

1:26:46And so what they went up against to get this done is absolutely incredible. And, you know, personally, you know, we don't talk about politics on this show, but I firmly believe it's not a political issue at all. It's just this this will be good. You know, Americans will get more information and hopefully we can create some guardrails to help everybody be healthier. So I think it's a huge win. For sure. For sure. One interesting note, I'm going to potentially butcher the details here, but just I didn't realize you remember seeing like we pretty much spend all of our time on X. But if you've ever watched CNN, you'll get like three ads back to back for drugs.

1:27:30And you're thinking to yourself, this doesn't seem like a very good ad. right because it's like quick shot of a guy like driving his truck and then like wave into his wife and then it says this drug will kill you this drug will put you into a long-term coma like this drug will do all this and so so so i was always so confused i was like how is this actually good advertising because i come away from this being like this could this could maim me for life you know like it doesn't seem like an ad and um one of the one of the reasons that uh the pharmaceutical industry has had such a chokehold on legacy media is because they're simply spending so many dollars.

1:28:12It would be almost financial suicide for someone like a CNN to ever put out negative coverage of the pharmaceutical industry. And the pharmaceutical industry does many, many important innovations that help us live longer, better lives. But for a really long time, the legacy media just hasn't been able to talk about some issues with the pharmaceutical industry and some of the downsides. And so the fact that they were able to get this through, despite having, you know, the, you know, pharmaceutical industry having so much incentive to not have this happen just shows that the time to make America healthy again has really come around.

1:28:51So congratulations to RFK and Cali and everybody involved in the movement. And I mean, that point like that you just made sounds very political, but it's been that that exact point has been a major talking point of the left for generations. Like Noam Chomsky has the concept of manufacturing consent, and it's exactly that. And so like you could be quoting RFK in the modern era where he's a Republican. You could be quoting RFK from a few years ago when he was a Democrat. You could be quoting, you know, one of the biggest socialists, Noam Chomsky. So this shouldn't be as much of a political football as it is, but I hope people withhold judgment and understand that there's a very positive intention with this movement around health and let's see how things go.

1:29:41Right. And at the end of the day, every American should be able to make decisions for themselves around their health. It's like one of the greatest personal freedoms that we should we should always have. So I'm excited to see what comes of this. Yeah, it's undeniable that lifespans have flatlined. America is getting unhealthier decade by decade. Everyone kind of agrees on that. Clearly, that's a reason to try something different. This is different. And hopefully, it's the right move. So I'm optimistic. Let's move on to Nico over at Default. He had some press for his company written by Brendan Short.

1:30:22and I love this because included in this is a fantastic quote. He says, Nico has moved to New York City and has an office with a bunch of cracked engineers, a hungry team of go-to-market folks who are at the bleeding edge. And to use Nico's words, enough Lucy and Celsius to topple a sub-Saharan warlord. The team is building their company in a way that I wouldn't want to compete with. And so thank you, Nico, for the shout out. I love Default. We need to put it to use on the show. get some, uh, get some outbound going. Yeah. We need, we need our own outbound, you know, uh, guys just dialing, you know, uh, on the phones all day long, cold calling people say, Hey, have you heard about the technology brothers?

1:31:05Exactly. We're asking about you. They want it. They want you to listen to the show. Yep. Give us, you know, just three hours of your day, every single day. We don't ask for much, just three or four hours a day. That's all. Yeah, exactly. Totally free. It's hand-to-hand combat. Every single listener matters. We need SDRs that are convincing people to install the RSS feed. Hey, we'd love to upgrade you from just listener to live stream watcher as well. Have you looked into this? Oh, have you left five stars yet? You know, really develop a relationship with them. It's a relationship business. Podcasting is a relationship business.

1:31:38Yep. And so it's fantastic. Let's move on to the timeline. fine uh we got a funny post to kick it off with uh apparently over the last uh decade the purity of cocaine has increased significantly while the price of cocaine has remained the same and uh and the question is what other industries slash products has this happened in and uh hunter says it's worth noting that private equity has largely avoided the industry and the interesting thing here is that this has actually happened. This trend has happened in a lot of industries, specifically tech industries. Google search has gotten better while remaining free.

