Freedom 250 Recap with Bo Nickal, The Hand Anthropic Was Dealt, Fox Buys Roku | Bo Nickal, Gavin Baker, Leif Abraham, Aaron Ginn, Rafael Vivas

26:41Yeah, I don't know. Did you have to pay for it in addition to? No, no, no. Okay, so you pay for Paramount on a monthly basis, and then you get UFC for free. Got it. Gambling is just min-maxing done poorly. That's true. That's true. Anyway, so the news around Meta is, Meta's doing a 180, trying to be the vanguard of token minimizing. Two months ago, Meta epitomized token maxing, on track to spend billions a year on cloud, et cetera. We've seen an exponential increase in AI usage and we are tracking to spend billions on internal use alone in 2026. The memo said, at the same time, individuals and teams have limited visibility into and control over how they use AI.

27:22In 2027, we expect Meta will move towards managing AI tokens in a more structured way with bullet budgets, allocation decisions, and supporting tools. That makes sense. You have a marketing budget. You should also have a token budget. I also saw something they have like MetaCode, which is their internal. Yeah. That makes sense. I mean, they're like, you know, catching up to the frontier with. Yeah, I mean, Zuck talked about this. There's a bunch of like these leaked calls where Zuck is like, you know, you should imagine that MetaEmployees are going to be better than like the average open source contributor.

27:53So it's like the basically quality of coding data within meta should be super good. You can train some model on that. It's the same pitch as take a frontier model, bring them in through some sort of consulting partner. They fine tune on your business workflow. They automate your business process. But your business process in this case, if you're meta, is generating code that makes your social networks better. Yeah, especially good because in meta, all of the internal business data, it's already in code format. You don't have to scan in a bunch of papers into digital. I still don't know what meta is actually building.

28:34And I think there comes a time soon that they should probably communicate that to the market. Personal superintelligence, baby. What's there not to understand? No, it's just, okay, what is that? What does that mean? 75 % as valuable as SpaceX, buddy. Come on. It's crazy. SpaceX, well. SpaceX is 2.3. Well, if things keep going the way they're going, we'll see even more of a divergence. No, but I think like it's so unclear. You should be able to put a lot of the SpaceX bull case on meta, right? It's like, sure, maybe Colossus was built a little bit faster, but meta is pretty fast. I think they're wildly, I think they're, they're couldn't be more different with meta right now.

29:18It's the bowl case is it's potentially the greatest business in the history that is not threatened by AI. Totally. That actually is accelerated by AI. Yeah. And, and I don't think any, anyways. Yeah. But I do think I would expect some communication from Meta around what their real strategy is over the next month or so. Because it's killing them that they just keep saying, oh, we're personal superintelligence. But wait, they're building a coding harness and they're working on coding. Are they going to sell that externally or is it going to be internal? Coding? Are they going to try to... Coding seems like it makes sense.

30:01Are they going to try to sell their model on an API and get into enterprise? The big question is, do they take the leap? They kind of did that with Manus, but that's getting unwound. Well, let's talk to Gavin Baker about it. But first, let me tell you about the New York Stock Exchange. Want to change the world? Raise capital at the New York Stock Exchange. Our next guest is the CIO and managing partner at Trades Management. You've heard him on Invest Like the Best many times. Gavin Baker, welcome to the show. How are you doing? Doing great, man. How are you guys? Fantastically, right? SpaceX IPO.

30:34It seems like everything went just flawlessly to a tee, like to the point where it wasn't even dramatic. Let's give a round of applause for the banker. The banker. It's like 20 % perfect. 20 % pop almost to a tee. Yeah, what I mean by that is like, it would have been more dramatic if it had like popped up 70 % and then went down 30 and then went up 50 and it was drama. But it was just like perfect execution from start to finish. Was that how you interpreted it? I thought Goldman Sachs and Morgan Stanley did a very good job. Yeah. What do you think the market is looking for SpaceX next? Is it all eyes on the first earnings report?

31:10Like, where do we go from here? Because there's so much of the SpaceX story pre-IPO that was a decade out, five years out, two years out. But is the market going to be processing quarter by quarter plays like many other companies? Well, I think the market is always, you know, quarters matter. Yeah. Um, you know, the runners on X, you know, it's like, they're these reply people on X for any topic or experts. Yeah. But, um, somebody once told me a marathon is 26, one mile runs. Yeah. And so, you know, and then all the runners were like, no, that's not true at all. Right. You know, obviously running miles different than running a marathon, but you know, every quarter matters.

31:50But at the same time, I do think if you look at how the market has looked at Tesla over the last five, six years, Amazon during kind of the days of when they were building out AWS and then kind of their retail distribution infrastructure when they'd go through these investment cycles. I do think the public market has a much greater tolerance for investment and a much longer time horizon than a lot of people in the venture ecosystem give it credit for. By the way, this is Foxy in the back. He's one of the analysts here at Atreides. I was just listening to him on the Brad Gerstner podcast. I think he chimed in on that, right?

32:34You brought him with? There we go. Yes, he did. But he did the work on SpaceX, so I thought you guys might want to talk about that. But I do think that I'm not sure the story is as far out as you made it seem to be. I think there are two variables that are going to matter a lot over the next year. The first is just how quickly can they bring on terrestrial compute? It does seem like they monetize gigawatts at a higher rate than anyone else. And we know from Jensen that they bring on data centers faster than anyone else, per Jensen's words. And everyone in the ecosystem is really incented to get land power in the hands of people who can energize it because everybody starts making more money when the GPUs are energized.

33:26So, you know, if they can, what was the altimeter figure for what they were monetizing gigawatts at Foxy? Do you remember? for which deal? Well, I think it was like two to three, wasn't it like at least two times higher than like average NeoCloud pricing? And that's partly due to scale and customer quality and things like that. But it was meaningful. Yeah. So they're doing 50 billion gigawatts on the Google deal. So how quickly they can add gigawatts really matters. If you can energize two, three, four gigawatts in the next year, that's a lot of revenue. Now, you know, that prices may go up, they may go down, but that's really going to matter.

34:06So all eyes on Colossus 3, 4, 5, 6, 7, 8, 9, 10, et cetera, at least in the short term. Yeah, or macro hard, macro harder, macro... Hardest. To that name, yeah, macro hardest. And then I think cursor is another big variable. You know, we talked about it with Brad about how Composer 2.5, after three weeks of, you know, RL and supervised fine-tuning Colossus 2, is kind of Pareto dominant. So what's going to happen when it's applied to a bigger, better base model? I do think Cursor being in, you know, half the Fortune 500 is interesting. So I think those two things, while I'm super excited for going to Mars and asteroid mining and a city and mass drivers on the moon, all that stuff is awesome.

35:01And I think there's a decent chance it happens in my lifetime. I just think there's much more tangible near-term drivers here. Yeah. How do you think about the tension of the cloud business versus their own application and model business? I think a lot of people were surprised when the initial Anthropic deal happened purely because knowing Michael Truel, he would have been very excited. That's my compute. Yeah, yeah, get access. It's like, hey, you got to share? It's not an only child around here. And it feels like you can imagine SpaceX bringing on a lot more compute very quickly. But at the same time, every lab has had to go through this tension of like, how much compute do we allocate to training versus inference?

35:48A way to interpret that is that maybe the team at SpaceX is pretty confident in their ability to bring gigawatts online. Yeah, that makes sense. And the altimeter figure that they've ordered 20 % of the Rubens. And the Ruben is an epic chip. Like Blackwell, it was really hard to get it online. Ruben is kind of a more drop-in replacement. It's a really, really good chip. You'll have the Grok LPUs integrated at some point in the next six, nine months. So one way to interpret that is they're pretty confident that they can bring data centers online pretty quickly. But I also – I don't remember all of the details, but I do think there was an out in the anthropic agreement that if they – Yeah, and the Google – and the Google deal.

36:40Yeah, it could be short-term. That's what I just meant. It's like it is – there is like a tension there where if you – there's a moment where maybe you want to compute, but you don't necessarily have all of the revenue yet. And so you could see – anyways, I'm very confident they can figure it out. On the topic of Elon Web Services, is there a world where SpaceX winds up building out more of what looks like AWS? We've seen between OpenAI and Anthropic, there's this tension of you've got to be on AWS because ITAR or the ecosystem or enterprises just want to be on AWS. They won't even go over to Azure or Google Cloud for whatever.

37:17And you could imagine, is it enough to just be a token factory or do you need to have a database and an in-memory storage and cloud storage and all the things that ABS provides? My thought is that being a token factory is more than enough for the next five to 10 years. Man, we need more token factories. But we'll see. And if they need that stuff, they will build it. Yeah. How are you thinking about the other hyperscalers, the other big tech companies? We were sort of puzzling over meta strategy at this point. Tons of resources, cash flow, data centers. They have experience there. Maybe they're not as fast as SpaceX, but there's a lot there.

38:03But it's a completely different motion to go into token factory. And yet there's still a lot of demand. So how do you think all of that plays out? Well, I think there's many ways to go to the token factory business. If you're meta, you could just say to someone like Fireworks, hey, here are 100 ,000 GPUs. We'll take a revenue split and we'll see what happens. I am increasingly looking at EV to net PP &E as a valuation metric. Just with the idea of being installed atoms on Earth, I think are going to appreciate in value. This is a little bit that halo trade that I think maybe Goldman Sachs came up with, high asset value, low obsolescence.

38:49But Meta's EV to net PP &E multiple is in an interesting place. It just suggests that the market has an immense amount of skepticism about their ability to monetize their own asset base. And I think that's warranted given that all we've really got out of management is this concept of personal super intelligence. And it would be different if Meta AI was at the top of the app store and everyone you were talking to was like, yeah, I'm using Meta AI. Or even there was a killer feature within Instagram. It's like, oh, people are shopping in Instagram now. And I think no one doubts that once Zuck has an AI product with a billion dollars of revenue, he can take it to tens of billions.

39:32But it's unclear. I feel like, you know, going into enterprise, like, you know, what is this API business going to going to look like? We know they can use the GPUs just on making the ads product better at the end of the day. And but there's a lot of questions. Look, I think a few things I do think. If I look at the way different players are behaving, it feels like everyone thinks we're entering the end game. Everybody, you know, loves to use these chess analogies. and it looks like the end game may be sooner than we think. I think that's why OpenAI is cutting codex pricing simply because coding tokens are so valuable and if you don't have enough of them you may not be able to get into this RSI loop that everyone is pushing for.

40:26I think if you're Zuckerberg you feel that acutely. I thought Muse what is it muse spark it was to me it was an upside surprise and it made me feel like you know what's the uh what's what's what's from talladega nights or what is it so you're saying there's a chance oh yeah like yeah so you're telling me there's a chance um i mean the other quote from talladega nights is if you're not your first if you're not first you're last and and that's how a lot of people there's so many good quotes from talladega nights It's all the windshield. Yeah, 100%. But I think if – I'm pretty confident Mark Zuckerberg has proven to be a good entrepreneur over time and has been willing to pivot.

