Google I/O Reaction, Microsoft Build Recap, OpenAI's Stargate Datacenter | Austen Allred, Jeff Morris Jr., Cliff Weitzman, Logan Kilpatrick & Tulsee Doshi

29:08People take startups seriously. But I'm thinking of that. What is that Anker Jane company where you can pay your rent with credit card? And Wells Fargo like totally took a bath on the deal, at least in the short term. You remember this? It was some sort of credit card. Built. Built, yeah, built rewards. And so like doing a deal with Wells Fargo at that scale as like a startup is crazy. But like Anker is clearly just a really, really great like deal maker. and so he was able to get it done. And if points on housing actually does play out to be a real thing in a big business, it will be on the back of that crazy deal that needed to get done to make this happen.

29:50It wasn't just going to be some ground up, small company deal. You had to go in and do this big thing. Yeah, it's interesting in some ways. Now Apple Pay enables what would have been the goal at this time, but it does it effectively at the hardware layer. Yeah. Yeah. Yeah. It's not even that good. I think it's pretty, it's getting to the point where it's pretty good. Yeah. Yeah. It's pretty good. But I mean, still like you, you hit web checkout forms all the time and have to hit the auto fill, which is like such a kluge because it could just not even be there. Yeah. It could just be as native as you click a link or, you know, even just like the integration of email or the integration of the share sheet.

30:31Like there's so many different aspects that are built into the web browser natively. Like the ability to play video on the web. Like that was something that all the browsers needed to figure out. And like it just works now. Like every browser supports video. Mark Andrewson was talking about all the different things. Like why the hyperlinks are blue. Like he's the one that decided that because he was like, we need hyperlinks and we should make them blue. And it's like there could have been a version of money. So anyway, Ben Thompson goes on to say, I think Andreessen is too hard on himself. And I think Zuckerman is too harsh on the model Andreessen created the conditions for.

31:09The original web was the human web and advertising was one of the best possible ways to monetize the scarce resource in digital human attention. The incentives all align. Users get access to a vastly larger amount of content and services because they're free, which I really like. It's great that anyone can access the internet for basically free and they can go all over. And most of these services are free. The information spreads very quickly. Content makers get to reach the largest possible. The information doesn't spread quickly always because there's a paywall, but there's the black market of PDF as well that I think it's Paula has talked about in SV.

31:49Yeah. Content makers get to reach the largest possible audience because The access is free and advertisers have the opportunity to find customers they would never have been able to reach otherwise. Yes, there are downsides to advertising. Zuckerman fretted about, but everything is a trade-off. And the particular set of trade-offs that led to the advertising-centric web were, on balance, a win-win-win that generated an astronomical amount of economic value. Yeah, it's hard to go back and play out the Google story and say, like, oh, they left a lot on the table. Yeah, and in so many ways, content wants to be free, right the second that you put web pages or anything behind a paywall yeah the uh attention they get drops by 99 usually more right totally uh and yeah it's just it's just way better to be advertising led it's way better to just you know as you're talking about one story just are to just start talking about figma you know think bigger design build faster figma helps design and development teams build great products together you can get started for free anyway it is the backbone of our show, and we can't thank them enough.

32:57Okay. Thank you. Moreover, I disagree with Andreessen that we could have ended up with a better system if the banks and credit card companies had been willing to play ball. In fact, over the last 30 years, the credit card companies have, in particular, have, in part thanks to companies like Stripe, gotten their digital acts together and are integral to a huge amount of web-based commerce, which itself is driven through digital advertising, the largest category of advertising for both Google and Meta. that too is human in that the biggest outcome of digital advertising is physical products and real world experiences like travel.

33:28Digital products like apps and games, meanwhile, are themselves pursuing human attention. What was not viable in the 1990s, nor at any time since then, was something like microtransactions for content. One obvious problem is that the fee structure of credit cards don't allow for very small transactions. Another problem is that costs to produce content are front-loaded. And the potential payoff is both back-loaded and unpredictable, making it impossible to make a living. The biggest problem of all, however, is that microtransactions are anti-human, forcing a potential content consumer to continually decide on whether or not to pay for a piece of content is alienating, particularly when plenty of alternatives for their scarce attention exist.

34:10I really believe that a large amount of the sub-stack economy is effectively crowdfunding somebody's ability to just nerd out on a specific set of topics. I agree. And I think it's beautiful. I agree. Yeah, it does seem like if there's, yeah, sorry. Yeah, I was just gonna say, but a lot of the content creators that are paywalled on Substack would be bigger and more influential if it was just completely free, right? Yeah, yeah. Yeah, there's a big question in my mind of like, where does investigative journalism go in the era of going direct and modern tech media uh like where is tech seymour hirsch like you need someone who can just be like seymour hirsch was just on the payroll of big newspapers for a long time and then could go and like hang out at a bar and talk to former soldiers about what they did in vietnam and then figure out that the mylai massacre happened and like uncover this like massive scandal.

35:07And we see this in Silicon Valley where there are companies that are like, you're not going to be able to put a bunch of sponsored content on a takedown of some company that's defrauding their investors. The, the win case is the John Kerry story with Theranos where he was able to be on the wall street journal payroll for a long time, hunt that story down for a long time, do a lot of sourcing and a lot of confirmation because it's extremely risky to write something negative about a$10 billion company that has incredible resources. I mean, you kind of need the heat shield of a big organization. Totally.

35:41Yeah. And also just, you need to be able to pay your mortgage while you're doing the research and not publishing and just doing nothing basically. And being a hundred percent focused on chasing down a really big story. And then when you do it, there's a huge outcome because he of course sold a book and then the rights to the documentary and the movie and the tv show and all this stuff and i i don't even know if he's i don't know what he's up to now but it seems like he worked out really well that'd be great to get him on the show um here if he's getting back in the game digging into some of the the maybe he's already working on yeah i mean theranos 2.0 is coming right now he's like i'm back he's like i'm i'm ready to start talking to the employees of this new the new blood testing it would have been a huge missed opportunity to not just name the company theranos 2.0 inc Yeah, that'd be great.

36:29I mean, attention. Do we know what the name is yet? I don't know. I missed it. But we'll have to look at that. Anyway, subscriptions do work at smaller scales, says Ben Thompson, because they are ultimately not about paying for content, but giving money to another human, which you've mentioned, or human institution from the local news business model, which Ben wrote. It is very important to clearly define what a subscription means. First, it's not a donation. It is asking a customer to pay for money for a product. What then is the product? It is not, in fact, any one article, a point that is missed by the misguided focus on microtransactions.

37:02Rather, a subscriber is paying for the regular delivery of well-defined value. Each of those words is meaningful. Paying a subscription is an ongoing commitment to the production of content, not a one-off payment for a one piece of content that catches the eye. Regular delivery. A subscriber does not need to depend on the random discovery of content. Said content can be delivered to the subscriber directly, whether it be email, a bookmark, or an app. Well-defined value, a subscriber needs to know what they are paying for. The last point is the crux of why many ad-based newspapers will find it all but impossible to switch to a real subscription business model.

37:38When asking people to pay, quality matters far more than quality, and the ratio matters. A publication with one valuable article a day about a well-defined topic will easily earn more subscriptions than one with three valuable articles, but 20 worthless ones covering a variety of subjects. Yet all too many local newspapers built for ad-based business model that calls for daily content to wrap ads around, spend their limited resources churning out daily filler, even if those ads no longer exist. Ben says, I expect that this model will endure in the age of AI. Obviously, I'm biased at this point, but in a world of infinite content on demand, common content becomes community.

38:17and if I'm successful, this essay will generate a lot of discussion amongst a lot of people precisely because it is both original and widely accessible, funded by an audience that wants me to keep writing articles exactly like this. So of course, Ben writes free articles and then also private ad-supported articles and goes back and forth. So he gets a little bit of the reach. So he goes in here, the death of the ad-supported web. The ad-supported web, particularly text-based sites, is going to fare considerably worse. In fact, the most substantive pushback to my defensive advertising was in my own excerpt most ad supported content is already terrible thanks to the bad incentives both zuckerman and injuries and bemoan and the impossible economics enabled by zero marginal cost content generation and consumption google in its most idealized form aggregated content consumers aggregated content consumers by mastering discovery in this world of abundance directing users to exactly the site they were looking for which was monetized through ads that were sold and served by Google.

39:14Indeed, this is the great irony in the ads antitrust case in which Google is currently embroiled. Mark Sufert asked on MobileDubMemo, I've heard arguments that because Google suppressed competition in open web advertising markets, those markets should flourish when Google's monopoly is broken. But my sense is that this ignores two realities. First, that consumer engagement has shifted into apps and walled gardens irreversibly, of course, like most people get their news from X or Instagram or Facebook. Yeah, this was the logic for X to say, yeah, we don't want you posting links. We're fine for you to post an excerpt or a screenshot.