1:32:19Like YouTube has gotten more content without changing the price. And there's a lot of products. TVs are basically free. But I mean, so this reminds me, I posted yesterday that Pablo Escobar might be the greatest CPG founder of all time. And I'll just read out some of the stats. So Pablo obviously contributed to this trend, and private equity was actually the counterparty to this trade that Pablo was making in many ways. He was dominating the market in the 80s. He had about 80 % of the TAM at the time. So just to get some ideas of the scale, Pablo bootstrapped to annualized revenue of$22 billion.

1:32:56He didn't really have access to the private markets the way certain entrepreneurs would global operations of sales and distribution hubs on nearly every continent developed an amazon style logistics division he had his own trucks boats planes fulfillment centers ports etc he expanded margin and improved deliverability and traceability and this is you know one of my favorite ones he actually built a prison for himself so he could lock in and really sort of inspire himself to grind harder and then he escaped from it just to just to prove that he could. And he even had a run at politics too. He, he became elected to the house of representatives.

1:33:33So, um, so yeah, uh, I'm sure that private equity is bummed that they couldn't get into that, uh, market, but, um, but yes, other people took advantage. And Escobar is the one that's chronicled in Narcos season one. Is that correct? Yeah. Yeah. Great. The last, the last show that, uh, the last good show that, that Netflix made. oh yeah it's been a rough couple years but i remember watching that but five six years ago it was great highly recommend yeah uh well let's move on to vittorio uh he says be trump 4d chess grandmaster slap 25 tariffs on canada and mexico secure the border or else drama ensues canada and mexico are losing their minds canada screeching about retaliation mexico sweating concedes first and agrees everything tariffs are paused 24 hours later canada folds to total victory economy saved border secured america first uh how does he keep getting away with it and it is it is funny like trump the deal maker he knows how to come in and put the hurt on someone and really expose the leverage and it's interesting that he you know presumably chose to do it over the weekend when the markets weren't open yeah and so he if if that was intentional to try to minimize some of the chaos.

1:34:46Uh, you know, it, it worked well. It was interesting to see how quickly everybody went from, uh, you know, you, you can't just stop the flow of fentanyl. It's, it's, it's impossible. All the stuff to Trudeau saying, yeah, we're, we're sending choppers and the military to the border and we're going to, we're going to stop the flow. Um, and so anyways, hopefully it has a positive impact fentanyl is you know our version of the opium wars so let's get it out of the country but hopefully you know no market turmoil and less illegal drugs like that's a win for everyone I think everyone should be happy about that if that's the outcome hopefully it will be well let's move on to Aaron Levy founder and CEO of Box cloud storage company He says, can confirm OpenAI deep research is quite strong.

1:35:41In a few minutes, it did what used to take a dozen hours. The implications to knowledge work is going to be quite profound when you just ask an AI agent to perform full tasks for you and it comes back with a finished result. What is your experience with deep research been so far? So we've used it for a couple projects this week that are relevant. So yesterday we did a deep dive on Mary Meeker, absolute legend, icon of the bubble, and more recently a venture capitalist. I thought it was very competent at researching Mary Meeker. And the reason for that is that the project was basically collect information from the entire internet, try to rank and get the highest quality sources and then organize it in a sort of sort of linear storyline and help me understand her strengths, her vision, what was her impact, things like that.

1:36:38It did a really good job at that. Today, you tried to use it for for Luke Farreter to try to get a better understanding of his background. And I think it was much weaker, the output. And that's obviously because there's just much less information about Luke online and sort of super high quality sources. So anyway. Yeah. My thoughts on it are like, I can't tell if I'm, I'm probably some combination of bad at understanding the correct way to prompt deep research to get great results. I noticed I was dumping in whole text exports of PDFs and it was kind of just breaking and like bugging out. And so there's probably a better way to interact with it, to prompt it.

1:37:23And I'm sure we'll learn these patterns. And I kind of need to unlearn some of the patterns that I learned when I was using O1 Pro or GPT-4, because for a lot of those with some of them, they have, they have the ability to pull things from links. So I would dump a bunch of links. It would pull all those in other ones, PDF upload. So I would upload a bunch of PDFs and then it would have that as extra context with the deep research. It does, it does a lot of it by itself. So I think with just a simpler prompt, you can get a better result, but I think like doing too much handholding might actually be a problem for it.