41:14And it's just – it's so funny. Right now, Facebook is – Meta is telling investors there's like no chance that we're going to monetize GPUs externally. well like 10 days before they announced all those layoffs um which i think was at the end of 22 if not i don't remember when they started to announce the layoffs it was shortly shortly after brad maybe two months after brad wrote that letter to mark where he said you're the king you can do whatever you want but this is what i might respectfully encourage you to do um you know they went from saying we're not going to do that we're going to keep investing to you know super focused on OpEx in a couple of days, man.

41:58So it's like people, they meet with Meta and they hear, oh, we're not going to monetize our GPUs externally. Well, I don't know. Check back in a few hours. Yeah, yeah. No, it's like everyone, it comes down to like everyone has a price. You look at Elon and Anthropix's relationship four months ago, and then you look at kind Kind of as the opportunity unfolded, it made sense for them to partner. I wanted to ask how. On the meta thing, I think there is one point that's important. What ultimately drives behavior for all these big cap companies? Like getting to AI, I think that does feel existential for all of them.

42:38But the stock price also really matters. Because if the stock goes down, you know, you gave people a grant at this price, stock goes down. You know, your engineers are unhappy. And it's tougher to get to where you want to go if you don't have these – now forget the 10x engineer. People are talking about the 10 ,000x engineer. You're not going to get there if you don't keep those 10 ,000x engineers. So just I think we'll see with Meta. Yeah. Yeah. How did this IPO update your general kind of framework for the role that retail is playing in capital markets? It's a lot of it was very funny last week to see people like say like, oh, the IPO is only 2x oversubscribed by retail.

43:27All these other three billion dollar IPOs were 10x oversubscribed. And it's like, no, we're talking about, you know, a very order of magnitude difference here. But it still feels like retail is going to play a very, very important role over the next 12 months, maybe more so than ever, given that the hyperscalers are now running cash flow negative. You have the conflict in the Middle East, right? There's rebuilding efforts that needs to happen. And so I feel like this is kind of retail's moment now, maybe more than ever. Yeah, well, so a few things. One, people say retail in a pejorative way. And I would just say stupid is as stupid does.

44:11and like, you know, we track, you know, there's all these indices of retail favorites and man, they're up a lot and they're up a lot 25 and they're up a lot 24, you know, so kind of stupid as a stupid does. So I'm not, um, you know, like I think retail is probably outperforming the overwhelming majority of professional money managers, whether they're, you know, private equity managers, venture, you know, public equity managers, whatever. So like Retail, I don't think it's a majority. I do actually think in the case of SpaceX, I'm not sure you process so much information. I'm not sure where this comes from.

44:52But I actually think after the IPO, for whatever reason, some of that retail stock may have gotten allocated to people who were flipping it. Because my understanding is there was more institutional buying. I don't know where this – after the IPO, there was retail buying. Now, I'm sure retail is very sensitive to momentum, so maybe what's happening today changes that. But I think another really underappreciated thing about the SpaceX IPO is that over 10 ,000 SpaceX employees bought on the IPO. And that's just – everybody does all these lockup analyses and, oh, how much stock is going to come to market.

45:34And for sure, there's all these triple-layer SPVs or whatever. or maybe there are, there are, people speculate there are. And I'm sure some of that will get unwound. But the reality is that SpaceX employees own a lot of this. And if you're an employee or even if you're an investor who has an SPV or you're directly on the cap table, you've had a chance to sell every six months for the last 10 years. If you wanted to sell, you could have sold and, you know, whatever. when they did that offering in the second half of last year. So I think the supply-demand dynamics here are going to be very interesting.

46:12But with retail in general, yeah, man, they've been a more powerful force in the market over the last three and a half years than at any other time in my career, including the year 2000 bubble, which I think this is nothing like, by the way. But yeah, they matter. And stupid is and stupid does. I'm interested to go a click deeper on the idea of like value will accrue to companies that are in the token path. I think that phrase is extremely powerful right now. But I want to sort of expand it and understand the fringes of the token path because we talked to Matthew Prince at Cloudflare. Stocks at all time highs.

47:01it's delivering tokens at the edge. And obviously there's an immense amount of AI agents that are interfacing with different websites. They need to be distributed. So there's a lot of value there, but is Cloudflare in the token path? If they're the one finally sending you the packet of tokens at the edge, or does that not count? How does that, how do you think about that? Every CDN has this business, you know, Akamai, they signed. what was it, a$1.8 billion with Anthropic? And if you have all these points of presence and you can deliver really low latency tokens to high-value users, I think what's interesting for all these CDNs is they're getting a massive premium for that latency.

47:47It turns out one of the lessons from Cerebris is people are willing to pay for speed. And you see that in the prices these guys are commanding. But I do think, I mean, my gut is in terms of tokens, consumed on planet Earth, these CDNs are delivering less than 1 % of them. I mean, maybe less than 10 basis points of them. Most of the tokens are happening internally, and then you just get the result. Would I say that these guys are in the token path? I mean, I would say they have a path towards being in the token path, and they have part of their business that's in it today, and like everyone, and they're trying to move it more and more there.

48:30Yeah, I mean, Matthew was talking about co-locating NVIDIA servers on the edge, specifically for the delivery of voice models, because you want those to be very low latency. Maybe you want your coding model to go off and cook in Virginia for 20 minutes or an hour and then come back to you with the final result. But if you're trying to actually talk to a model, you probably want it as fast as possible. What about on the opposite end? Wasn't there that startup that NVIDIA just invested in that will pay money? to put a GPU, you know, a four GPU server on the outside of your house. I mean, yeah. GPUs are going everywhere, going in your bed eventually.

49:09I mean, it's full circle too, because wasn't Jensen talking about stuff like that back during like the original crypto cycle being like everyone's going to be, you know, mining. Yeah, and I mean, the Tesla Powerwall is like a version of that for storing energy. It doesn't store compute, but it stores energy locally on the edge, off the grid. And there's a lot of powerful things that get unlocked by that. What about land? Is land in the token path at some point on the extreme other end? Because people are obviously searching for going further and further upstream. They found a toilet company that makes a particular material that goes into semiconductor supply chain.

49:45People are hunting for like the final ingredient. Maybe it's just sand that turns into silicon. Yeah. I do think the bottleneck bros, as they are called, are – this like bottleneck trade is kind of nearing its end. Okay. And I did – the Wall Street Journal had the story about this Japanese company that makes – I forget what they make. Isn't it Toto? Ajinomoto. Yeah. Ajinomoto. And everybody's in this because they thought they were going to raise prices and then they just said, we're actually not going to raise prices. This is the wrong thing for us. And I almost posted yesterday on X, welcome to Japan, to all of the bottleneck people.

50:29But, you know, everybody's, you know, having claw and run. What's the next bottleneck? That was the game for the last year. The next game is what has enduring franchise value kind of on the other side of these bottlenecks, whenever that is. As far as land, is land a bottleneck? Man, I do think the math for orbital compute, to me, once they can reuse Starship, I think the math for orbital compute becomes pretty compelling. You know, it's just$60 billion to bring on a gig terrestrially. $25 is power and cooling. You don't need that in space. And so the right comp for that$35 billion of IT equipment, GPUs, CPUs, switches, memory storage, is that$25 billion versus the cost of launch.

51:21And once Starship is reusable, I think the cost of launch is$5 billion. So that means you can put a gig into space for$30 billion, and a gig on Earth is$60 billion. and that 25, the power and cooling, feels reasonably inflationary to me. So I don't know that I would say land is in the token path. Maybe beachfront property, but that's about it. Beachfront property is beachfront property, airplanes, really nice cars. Firmly in the token path. All that stuff is in the token path. I gotcha. How do you think the events of last week with Anthropic and DC update different countries on their own sovereign AI play?

52:08Because there's been attempts. It doesn't feel like many of the attempts have... You can have a powered shell and you can have the best GPUs, but if you don't have the talent, it's going to be really hard to get to the frontier. And now if you don't have massive usage, it'll also be really hard to get to the frontier. And so do you think the ship has sailed? No. Well, look, look, I think every country is going to want to have their own sovereign AI strategy at a minimum for national defense. I think where that ends up is I saw today that the EU had restricted exports of Mixtrall's. I think that's a joke.

52:46I think that's a meme. So people have gone so far on the Mastral-Lachat thing, Lachatant, that they're saying it's like mythos is distilled on it and it's breaking all the benchmarks. I think it's a good model, but I don't know that it's quite there yet. Yeah. But you can imagine that we get there for sure. Yeah. So I think what sovereign AI will look like for essentially all countries really other than the United States and China, although I think China is going to fall further and further behind, is just some sort of, you do, you use, you know, you use one of these providers to do some reinforcement learning on your language, your culture, your values.

53:27You have a system prompt, you do some supervised fine tuning, and you run that on whatever the best open source model is. I think that's where sovereign AI ends up. And then you run it in your own data centers. So you feel like it's safe and whatever defense questions you're asking it or whatever, forget questions, whatever, defense and intelligence and maybe policing activities your sovereign AI agents are doing 24 hours a day, you feel like they're safe. So I think that's where sovereign AI ends up. And I think there'll still be a big build out for that. But man, sovereign AI at the frontier, I don't see it.

54:09Yeah. What do you think the drivers are of the widening gap between Chinese open source models and American closed source models is? China has made a terrible mistake not, you know, taking – it feels like the administration has been willing to let them buy H200s or B30s. Oh, yeah. And I think they're on this like, you know, they have this crazy belief that, oh, you know, our own internal chips are good enough. They're not. Yeah. And then, you know, I think what's making them think that is that Chinese labs are very, very good at distillation. Somebody told me it only took 160 ,000 reasoning traces from 01 and 03 to get the original DeepSeek.

54:52You know, they're very clever at industrial scale distillation, running it through multiple APIs, pinging each API from, you know, we've all seen those iPhone farms in China. But they've got the same thing for distillation, and they've got 100 ,000 endpoints distilling these models across every API available. They've gotten really, really good at that. But man, all that goes away if people stop releasing these models at the frontier. And I think Mythos is a side of things to come there. Yeah, yeah. It seems like they're getting much better at locking down the reasoning traces, locking down the espionage.

55:30It feels like back during the 01 days, the labs weren't even aware that distillation was so possible that that was something that was such a potential threat for sure. Jordan, please. Is any part of you worried that you'll never see another company like SpaceX?

55:53Worried is the wrong word. Not worried, but you have to appreciate that a moment like that, it's possible that you have an opportunity to invest in a company like that one time in your career. And thank God you did it, because there's plenty of people that had the opportunity and didn't. Well, I did own 15 % of the video when it was a sub -$2 billion market cap, but I owned 10 % of Tesla when it was a sub -$2 billion market cap.

56:25But SpaceX, certainly, it's been a special experience for me. And I think there is a chance that it is, you know, one of the most important iconic companies of all time. I mean, it already is. There's a chance it's the most. and I think in general it's just like I kind of want to take a step back and like all this trillionaire hate from the left it's like you know there's a great post from my friend Kevin Mahaffey saying like oh this is a Bond villain who's decarbonizing the world last time I checked on the left like the environment connecting poor people in low-income countries, schools and hospitals, to the internet at very low cost.