39:49Let's build those walls a little bit higher. Because we want you to click into the content and see another ad and then click out, go see something else, see another ad, and just do that forever. And second, that Google was keeping the open web on life support and the open web's demise will be hastened when Google no longer has an incentive to support it. What happens to the open web when its biggest, albeit imperfect benefactor, loses the motivation to sustain it. Well, everyone's going in the walled garden. Walled gardens, like social networks, are both more attractive to most users and also better for advertisers.

40:22Google might soon lose what little motivation they had left to support the open web. However, that's not Google's and the web's only problem. Why go through the hassle of typing a search term and choosing the best link, particularly as search results are polluted by an increasingly overwhelming amount of SEO spam now augmented by generative AI when ChatGPT or Google itself will simply just give you the answer that you're looking for. In short, every leg of the stool that supported the open web is at best wobbly. Users are less likely to go to ad-supported content-based websites, even as the long tail of advertisers might soon lose their conduit to place ads on those websites, leaving said websites even less viable than they are today, and they're barely hanging on as it is.

41:04I mean, can you think of a single - classic example of this is like historically trying to find an ingredient like a recipe right you're like i want to make oatmeal yeah and the site like buries the only information you actually need which is like how much how many how many cups of oatmeal to water the ratio or whatever and you have to see you have to scroll by you know two pop-ups and six ads to get to that little nugget of information and now it can just be immediately surfaced by an lm i'm trying to I think about the last time I visited like a truly ad supported website. Like I'm scrolling through here and it's just nothing in my tabs.

41:46Like everything is either a marketplace that monetizes by transaction fees or a paywalled website for news or just Google search generally finding stuff. but there are very, very few websites that I visit today on a regular basis that are purely ad supported. Like I do go to the Wall Street Journal or The Economist or Stratechery or any of these, but none of them are purely ad supported. The Wall Street Journal does have ads, but they also have a big paywall and an actual subscription fee. So it's interesting. Yeah, the open web, I mean, is it dying or is it already dead? It seems like the Vice News and the BuzzFeed, that boom and bust has already happened.

42:37Yeah. So I don't know. Anyway, he moves on to me. Yeah, I mean. What do you think? It'd be interesting to try to honestly run a deep research report on trying to understand traffic to these websites that are effectively dying but not dead. right because if you have a website that's i would imagine like how many websites have recipes for uh you know cooking various things that still get people trickling in and they're technically still monetizing maybe web the question yeah the question is like at what point does uh does it cost more to even host the website than it's generating traffic right yeah i mean there's been a couple of those because if you're making whatever if you're making a thousand dollars a month in ads and it costs you a couple hundred bucks to maintain the website in theory somebody would just keep that running uh indefinitely yeah i mean uh tech crunch was obviously famously ad supported they were bought by regent uh which is a private equity roll-up of uh of brands let's look at their portfolio it's all very hyper specific stuff they own tech crunch now but they also own computer world, network world, PC world, Mac world, tech hive.

43:52They own Cheddar News. They own defense news, Air Force Times, Navy Times, Army Times. So I imagine that Navy Times is probably ad supported. I mean, I'm just clicking around on the website and there's not a lot of like paywalls I'm hitting, but they are running ads and I'm sure that they have other ways to monetize, whether it's through premium reports or maybe conferences or something like that. But in general, it seems like there aren't that many companies. I would struggle to name companies that are generating over a billion dollars in revenue off of purely ad-based website that's not an ad exchange, for example.

44:30Yeah. I doubt it exists. It doesn't really exist. Anyway, so Ben takes all of this, preliminary thesis and weaves it into Microsoft and the open agentic web. It says, this reality is the fly in the ointment of an intriguing set of proposals that Microsoft put forward yesterday at the Build 2025 developer conference about the open agentic web. And so the quote from the CTO is, the thing that is super important if you think about what an open agentic web could be is you need agents to be able to take actions on your behalf. And one of the really important things about agents being able to take actions on your behalf is that they have to be plumbed up to the greater world.

45:13So you need protocols, things like MCP and A2A and things that are likely going to be emerging over the coming year that will help connect in an open, reliable, interoperable way. The way agents that you are writing and agents that are being used so actively now by hundreds of millions of people to be able to go access content, to access services, to take action on behalf of users in fulfilling the tasks that have been delegated to them. One aspect of this vision of the agentic web, says Ben Thompson, was Microsoft's commitment to MCP, which we talked about a little bit, created by Anthropic. Scott told Neelay Patel in an excellent interview on The Verge that while MCP wasn't exactly what he would have designed from scratch, ubiquity is more important than semantic differences, particularly when you're trying to create HTTP for AI agents.

45:58The second part of Scott's vision was something Microsoft created called NLWeb, natural language web. And these are natural language interfaces for websites that make them more directly accessible for agents. He says, if you think back to the web, we have HTTP. And then we had things that sit on top of HTTP, like HTML mainly, that are opinionated about the payload. So today we're announcing NLWeb. The idea behind NLWeb is that it is a way for anyone who has a website or an API already to very easily make their website or API an agentic application, lets you implement and leverage the full power of large language models to enrich the services and products that you're already offering.

46:37And because every NL web endpoint is by default an MCP server, it means that those things that people are offering up via NL web will be accessible to any agent that speaks MCP. So you really can think about it a little bit like HTML for the agentic web. I always thought this was odd because I thought that the layer to go between APIs and HTML for an agent to just transform HTML into something that an agent could understand would be very, very simple. I didn't think that we'd need a new protocol, but it seems like it's getting tons of adoption. So I guess this makes sense. We've done a bunch of work already with our partners who have been really excited to be able to very quickly get to implementation and prototypes using NLWeb.

47:18They've worked with TripAdvisor, O 'Reilly Media, a ton of really great companies that offer important products. So Scott concluded by reemphasizing how important it was that the layers of the agentic web be open and use the evolution of the internet as his reason of why. So he says, so the last thing that I want to say before handing things back over to Satya is just sort of press on these two points about why open is so important here. you know it is unbelievable what can happen in the world when simple components and simple protocols that are composable with one another are out there exposed to the full scrutiny and creativity of every developer in the world who wants to participate or who has an idea this thought game that i play with myself all the time is trying to imagine what the web would have looked like if one of the actors in the early development of the web say that browser manufacturers browser manufacturers is a great terminology mark andreason a browser manufacturer yeah he made his money in browser manufacturing domestic browser manufacturing uh american dynamism browsing so had decided that they wanted to vertically integrate and own the entire web a hundred percent of the web would have been dictated by the limits of their imagination and it's just obvious with 30 years of history that that wouldn't have been a very interesting web the web is interesting because yeah think of the iphone app layer if apple wasn't controlling it would be extremely chaotic but there would undoubtedly be sort of cool uh you know things that would emerge yeah i'm kind of split on it because like there's so much creativity that you can do within a jpeg or an mp4 and so if you get on youtube i mean it requires more production value but uh you know we we like we are not constrained by anything other than just pixels here and we can put tickers and do all sorts of things within the confines of the mp4 box i guess it is a little bit more narrow than than a web ui that anyone can use and click around so we in some ways we are being constrained but they're like you just scroll on on any social network and you see the amount of creativity that that occurs even within the constraints of like no links right yeah despite Despite Apple's control of the app store, you still get the benefits of the web, which he goes on to describe here.

49:37The web is interesting because millions, tens of millions, hundreds of millions of people are participating to make it this rich, dynamic thing. That's what we think we need with the Gentic web. And that's what we're hoping you all can get inspired to go work on a little bit, to riff on, and to use the full extent of your imagination to help make this thing interesting. Yeah. So he says, so back to Ben Thompson, he says, I think the widespread adoption of MCP as a protocol layer and NL Web as markup layer sounds excellent. The big hole in Scott's proposal, however, was pointed out by Neelay Patel in that interview.

50:07That's the piece that on the web right now seems the most under threat. The underlying business dynamics of if I start a website, put a bunch of schema on it that allows search engines to read my website and surface content across different distributions. I might add an RSS feed, which is a standardized distribution everyone agrees on. There's lots of ways to do this, but if I make a website and I open myself up to different surfaces, what will I get in return for that is not necessarily money. In almost every case, not money. What I'll get is visitors to my website and I'll monetize them however I choose, selling a subscription, display ads, whatever.

50:38That's broken, right? As more and more of the answers appear directly, particularly AI-based search products, traffic to websites has generally dropped. We see this over and over again. What's going to replace that in the agentic era where where we've created a new schema for agents to come and talk to my website and receive some answers. What's going to make it worth it? And this is a good question. Scott, in his answer, noted that websites would be able to communicate to agents that they wanted to make available and on what terms, along with some vague hand-waving about new advertising models and transactions.

51:08That last point is valid. TripAdvisor sells hotel rooms, O 'Reilly sells training courses, and you can see a world where websites based on transactions can not only benefit from exposing themselves to agents, but in fact transact more and potentially pay an affiliate fee, Patel. So yeah, I mean, if you're searching for a car and you're searching across eBay and Auto Tempest and cars and bids and bring a trailer, all of a sudden it doesn't really matter if someone's landing on your website. All that matters is that they're transacting and that they found the car that they're looking for. And so for all those transaction-based websites, they're going to do fine.