1:37:55And so there's still the question of how do I get it a source that it doesn't have access to that's maybe behind a paywall or, or some arcane scroll that it doesn't know about. And I want it to be in the research report. Um, and then also there's just a question of like, for a lot of these, uh, for, for, for some of the really popular topics like there might already be a deep research style report out there just in the form of the wikipedia page or in the form of some sort of podcast somebody somebody was posting that it's basically a new form of wikipedia that you can sort of slightly customize and prompt um but uh but yeah it's interesting that that uh open ai made a huge effort to hype this launch right they have a very good network of investors team members sam etc that kind of can create a lot of hype around a launch.

1:38:46And a lot of people have been working on the same idea using LLMs for research, right? And so there was a bunch of different product layer companies doing this previously. But just goes to show that OpenAI, I do think they're feeling the pressure around the model layer commoditizing and potentially good models going open source. And so they're just needing to innovate more at the product level and say, hey, we're actually not just the model layer. we're operating at the app, the product layer as well. I mean, the easiest win, and I don't know, maybe I'm playing like armchair product manager right now, but the easiest win I could imagine would be just, there's only a text box.

1:39:28And when I prompt it, in my prompt, I say, I'd like you to deep research this, or I'd like you to go online, or I'd like you to use a PDF upload. And then it routes me to the correct model for that. and it intelligently knows, hey, this prompt is perfect for deep research. Let's go over here, 03 high. Oh, 03 mini is actually best for this instead of putting that on me because now I wind up with, I write the same query in five different tabs with all the different - Yeah. Here's how the workflow will actually work, right? As you go to XAI and you say, hey, I want to do this thing. How should I do it?

1:40:06And it says, well, I can route it here if you want and then bring it back or I'll try this and I'll try it in a couple different places. And so it's interesting to think about how you might use a model to help you better understand how to use other models and just get the best output. 100%. Yeah. There's already a version of this happening with like the open router system where a lot of the programmers who want to use an open source model will, instead of just saying like, I want to use DeepSeq v3 hosted by DeepSeq, they will say i just want to use this model at the lowest possible cost and all of the different servers and and and companies that serve these models are out there competing on price and whatever load balancing is going on whoever has the lowest cost of energy or gpus that day low demand will price their model dynamically and route you to that we just need kind of like a new layer a new abstraction layer maybe because i mean it'd be very cool to have like you know there's one place where I go to prompt, oh, looks like you want to upload a full book, a million token context, Gemini for that.

1:41:13Oh, looks like you want to do some deep research, chat GPT deep research for that. Go here, do this. And just kind of route that intentionally. But I do think all of this will be solved very quickly. It seems too obvious to not be already in the works. And this is one of those things where we're talking about it now, they're probably putting the polishing touches on it right now. It'll go out. Once it's a meme, the company knows, especially if it's a fast-moving startup with a founder mode CEO and all this other stuff. Like it's not, it's not like, uh, you know, talking about Google where people will say for years or Apple, people are beating the drum of like Siri doesn't work for years.

1:41:47And it took them so long, uh, open AI, like they're, they're moving fast. They got, they got it. Okay. Look at Apple today. Everybody's saying your, your photo app is the worst app that I've used in, in forever. And they're like, okay, we heard you loud and clear we're going to launch a part of full uh competitor now uh it's just like please just just fix the uh the photo app yeah anyways uh anyways let's move on to uh nakil uh krishnan he says if there's a market map you're too late do you get this reference is this is this a kanye oh it's drake it's drake okay it's a it's a cover art okay yeah uh i don't I'm out of touch.

1:42:29You just, you just, uh, out of yourself as not being a Drake fan, which is not the worst thing to be out of all the way, baby. Um, anyway, it was great. Uh, great graphic. I mean, this, this is, um, I mean the, the original album, if, for those, uh, that aren't, uh, Drake enthusiasts or didn't pay attention to pop culture, like 10 years ago at this point, um, uh, is if you're reading this, it's too late implying, I I'm sure he had some sort of beef with somebody and he was dropping the album and you know you know was saying if you're reading this uh you know i already dissed you or something like that um in this case i do think it's true a lot of the best companies get started before there's a market map you look at andrel and palantir you know these these uh yeah maybe you could go back and look around when they were incorporated and make a market map but it's really more like by the time the market maps are being shared publicly on X, that is not the right point to try to start the company.