57:16And he's helping wide people see today and interact with the world. That's a villain. And then just like, there's so many parts of the SpaceX story, like all of the blue-collar workers who've gotten super well. If you're opposed to data centers on Earth, because the environment, Well, SpaceX is your solution. So, you know, there was another great post that just said, you know, the left won and they don't even appreciate it. The world's first trillionaire, you know, has done more to kind of solve the environment than like everyone else on Earth combined. Yeah, I saw there was another good one. It's like, yeah, Elon could solve world hunger by, you know, market selling every, you know, piece of stock that he has and send the world into a global economic downturn, losing, you know, millions of millions of jobs in the process.

58:11yeah that uh somebody said that elon that the world bank could solve hunger with five million and he said if you prove it to me i'll do it yeah of course it turns out you can't solve world world hunger for five million dollars yeah um but yeah spacex is certainly i would say you know spacex nvidia tesla they've all been very special to me in kind of a different way but man there's nothing like a rocket launch and so i just don't think has a visceral experience i highly recommend everyone listening you guys if you have kids take your kids to a lodge you don't want to go with spacex everybody's always like oh get me the special tickets you just literally you can go to a beach at boca chica and be where the special spacex viewing area is you could literally be closer to the lodge you can there's hotels near vandenberg take your kids see a lodge it's super inspirational that humans are capable of this and it's much more visceral than you realize you know the sound the blast of hot air a lot of people cry so go see a lodge but there will be a And never, I don't think, I'm pretty skeptical that there will be another company that delivers a visceral experience like that.

59:31And then, listen, if SpaceX puts a city on the moon and then Mars and enables, you know, becomes the British East Indian company of the solar system, I think this will. There's a lot of hard engineering that needs to happen to go into all that. this will probably be the most important company of certainly my lifetime, but maybe of all time. And so from that sense, I don't think there will ever be anything else like it. And yeah, I guess that is a little bit sad, but you know what? There's so much awesome stuff happening in the world that it's tough for me to get too down. I love it. Yeah, hard to be too down.

1:00:10I have one last question. You mentioned owning NVIDIA sub$2 billion. What is the health of the sub$2 billion market right now? Is there anything that you're excited about? Is there anything that the bottleneck bros haven't ran out of? You haven't run out of it? The bottleneck bros have taken everything under$2 billion. Maybe not even like public companies, but private areas. I mean, we're starting to see the knock-on effects of AI and bio and material science. And, like, Neuralink was sub-2 billion for a long time, right? And so there are more, like, not in theme but accelerated by. So I don't know.

1:00:50There's also just, like, you know, SaaS company. There's loads of incredible venture companies, you know, startups under 2 billion. Yeah. Like, loads of them. Yeah. You know, I talk to them, you know, several times a week minimum. Yeah. In public, you know, until the Bottleneck Bros came along, until AI came along, there was not a lot happening in public small cap land. And by the way, on this like all these small caps, these bottlenecks, this AI, it does feel a little weird to me that you can have like a large following on social media, post about, you know, buy stock in something. And then post about, you know, outline your thesis in a$35 million market cap company and send it up like a thousand percent.

1:01:47and there's a lot of that going on and by the way this is not this is not like a serenity comment i think that guy's that person is smart but i mean there's there's there's there's a lot of shady stuff happening it feels like to me sure well yeah and it's always happens you look back at uh you know you're a young uh young analyst at fidelity right during the the doc you know the end of the dot-com cycle. And there was a lot of just like euphoria stuff happening. And in the years that followed, there was consequences, right? There were people ultimately had to face. Sometimes civil penalties, all sorts of different things.

1:02:26Companies went bankrupt. There were all sorts of different perturbations in the market. And of course, we got a bunch of really enduring generational companies through that period too. Although a lot of these accounts are anonymous, And I'm sure they're logged into social media with a made up email. Yeah. You know, called through a VPN. And so I don't I don't know. It is different than a research than a sell side research report that maybe goes a little bit too far. But there's still a whole compliance department around it. We are in uncharted territory. So everyone needs to stay safe out there and do your own research, I suppose.

1:03:05Yeah. Anyway. Well, guys, man, this was super fun. This was great. Let's do it again soon. Thank you so much. Anytime. Let's get the whole team on, too. Yeah. It's great to have both of you guys. You know what? That's actually fun. Yeah, that'd be great. Let's do that with the whole team. That'd be amazing. That's awesome. I would love it, yeah. Yeah, you have a conference room with a nice wide-angle camera. You can just have the whole crew there. That's great. A partner meeting. Bring us into a partner meeting. Yeah, exactly. Awesome. Great to hang with you guys. Have a great rest of you guys.

1:03:31Thank you so much for coming on. We'll talk to you soon. Let me tell you about CrowdStrike. Your business is AI. Their business is securing it. CrowdStrike secures AI and stops breaches. Our next guest is Leif Abraham from Public. He's the co-founder, co-CEO, here to break down what happened on Public when SpaceX went public. How are you doing, Leif? Good to see you. Beautiful background. What's up, guys? Hope you're enjoying New York City. What's up? It's fantastic. Great to see you. Was Friday crazy for you? Was the weekend crazy for you? Is today crazy for you? Is it all just like crazy in the, wow, this is a historic moment versus like crazy at the office, like the servers are on fire?

1:04:10Like, does that happen with you? Yeah. I mean, by now it's obviously more kind of business as usual when IPOs happen. But on Friday, definitely. I mean, SpaceX was the most popular IPO that we have seen on the app ever by like a wide margin. and um you know to give an example of like you know of everyone who bought a stock on friday nearly half of people who bought a stock on friday bought spacex right so which is obviously quite quite crazy right like a diagram is a circle but like second most traded stock was nvidia and spacex was like 533 percent more trading than nvidia that day right and so and so definitely you know the the like one of the kind of craziest ipos that we've seen so far yeah what was the retail allocation actually like on the ground we heard numbers like it's it's double oversubscribed but then the number that i saw reported was like 100 billion for retail and that seemed like way more than what would actually go to retail because so much of it is going to be anchored by the banks and what I would not put in the retail bucket, like JP Morgan's clients, right?

1:05:24And you would think so. But I think when people talk retail, they think what you and I were just thinking of basically people who use retail investing apps like Public and the like. Individuals and their making decisions. Individuals are like self-directed. Not necessarily true. Not a fund. But retail is still the rich guy who has a JP Morgan advisor and stuff that still counts as retail. And like when you see, you know, and I know it was first about 30%, then it was like down to 20 % in terms of like retail allocation of it. You did still see that, you know, at least, you know, sort of, you know, half an adult labor, like you did still see that at the end of the day, when these retail allocations happen these days, it still mostly goes to the good, wealthy customers of the big banks and their wealth management arms first.

1:06:15And that's why you saw like, Like, you know, the retail brokerages that had some allocation, you know, ended up mostly giving people like one share and stuff. And that is because most of that 20 % still went to, you know, the good long-term customer with a very large account of JP Morgan and Merrill and whatnot, right? So that is still the reality. And I think the main thing there is really is that, you know, the banks who are in most cases also like the ones who are underwriting the IPOs, you know, they are kind of managing the process. They will send it to retail location, et cetera. the most companies that go public maybe also don't really have, not saying SpaceX, but like, you know, most companies in the city really have the perfect understanding of like the nuances in retail.

1:06:54And I think, you know, that's why you're still seeing that the banks who are underwriting are like pushing their weight around. And at the end of the day, most of that still goes to, you know, the wealth management customers and stuff. Can you talk a little bit about either the research that you're seeing folks do, or maybe the research that you're enabling with Publix tools. Specifically, I read a very interesting report in the Financial Times where they visualized over the next year how the lockup will actually play out. It's a very low float stock early on, gets added to the indices. And there's all these different milestones that, I mean, you could just say it's all priced in already.

1:07:35But I imagine that many investors will care and want to buy ahead of an index purchase, but after a lockup ends or something like that. And I'm just wondering about how you can actually help an investor understand those dynamics. Yeah. I mean, I don't have the perfect schedule in front of me right now. But first off, I think this IPO specifically that the banks likely have done a pretty damn good job. like in terms of the pop was there it was sizable but it wasn't ridiculous necessarily you know um even now on day two like the stock clearly is holding up um and then the whole orchestration of the kind of multi-stage unlock of the of the float at the same time or or or the lock up at the same time where you know obviously like the whole renegotiation with the you know adding to the nasdaq 100 and so on which then creates more buy pressure on the other side as the other ones kind of, you know, get unlocked.

1:08:36And I think that orchestration, we'll see how it all plays out as it kind of really unwinds. But it's clearly very well thought out. And if you would judge the performance of that, you know, orchestration so far throughout this IPO and stuff, I mean, I would argue compared to many other IPOs, this has been very well executed, right? So my hunch is that a lot of smart people have done some good work there. I don't know if you can really play it like that. Sure, sure, sure. You know, there's surely smarter people than you and me that have models that have all figured that out. So there's clearly continues to be more retail demand than allocation for these Blockbuster IPOs.

1:09:15On one hand, Elon has benefited tremendously from like the power of retail, right? It helps to have a bunch of people invest at like, you know, low two digit, you know, billions, you know, with Tesla and sort of ride that up, right? But I feel like one of the challenges for retail to actually get meaningful allocation is just the lack of like reliability and the flipping risk associated with allocating to retail. I'm sure Elon in a perfect world would love to say like, yeah, we're going to give half of the IPO to retail. But then there's going to be that risk that people are like, you know, not as reliable as the big institutions and things like that.

1:10:01Or certain even clients of the private banks that want to make sure they're in the next IPO. So how do you think that that gets solved? is there a world in the future where like retail has like a true lockup like they they cannot sell versus just saying like hey please don't sell what do you think happens yeah i mean so as a broker you you know what what what most brokers do and also what the companies who ipo kind of ask for just like what's your flipping policy and is that in most cases if you flip within a certain time frame you basically get restricted from future ipos and that's like one of the kind of forcing functions but a pure securities law perspective you can't create these this notion where you know once this stock is common stock publicly trading like every you know every investor has to be treated equally and you can't then suddenly be like well i'd like i don't trust you retail investors so you can't sell but the other institution i sold it to they can you know like those things can't like can't really happen um but i think from the retail investors where it really depends on obviously like the the the at the end the platform in most cases right so So in our space, I would always invite it up as like trading platforms, where they have their focus, right?

1:11:12Trading platforms are like investing platforms. And like trading is basically like your chart-based first product, technical analysis, where we have your options and futures and so on. And in that world, you do actually have a flipping culture. Like there's Reddits about it. There's like, you know, like Telegram groups, et cetera, about, you know, where basically people like try to find multiple access points to an IPO just for the matter of like flipping it. But I would say that is a small sliver of the retail market. Most people are actually more buying and holding. And what we've seen with IPOs in our history, our net share retention on IPOs is like 125 % roughly, which basically also means that people actually add to their positions afterwards.

1:11:53And so they get shares allocated. They didn't get everything that they wanted, obviously, so far. But then they add to it as it starts trading in the public markets. And I think most cases what you're seeing, because like normal retail amounts, we're not traders, we're people who like build up portfolios for the livelihood and stuff. Like they are mostly people that are cold stocks. And that's what you've seen also with like the diehard Tesla crew, like in the past, you know, these people were people who were treating out pictures of, you know, their monthly DCA, their monthly dollar cost average into their Tesla stock because they got a new paycheck, you know.