51:46Yes, someone who's just making content and putting ads on it is kind of screwed. I don't know about these transaction based websites, right? I mean, thinking of cars as an example, right? You have car gurus, you have probably what cars.com trailer cars. Yeah. The auction ones, but imagine a world where I just have car gurus is like an ad based business model. They want to drive leads to dealerships and get that. But in a world where I just say, Hey, find me every single Ford GT between this year and this year that's publicly available online bring me the contact information and actually reach out to the people yes yes yes but but so i don't think you can disintermediate entirely i think that i think that the agent would would say hey there's a ford gt that's available and bring a trailer right now here's the current price do you want me to sit here and bid on it for you yeah but here's the issue though because i can have that you could have the agent like in theory the agent would go to car gurus and fill out the form and tell the dealer process a lead to the dealer and the dealer's like thank you for this lead car gurus if i sell the car i will pay you a fee or maybe it's just paid up front but the issue is an agent could theoretically just like find the see the image of the car and then find do an image search uh maybe yeah i'm just saying do an image search and be like oh i found this exact car and this exact photo that the dealer posted on their own site and i'm not going to pay car gurus i'm just going to find and i'll actually call the dealer and confirm that they have it and i'll negotiate on your behalf and then but people already do car gurus is cooked yeah yeah they already do that but it's just much more scalable to say yeah but i mean that's not that's not a a marketplace like like if you are on bring a trailer and you see a car like you generally can't disintermediate bring sure like like so if you are a platform that's that's bringing liquidity to the market and bringing listings that don't exist elsewhere on the internet.

53:41But yes, I mean, people see this with Airbnb where they see a beautiful place and they're like, I'm gonna go just look up this place and see if they have their own website. But a lot of people that are selling a one-off car don't have a website where they're listing their car. Like somebody might do that. Maybe in the future, you would just post on X, hey, I'm selling my car. I have it listed on bring a trailer, but you can just negotiate. Well, it's funny. So one of the companies that's probably pretty cooked in this new era is internet brands and they own web md they own but all the way through they own board truck enthusiasts they own renlist that seems rough they own the dodge forum like some of these more community-based sites i think are going to be fine yeah because it's a place where discussion is happening but again uh oh well well sites that are purely indexing so yeah ben thompson goes on and says, the original sin of the internet lacking native payments was not, in my opinion, a sin at all.

54:41Advertising supported the human web, not because Andreessen failed to make a deal with the credit card companies, but because it was the only business model that made sense. No, the real neglect and missed opportunity in terms of payments is happening right now. Microsoft is on to the right idea with its adoption of MCP and an introduction of NL web, but its proposal by virtue of not including native payments isn't nearly compelling as it should be. The key difference from the 1990s is that on the agentic web, native digital payments are both viable and the best possible way to not only keep the web alive, but also in the process create better and more useful AI.

55:23And so he goes on to talk about stable coins and agentic microtransactions. Let's Start with the viability. This is from Bloomberg. Stablecoin legislation overcame a procedural blockade in the U.S. Senate, marking a major victory for the crypto industry after a group of Democrats dropped their opposition Monday. The industry-backed regulatory bill is now set for a debate on the Senate floor with a bipartisan group hoping to pass it as soon as this week, although senators said a final vote could slip until after the Memorial Day recess. So hopefully this passes and we can talk to everyone on Crypto Day about this next week.

55:55That'll be a lot of fun. Ben goes on to say, I know I've driven longtime Stratechery readers a bit batty with my long running and still enduring in the face of massive grift and seemingly unending scandals, interesting crypto, but stable coins are genuinely a big deal. I wrote a brief explainer last fall when Stripe acquired Bridge. And so I'm sure most people are familiar with stable coins. He goes on to say, stable coins solve several of the microtransaction problems I listed above, including dramatically lower or no fees. And the fact that they are infinitely divisible and thus can scale to very small amounts.

56:29Stablecoins by virtue of being programmable are also well suited to agents. Agents, meanwhile, are much more suited to microtransactions because they are not in the end simply software making a decision. Because they are in the end simply software making a decision unencumbered by the very human feeling of decision paralysis. So an agent can just go around and make a bunch of microtransactions. The entire digital ad ecosystem, he writes, is an example of deterministic agents making microtransactions at scale every time a human loads a webpage. An awe-inspiring amount of computation and communication happens in milliseconds as an auction is run to fill the inventory on that page with an ad that is likely to appeal to the human.

57:06These microtransactions are only worth fractions of a penny, but the aggregate volume of them drives trillions of dollars worth of value. The problem, as I and Patel both noted, is that this ecosystem depends on humans seeing those web pages, not impersonal agents, impervious to advertising, which destroys the economics of ad-supported content sites, which in the long run dries up the supply of new content for AI. OpenAI and Google in particular are clumsily addressing the supply issue by cutting deals with news providers and user-generated content sites like Reddit. This, however, is bad for the sort of competition Microsoft wants to engender and ultimately won't scale to the amount of new content that needs to be generated.

57:46What is possible, not probable, but at least possible is to in the long run build an entirely new marketplace for content that results in a new win-win-win equilibrium. First, the protocol layer should have a mechanism for payments via digital currency, stable coins. Second, providers like OpenAI should build an auction mechanism that pays out content sources based on the frequency which they are cited in AI answers. And this is kind of already happening with Spotify, right? Like there's a whole bunch of music on Spotify. they have a whole pool of capital from all their subscribers and then the more listens that they get the more money flows in it's not really an ad-based auction system it's more like just dividing up the pie the thing there and it's a good comp is that that was happening from the very very beginning and the initial deals that spotify did with record labels to get the music on in the first place and now we're in a situation where all the llms are just using the internet that's not true though like open ai has a deal with the wall street journal and they have some deals but they certainly don't have deals with every book they've ever ingested no no no but you imagine that they'll kind of go down the power law curve of like the most important information sources and broker deals more and more and more which is what spotify did at the beginning because they'll do that if they're sued remember like they had and they have been sued they've been sued a ton and then over and over so they get sued and then they settle and then they a little messy, but it's fine because at the end of the day, the Wall Street Journal has a deal with OpenAI where OpenAI can ingest information from this, surface it in chat GPT results, and the Wall Street Journal gets paid for that work.

59:23And I don't know the structure of the deal, but I imagine that it's something like, we're generating this much money from people searching and you're driving 1 % of our value. And so we'll give you 1 % of the cut or half a percent. We'll split it with you. Just like, you know, if you're Taylor Swift on Spotify and you're getting, you know, 1 % of the listening time, they'll give you half a percent of revenue or something like that. Right. Is that not crazy? I love it. Theoretically. I think that's like what's happening. And, and the problem is that it's going to need to go down the stack until it's self-serve because if you want the open web, you can't do individual deals.

59:59And so eventually anyone can go on Spotify. Like we're on Spotify. We get, uh, I think we get a check. We get a check from Google at least. And in theory, it's like, we don't need to do a deal with Spotify. Of course, Joe Rogan did do a deal with Spotify directly like the Wall Street Journal did a deal with OpenAI. But plenty of podcasts go on Spotify. Spotify automatically runs ads and does premium plays and then sends them a check. It's just such an interesting dynamic, right? Because so often LLMs are not just serving the content. They're effectively... Remixing it totally right but but they're precedent but that is like historically hitting the page historically if the journal went into the you know somebody from the journal goes into the library public library reads a bunch of books forms its own kind of summary of nobody's getting paid for that right yeah but and so there's an argument the the models can make an argument that there's enough precedent that says there's nothing illegal about ingesting yeah that's information but there is this there is this win-win-win that ben thompson's talking about this idea that Google has an incentive to keep the open web alive and the LLM providers might have a similar incentive because they want more journalism and more facts to hit the internet that they can scrape and pull into results.

1:01:22And so what is the value of a single Wall Street Journal page loading logged out, right? Yeah, I can see a scenario where it's like net new content or something like that, where like OpenAI does a deal with Substack. Why not every time? Why not on a user basis? I asked for a summary of the Wall Street Journal mansion section. No, I'm saying - And it went and read 10 articles. No, I'm saying every time. I'm saying every time. I'm just saying it's possible that there needs to be some type of cutoff date where, again, how does this actually - It sounds really simple in finding this win-win-win, but the actual mechanics of getting a deal done between the internet and a relatively small group of foundation model providers.

1:02:14But again, are you saying that there's a tremendous amount of complexity? I'm saying there's a tremendous amount of complexity, John. Because that's exactly what Ben Thompson's concluded with. He said, there is, to be sure, a tremendous amount of complexity in what I'm proposing. And the path to marketplace for data generation is quite unclear at the moment. Who, however, could have predicted exactly how the ad supported web would have evolved or centrally designed the incredible complexity that undergirds it? This is where Scott's exhortation of openness is spot on. A world of one dominant AI making business development deals with a few blessed content creators and scraping the carcass of what remains on the web for everything else is a far less interesting one than one driven by a marketplace auctions and aligned incentives.