1:43:34Right. Yep. And it's not to discourage entrepreneurship or getting excited about a category and making a bet there. But usually by the time the market's mapped, there's a bunch of super, super talented people that are already tackling different areas of it and maybe have a two, three, four, five year head start. Right. Sometimes even more than that. There are two notable exceptions I can think of. First would be Google because there were a lot of search engines and they were definitely mapped in Mary Meeker's report. Excite, Lycos, Yahoo. It was very clear that there was a defined market and maybe it wasn't a market map on Twitter because Twitter didn't exist at the time, but it was clearly understood.

1:44:17And then the other one would be Facebook actually, because LinkedIn had already started. And there, I believe one of the early investors, maybe it was Reid Hoffman or somebody in Peter Thiel's network had actually started a company called like socialnetworking.com or something like that. And a lot of people were circling and Peter has said that like, he knew that there was going to be someone that cracked the code. And so he went, when he met Mark Zuckerberg, he was like, I'm in. uh and so there there are some exceptions but uh but yeah i mean once it's a full market map and there's like hundreds of companies it's a little bit rougher it's more it's more just like okay if there's a few competitors and they're doing something really fundamentally wrong there's probably still innovation opportunity but if you're just like looking at a market map it's going to be a rough go anyway let's move let's stay with meta actually and move into uh a news article from the Wall Street Journal, Meta in talks to reincorporate in Texas or another state, exit Delaware.

1:45:14Potential step by social media giant follows similar move by Elon Musk, who moved to reincorporate his companies in Texas and Nevada. And so Sheil Monat says, Delaware probably lost its status as a place where most companies choose to incorporate. Huge hit to the state budget. 40 % of general fund comes from franchise taxes and corporation fees from companies who choose to incorporate there due to the business-friendly approach. And so, yeah, it'll be interesting to see like, you know, YC and Stripe Atlas, they still kind of recommend Delaware. It's like the standard thing, but these things change over time.

1:45:50Yeah. Hopefully I'm not lagging too much. It seems like my connection's dropping a little bit. But yeah, so give some people some backstory here. So obviously every venture-backed startup has been incorporating in Delaware. I've invested in over 50 companies. I don't think I've invested in a single company that wasn't incorporated in Delaware originally. And yeah, you can register in other states where you kind of operate, but the actual incorporation happens in Delaware because there's so much case law there. It just makes sense to do it. It's sort of been the default and Delaware has really benefited from that.

1:46:25Now, what happened and why Meta is making this move is that there was a very high profile lawsuit. I think we covered it at different points where there was a Tesla shareholder who had something like seven shares or something like that. Or maybe it was even, it was like very small number of Tesla shares. And he basically partnered with a law firm or a group of law firms to bring a very aggressive case against Elon's pay package saying that it wasn't in the best interests of the company and ended up being, I don't know where it's shaken out today. I think it was the judge ruled in favor of the shareholders and said, no, this is not right, even though it had been approved back in the past.

1:47:11And then they did a vote to overturn it. And Elon was sort of rallying the troops and saying like, hey, I had, and originally the pay package was set up in a way where Elon had to hit the world's most aggressive sales and growth targets to achieve the pay package. And he basically did the impossible to do that. And then you had this hyper sort of political judge in Delaware who struck it down. And what that means is every CEO now is saying, look, I don't feel comfortable operating out of Delaware if judges there are going to get involved in basically the internal decision making at the company, right?

1:47:52It just doesn't, it really doesn't make sense. And so now you have people moving to Nevada, some people moving to Texas. And we'll see what shakes out, but huge cell phone from Delaware. Yeah. And so I just looked it up. The story was Elon calls his shot and says, I want more equity in Tesla. And you you will benchmark my performance to the stock price, which is the purest essence of shareholder value creation for a CEO. It's perfectly aligned. He's not talking about revenue or deliveries. He's just talking about if the value of the company goes up, this will be accretive for everyone. You will dilute yourself because you're giving me more shares, but your shares will be worth so much more.

1:48:41And so during that time, he like 10X or 100X the stock. It went way up, generational run. And so he hit all of his targets. He was ready to get that package. The Delaware court struck it down. And then Elon did a shareholder vote. All the shareholders were like, yeah, this is great. Like this guy's putting up insane numbers. Let's give it to him again. And then a judge struck that down again. So as of December, 2024, the pay package has not been approved. But if they reincorporate in Texas, they can try and go approve it again. and then the Delaware judge would not have the authority to block it.