1:12:27And I think that is the much more normal behavior, I think, than this true flipping thing. So I think it's, yes, it exists, but I think it's a little bit maybe the fear is a little overstated, I would argue. There were a lot of people that were upset about SpaceX's inclusion in indices. Maybe they don't like Elon for political reasons. Maybe they don't like the stock because of the revenue multiple. There's a variety of gripes that people have. But I saw Jason Calacanis fire back, say, hey, you can create a synthetic index that, you know, you want to own the S &P 499. just go do that. And it seemed a little complicated.

1:13:04How complicated is it actually to do that today if you're genuinely so bearish on SpaceX that it can't touch your portfolio? Because you could go short or you could just buy everything else in equal proportion, but then there's reweighting that happens and it's sort of complicated. But where are we from someone being able to just do that with a prompt or a click these days? Well, I love the question because I can perfectly put an ad in here. So the simplest way is we would just go to public.com, sign up, and there's something called direct indexing. There you go. Fantastic. And there's direct indexing, which basically means you can buy the S &P, you can customize it.

1:13:49You can be, you know what, I want to have the S &P 500 without this and that stock. You can have rebalancing built in, even Texas harvesting built in, which means you can actually save some money just on the taxes as well. Yeah. Selling the losers and re-waiting all the time. And so that is super easy now, at least in public. And it's something that a lot of people do. I think the main thing that really was, I think what a lot of people got upset with was that people have trust in these indices because of the rigid frameworks that they have. Yep. Have to be profitable for a certain amount of quarters.

1:14:31Exactly. Have to be a certain size. Yeah. Totally makes sense. I understand the critique. And so the minute it was basically like, oh, now we're making an exemption suddenly. I think a lot of people were just getting upset with that. I'd basically be like, hey, what the fuck? I put my life savings into this because of these frameworks, and I have basically agreed to them or whatever, I believe in however you structure it. And I think that was mostly what kind of came. Yeah, and also when I think about the S &P 500, I think most people mentally think, okay, I'm going to have 0.2 % in every company, but of course it's cap-weighted.

1:15:05And when you see a 2 trillion behemoth come into the index, you're like, well, that could be like 3 % of my portfolio, maybe 5 % of my portfolio if it runs. And I don't want that index exposure necessarily. Of course, everyone has different risk tolerances, different preferences. But good to know that there's an alternative out there. Jordy, anything else? I was going to say, if you have 30 more seconds to answer, how do you think the SpaceX IPO impacts how, you know, bankers and companies are thinking about, you know, potentially other IPOs this year? Obviously, retail is quite strong. they want exposure and it's at a level that is pretty unprecedented.

1:15:44And also the market, I felt like there was one narrative was like, if SpaceX wins, everyone else loses because there's gonna be so much rotation out of everything else. But the markets performed well today and stuff and that's not what's happened at all. Yeah, I don't know. I would argue they have so much money in the world and it's totally fine. I think when you look at the big institutions that put multi-billion dollar checks in the SpaceX, a lot of those were even like existing investors and so on that kind of doubled down and stuff like you know and so i i wouldn't necessarily think of that argument um i do think that um because this ipo at least so far has been really executed quite well that it makes everyone very confident on the next ones yeah and so you know if i would be now anthropic or open air or something i would i would like to look at this one now and be like okay fantastic the market is ready and the bankers seem to be ready as well.

1:16:35So I would say, I would argue it's a very good sign of general confidence. White pill on a red suit day. There you go. What else? Sorry, I cut you off. Ah, whatever. Okay. Thank you so much. Great to see you. On the show, always great to see you. We'll talk to you soon. Have a great rest of your day. Goodbye. Let me tell you about Cisco. Critical infrastructure for the AI era unlocks seamless real-time experiences This is a new value with Cisco. Fox is buying Roku, the streaming service, for$25 billion. It's in the Wall Street Journal. 25 or 22? 25 billion in the Wall Street Journal here. Let me refresh the page, see if they updated it.

1:17:16It still says 25. Weird. I'll read through it. Ares is reporting 22 billion. Okay. But who knows? Somewhere in the north of a billion, sub 100 billion. Let's be very conservative with our estimates. Yeah, CNBC, also$22 billion. Weird that the journal is... The journal, I mean, I have inside information, given that it's a News Corp property related there, right? Anyway, let's read through the journal piece, which might be... I don't know. Go for it. Let me just give you some facts, and then you can sort of give me some takes and contextualize it with more information. So Fox Corp said it's acquiring Roku in a deal valued around$25 billion.

1:17:58So the Wall Street Journal saying around? Is 22 around? Maybe. Making a major bet on the future of ad-supported streaming. Ad-supported streaming, obviously. Netflix pivoted to ads after saying we're not going to do ads. Turned out to be a great business. Ads are undefeated. Consumers are down with ads. They're just down with ads, especially if they're good ads. Anyway, the Fox, the deal. The deal is Fox's largest to date. It brings together a media company known for its live news and sports programming with the biggest provider of streaming platforms for connected TVs. It will add scale to Fox's streaming business, currently home to free ad-supporting streaming service Tubi, which the company bought for$400 million in 2020 and subscription-based Fox One and Fox Nation.

1:18:42And Tubi, from my understanding, has been a home run. Like, you know, I don't remember exactly what the revenue is, but they bought it for 400. It's in the billions now. And all the metrics about actual audience size are huge. And yeah, putting up, getting to tens of millions of dollars in revenue, hundreds of millions of dollars in ad sales against a big audience like the Tubi viewership. When you have the Fox machinery behind it, it makes a ton of sense. In addition to distributing other streaming services through connected TVs and devices, Roku has its own ad-supported Roku channel. The combined company will better compete with the likes of Amazon.com and Netflix for ad dollars.

1:19:22Quote, bringing these two companies together will really help define the future of television in the United States and in many other markets around the world, Fox chief executive Lachlan Murdoch told investors on a call Monday. Fox will pay around$160 per share, 96 in cash, and 0.9693 Fox Class A shares. The deal is valued at around$22 billion on an enterprise basis. Fox expects to fund the cash portion of the transaction with$12 billion in new debt as well as cash on hand. The combined company expects to cut around$400 million in annual costs. Fox plans to keep 2B and the Roku channel as separate offerings.

1:19:59Consumers are increasingly opting for free and lower cost ad-supported streaming options as the cost of subscriptions marches ever higher. Ad-supported streaming plans now represent almost 50 % of all premium subscription ad video on demand signups in the U.S., up from 39 % just two years ago. More than 100 million global households stream with Roku. Roku is the largest streaming platform for connected TVs with 25 % market share. Samsung's Tizen is number two at 23%. And then I'm sure probably Amazon's Fire TV is not far behind. Fox remained on the sidelines during the heady early days of streaming boom, pouring money instead into programming for its cable channels and buying up sports rights.

1:20:43It launched Fox Nation in 2018 and introduced direct-to-consumer Fox One, which includes sports and Fox News last year. Fox said last month that Tubi had nearly 100 million monthly active users and its revenue had grown by 23 % in the fiscal third quarter. And so Fox's stock is down today. Roku is down 0.2%, something like that. And the market doesn't like it. Take him has a take here. We can read through his opinion. He says, I don't understand how this Roku deals makes any sense. Bringing together the most valuable live. I'll tell you how it makes. How does it make sense? No, so I think it makes sense.

1:21:25One, Fox, they have a great product in Tubi, right? Uh, it's again, um, uh, there, there are certain people that are, that are happy with their, with their HBO or Netflix or whatever, but Tubi has, uh, has a great niche. Uh, it's been a great acquisition for Fox, um, north of a billion dollars of revenue. Uh, that is a product. Roku is a platform. They have over 20 % market share in connected TVs. Um, I was looking at the data, they have over 40 % of the engagement with connected TVs. So when you think about it from an advertising potential, right, it's not just that they have 20 % of the connected TV market, they have over 40 % of like the watch time effectively, right?

1:22:11So looking at the potential from an advertising standpoint, and how many dollars are still yet to shift from traditional television to connected TV. So from that lens, I think it's I think it's great. Roku is also a much younger demo. So like a lot of media, a lot of media properties, right? Especially television related are going to be, you know, older demos that are, that are eventually going to be aging out at least of like prime consumers. But these are consumers that are in their, you know, prime earning years, prime years as consumers. And, and so ultimately, I think it makes sense. I think it makes sense for Fox.

1:22:53Next, the thing that I hope that they can do as a consumer is re-bundle, right? We've just gone through this era of unbundling, and the fact that you get a new TV and you're like, okay, great, let me log into 15, 10 different services, something like that. I would like to see them do something in bundling for a consumer. So again, looking at it from the lens of having north of 40 % of watch time, that is a super valuable property. And with the right ad-driven approach, I think it'll pay off. I wonder how windowing fits into this. When I grew up, I didn't have cable, but you would get a prestige movie played on ABC like once a week.

1:23:47And for a while, that was the flow on Netflix. And HBO was like its own premium subscription. You open up the HBO app. It's all premium series and movies. And then some of that would trickle down. But then it feels like the ecosystem sort of branched a little bit where Netflix stopped getting like the James Cameron library for a while. And Disney started hoovering up some of that, keeping some of the really popular movies, the Marvel franchise, off of Netflix, even for a later run, a year or two after. Because there was more competition from the actual different pieces of the different studios.

1:24:27So I wonder if Roku will be able to provide some sort of like neutral territory in some ways where viewers can pick up something that's in the premium end, something that's a sequel to a franchise that they know and love, but it's not seen as competitive as Disney versus HBO or whatever. We will see. The history of Roku is interesting. We've got to take you through this briefly. So it was founded by Anthony Wood, born in 1965. When he was a teenager, he published Lunar Lander in the Ahoy magazine, earned a bachelor's degree in electrical engineering from Texas A &M. He met his wife there. Now they have three children.

1:25:12Congratulations. They live in Palo Alto. But in college, Wood founded his first company, AW Software. AW Software. What do you think the AW stands for? He's putting his name on the line. On the line. Andrew Wood Software. I got to meet Anthony recently. Oh, you did? Yeah. Wait, really? No way. That's awesome. So he was selling computer programs. He founded Sunrise Industries while studying engineering, developing software for the Amiga, the original Amiga system. After graduating, he founded his, I think this is his third company, and it's called Sunrise Version 2. Later in 1995, he launched another company, iBand, and iBand sold to Macromedia for$36 million in 1995.

1:25:57That's a lot of money. And Macromedia, of course, was the makers of Adobe Flash. He left in 97 after two years to launch Replay TV, which was a digital video recorder DVR. You'd have something coming in over the antenna and you would be able to record it and watch it later. Much like TiVo. TiVo was their main competitor. In 2002, he founded Roku, his sixth startup to market home devices. Roku means six in Japanese. and he's just like, it's the sixth time I'm doing this. Imagine being on the sixth startup. I'm number four or three or something like that. He also worked at Netflix. The Roku history is sort of interesting.