1:02:58To get there, however, means realizing that the internet's so-called original sin was in fact key to realizing the human web's potential, while the actual mistake would be in not building payments now for the coming agentic web. And so bull market in stable coins, we can see stable coins trading at$1.000. zero one dollars so funny it's so funny because everybody's so bullish and convicted on stable coins now but it's like how do you how do we make money on this how do we make money i don't think it's launching the next circle right or another stable coin provider even though that clearly is a great business if you look at yeah uh you know some of the different providers i was actually wanting to get uh there had been rumors that circle is talking with coinbase and ripple about a sale because they put out their s1 the market hated it and they're basically like you are completely dependent on on coinbase in many ways and paying all such a large part of your revenue to coinbase you know does this so anyways could make a lot of sense for those two to join forces but Coinbase is also dealing with a lot right now.

1:04:16Yeah. Well, that concludes Microsoft, and we've talked about Google a little bit. Should we move over to Stargate and OpenAI? I would like to do that, John. We're taking a full tour today. We're just going around the horn to all the big labs, one story after another. We've got to get boots on the ground and Abilene. Yeah, we've got to go there. I mean, Chase was texting me earlier. We got to have him on the show, but I think visiting would be worth it. It seems like Shirin Ghaffari, I don't know if I'm pronouncing that right, but Shirin over at Bloomberg got an exclusive look inside Project Stargate, the$500 billion AI infrastructure project, including an on-the-ground tour of its first massive data center in Abilene, Texas, with interviews of Sam Altman.

1:05:05Love it. She's been on absolute tear. Wrote this today. Dropped the anthropic profile of Dario yesterday. Just banger after banger. So inside the first Stargate AI data center, OpenAI, Oracle, and SoftBank hope the site in Texas is the first of many across the United States. Let's dig in. Trucks carrying concrete and electrical wiring plod over red clay weaving in between cranes and excavators. two symmetrical buildings stand in a massive plot of land where thousands of people in brightly colored vests work day and night to construct six more near identical structures that will make up the first site for stargate project stargate is collaboration between open ai oracle and softbank with promotional support from donald trump i love it throwing that in still unbelievable that they got him to just go and and announce it even though the guy loves building in america you know this is like his whole brand.

1:05:58Showbiz. Loves to build the big things. To build data centers and other infrastructure for artificial intelligence throughout the United States, the companies have pledged to spend as much as$500 billion in numbers so large it's hard to believe it'll actually happen. But at least for one, for this one, in Abilene, Texas, 180 miles west of Dallas, Chase Lockmiller says they're good for the money. Chase Lockmiller. This is an incredible... He chases the energy. He locks it down. Then it's Miller time. Chase Lockmiller, baby. He's on the case. The nominative determinism is wild. Let's pull up the photo of Chase.

1:06:34He's looking great. He's hanging out. An absolute dog. Yeah. He's been on this for so long. Lockmiller is the co-founder. I met him four or five years ago. You can go to the next slide. It's so he's more centered. I met him four or five years ago when they were doing oil and gas flaring for crypto mining. And it was great. Yeah, there was. I mean, the business was doing really well back then. It's funny because it was very low status to do the crypto to AI pivot. Totally. Yet you get CoreWeave and Crusoe out of it. Yep. Just absolute monsters. Always ignore the meme. Whatever the meme is, just ignore it.

1:07:07Build a GDPT wrapper and sell it to open AI for$3 billion. Like pivot from crypto to AI and IPO for$40 billion. Do it. It's fine. It doesn't matter. Ignore what the haters think. Yeah. So Locke Miller is, of course, the co-founder and chief executive officer of Crusoe, a startup that helps develop AI data centers. Crusoe's costs to build the one in Abilene are expected to reach 12 billion, Locke Miller says, and that's not counting the billions of dollars worth of NVIDIA Corp chips that will be installed in the finished facility. I've never built anything of this scale, Locke Miller says. I've had to learn a lot on the job.

1:07:41So the three main companies behind Stargate could say the same thing. OpenAI knows AI, but has relied on Microsoft for data centers. Oracle knows databases, but only holds 3 % of the cloud market. softbank once raised a hundred billion dollar fund but that didn't go so well let's give them some time let's let them cook you know uh 10 year 10 10 year horizon we've got a got a few years left on that one oh yeah we we we got to pivot really quickly to the to the economist because the economist has an article about will open ai ever make real money we should do a whole deep dive on this one, but the way they describe SoftBank is hilarious.

1:08:21Here it says they're talking about the latest OpenAI fundraising. Happily for the CFO of OpenAI, money men swept up in the AI mania need little persuading. They're falling over themselves to fund OpenAI. On May 13th, SoftBank, a Japanese tech piggy bank, said that it's$30 billion investment in the firm was unaffected by open AI's recent decision not to ditch its odd governance structure. A nonprofit board would keep control of its for-profit arm. It's a whole great article. I mean, we're talking about this off air. I mean, it's absolutely credit to Sam for not completing the conversion, but not having to renegotiate at least the top level numbers, right?

1:09:11The 30 on 330 or whatever it was um one of the best deal makers of all time and masa doesn't clearly yeah clearly doesn't care what price he pays just simultaneously the soft bank deal is like crazy and unprecedented and wild and japanese piggy bank and all that but the premise of like will soft will open ai ever make real money is like ridiculous to me like well the next will the next uh consumer tech giant make money online will a company 500 million users make money i was saying saying this yesterday off air i was like you remember it was only it was less than a year ago people uh anthropic was ripping yep and yahoo and everybody was just saying yeah open ai is yahoo yahoo i was thinking about this a lot and i was like what what was the problem with yahoo like They got disrupted by Google, obviously, but more specifically, what happened?

1:10:12It was a shift from non-algorithmic links to a better algorithm in PageRank. It was a development of a better algorithm that really smoked them. And I'm wondering, is that a point of fragility for OpenAI? You could imagine someone comes up with a different model for AI. Like they say, like the transformer architecture is fundamentally not it. It's V1 and we're coming out with V2 and it's completely different architecture. Fine, maybe that happens. Is OpenAI agile enough to implement that within six months? Like probably, right? If DeepSea can clone transformers and reasoning models in just a few months, you would think that like, I guess the question is like, Yahoo failed not just because Google invented PageRank, which sorted the links by the number of links to a specific website.

1:11:10And so if everyone is linking to Stratechery and you search for tech news, that increases the PageRank and that shows up at the top. And that was the key insight by Larry Page, the creator of PageRank. And it created much, much better results. Like when you went to Google, it was dramatically better of a product. I remember when it came out. Like I was a kid and I remember using AltaVista. You were what, like 30 at that point? Yeah, yeah, exactly. Like a little late, late teens. I think I was actually like eight or something. But anyway, so I had been using Yahoo and AltaVista and you would search and it would just be kind of like random links or they'd be like kind of curated.

1:11:52It would literally just be, it would basically just search based on the keyword. So if you search for like tech news, you would more than likely just see like technews.com come up because it had really strong like SEO just from keyword searching. Google brought in PageRank and said, well, it doesn't matter that Stratechery, the word doesn't make any sense. And Ben Thompson never actually writes, I am tech news, technology news, hashtag technology. It doesn't matter that he says that. All that matters is that everyone is linking to Stratechery and it's actually a great source for tech news. And so we're going to put that at the top of the results.

1:12:25Now, that was a better algorithm and it was a better product very quickly. but if Yahoo had implemented PageRank, which I don't know if it was like patented or something, but if they'd been able to keep up with that, people probably would have just stuck with Yahoo for a lot longer. But something about where the company was and the culture didn't allow them to upgrade their search results and so they fell behind very quickly. And so for OpenAI to become the Yahoo of AI, there would have to be a new company that comes out with a dramatically different technology or paradigm and either is able to patent it or keep it locked up in some way that OpenAI can't just port that innovation back.

1:13:04Because they've obviously been able to do that with other advances in image models that are happening elsewhere, reasoning or tool use. Like it would be crazy. And this is something that's always interesting in tech is like there just don't seem to be that many patents that hold. Like how amazing would it be if you're just like, I'm the person that thought of MCP or I'm the person that thought of image diffusion and I have the patent. And so I'm the only one that can build the company or you have to pay me to license this. Like that's just not a conversation at all. How many designers, for example, have patents from big tech companies and then can leave and effectively rebuild the same features?

1:13:39And the patents don't even seem to hold. Like, did you know that the swipe down to refresh, pull to refresh, that was patented by a designer at Twitter like 10 years ago or 15 years ago. And - Potentially they created the slot machine for the mind. Yeah, endless scroll was another one. That's slot machine for the mind. Yeah, endless scroll. Now you don't even really pull to refresh. I mean, I guess you do every once in a while, but mostly it's just endless scroll. But that was another thing that was invented at one of the big tech companies and then immediately ported across every other platform.