1:49:15And so, yeah. And to be clear, the real devil in all of this is the law firm that I believe made hundreds of millions or billions of dollars in fees as part of this lawsuit, even though the original plaintiff in the case, the shareholder who brought the case, had something like seven shares or something like that. I need to dig into more of where that money actually came from. In terms of the person who... Yeah. I need to dig into more of where that money for that law firm came from because the money had to come from somewhere. clearly couldn't come from the plaintiff if they just own seven shares or something like that.

1:50:04So maybe the Delaware court awarded it. I wonder if that's on hold as Elon's fighting back. It's all very unclear, but certainly worth a deep dive and certainly reshaping how large tech companies think about where they're incorporating. Because I don't know if Zuck wants to do some sort of similar pay package. He already owns so much of Meta. I don't think it's that big of an issue, but it's certainly scary thinking that the shareholders collectively could want to do one thing and then a judge could say hey actually we we we don't want you to do that even though it's it's massively popular amongst the shareholders broadly uh anyway let's move on to gary tan gt's on the timeline again with a low tam banger that i thought we should highlight here because we love cars he says if you like cars watch this space and he's quote tweeting bubs who says the car community for the car community it's going to be fire and he posts a logo for something called rides.

1:50:59I couldn't find any more information on this, but I wanted to track it because it seems like maybe it's a YC company. Maybe it's some sort of ride sharing or car community. Maybe there'll be the ability to buy and sell cars on there. All seems very interesting. I've always thought there was an opportunity to build like a Strava like app for a car enthusiast because people are constantly doing, you know, I'll meet up with friends to go for a drive. I'll share that drive with other people. There's little rallies that happen. There's car meets. There's things like that. And then, so I'm just totally sort of extrapolating what something like this could be.

1:51:41But I do think that you could use a social network to bootstrap a actual secondary marketplace for cars. And some of these car marketplaces can be extremely lucrative. And so anyways, cool opportunity there. We'll have to, Gary, send us some more information and we will use the app and talk about it on an upcoming show. Let's move on to Ryan Peterson. Can't believe this app is only$8. Absolute banger, 40k likes. He says, Dear Doge, please look into the US Mint in San Francisco. It occupies an enormous block of prime commercial real estate. And all it does is produce special commemorative coins for collectors the coins aren't even cool and elon says noted noted damn bad bad day to be a commemorative coin i gotta say if you're seeing that post get 40 40 other side of this i i'm very pro pro physical commemorative coins generally anti the meme coins i i i think these are the the commemorative coins are lindy maybe the designs aren't cool that's an easy fix let's get a flex export coin let's get a spacex coin made from the mint well yeah i was i was pro crypto until i bought uh the client the official kleiner perkins oh did you lose it all i think i lost it all the market cap last time i checked his went from 10 grand to something like zero and so i'm gonna have to talk with everett about this and see you know you should send him your tokens yeah yeah yeah Yeah.

1:53:13No, honestly, there's like a commemorative token for me. It is. Leave it in the wallet. Everyone will know. You bought Kleiner. I was early. Do not buy Kleiner. It was a hacked project, by the way, in case you're just tuning in for the first time. This was a hacked meme token on Pump.Fun. We do not support this and it's not financial advice. That is correct. Anyway, let's move on. And it's worth noting that the app would cost negative$8. You know, negative, like Ryan Peterson is actually printing money. If you're getting 40K likes on a post, you're definitely making your eight bucks back by being a premium subscriber.

1:53:54So shout out to Jacoby and Tyler and all of our friends at X for making X usage profitable for posters. Yeah, for posters. Let's go to Willem. He says, our children will romanticize the last era of pure human creation in ways we can't imagine. And he posts a screenshot that says, cultural memory has a certain rhythm. Every generation romanticizes the era roughly 30 years before its own. Gen Z clings to the pixelated naivete of the 2000s. Millennials buff the 1980s and 90s into a yuppie golden age. Gen X yearned for 1960s idealism. But the 2020s will mark a rupture in this continuum. When an AI-generated song hit the billboard charts in 2023, the prior century collapsed into legend.

1:54:46The last time creativity wasn't a dialogue with silicon. I think that's very well-written. Very interesting. Well, lock in, brothers, because this show is not a dialogue with silicon. Yeah, it's cool because even so, so Willem is an investor in a company called Visual Electric that makes the, so far to me is it's an amazing alternative to stock photos because you can just go in there and it's similar to Mid Journey, but it's more oriented around designer use cases. So I've used it to create a bunch of assets. I used it to create an asset for PMF or die. Super powerful. But ultimately I don't, I think it's still like the idea that, we've been romanticizing every art form forever.