1:26:39So he founded Replay TV. Replay TV was not successful, so he worked at Netflix. In 2007, Wood's company began working with Netflix on Project Griffin, a set-top box. Netflix was thinking about getting into hardware, and it would allow Netflix users to stream Netflix content to their TVs. Like they were working on like the Apple TV, basically. It was a crazy fork in the road. A few weeks before the project was due to launch, Netflix's founder, Reed Hastings, decided that it would hamper license agreements with third parties. It was all of our third party license agreements. They're giving us content.

1:27:15They're going to be super upset about this. We're shelving this product. we're not doing it because we want to keep Netflix on all the other platforms. When the Apple TV comes out or whatever other box is out there, we want Netflix there. We don't want Apple cutting us off because they say, oh, you got your own box. You can live over there. You're not on ours. Not that Apple would necessarily do that, but that type of set-top box would not integrate, or the smart TV would say, we are not integrating. And so Fast Company cited the decision to kill the project as one of Netflix's riskiest moves.

1:27:46Netflix then decided to spin off the company and Roku released their first set-top box in 2008. In 2010, they began offering models with various capabilities, which eventually became their standard business model. And so they went on and on and wound up as a very successful company, now owned by Fox, as long as it's dealing with players. Overall, real platform. They already have a product that sits on top of it. Tons of advertising potential. And I think that regardless of whatever the market reaction is today, I expect that people will get it over time. Well, Roku is ad-supported, and we are too.

1:28:25So let me tell you about Console. Console builds AI agents that automate 70 % of IT, HR, and finance support, giving employees instant resolution for access requests and password resets. Tyler Cowen shared some more thoughts on the recent mythos, brouhaha. It's a good term. We, this was all over, we talked about this earlier, but he says, according to not yet confirmed, but likely true reports, it was shown that the model could be jailbroken. There's debate over this now. The released mythos, already restricted bio and AI improvement queries rather than strictly in fact, rather strictly in fact.

1:29:01So now we are back to the model not being available. Here are a few of the constraints on the US government, not the only ones I might add. One, it needs for the main companies to stay in business. On top of that, it wants their IPOs to go reasonably well. And it's now much harder for the top companies to recruit foreigners, which is a significant share of their highest quality workforce. Demis, Ilya, Andre, for a start, are all international engineers. It is much harder for the main competitors to drum up foreign business in a credible manner and sustainable manner. That's interesting. We haven't seen many breakout charts of how much revenue is domestic versus international, but we have seen reports of OpenAI and Anthropic doing big deals with international companies.

1:29:46Some of these companies, Fortune 500s, they just have global footprints, so they've got to use the models everywhere, ideally, unless they do all of their software engineering in Silicon Valley. 1B, how are American multinationals operating abroad supposed to use top systems moving forward? That's literally what I just said. I just predicted the next line. Whoops, I am a stochastic parrot. It wants to use model access as a tool of both hard and soft power. So model access has to be possible at some level. But it is very hard to control what foreign agents will do with partial model access when they get it in the future.

1:30:26Three, the U.S. needs to stay ahead of China in the AI race. This is a big question. We have Aaron Ginn from Hydrohost joining in just 10 minutes. We'll ask him for his perspective on this. Four, the U.S. needs to issue restrictions that are actually enforceable, and U.S. citizens only doesn't fit that bill. That's a good point. You might have some KYC, but it's very difficult when these APIs leak into other products. All of a sudden, you're prompting a model within a piece of SaaS. We've seen this with, you go to Slackbot in Slack, Salesforce product. There's an AI model under the hood that's vended in by Anthropic or OpenAI, depending on the deal, depending on the product.

1:31:05and that now needs to be passed along to understand, is this a US citizen on the other end of the line? Let's find out. Furthermore, markets and everything. It is easy enough to hire a traitorous American to access tools of wrongdoing. That's a really good point. How can you verify that every American is loyal or for a matter it is not that difficult to fake citizenship in various ways? Yeah, there's been people over the last 50 years that have gotten caught like passing on or basically selling, you know, secrets around our various military aircraft, for example. Yeah, there's a very controversial story of Virgil Griffith, a cryptocurrency researcher who I actually met once.

1:31:49He worked at Caltech, was deep in math and very excited about cryptocurrency. And he went and gave a talk on cryptocurrency in North Korea explaining how cryptocurrency works and how cryptography works. And that was seen as a violation of export controls. And he was sent to prison. And the crypto community is very upset about that because they maintain that math should not be illegal. This information should not be illegal. The government side is helping. What was his defense? Was he like thinking that he was going to liberate the North Korean people by giving them access to effectively or explaining how code can be used to create a store of value that is unsanctionable, essentially.

1:32:32And so it was seen as a violation of sanctions by the U.S. government. And more importantly, it was seen as unpaid to buy. Do they have a North Korean stablecoin? I don't know. I don't know. They have a lot of housing. They're calling it the most sanctioned stablecoin ever. Potentially. Potentially. This one, number five by Tyler Cowen, was a little bit controversial. He says, the U.S. government cannot nationalize these companies. and then proceed to run them effectively. And people were debating that, saying that it might be possible for the U.S. government to own the labs in some way and leave them to their own devices to actually roll these things out.

1:33:08What do you think? Yeah, I mean, if you're like super RSI-pilled, right, you don't need the employees at all because the AI just improved the cell. So the government just says, continue to improve. Yeah, basically. And that's it. So you don't actually... That's like, you know, the extreme scenario. Yeah, yeah. And then on the other side, it's that, okay, these systems are actually extremely complex. You look at the uptime of some of these systems, the research taste. In fact, you need so many employees to make these products effective. You actually need the international employees as well because they come up with great ideas.

1:33:38And so, yeah, those are the two sort of sides of the debate. Six is Chinese and open source models do in fact improve at some reasonable pace, even though they are right now considerably behind the best proprietary models. And that's something that I wanna dig into more. It does seem like the pace of open source development in China is slowing. I'm not entirely sure what's driving it. It feels like there's a number of different things. Gavin Baker said it's about compute, and they're turning their backs on the Blackwells that they had the opportunity to buy. I think it might be research ideas that are more locked down now in tighter controlled circles in San Francisco.

1:34:14It also might be the data. But you'd have to imagine that they have lots of people that are writing code, lots of people that are inferencing those models, and then full data and information capturing of those rollouts. There are a number of different reasons why that pace might be slowing. And we'll see. Maybe there's a big jump in the graph. Maybe we have another deep seek moment in the next couple months. We'll see. I think everyone should expect some type of update, hopefully today, from Washington or Anthropic or both hopefully today. Anthropic had originally said, I think, 24 hours. Obviously, a lot more time has passed, but partially due to the events on the White House lawn yesterday, making things a little bit harder.

1:35:00Well, before we move on, let me tell you about Railway. Railway is the all-in-one intelligent cloud provider. use your favorite agent to deploy web apps, servers, databases, and more, while Railway automatically takes care of scaling, monitoring, and security. Who was impacted? One person potentially impacted is Carpathia. Okay. Theo went to Google and said, is Carpathia a U.S. citizen? And AI overview seemingly pulled, went to Grok and said, according to Grok, Andre Carpathia is an EB1 extraordinary ability green card recipient, not a U.S. citizen. This is a loop. This is a loop. loop from Gemini to Grok and back, and then it goes back into Grok now because the screenshot's been shared.

1:35:43This is RSI. This is RSI. For sure, for sure. Where next, Jordi? What else do we have? We have to talk about Le Chaton. Le Chaton. Le Gros Chaton. Le Gros Chaton? I think that's how you pronounce it. Okay, yes. Take us through this. What's going on? Well, yeah, so there's rumors. I think this has not been formally announced by Mistral. Yeah. formally announced by a bunch of teapot schizos. So in closing, Tyler Cowen called out Mistral specifically. He said, rising in status, Mistral, AI nationalism, proponents of slow takeoff is the likely scenario, reticent, quiet CEOs. But he calls out Mistral as a potential beneficiary of all this government chaos, government restrictions, closing down.

1:36:32And so what's going on? Mistral's released many models. They've done their actual pre-trained. They're not doing fine tunes on Chinese models, correct? And it's been a good product. Like, it's been working. They've been raising more money. But they've never been seen as one of the leading frontier labs. Is that the general tone? Yes, I think that's correct. I think, I mean, very early on, I think they were like, oh, this is maybe one of the frontier labs, right? It was all, I think, ex-meta researchers. But, yeah, there's the new model. You know, is it real? Technically, no. but perhaps in the future some of the founders are vague posting.

1:37:10Maybe they will actually release a model. Let's go through some of the vague posts. All I know is a lot of Americans ever since this new model started being talked about, a lot of Americans that maybe formally had some type of beef with France have been real quiet. Real, real quiet. Well, people are having fun with the fat cats, Arthur, Mensch. This is a fake screenshot, I believe, but tensor qt shares the death star with the cat on it and then uh shashank goyal says le chaton fat is now number one on open router need to urgently fix our axes and he actually he's not really helping the confusion he actually works at open router and on the chart it has a break in the chart because it goes so high that it's off the charts le chaton fat is crushing it I like a friendly hype cycle.

1:38:06This is great. Lucas says, holy yes, I thought we had more time. And it's a fake image, but it says, the French government, citing national security authorities, has issued an export control directive to suspend all access to Le Chateau Fat by any foreign national, whether inside or outside France, including foreign national Mistral employees, The net effect of this order is that we must abruptly disable la chaton fat for all of our customers to ensure compliance. It's a direct copypasta from the Anthropic Post, of course. And Gary Marcus also says, I got early access to chaton, and it's terrifying.

1:38:50I was wrong about everything. Of course, Gary Marcus has been skeptical that LLMs will deliver AGI, ASI, RSI, whatever you want to call it, wherever your goal posts are. Gary Marcus says LLMs are not the direct path. And so the joke here is that Le Chatant updated his virus. Fai says, anyone notice Le Chatant fat got quantized lately? Yes. People are also saying Mythos is a distillation of Le Chatant fat. Yeah, there's various rumors around. I think Accelerate Harder says you can really tell who has early access to Le Chaton Fat and who does not. You know, the butt of the joke here is that, oh, Le Chaton Fat and Mistral, it can't possibly be on the absolute frontier.

1:39:38But this is just good vibes. It's showing that they are the leader in France for sure. Totally. They're getting a lot of attention. Still have Mindshare. Yeah, growing the valuation, delivering something. And now people are going to check out this model and see what it can do. And it's certainly, like, people wouldn't be making this joke if Mistral had, you know, been like completely languishing, not doing anything, not making any progress. Like, this is a sign of some healthy attention. I can't tell if this is a joke anymore. But NVIDIA is reportedly in talks with Mistral AI to supply 1.5 billion euros in compute per month to help support the demand for Le Chatant Fat and Le Chatant Grosso.

1:40:25That is a joke, John. That is a joke. I mean, NVIDIA probably do. It's all faked except the vibe is real and it's amazing. You can tell who has early access to Le Chatant Fat and who doesn't. In other news, the Prime Minister of the United Kingdom has banned social media access for under-sixteens. He says, these days kids must find their feet in a world where technology intrudes into every area of their life. I just can't let that go on anymore, so we're giving children their childhoods back. Let's play the video. Very interesting. Keir Starmer, right? Every parent wants the best for their kids.