1:14:09And like stories, Snapchat, Evan Spiegel created the stories format. Thank you, Evan Spiegel, for creating stories. They love innovation. Thanks for creating a low-risk way to just share what you're up to. really showing the stories but he wasn't able to patent it or like or like you know keep meta from rolling out to every single thing uh linkedin has stories now and there's this question is like it's kind of this weird failure potentially of the ip system maybe it's better because stuff just goes everywhere but if you're if you're open ai and you're on top of the of the innovations that are happening even at other labs you would imagine that you'd be able to port back anything and stay on top as long as you're that front door and you have the scale that Yahoo or Google eventually got to, hundreds of millions of users, you should be fine.

1:14:56Anyway, that was just my thinking on the Yahoo thing. It feels like a stretch. Yeah. Especially given the recent innovations. Totally. Anyways, back to Abilene, where we don't use Manus. We use chat GPT around these parts. anyway so the article here is basically pointing out that open ai softbank and oracle yeah are funding this 500 billion dollar project and yet none of them have hyperscaler hyperscaler sort of data center microsoft but yeah experience um no microsoft i mean microsoft is not in stargate it's open ai softbank and oracle yeah yeah true true true and so the only companies that have built cloud infrastructure on the scale of Amazon, Google, and Microsoft.

1:15:44Yeah. Oracle knows databases, but they only have 3 % of the cloud market, right? Oh, they're saying Larry Ellison isn't capable. Don't count out, Larry. Oh, yeah, right. Oh, Sharon, you're in the truth zone. Larry's good. He's good. Larry's good. Don't come for Larry. Larry's on top of it. We will defend Larry. He's 87 years old, and he looks like he's 42. He looks great. Incredible. And he follows TBPN. Yeah. He's going to be fine. We love you, Larry. He can build some cement. He's got Chase on the case. That's right. He's got Chase on the case. Anyway, so in interviews with Bloomberg Businessweek, the CEOs of OpenAI and SoftBank acknowledge that they've promised a lot and that to some extent, they're figuring things out as they go.

1:16:25And we knew this, right? They announced this. It was like, you know, Elon was pointing it out. He was saying, where's the money coming from? Yeah. It's very, you know, pulling$500 billion together is not the easiest thing in the world. Yeah, yeah. Um, so they just, they dismiss critics, the loudest being Elon Musk, who says the full scope will never be realized because they don't have the money. We don't. And Masa says, uh, founder of SoftBank, uh, the infamous Japanese piggy bank is this article. And the economist says we don't need$500 billion in one day. We'll go step by step. Do you think more founders should be pitching stuff like Stargate?

1:17:01It's like, yeah, like I, I need to realize my full vision. I need 500 billion. I don't need it right now. So if you're going to come at me for that, that's ridiculous. I didn't say I needed it right now. But over the course of this company, we will consume$500 billion capital. I mean, a lot of the nuclear companies might. Who knows? We will produce trillions. So OpenAI CEO Sam Altman knew they'd need construction crews and lots of computers. Yep. We're going to need computers. Hey, folks. We're going to need lots of computers. We're going to need computers. But data centers also have extensive electricity and water needs to keep the machines running at a safe temperature often requiring infrastructure upgrades that can take years for abilene which will have mighty capacity of 1.2 gigawatts the team built its own gas power plant to get the place running more quickly yeah the the we talked a little bit about augustus but there's this whole meme about like every time you search jet gbt it like pour empties out an entire lake and like we're running out of water and like i i mean i'm sure it uses some water but i have no idea exactly how that's calculated and that feels like something that's yeah the question is what percentage evaporates during cooling process yeah and is it like a lot of a lot of cooling systems are pretty closed loop because you're just piping you're piping the water through through tubes and then the water goes onto the chip the chip heats up the water goes the water gets hot and then you pipe the water out that's like a water cooled gpu rig on like a gaming pc and like yeah you need to change out the water every once in a while but like not constantly and so it's not like i i i do wonder how what the actual impact scale is here and i bet there's a lot of people with like the incentive to say doesn't use any water or i wonder if you could use way too much water i wonder if you could rip out the the parts of an air-cooled porsche and potentially use those yeah air cool i want an air and then elon could take the air-cooled porsches and put uh engine swap tesla motors I think we wanted a supercharged AI factory.

1:19:04Just pipe the air back in to accelerate it. Take the exhaust fans and reroute them right onto the chip. Yeah. So anyways, Sam knows he's going to need a lot of computers, but they also have extensive electricity and water needs. So Abilene is going to have 1.2 gigawatts. The team built its own gas power plant to get the place running more quickly. Cool. One of the things that really surprised me as we were starting to dig into this, Altman says, was just how many things feed into the main line. The main line is still being assembled. At the Abilene site in March, some rooms are in the process of being wired and are off limits due to the risk of electrocution.

1:19:41In the future, tubes will pump cooling liquid around servers, which will be loaded with GPUs. GPU actually stands for graphics processing unit, as they thoughtfully noted in this piece. It's good to note. it's good to note uh if you've been living if you've been living under a cluster a gpu

1:20:05they also contextualize it by telling you what a gpu here is it's not only a graphics processing unit you can think of it as the physical brain of ai something there something there pb pbas this is this is this is ripped straight from a soft bank deck yeah it's like they're talking the same audience retail yeah for now those tubes dangle from the ceilings beside half-lit hallways we're trying to deliver on the fastest schedule that 100 megawatt or greater data center has ever been built lock miller says from this front seat of a buggy on a ride through the construction site in this moment speed matters a lot the big reveal for stargate was at the white house on day two of trump's second term i didn't i forgot it was so early altman stone and oracle chairman larry ellison stood behind this was so funny to remember because it was it was elon and sam like both around the white house on the same day in the midst of this battle dude a little bit of an awkward have you have you seen this this picture of masa getting hype mogged so bad by larry it's really john you're gonna bring up hype mogging it's a sensitive topic on the show it's a sensitive topic but we but i mean we we should pull it we should pull it up we got to call it out.

1:21:20Anyway, lavishing praise and crediting him with help making the project possible. The whole production came together in a matter of days, according to a person familiar with the events planning who asked not to be identified. Stargate's real origin, according to Peter, the vice president of infrastructure and strategy and operations at OpenAI, Hoshale, I'm not sure how to pronounce the last name, goes back to a research paper published at the beginning of the decade written by a group at open ai that included dario amade who'd go on to start one of the company's main rivals anthropic pbc um the paper describes so-called scaling laws this is gpt2 which we've talked about a bunch uh which assume that the more capable ai requires ever more data and computing resources what's interesting is like we're talking about increasing the ooms uh but like this has to be synthetic data at this point because we've kind of already hit the data wall i believe or are we because i i don't know that there's ever anyone expanding it yeah but i i don't know that anyone's really mapped out like 10x uh yeah check out that photo um rough podium situation trump's also pretty big too larry's pretty big but uh yeah masa well presentation still a size lord yeah makes up for it with the checks he rips yeah open ai as many know already had a contract designating Microsoft its primary financial backer as its exclusive cloud provider but Altman decided he'd eventually need other options Oracle was looking for partners for the future complex in Abilene and was talking with Musk before Altman came in says a person familiar with the discussion Musk obviously chose Memphis for XAI so went a different direction oh this is cool Altman picked the name Stargate because of one of OpenAI's early data center designs resembled the ring-shaped portal that could open a wormhole in the 1990s science fiction movie of the same name.

1:23:17Also a TV show. You ever watch Stargate? Absolutely not. Next question. After half a year of Altman selling the idea to prospective backers, Stargate really came into focus in mid-2024, and he says he found himself in a lot of Zoom meetings. Wasn't Stargate also a CIA project around mind reading? Oh, I don't know. I'm not familiar with that one. Look it up. The hardest part was figuring out what the shape of the deal would be. Would it be part of OpenAI? Should it be a separate entity? You know they love separate entities over at OpenAI, so we know where they landed on this one. Should we just try to get one company to build it all for us?

1:23:54That took a lot of inspiration. The Stargate project was a classified United States Army program. It wasn't affiliated with the CIA, but it was initiated in 1977 by the DIA and SRI International to explore the potential of psychic phenomena in intelligence gathering and military applications. How'd it go? Were they successful? I mean... Seems like it. I'm sure they cooked. So OpenAI is responsible for the operation of the business and will be its main customer. SoftBank handles the financial side, including raising additional funds for Abilene Oracle, will lease the data center and fill it with servers.

1:24:28Crusoe declined to comment on whose else is going in. OpenAI and SoftBank will each put in$19 billion to start Oracle and another equity partner, Abu Dhabi-based investment firm MGX are on the hook for$7 billion apiece, according to a person familiar with the matter. So yeah, I mean, 19 and 19 plus 7 and 7, you're getting up into the 40s, 50s, 60s, billion. It's not bad. It's not 500, but they're getting there. They're within one oom. That's what they got to do. Striking distance. Each project will be financed individually with a mix of equity and debt with data center firm Primary Digital Infrastructure is helping orchestrate the financing.

1:25:07JP Morgan Chase is doing some loans. Yeah, so if you have money over at Chase, you're, I would say at this point, entitled to say that you're a financier of the project in Abilene. That's great. For future sites, SoftBank has held talks with dozens of lenders and alternative asset managers, although it's yet to secure a deal and some of those conversations have slowed due to global market volatility. But now we're kind of flat. Maybe the markets open back up and things move on. That's a structured financing that SoftBank has done many times in the past. So we are very confident. And yeah, I mean, SoftBank took ARM private.