1:55:33We romanticized, you know, hitting, hitting a stick at the right tempo against another stick. Right. And we moved sort of up the chart. Um, and, uh, ultimately the, the, the power of combining the human mind with, uh, you know, new tools creates beautiful things. So it reminds me of that. I think it was, was it Grimes that was just absolutely dunking on the guy who was doing the AI song generation tool who said, oh, it sucks to learn music. You know, why even learn when you could just generate songs with AI? But ultimately, I think these new tools are just going to introduce more people to the process of creativity.

1:56:12And then as you get, as you fall in love with the pure process of creation, you realize that um you realize that uh that that the pure act of creation is so enjoyable totally um and so stimulating that that you you'll use the tools and then you'll take them to new places that they haven't been then you'll combine them with your own genius and and well things happen yeah study chess chess has been solved by computers for decades It's more popular than ever. People like watching people do things. And this is not going away, even as the computers defeat humans in all of the evals. The entertainment will continue on.

1:56:54Let's move on to David Ulovich over at A16Z. He says, for the 12 ,589th time, revesting is actually is usually the founder CEO's friend the email below from council explaining to CEO why the departing co-founder is basically fully vested I explained this all to no avail in the series b and the email says closing the loop on this for the rest of the thread the revesting concept was proposed early on in the series b negotiations but dropped in the final term sheet so it was not included in the series b docs best rough best brutal clearly some sort of co-founder dispute somebody leaving and the vesting uh they they did not revest and so uh yeah and so nothing to negotiate yeah just uh for for some context if you go on stripe atlas today or you do a standard incorporation with a goodwin or a cooley or someone like that they're going to set the founders up on a four-year vest.

1:57:56That's four years is a long time, but oftentimes it takes many, many, many, many years to build a company far beyond four years. And so especially now when a company can go from zero to a series B or even further in a few years, you end up in these situations like David is highlighting where a founder is able to leave after three years and And they've almost fully vested their shares, yet there's so much more work to do. And in that situation, they could have the same amount of equity or close to the same amount of equity as the CEO and the team that's going to continue to work on the business.

1:58:34And so, um, so yeah, I think, uh, it's always an opportunity to, to extend, um, extend out the vesting period. And, and it's usually in the benefit of the person who's, you know, going to continue working on that business day to day infinitely. Yeah. Yeah. And I mean, that's what the negotiation during series B was clearly framed around was, Hey, look, we're going to go bigger. We're raising money. We are going to be in this for another four years, another eight years, decade. so let's revest to make sure this is the team that's like staying on board and because like refresh grants just aren't going to be anywhere near what the initial founding grant is and so but it can often be seen as a very adversarial between the co-founding team and the investors and so the co-founding team says like we don't want to revest like what if you fire us all or what if we leave like then we won't have our equity we started this company and it becomes this big debate.

1:59:33But even I think the happy medium here can be just extending the unvested portion at the Series B. And so maybe you're halfway through a four-year vest. You take the second half that has invested and you extend that to a new four-year vest. So you're not actually losing the shares that you vested on the original schedule. You're just extending the unvested shares. And that's kind of a happy medium that can work out sometimes, but it's always tricky because, yeah, I mean, you could not be doing your job, get fired, and you're like, ah, I didn't get my full stake, which I wanted, and that would have been awesome.

2:00:13But then, you know, like, what's fair to the team? What's fair to the people that are going to go build this company for the next decade? You know, you got to have equity for those folks. You got to have them aligned. Anyway, we will end it there. Thanks for tuning in. Thanks for dealing with all the technical difficulties. We are still ironing things out, but, uh, that's what comes with being the number one live show in tech. You know, you just got to figure things out sometimes. So you got to wrestle with, you got to wrestle with tech. It's not always autonomous. Sometimes it acts up and you gotta just figure it out.

2:00:47So thanks for bearing with us. We're trying to get 100 % better every day. You know, a lot of people say, I want to be 1 % better every day. It's not enough for us. Doing our best to hit 100 every single day. And soon we'll be at the top of the charts. I love it. Leave us a five-star review, Apple Podcasts and Spotify. Leave an ad in your review and we'll read it on the show. Thanks so much for tuning in and we'll see you tomorrow. Thank you, folks. See you tomorrow. Thank you. Bye.