1:41:03And that's what being a parent means. And for me, for my two kids, all I've ever wanted, hand on heart, is for them to be safe and for them to be happy. And the rest is up to them. But you know, I think back to when I was growing up, and I have to say, I think we had it easier. These days kids have to find their feet in a world that changes so quickly, where technology intrudes into every area of their lives. And we know that harms them. The response from parents in the consultation has been absolutely clear. Thousands of parents say their children are addicted to social media. It can leave them trapped in a cycle of endless scrolling that displaces play, sleep and time with the family.

1:41:59It can harm their mental health. And Frankly, parents need our support on this. That is why today the government has decided to ban social media access for children under 16. It's a big step for our country. Goodbye. If you're under 16 in the UK, goodbye. It's not an easy thing to do. We exist on social media. I don't know. RSS feeds? Are those social media? We look carefully at the evidence. Imagine if they'll turn... Okay, so we can... You know what we have to do? We have to print every episode's transcript as a book and mail it and put it in children's bookstores. So every episode of TBPN needs to be transcribed.

1:42:44It works because there's no swearing. Printed on paper and delivered to children's bookstores. Fly a plane over the UK and then drop leaflets. Drop leaflets. A massive leaflet campaign. But every episode is a 5 ,500 ,000 word. So it just hits the ground like that. So what's going to happen? They're going to require major social media companies to require ID verification for every user. There's potentially a bunch of issues with that, especially given that there's a sort of raging debate around free speech in the United Kingdom and a bunch of issues related to that. and so that that a lot of this again I will happily say that I I'm I look forward to trying to get my children to not use social media as long as possible I don't I don't think it's I don't think it's good for anyone's mind must much less the mind of of a child but there's a lot of issues here one the other thing with vibe coding is like literally anyone can make a social media app with like one prompt now.

1:43:49Right. And so my expectation is this is not really going to work. And one of the. I think it's a power law, though. Yes. But but imagine being a kid and being and that's been you're 15 years old right now. You've been using social media for years. I mean, truthfully, like if a kid goes and vibe codes a social network and sends it to like their five friends, like, yeah, that might violate like user account logins. It might be like a social app. But That feels like way chiller and not a big deal to me. Like it feels like the spirit of the law is upheld there. Anyway, we can come back to this later again.

1:44:25Yeah, I just don't. I just think like there will be a new social network later tomorrow that gets hundreds of thousands of users because social media is inherently viral. It's banned the next day. They all have. Yeah, yeah. But again, like these things pop up. I remember there was social media. If you have like, okay, there is a million dollar penalty for delivering a social media experience to someone under 16, then if I'm a vibe coder, first the model is going to say, hey, what you're doing violates UK law. I can't help you. Or they'll say, are you sure you want to do this? Because like that's risky.

1:45:01And then you do it and then you just get the fine and you're like, I'm shutting down. Why would I keep doing this? Yeah, but there's going to be plenty. I mean, there's information flows. Information flows. And the only other thing is people have had every issue with like metas, like trust and safety. Right. But for everything that they do is that is bad. They do probably a million good things. Right. Like taking down content that shouldn't be online, stopping abuse, things like that. And so I'm just very interested to see how this plays out. I think the kids are going to find a way to gather online no matter what the law says.

1:45:44Yeah. You know, maybe it's in the comment section of like the Financial Times. You know? Yeah. They'll turn that into it. So the definition that the UK is using, they're using the Australian model. It's not anything with accounts and comments. It's user-to-user platforms whose purpose is to enable social interaction where users can post material and where content is distributed alongside slash through algorithms. so you've got to have an algorithm there. They explicitly name Snapchat, TikTok, YouTube, Instagram, Facebook, and X. And so the working definition is basically a social app where users post content, two other users interact socially, algorithmic feeds, shape distribution.

1:46:24So messaging services like WhatsApp signal are not affected. So anyway, we can dig into this more. I think we have Derek Thompson coming on this week. Imagine being in the one group chat that just everyone's sharing, you know homegrown reels in that they're making in their own homes yeah why not imagine that seems more healthy than i don't know it seems like it solves the problem that they're going after if they think it's a problem anyway we have aaron ginn from hydra host he's the ceo and co-founder you know him you love him aaron how you doing been too long what's up yes it's been a while man i miss david cameron so that that's what that's why i take away from that yeah oh really The Tories are a mess, but yeah.

1:47:04Yeah, yeah. Have you been grappling with the phones, fertility thing, the social media thing? Like where do you stand on all that? I mean, one, most of the law and institutional studies, they actually can't normalize their control for most of the stuff versus like already predisposed behavior. Sure. And then like you're already more existingly depressed and accelerates the depression, similar to like alcohol and other things like that. Sure. But the second is that this is going to go the way of the 18th Amendment because of what Geordi said, which is like – but the world is flatter than it's ever been before.

1:47:33Just like the model stuff with the Anthropic. It's like, okay, so we make a big deal about this, but then Six of the Player China already has it. So what's the point of this? And I think that that's, I like the intent, but the intent should be empowering parents to educate their children and empower them to control. Or choose. Which Apple is doing. Even a curfew feels more enforceable or enforce screen time, which is like you get 30 minutes a day on social media. Like that feels like easier for the platforms to actually enforce or the country to enforce than like a total ban. Yeah, but this just goes the normal trajectory of how technology gets adopted.

1:48:18There's always a late stage of regulation. And for like GPUs, you know, like the reason why the UK government is so aggressive on sovereign AI is because they want to do similar things. to what this is. I think that that trend is a little bit unescapable because in the UK, you have the right to do that. They're a sovereign country. You can regulate how you want to regulate. Then the latter component is that if you think about how this whole space is washed out, what has enabled our business and why we just closed a very large Series A at$100 million. $100 million. Yeah, I know. Right. Right. So, I appreciate that.

1:48:59I have a gong in mind whenever y 'all had your successful acquisition. I ran my little gong for you. Thank you. Yeah, of course. Did you prime it? Because we've been getting a lot of critiques online. People said you didn't prime the gong. Yeah. And I just thought you'd come in with the hardest possible hit. No, I'll show you. I'll show you. You have to do five priming strikes and then the real strike. So you go.

1:49:28Now it's prime. Okay. Now a real hit, like this.

1:49:35That's how you prime the gong before you strike it. This is the way you do it. We learned this from the commenters who said we weren't warming it up. Hey, I am pro appropriation of my culture. So, like, this is always a pro for the J &J. Yeah, you brought us hats that I didn't feel comfortable wearing because they just... I thought he was talking about appropriating the GPU whisperer culture. Whispering to the GPUs. I mean, literally, my dad gave me this on my desk. So this holds my phone. Very cute. Love it. So$100 million. What is the distribution of that? I mean, are you going to be buying a lot of GPUs?

1:50:14You're working with NVIDIA. Is this like one data center, multiple data centers? Are you building? Like, restate the thesis of where you fit in the bottleneck. Yeah. So no, we're not using any of the money to buy GPUs. We are an asset-like company. I believe we hold the title as the only NeoCloud in NVIDIA's orbit that is a software company. So we manage GPUs. So we provide an operating system for the data center to where any data center in the world can become a NeoCloud. We're already in almost two dozen countries, close to 60 data centers. and we have, let's say, several billions in contracts that have been signed for us to continue this project.

1:50:56So that's why Sovereign is a big customer of ours. You've got to think that, is a U.S. company really going to go try to build a data center and supply in England? Or are they just going to rent from somebody in England? Then you then add the layers of, now we're on social media, but this is clearly going to be applying to GPUs. then you can see how this all kind of all flows out where data residency in nation states is going to be a permanent fixture going forward. And then that's not me approving that or wanting that. Like, I just think that that's just where we are right now. And then you then add the continuous layers to that of like, well, what is AI going to work on?

1:51:33Healthcare, education, defense, already all those are nationalized industries in other countries. So in summary, public cloud is dead and NVIDIA and all the other accelerators are basically are applying a ton of free cash flow to that same argument. And so we're the software that enables all that to work together. How much of your thesis is like you want to stay NVIDIA only? You want to compound the learnings around the NVIDIA ecosystem? There's value. Like we talked to another, a NeoCloud last week that's AMD super focused. But then you talk to other folks and they're like, we want to be completely agnostic.

1:52:12We want to be, you know, one big blob of fluid compute. There's multiple theses that are playing out and people are sort of testing every idea. But how do you see it? Like, what is your strategy? Yeah. So our software works with any OEM or ODM. It's intentionally designed that way. But of course, like the capacity in our data centers reflects exactly what the market demand is. And the videos is just the best. And yes, I do think that there is a place for not necessarily the hyperscaler chips. I think that that market is pretty narrow. I think it's probably five customers that actually would ever buy that.

1:52:48But the rest of the kind of alternatives, they're all going to be designed for very specific use cases. but if you're in a market where power is going to continue to be constrained, data center is going to be continuing, you're going to pick the most. You're basically always going to pick the Porsche Cayenne Turbo over and over and over again. You want to put your kids in it. GT. You want to put some stuff in the back. You mean the GT? You want to go fast. You want to go fast. Or Mercedes station wagon, right? The AMG station wagon, right? Yeah, that's good. Classic. So that's the NVIDIA play, right?

1:53:21Is that I'm the best, I'm expensive, but I can do everything you wanted me to do. And ASICs and TPUs, et cetera, they're like, I'm getting a motorcycle, I'm getting a Skoda. And the market will eventually get there. Like a Nissan cross-cabriot. Yeah. React to what Gavin Baker just told us in the show earlier. I asked him about, it looks like the trend lines are widening between the United States closed source model capabilities and Chinese open source model capabilities. There's a bunch of charts that show one line is growing linearly, the other is growing exponentially over time. That could be really good for America.

1:54:02It could mean a lot of different things. They could catch up. Who knows? But he was saying that the big reason for that is that Blackwell is a great chip. They've had the ability to buy it and they've turned their back on NVIDIA, even though Jensen and NVIDIA went to Washington and figured out the correct framework to allow for exports. Those exports have not been received on the other side because of the push to build an indigenous supply chain. How strong is that narrative for you? What would you add to that? I think on one of my last op-eds and appearance of the show, I told them all that was going to happen, that China was going to basically reverse ban.

1:54:41Okay. And that's why I wasn't really that concerned about the initial kind of – yeah, because that wasn't actually the goal. Again, like y 'all both know my disposition that I love this country and I'm happy my family came here. But there's a kind of underappreciation about how actually Chinese people think and what their goals are as a society. so the i agree with gavin's kind of like you know listen to him on all in his other podcasts like yeah yeah he's very aligned with kind of our thesis about global compute sure the the one thing that i would add is a caveat like the question is like does it matter and that's what we don't really know is that if we're in the market as customers and i think probably all three of us has at least some german car sure then other models of german cars are very interesting to us but if china doesn't care because it buys toyotas it buys volkswagens it buys whatever like lower end stuff then it's just a different way of understanding the preference theory of another country and i'm currently i think the safest assumption that we should have as americans is that it doesn't matter to them and because it could be 80 and that's all it needs to be and if you look at the history of ccp policies everything from environment to manufacturing to buying stuff from Timu, it seems like the consistent strategy is that 80 % is good enough.