1:25:43And so they're clearly capable of operating at this scale. It's not crazy. Not everyone is so optimistic about SoftBank's ability to execute. The last time Sone did anything close to this scale was the Vision Fund, which depended on a$45 billion contribution from Saudi Arabia's largest sovereign wealth fund. Imagine clipping 2 and 20 on that. soft banks fund racked up losses most disastrously most disastrously on the real estate startup sometimes i get crazily overexcited and i make a mistake like we work but when you have the conviction and the passion moss's mistake was not backing what's the new company the cursor no no no the new real estate company uh by uh newman oh i don't know andreason did flow flow he should have doubled down but when you have the conviction and the passion you actually learn from those mistakes and the scars and that will make you stronger i've made so many more mistakes that i think i'm a little stronger than in the past he's been very wrong but he's also been very right and he's been right more than he's wrong and so he's still in the game and as long as softbank is cooking as a company he can keep ripping checks yeah i mean it's his calculus is i believe yeah can be done on a napkin and this is just my guess he has a very large napkin and it's basically if I buy 10 % of OpenAI and it's a trillion dollar company someday, I'm going to do very well and I'm going to lever up to do that.

1:27:08So my actual return on equity is going to be fantastic. It's amazing. And he's going to be laughing and this is... I mean, this is like... He's a gambling man. It's not as crazy as investing. Some of the best books on Masa. One of the best books on Masa is called The Gambling Man. That's the context you need. Yeah, we did a whole deep dive on it. Complicating matters are Trump's tariffs. Cost calculations swing every time the president changes his mind, but the trend line is expected to go up on aluminum, steel, and other construction supplies, not to mention NVIDIA GPUs, which are made mainly by Taiwan Semiconductor Manufacturing Co., TSMC.

1:27:44Sohn says he expects no significant impact from the trade policies, and I think he's right. I think this is what Trump wants, and I think all of these will get car routes, and they've already been negotiated down, so I'm not too worried about that. I think the bigger question here is just like, what is the return to scale? Because we've seen the scaling laws kind of maybe potentially drop in terms of pre-training wall and whatnot. And so the question is just like, what does a 10X larger facility actually get you? It better be worth it because we know the economics of GPT-4 training run were great.

1:28:19Like they printed tons and tons of$20 a month subscriptions off of that. and I think the total cost was like$100 million. Now you're up at$10 billion. Can you get everyone on a$2 ,000 a month subscription? If you can, no big deal. Well, yeah, and a lot of, I mean, won't a huge amount of Stargate's resources just go towards servicing models? Inference, potentially. But I mean, I feel like a lot of the narrative is like training. But, you know, obviously, obviously it will be both. Alibaba Chairman Joe Sy has raised the possibility that we're in the middle of a data center construction bubble. And obviously Amazon, Microsoft have pulled back on some data center plans.

1:29:01Altman is undeterred, still seeing compute capacity as precious resource. We need more compute and more capital. He says, we want to have access to a lot more of the machinery to make AI and run AI. And I mean, yeah, like the GPUs do go on fire and there are limited resources still, even with the models. I mean, obviously there's a ton that you can do on compressing models. Yeah, the fact that you're getting rate limited by Google as a paid customer. It's insane. Yeah. It's insane. Like it is the biggest bull case for Build More data centers. But I honestly put that less on their cloud offering than just some PM was like, oh, no one would want to generate more than three videos in one day or whatever.

1:29:44Totally. Or like, let's just roll this out slowly. Altman is undeterred, still seeing computing capacity. the abilene skyline is made up largely of buildings constructed in the 1920s during the texas oil boom among the city's major employers is a nearby air force base and cheese production plant that opened in 2022 well meanwhile activity at the stargate site spanning 900 acres larger than new york city central park moves at the pace of a boom town and i was i was talking to some real estate folks and i was saying like you should probably just go to abilene and start building like walmarts and gas stations and everything because like it really will be a boom town they're going to be building this for a long time yes these are going to be somewhat human resource light but there still will be a ton of people working there a ton of people getting paid a lot they'll want bars and restaurants and like the local economy should like it would be impossible for it not to flourish like the economy booms when you put in like a soccer stadium like you're talking about yeah i $10 billion of gotbacks.

1:30:45I wonder if there's been any people going. I mean, I'm sure the Stargate project in general has just been buying up surrounding land to just sort of mitigate potential risks and future issues. But if you own like an acre, even just a single acre that's not connected to roads at all within this area, you could probably end up selling it for millions beyond. No, you got to just hold on and make them build the data center around you. Do you need a helicopter to get in? You just look every, you have this quaint little house on the prairie. And then it's its own little microclimate because like the heat coming off.

1:31:22Have you seen that photo in Virginia where basically there was like this nice little house and then AWS and Amazon just built up these massive. And so you just see this nice house and you pan up and it's just as far as the eye can see. It's like beautiful, rough. The team behind the Abilene data center conceived under the code name Project Ludacris. Nice, nice code name. First put shovels on the ground in June of 2024. Crusoe decided to fly in workers from all over the country because of the cities, because the city of 129 ,000 people didn't have a labor force large enough to support it. Locke Miller says, its project - 129 ,000 is way more than I originally kind of imagined for this town, right?

1:32:02Probably got some good high school football going on. That feels more like a city than it. Yeah. People like to position Abilene as like, oh, this quaint little town. Don't hate on Abilene. it's projected to take slightly more than two years for the entire project to go from start to finish, although parts of the data center are slated to go online sooner. Towns like Abilene are usually on the losing end of technological change, which tends to create most jobs in the largest cities, and data centers traditionally don't employ that many people. Crusoe has promised officials that the Abilene site will deliver 357 full-time jobs once construction has finished.

1:32:37That's not that much, actually. That's pretty small. I thought it would be higher. For a$500 billion project. Well, I guess it's$10 billion in this version. Or what are they investing? A little bit more. $10 or$50. But yeah, that is crazy low numbers. But the AI agents are just grinding. Hate to be contributing to this. I backed a company that makes robots for data centers. Reducing it from$350. We're going to get that number down to$5. Yeah, that's the goal. Yeah, I mean, it's basically the idea that data centers are flat. And there's routine maintenance. it's reasonable and it's like very much a controlled environment and just driving a little wally style robot around makes a lot of sense we're talking about like how much of a boomtown is like 375 jobs for now on a base of 129 000 it's like nothing existing no people i i feel like there will be more knock-on effects though anyway the apple and what about the chip there's Chipotle opportunities.

1:33:37Yeah. Those 357 people are going to be eating a lot of double steak, wok, burrito bowls. Yeah. So the Abilene government is hopeful that it is the start of something bigger. The city and county agreed to extend significant tax breaks to get the deal done. And local officials saw an influx of requests in the days after Stargate was announced from housing developers, infrastructure, energy infrastructure vendors, would-be investors, and other municipal governments desperate to bring jobs to their town. It will impact the rest of the economy. our restaurants, our home builders, our Chipotles, with many new people coming in and taking these jobs.

1:34:09The city was able to accommodate Stargate's water needs, which are small compared to a typical server farm due to a novel cooling method that recycles most of the liquid. Let's hear it for the fake news that ChatGPT is destroying the ocean. It's not true. Like, they figured out how to recycle the water, of course, because water's expensive, and why would you waste it? The trade-off is that the data... Again, the water is not being massively contaminated like in oil production, fracking. And so they need a ton of electricity. Data centers at this scale are unprecedented. This was cause for concern where the memory of 2021 Texas blackouts, which led to the death of six people in the county, is still fresh in people's minds.

1:34:53Much of the blame for those outages belongs to Texas's deregulated energy grid. but the flexibility that comes with the lack of regulation was part of the allure for stargate crusoe went out and bought gas turbines and oversaw the construction of a natural gas plant on site which will supplement the what the data center can get from local utilities yeah i talked to an investor who uh was uh who knows chase and was like he's just he has an uncanny ability to find energy which is like i don't know something i wouldn't even think about in terms of like what the skills of a founder are necessary, but he's like extremely good at finding like opportunities in pockets of energy that are being underutilized.

1:35:35So I'm technically millennial, but I was fairly close to being Gen Z by a few days. So is that like rizzing energy? Like I'm just trying to put it, he's an energy, he's an energy. No, it's like Rizzler. Is that where you're kind of saying? It's like there, I think there are a lot of, there are a lot of companies out there that think kind of along the lines of like a single energy source. So there is a lot of natural gas here. Chase is very good at putting together different opportunities. There's an existing plant. We can build a new plant. There's wind, solar. Like, they're very energy agnostic.

1:36:08But how do you piece all those together to meet the actual demand on an ongoing basis? To Stargate's critics, the idea that the project's backers could maintain this pace and scale across the country is reason to think they're living in a fantasy. Amadei, co-creator of the scaling laws, publicly questioned Stargate's seriousness, calling it chaotic. Musk, breaking with Trump, called it fake. Altman's retort, he says all sorts of crazy stuff. Salesforce CEO Mark Benioff said in a post on X in April that Stargate signaled an end to the honeymoon between OpenAI and Microsoft. The project does reflect a shift in the relationship between the two companies.

1:36:45They revised their cloud contract in January to allow OpenAI to use other vendors, such as Oracle, as long as Microsoft still has right of first refusal. Microsoft doesn't intend to invest in Stargate, but was listed by OpenAI as a technology partner in the project. And this was interesting because they - Can I just put your logo on the deck, please? Can I please just put your logo on the deck? Yeah. There's this amazing - Microsoft is providing exchange. There's this amazing line from this guy, Aaron, buddy of mine. We'll be using Microsoft Excel on site, so they're a technology partner. yeah that's it um but yeah i'm good for my 80 billion he's like i'm good for my 80 billion generically capex it'll happen somewhere it's not necessarily an investment start i'm gonna butcher the exact quote but aaron frank has an iconic post at one point or maybe he just said this to me in person he just said some people just want to see my name and there some people just want my name in their deck because there was like this fintech boom and people would just come to him and be like please can i give you 50 bips to just like put your name because like that like at some point he created the card that became the apple oh okay what was it called again you don't even see that the apple push no apple card remember the apple card i think it was called the apple card but his his company like became that yeah apple card you don't hear much about the apple card they had to deal with goldman and then they kind of like fell off and maybe they're not doing it anymore did people get those i never had one was it good did it have like cash back on stuff it was pretty good okay anyway unlimited daily cash back i'm not really a credit card points maxer or into never been big into that world never to uh management consulting coded it's like every uh every guy i know who works like mckinsey or bain or bcg is like on the spreadsheet of points and i'm just like i don't care just tell me which card i'll get and I'll use that for a decade and they'll squeeze me for annual fee probably.

1:38:44And I'm probably like way underwater on it because I'm not points maxing. Yep. Anyway, if things go as planned, Abilene could serve as a model for the next of Stargate's developments. The day after Altman first visited the Abilene site in early May, he testified before Congress asking for help to fast track data center permitting on future locations. The first site was incredible. We need a lot more of that. Crusoe is evaluating another potential spot in Amarillo, Texas, which it hopes could be part of Stargate, according to a person with knowledge of deliberations who asked not to be named. OpenAI has said it's also looking in several states, including Oregon, Pennsylvania, and Wisconsin.

1:39:18And while Stargate might rent data centers already being built elsewhere, meanwhile, OpenAI and Oracle are taking the spirit of Stargate International with an AI data center under development in Abu Dhabi, which will not be part of Stargate LLC, but will count OpenAI as a customer. It's simple. If all that wasn't enough, Stargate could even expand to include semiconductor production, according to Altman, perhaps as soon as next year. I think of Stargate as the AI factory. If we don't have to be involved here, maybe we wouldn't. But if we could just magically spin up all the compute that we needed in the sky, but at this kind of scale, he can't do that.

1:39:57And so there's another interesting angle here, which is the idea of building an AI data center in space. We're having a couple of folks to come on the show maybe next week to talk about that. There's a company that's thinking about doing it. There's some investors that are looking into it. Sounds silly. Sounds extremely buzzwordy and sci-fi. It's like hard tech space and AI and data centers. But think about it. You get energy from the sun, from solar panels, basically for free. And then you also get cooling because you're in the vacuum of space and it's cold for free. And so you don't need probably water cooling and you don't need as much energy.

1:40:35and so the economics might work out potentially. You don't need land. Yeah, you don't need land. And so you've cut out a bunch of costs and then added Starship or Falcon 9 launch costs, which are significant but maybe small. I cannot wait for the day where a satellite is gibbling for me. Just knowing that I can create the most silly picture in my mind and then send it up to space to get made and then have it sent down. Just send it back whenever you get around to it. Could be tomorrow. And then it says, you've run out of requests. We don't do much Ghibli anymore. When's the last time you saw Ghibli?

1:41:15It's been a while. I have been using, I've been using images in chat GPT a lot, but on a lot more like practical sense, just trying to visualize different things. I like the library. I told you I've been using, I've been using Chad GPT image, uh, images to, uh, get my three-year-old to eat dinner. So it's basically bite by bite. I will generate a new, if you take another bite of chicken, uh, and chew it well, I'll generate another picture of me as a dinosaur. My new, my new go-to Ghibli, instead of asking, turn this into a studio Ghibli. I just say, uh, uh turn these who turn the image into bodybuilders and i've been having a lot of luck with that i i sent one to the chat we'll try and pull it up but uh get this pulled up it's it's great oh but that's that's the original picture yeah this is so we'll pull up the original picture first of the open ai team there they are yeah okay and then can you can now can you make them look like bodybuilders Yeah, for sure.

1:42:23Yeah, yeah, I enjoy that. Also just making, yeah, just a lot of Cadillac Escalades with GT3 liveries and a lot of TBPN merch ideas. A lot of stringers, a lot of suits with ads on it. Speaking of which, we should do some ads. Go to Vanta.com, automate compliance, manage risk, prove trust continuously. Vanta's trust management platform takes the manual work out of your security compliance process. If you're doing anything important, you probably should be on Vanta. For sure. You heard it here first. Go to Vanta.com. You should also get a numeral, sales tax on autopilot. Spend less than five minutes per month on sales tax compliance.

1:43:03Benchmark series A. Benchmark series A. Anyway, do we have time to do, we only have 15 minutes until our next guest. Should we do a little timeline? We should do a little timeline. We got Austin Allred coming in. We're going to ask him about AI coding in the era of agents. We can cover Dario maybe tomorrow. I also want to go through, oh, we didn't get a chance to dig through Craig Federighi and the Apple AI piece in Bloomberg. But there are some really hilarious points in here. One is that apparently when Steve Jobs was trying to acquire Siri, he called the CEO and said, I'd like to buy the company.

1:43:48I think this is the future of computing. I think voice interfaces, artificial intelligence. This is what Apple needs. We want to buy your company, bring them in house. The CEO of Siri said, no, I don't want to be part of Apple. I'm good. And Steve Jobs proceeded to call him every single day for 24 days straight before he got the deal done. Insane. Absolutely insane. You don't hear about that a lot. Yeah. You get this idea in your head of somebody that is a demigod figure and you think that they don't have to be cringe to get things done yep and turns out sometimes you got to cringe max yeah and and do whatever it takes and sometimes that's calling somebody every single day it must just be so funny to pick up the phone imagine you're like 24th imagine you're like yeah walking your dog or you know it's like steve jobs calling again oh he's leaving a voicemail oh hey bud uh yeah not interested still building my company still grinding steve jobs steve jobs would get sort of total privileges to call people bud right totally one of the few when you're at the top one of the few that earned it you're the greatest entrepreneur of all time so if you're not steve jobs don't use remove that from your vocabulary uh let's go to some timelines zach kukoff's talking about oh my god we're really going to speed run 2008 with collateralized blarna's losses have widened as more consumers fail to repay loans unfortunate learning you know basically probably speed running uh risk management that credit card companies have done for a really long time I wonder what's actually going on here because the whole like, yes, you can buy now, pay later on your burrito.

1:45:35That's silly. But that's probably not the vast majority of their underwriting, right? Like that's the meme, but that's not actually what's driving buy now, pay later activity. And I wonder if in the lead up to IPO, they loosened underwriting restrictions to try and ramp volume. And because it seems like Klarna, have they gotten out? No, right? They're not public yet, right? They have not successfully IPO'd. And so I imagine that in the lead up to the IPO, they're trying to do a bunch of things. There's that whole news cycle around, oh, we're not going to hire anyone. We're going to use AI for everything.

1:46:09Obviously, that's sending a signal to the market that, hey, we're going to be an ultra efficient business. The margins are going to dramatically improve. We are taking AI super seriously at this company. And so our OPEX should be really low over the long term. You can underwrite the IPO against a really low SG &A cost, right? And then also on the revenue side, they're probably trying to do everything they can. Maybe they went too far and now they're generating losses, which is obviously not good. Yes, and the issue is they doubled losses. So their net loss for the first three months of 2025 was around$100 million.

1:46:46A year ago for the same period, it was$47 million. Is this from like the S1 or something? Why is this data public? I think they're trying to get out. And so I imagine they need to do some type of reporting. Revenue increased 13 % year over year to$700 million for the quarter. And again, this is a company that in 2021 was valued at$45 billion. Most recent private mark was around$15. So unclear what they'll do. They put their IPO plans on hold last month along with StubHub. And again, they had been on this marketing tear, right? Remember the CEO came out and he was like, we're using AI for everything.