1:55:56And the one thing that we do have to be very careful about, which Zach does talk about pretty religiously, is that they are winning on the adoption side. And every kind of arc of innovation that has happened in the world, like previously AI, America has won the several stages of the industrial revolution to other phases of the internet because we are first to adopt. And China clearly is the first to adopt on robotics, on drones, on AI integration. And that's where maybe they figured out, it doesn't matter. Like they can solve it via other mechanisms like dirty power, inexpensive chips, and they can kind of go their own trajectory.

1:56:36So like, you know, I'm with the administration on the changes that they've all implemented. I would say that the Freedberg's kind of last rant last week was definitely echoing like my view on things, which is like the government always thinks they can do something about something when they're out or they can't. And then they spend a bunch of energy and at the end of the day it doesn't work and then they still claim victory. Like the war on poverty is a great example. And so I feel like that's where we're going to end with AI where in the end it kind of like all this effort really didn't matter and it caused entrepreneurs to slow down and then eventually the government backs off and realizes that we have to, to quote David Sachs, you know, let America cook.

1:57:13Yeah. Is distillation a bigger problem than chip exports? I think most of that's overblown and it's kind of hard to prove. Yeah, I think it's actually quite hard to prove. And I also believe there is this kind of subtle... Even if the model will just tell you straight up that it's... It's flawed. Yeah. I mean, yeah, I like that. I'm not, to be clear, it totally does happen. The question is, how much does it matter? And I think a lot of it is oriented towards the fact of underappreciating the fact that Chinese engineers are actually amazing at this. And I think it's kind of all coded with that.

1:57:55They're like, oh, if they're copying us, somehow they can't do it themselves. And they have proven over and over and over again they can. And then you then go into the fact of obviously coding is now universally accepted as a wide adoption or the first CSA foothold for AI. Well, that's because it was also the most widely used by the customer base, and it has a firm yes or no answer. So now you see China, which is using kind of grade B models currently, but accelerating in its adoption. And it doesn't care about the things that we care about in terms of everything from morality to safety and things like that.

1:58:31So, of course, they're going to be able to find use cases and things that we didn't understand. And that's something we as Americans have so far deeply underappreciated. And you can see that in the poll numbers where data centers are more unpopular than nuclear energy. And that's a quite scary place to be, which is why the kind of, I think, end arc of the data center business is actually going to mimic the oil and gas business, where the reason why fracking became this great energy revolution and why we became the number one exporter of oil and gas in the world is because oil and gas companies pay off.

1:59:05owners of lands yeah so that that's just whatever too i mean you have a small piece of land that they're fracking on like you get a check in the mail um yeah and that's starting to happen i i there's a sounds like brad is working on something oh with the trump accounts but also i mean no not even he was sort of teasing like we have something like around like yeah because we were just saying why would you want to center your backyard if you can get if you can use inference from you know somewhere in another state. Tyler just wanted to say hi. It's been a minute. Oh, yeah. There we go. There's the hat.

1:59:40You kept the hat. Yeah. Oh, of course we kept your gift. We would never. It's here always in the office. It's on our hat rack with a space helmet, hard helmet. Cowboy hats, unicorn heads. Howard William, I think. Oh, that's so great. Anyway, thanks so much for taking the time. Yeah, congrats on the milestone. Great to see you. Yeah, thank you. Thanks, guys. It's been too long. Let's do this again soon. We've got to chop it up on all sorts of things. It's always a great time. Have a good one. Yeah, absolutely. And congrats to you all, too. God bless. Y 'all definitely, out of the few entrepreneurs I know, man, I was very happy for y 'all.

2:00:14Y 'all deserve it. Thank you. Thanks, Aaron. Great to see you soon. Congrats again. Let me tell you about Figma. Agents meet the canvas. Your AI agents can now create and modify your Figma files with design system context. And our next guest is here with us live in the TBPN Ultra Dome. And Rafael, welcome to the show. Please introduce yourself for everyone at home first. Rafael Bubis helps her at AppLovin. Yeah. AppLovin is the largest mobile ad platform that you may or may have not heard of. Let's put this. I think everyone on X knows. I feel like you guys have like 100 % saturation, at least on our corner of X.

2:00:51Yeah. I feel like some people learned like forcibly because they were like, hey, what's going on with this business? It came out of nowhere. Like, I don't know. It wasn't like super noisy. and then people were skeptical and then you kind of proved all the haters wrong again and again. Not a venture story, right? No, not at all. We couldn't even raise a dime in Sand Hill. I think Adam was willing to give away 25 % of the company out of$5 billion cap way back in the day. Wow. And now the company's worth$180 billion. We've done pretty well. That's crazy, 25%. As you tell the story, what was the key to get from$5 billion to where you are today?

2:01:26The big thing for us has really just been the model, right? The great thing is in the world of performance marketing, advertisers don't have incremental costs typically to bring in new users, right? At least on the digital side for games. And then we went into e-commerce as well, and we made the model work there. But people always want more customers, and especially if they can buy them profitably. The question is how many more times over can you do that? We've been able to do it at a pretty big scale. Okay. So mobile games, super interesting economy, sneakily large. Again, I think the part of the reason why app loving is sometimes misunderstood is that people misunderstand how big the mobile games market is.

2:02:00They think like, oh, well, I'm familiar with like a blockbuster movie. Certainly it's about the same. It's entertainment. No, it's way bigger. But walk me through first, how big is the mobile game market? How international is it? Walk through the dynamics of like whales versus daily players versus free players. Like what's the shape of the market that you're describing to a potential new app-loving customer? Yeah, sure. So the mobile gamer is pretty much everyone. Think about it. You're on a first class flight, right? You see somebody right next to you playing a word game or a solitaire game or you're on the bus or it's your wife at home.

2:02:38So it's not just, you know, some kids sitting in their basement. For us, we see over a billion people every single day, primarily heads of households and female. So for us, we see it's a massive market. And I I think in the app store, there's, I think, over$120 billion of annual spend just in in-app purchases. So that really speaks to the volume of it. Yeah, the dads are PC master, ace, mouse, and keyboard. Exactly. They have a call, dead on a mobile game. But it's getting there. It's getting there. You get the backbone. You click that into your phone. You can play COD Mobile. There's ways around this.

2:03:13There's a little Halo. Game streaming. The business grew 70 % last year, and it was primarily driven by the gaming side of the business. E-commerce has been the really big, massive thing for us. Huge. Listen, you say everyone's heard about us. Part of our TVPN ad partnership helps with that. Yeah, yeah, totally. But no, it's been incredible. I mean, kind of looking back, we're in 26. Yeah. In 25, we announced having a billion-dollar run rate in the e-com business. Just a year of it being open. Now we have our self-serve, referral only. Thousands of accounts have onboarded. And hundreds and millions of dollars, hundreds and hundreds of millions of dollars of value has been generated for e-coms merchants.

2:03:52and we're so small. I mean, just for the context of the market here, right? So I think Facebook's got over 10 million active advertisers. We only have a few thousand, right? And so for us, this is like a holy crap once in an opportunity, especially for advertisers that are looking for a new channel. That's amazing. For us, we're at less than 0.01 % of the market share, but we have north of$12 billion of ad spend compounding at 70 % year over year. So we think this is going to be a massive, massive opportunity. So two questions on AI. Let's start with the mobile game dynamic. We've seen those charts.

2:04:36The number of App Store submissions is skyrocketing, and yet we all can't really point to like, Like, oh, there's that breakout game that was vibe coded by the kid in the basement or something like that. And we could during the early App Store boom. I remember, what was it, Flappy Bird? Wasn't that created by a kid? It wasn't some Sand Hill Road$10 million. There was some NBA-related game. Yeah. I didn't play it, but I had at least a handful of people. But it was all web-based. There's a few games that are happening. But what are you seeing in the data? Is anything starting to move where you're like, oh, like that's AI or that's vibe coding.

2:05:13I can see something changing about the business. Or are we still sort of like pre-showing up in your business? So what we see is really cool. I'd say on the advertiser and the developer side, more and more people are coming onto the platform. Okay. And so on the developer side, what we see is that more developers are in need of distribution. Yep. It's now become a core part of the strategy. It makes so much sense. Yeah. In 2012, 2013, when we started the business, most advertisers would depend on just getting an app store feature. Sure. That is no longer the game. Yeah, yeah, yeah. Yeah, buddy of mine, Vibe Coded an app.

2:05:44Vibe Coded an app. Yeah. I downloaded it. Yep. And then was later trying to leave a review because he's like, hey, this helps visibility. Yeah. Couldn't find the app in the app store. Even if I searched the app. The exact name. Like the exact phrase. Yeah, there were so many little like. I could only find it through the link. So like App Store Discovery seems like, you know. There were so many little like, I don't know, like the web 2.0 playbook of like contact, import, invite your friends, share a social leaderboard, and people would be, oh, yeah, game center integration is going to be the thing that makes you pop out.

2:06:16And none of that was always sort of overpromising, but some of them did work. Like some of them really did go viral and had interesting distribution techniques, but a lot of those have been commoditized. So actually showing up and building your business on the back of Apple, it makes a lot of sense. What about AI internally? Eric Sufert at MobileDevMemo is writing a lot about GEM's model, the GEM model over at Facebook, that they're getting a lot of lift at meta out of new, more advanced, transformer-based, you know, matching algorithms, advertising algorithms. It's sort of like the unsexy part of meta's AI strategy.

2:06:56But have you started to see glimpses of just improvement in your system during the AI era? So yeah, so on our side, our developers on a weekly basis are releasing improvements to our algorithm. And a lot of those improvements are also on the backs of using the state-of-the-art models out there. So we definitely get an advantage of it. And outside of just like the ad algorithm itself, internally, our efficiency gains have been massive. Like I can speak for myself personally. Our marketing team is eight other people. Every single person on the marketing team is a vibe coder, right? They're using cloud code.

2:07:32They're using codex. And they're building tools. to make them more efficient in their role. We, before, used to have to run everything through an engineer. Now everyone is their own engineer. Are you token maxing? Are you token minning? Or are you token min-maxing? We're token maxing. Maxing? We're token maxing. Wow. Flashback to February. What's going on? Isn't this going to be a problem? Aren't you sure people are going to be upset? We've gotten some messages from IT. Flashback. Coming in. We've got some messages about cost getting a little bit out of hand. But, you know, the good thing is this.

2:08:03It's not showing up in the quarterly earnings yet. No, not at all. I mean, the beauty is that when you've only got a few hundred employees and you're generating as much revenue as us, you're going to have to be doing a lot of token burning. Hey, there was somebody who allegedly, it might be a complete rumor, but$90 ,000 in a day. Wow. So I think you might be changing your tune. No, we're nowhere near that. It was a light week, half a million dollars. But yeah, judicious use, token maxing, but not taken to the extreme. Yes. The judicious usage. That makes sense. What does it take to all the digital marketers, growth people I know will happily test any new ad platform?

2:08:46What has been the key to retaining customers, right? Like, you know, marketer, let's say they're managing a$20 million budget. A lot of it's going to meta, Google, handful, you know, maybe some TV. You come to them and you say, like, give us a shot with like, you know, a quarter mil or half a mil or something like that, everyone will take the shot, right? But if you want to build a big business, you got to retain that. Profitability at scale. So that scale is different for everyone. Some people are happy with you driving an extra 10 % growth for their business. Some are saying, hey, you have to be the next Facebook or Google for us.

2:09:20But I would say for us, we see over half our clients actually retain. So we do a pretty good job. The algorithm works for a lot of people to come on. Now it's just getting the word out to the masses, right? Yeah. Awesome. That's next week? That is next week we open it. One other big thing is that we are going back to the AppLovin name. And this is a part of the world as well. Amazing. That's what I wanted the whole time. I wanted that the whole time. AppLovin's amazing. It transcends app. I think of it as its own entity, AppLovin. It doesn't matter. And for anyone that's confused as to why AppLovin is going back to the name AppLovin, you guys were thinking about having the ad platform be named something else.

2:10:00Axon. Yeah. Smart play. It's what I always wanted. I have no say in the matter. Let's hire more marketing people. That's amazing. Talk about generative creative. Is that in demand from your partners? Because I can imagine a marketer saying, for this particular audience on this particular platform, yeah, I want you to just go to a frontier model and generate me a hundred different copy lines that all fit neatly in the box and generate some images and here's some screenshots to sort of work through. You could even have an AI agent actually use my game, take real screenshots. Then you don't get the slop allegations.

2:10:45But in terms of layout, in terms of distribution, like how much of that is brands coming to you saying, look, I'm already really comfortable with ChatGPT images or Nano a banana or Higgs field. So I got it handled. I don't need your tool versus I would love for you to do this for me. Yeah. So taking a step back, the value of creative is that if you find the right creative that resonates with the right audience, it can be one of the biggest growth levers for your business. Sort of a power law. Exactly. Right. It's, you know, let's say you spend an extra 5 % on creative and you find a winner. It doesn't mean you're only going to spend another 5%.

2:11:18You could spend double. Right. And so every advertiser wants more creative that's perform it in high quality. And so amongst all advertisers we talk about, they all want the generative tools. What we have right now is generative interactives. So that has been very helpful for us. Why is that? Why interactives? And we'll talk about video in a second. How our ad unit works is we show a video, then there's interactive, and then there's a catalog. A lot of the clicks that happen on our ads are within the interactive. And so that has been massively adopted. And that's basically playing a demo of the game or a smaller version loaded probably in HTML or JavaScript and then you get to demo it.

2:11:56You hit the nail on the head. That's exactly. And that's probably extremely cumbersome for a small developer with a new game. They have to go create a new version of their game that loads quickly in the app-loving platform very seamlessly and that's a perfect use case for 100%. And imagine you're not even a game studio, right? You're an e-commerce store. You're selling wallets. And you want to use the interactive. Right, exactly. Oh, interesting. Right? Well, the interactives are massive. Yeah. Right? And so it's where we get a majority of the engagement. And you're showing an ad within a game, right?

2:12:24Yeah. So how do you gamify that experience? Yeah, yeah, yeah. How do you allow it to look at more specifications of the product? Yeah, yeah, yeah. All, I would say, 80 % of our top advertisers use interactives. Yeah, yeah, yeah. And so it's such a massive unit. Yeah, yeah. Now, where is this going? So right now we've got the interactives. Yeah. Now video has been our main focus. Yeah. We have it in beta and it's been really good. Yeah. And so our goal is to get that out to everybody. Yeah. By the end of the year, how we envision onboarding on AppLovin is you go onto the site, you set up the pixel, then you create a campaign with one button.

2:12:57It automatically generates the creatives. It pulls the links. And then you're off onto the races, right? You just have to tell your goal as well. So that's where we expect where the market is going. And it's part of our goal, which is making profitable advertising accessible to everybody. What's your advice for somebody that wants to be the first hire at a company that becomes worth$175 billion in the public markets? Work harder than everyone else around you and always be meeting people. You know, I got lucky to meet Adam. No, I don't think there was any luck. I think it's pure skill. That's why I asked.

2:13:34But no, I mean, like my background, funny enough, is I'm a high school dropout, right? And what I tell everyone is that - Did you get your GED? No GED. If mom and dad are listening, sorry. Have you actually gamed out? Can you get like an honorary PhD from some elite institution? I don't know. I haven't reached out. Because that's the max. Advertising honors. Yeah. Wherever like your hometown has a university, you go give their commencement speech, you start donating and all of a sudden they're just like PhD. And it's like probably cheaper. Like if you donate what the tuition would have been, probably get the honorary degree.

2:14:09Well, if Stanford and Harvard are listening, you know, my email box is open for you. I think they need you. But my analogy I'd always tell everyone is that, you know, when you send the warriors out to go get food, the first question they ask back isn't who is the eldest tribes leader. It was who killed the animal and who brought us back the food. And so that was always my analogy of like, as long as I outworked everyone and delivered a ton of value, then I would be at the same conversation in the same table as everybody else. So your advice, one word, kill. Yeah. Kill. I mean, yeah, you kill it.

2:14:40A lot of small companies. And if you provide value, if you provide ROI, you keep showing up. What about other platforms? I mean, we were just talking earlier in the show about Fox acquiring Roku. They have Tubi. There's a lot of ad inventory there. Have you thought about getting into that space? Like, what does that look like? What does the product line expansion beyond the phone look like in the future? You know, it's funny. Everyone talks about expanding. We're thinking about consolidating. You want to focus. Yeah, focus. Exactly, right? You know, you try to do everything. You can't go deep on many things, right?

2:15:14And so what I would say is like our company has grown so much since we got rid of a lot of the gaming studios. We stopped poking on that side of the business. For us, we feel like we have so much room to grow. I mean, remember, less than a tenth of a percent of advertisers in the world even use Apple. Sure, sure, sure. So let us get to millions of advertisers, and then we can talk about the rest of the other platforms. That makes sense. And also, you're very fortunate in like you're focused on a market that is growing, both like mobile gaming and advertising in mobile gaming and e-commerce and time on phones like you're like 12 different tailwinds why go into a market that has headwinds 100 i don't think people are spending less time on their phone these days nope nope maybe in the uk if you're under 16 john with your apple vision pro you know that's taking away some screen time that's a real threat to you guys it's actually twice the screen time because both eyes two screens nixon one youtube on the left yeah he's asking full brain rot awesome anyway um yeah excited for more people to get access and great to meet you thank you so much thanks for having me on the show guys coming on the show for a bit we'll close out there leave us five stars on apple one of the best ads i've ever seen okay we're going from ad in my life that is is truly one of the best let's pull it up wait what is this this just is an ad from cheaper usually cheaper usually this is one of those fake a this is one of those fake tech ads that the guy put up in the subway that's what's going on no cheaper usually yeah i i start thinking well in what settings is it not cheaper this is really tough if you're trying to get people to to switch it's certainly not cheaper if you're trying to go uh like one block like a car is always going to be uh is always going to be more expensive but this also feels like it's like we're trying to be cheaper it feels like price war with uber still but it's like we're sort of doing a price war but not all the time so you don't know it's not really a guarantee of any sort of like i feel like most marketing campaigns need to guarantee something even if it's a moderate guarantee it's like five percent cheaper every time yeah but because if it's cheaper usually could they not just say cheaper even drop the usually the usually is hilarious like i'm thinking about like if i if you take if you take a bunch of lift rides yeah the same route every single day and you take a bunch of like uber rides yeah yeah you could probably just make the argument that it's cheaper yeah well what's the uh what what's that airline that has the tagline bags but it's also Tough to put cheaper and then your logo.

2:17:52Yeah. That's not good either. I think it's Southwest that has bags fly free. Like, can you imagine how bad that campaign would be if it was bags fly free? Usually. Like, built Ford tough. Usually. It's usually built Ford tough. Not always, but usually. What are some other big, just do it. Usually not the most expensive option. Most? I most that's even that's even that's even worse because then they're thinking okay sometimes it's the most expensive um anyways folks uh I'm rooting for Lyft there's some other billboards the new chat GPT billboards are really good Lyft is up 10 in the last month the chat GPT the image is working it's really cool I like it because it has the same like it it is aesthetically pretty but it's also functional it like actually don't fly free anymore apparently oh yeah they don't but there was one airline think different usually i'm loving it usually mcdonald's a diamond is forever usually to beers got me what's the other one finger licking good usually kfc it's very ominous the best a man can get usually breakfast of champions usually have it your way usually i love it usually Usually.

2:19:16Like a good neighbor, State Farm is there. Usually. The few, the proud, the Marines. Usually. Taste the rainbow. Usually. Red Bull gives you wings. Usually. That's actually probably accurate. Anyway. Fly the friendly skies. Usually. I got to tell you about Shopify. Shopify is the commerce platform that grows with your business and lets you sell in seconds online, in-store, on mobile, on social, on marketplaces, and now with AI agents. always. Shopify always lets you do this. They never, it's not a usual thing. Let me also tell you about Codex. Codex always is a powerful workspace for always getting work done with AI agents, whether you're writing code, analyzing data, creating content, or automating business workflows.

2:20:01Codex always helps you move projects forward from start to finish. Always. Visa, everywhere you want to be, usually. Also, we told you about public earlier, but it's investing for those who take it seriously. BMW, the ultimate driving machine. Oh, yeah. We also got to talk about fin.ai, sale to Salesforce, fantastic outcome. True testament to founder mode. Give it up for Owen McCabe, friend of the show, Mark Benioff, friend of the show, teaming up. Absolutely amazing outcome. Such a wild ride to build intercom, wind up raising a ton of money, build a great business, but not have this founder energy.

2:20:41We talked to Owen about this where it was like, okay, the business is working. Things are growing. It's not crisis mode. It's not wartime anymore. And he sort of got forced into peacetime and then AI shows up and he gets to go back into wartime. And he delivered fantastic growth, fantastic new product, a fantastic outcome for everyone, met the moment and is now on the Salesforce team and going to be absolutely knocking heads. Great outcome for Intercom and Finn. Massive pickup for Salesforce. Yeah. I mean, the rebrand, crazy move. Like, I think a lot of people were like, wait, Intercom's like this known thing.

2:21:23Why are you launching a new product and rebranding the whole company? But that's the type of thing that you get when a company switches into wartime mode, switches into founder mode. And so you get these like high risk, high reward things. And I don't know if the rebrand or the rename was, you know, that critical to the outcome. There was a lot of other stuff, mainly the growth, the product, right? But it just shows you that Own came in and said, I'm willing to change literally everything, including the name of the company that I've been running for a decade. So fantastic news. The transaction is expected to close in the fourth quarter of fiscal year 2027.

2:22:00That's a long time to integrate, but good luck to them to get through that. It's been 15 years in the making, so what's six quarters to wait around for the DIA to close? Super happy for the thin team. Fantastic outcome. In the seat for 27 years, Benioff's been at it. So, fantastic crew. Congratulations to all in all. Market clearing order. Leave us five stars on Apple Podcasts and Spotify. Sign up for a newsletter at tbpn.com, and we will see you tomorrow at 11 a.m. Pacific. Goodbye. Technology's Daily Show. Technology in motion. according to train in the chat we love you goodbye goodbye