1:47:35We're letting everyone go. And then he says, actually, no, we're not doing that. It's not good enough yet. I don't like when the IPO window is closed. I like an open window. Yeah. I like companies going out every day. You punched a hole in the wall at the gym when you heard, I remember when it closed. I was like, John, why is your fist two feet into the wall, John? You were trying to get it out. Too frustrated. Pissed off. Well, if you're trying to track all these IPOs, trying to get it on the action, head over to public.com, investing for those who take it seriously. they got multi-asset investing industry leading yields and they're trusted by millions also jordy how did you sleep last night i put up some good numbers i'm climbing up the ranks i'm getting back in the game okay beating you back to back days let's see how'd you do what's your number what's mine no you go first okay well one second um get a pod five ultra they got a five-year warranty a 30 night risk-free i got an 80 john free i'm sure you beat me oh i got a 94 smoked smoked get out of here get out of here try 96 actually 96 there you go boom look at you john i'm proud of you yeah still not good on the consistency going to bed at all random times waking up pretty consistently 5 45 uh anyway all right going on uh we kind of covered this already uh this from the lion does not concern himself with sock two compliance that's because the lion uses vanta yes exactly so i think this concerned maybe we need a promoted post yeah this is an ad hey this is an ad for sure andy you got to be disclosing yeah you have to do hashtag ad or maybe he just loves vanta so much it's possible it could just be ugc yeah yeah but anyway obviously don't concern yourself with sock to be a lion and get on vanta uh art over at brex announced a partnership with zip a big procurement platform apparently zip is taking a step back from the corporate card market and so this partnership uh allows oh interesting okay that that makes a lot more sense so zip had a corporate card yeah and now they're just partnering with it back with brex yeah and brex had a procurement product yeah which they rolled that kind of happened too with with stripe had a corporate card for a little bit and then stop that right isn't that yeah everybody was like wait corporate cards good business yeah we should do corporate cards yeah turns out hard to hard to do yeah well there's always a question about like where does the corporate card sit because stripe does not sit in the same place as like ramp in terms of like the cfo suite like it's a it's more of a like almost a developer tool it's that was their initial wedge yeah yeah but it's It's less about like an accounting product.

1:50:27It's more about like the, like the, the payments and engineering product. Although obviously it's very tied, but I don't think Stripe's ever gone into travel or, you know, bill pay. Like they, they haven't focused on that as much. Anyway, Art says, this is two YC companies with cultures of shipping fast and collaboration, creating something truly special. We love to see YC companies. Obviously the most, the recent collaboration between deal. and rippling also yc companies yes hasn't been as smooth right more tumultuous yeah a little tumultuous necessarily collaboration uh well they were partnered in some ways because they were both there was an employee yeah they were the same employee uh anyway uh back in 2021 uh art approached zip ceo because i saw zip doing something remarkable in the enterprise segment a market Brex was determined to win.

1:51:19At the time, the CEO of Zip pushed back, saying Brex was too focused on startups. What would he get from this? Fast forward to March, 2024. Brex has built their base of enterprises and many were demanding our products to work seamlessly together. Both companies had also retrenched to focus on core strengths. Zip stepped back from card. We stepped back from enterprise procurement. This is a classic competitors-turned-co-creator story. Zip brings world-class procurement orchestration. Brex brings global card capabilities and spend management across 50 countries. So congratulations to Art and Brex.

1:51:51Art, fellow LA guy. And I have some advice for Brex. Why don't you run a billboard to promote this on AdQuick? Yeah. Get some, Brex actually has a ton of billboards, right? They invented the billboard in many ways. They did invent the billboard. They put the billboard economy on their backs in 2020, 2019, right? It was like, it was hard to get a billboard because they were on all of them. So head over to adquick.com. Art, out-of-home advertising made easy and measurable. Say goodbye to the headaches of out-of-home advertising. Only adquick combines technology, out-of-home expertise, and data to enable efficient, seamless ad buying across the globe.

1:52:31Double kill. Great. Great transition, John. We got a post here from TJ Parker, who will be on the show Thursday. Again, he's coming back on. He says, one thing I'll never understand about healthcare startups is the instinct to take a strategic route rather than an administrative tactical approach. You don't need a top-to-top meeting to get in network with a payer. Just fill out the paperwork. You don't need a strategic relationship with Quest LabCorp to integrate scheduling or get competitive pricing. Just work with an existing vendor. If things go well, you can elevate to strategic relationship over time.

1:53:04But you'll never get off the starting line with a strategic approach. So, uh, Will has a, has a funny reply here. It's very funny when people tell me they're struggling with getting in to in touch with payers. It's like, have you tried going in the front door? Timeless advice, timeless wisdom. I wonder what's going on here. Is this just because there's a lot of like tech people who think I'm going to build tech for healthcare. And then they just completely unfamiliar. They think it's all about partnerships versus just unfamiliar with this market structure because TJ has been, I mean, he was a pharmacist before, right?

1:53:39Like he really understands the industry and has continued to understand the industry even post-exit. Whereas I think a lot of people are like, I build software. I know that healthcare is a problem, so I'm going to build healthcare software, but they don't understand like the structure of the market at all or how the deals get done. And so they got to learn stuff from TJ's posts, I guess. Anyway. We got a post here from Andrew Reid in the news. authentic brands buys dockers from levi strauss a little mix-up in the pants market and a little switch up and andrew says docker the containers uh overlapping with dockers the pants both making hundreds of millions selling to system admins um yeah you know andrew is a great uh he's a great investor but he puts his pants on one leg at a time like anyone else yeah uh let's get him some dockers let's see get him some dockers i somehow think he's we should get him too stylish for that yeah i can't see him wearing dockers but we should get him a tbpn tie yeah tie would be good working on with ads last time yeah last time he came on the show he's he's wearing a actually really nice figma sweatshirt but didn't have a collar so you know docked some points from that docked well you know we should also tell you about Wander find your happy place book a Wander with inspiring views hotel graded minis, dreamy beds, top tier cleaning and 24-7 concierge services vacation home but better folks John Andrew founder Wander was teasing how excited he is about some big news and I couldn't possibly guess what the news is but we're going to have him on the show Tane, friend of the show says OpenAI tried to partner with Google to use its search API to power real-time results in ChatGPT's search offering.

1:55:28Google said no, citing too many complexities. And this is from Michelle Fraden. Interestingly, she was at Sequoia. She was on the FTX deal and then went over to OpenAI right before the Sam Altman firing. And so it was just like chaos for a while, but it seems like she's settled in over at OpenAI and is doing well, but getting some pushback from the Google folks. She says, we hope you're doing well. We wanted to follow up on our discussions over the past few weeks regarding using Google Search API to help power ChatGPT's SearchGPT prototype and search functionality in ChatGPT. As mentioned, we are currently testing a prototype SearchGPT and to learn more about how users and publishers use AI chat experiences coupled with real-time information and search-like features.

1:56:13On July 25th, the day of our public announcement, we reached out to Google about using its Search API. We believe having multiple partners, in particular Google's API, would enable us to provide a better product to users. It's like, not just destroy you. We also understand Google publicly offers its custom search JSON API to developers looking to incorporate Google search results into their products, providing additional precedent for us to work together. So basically asking like, hey, you have this service that you offer to a lot of people. Can you offer it to us? And they're like, absolutely not.

1:56:44Hey, do you mind letting the fox into the hen house? Gemini, summarize this email. fox sending the email to a chicken in the hen house hey uh come in i'd love to come in check out the house i thought it might ask it seems like a great house i think my i think the other foxes in the fox house would like it

1:57:15google's like yeah the chickens over in the hen house are like i think it'd be kind of complicated Google said we're going to decline this because we believe that you are a wolf in sheep's clothing

1:57:31well cheers to Sundar for not letting the fox in the hen house and he lives to fight another day built his own Gemini built his own apps and we're excited to talk to some folks frankly built different we're excited to talk to some folks over at Google about the hen house protection strategy than the Fox Defense system. The Fox Defense Network. The Fox Defense Engine. Should we talk about Coinbase? This is a rough one. Michael Arrington is very upset with the Coinbase news. He says, I'm a longtime investor and champion of Coinbase. Something that has to be said, though, this hack, which includes home addresses and account balances, will lead to people dying.

1:58:11It probably already has. The human cost denominated in misery is much larger than the$400 million or so. They think it will actually cost the company to reimburse people. The consequences to companies who do not adequately protect their customer information should include, without limitation, prison time for executives. Very disappointed in Coinbase right now. Using the cheapest option for customer service has its price, and Coinbase's customers will bear that cost. Yeah, so for context, if anybody was living under a data center, Coinbase effectively was offshoring their CX function. certain CX reps had access to consumer data, including home addresses and account balances, which they then effectively sold or were bribed into passing to nefarious groups, who then were threatening Coinbase, saying they were going to leak it.

1:59:00Coinbase came out and said, you know, kick rocks. We're going to pay basically a bounty that leads to the arrest of these people. The issue, obviously, with home addresses and account balances being online is that bad actors could just find a home address. If somebody with a high Bitcoin balance go there and say with the threat of physical violence and say, send me your Bitcoin right now or even worse, abducted. And so Michael is basically saying that there's going to be real, real consequences here. Coinbase came out and said, anybody that sort of falls to various social engineering hacks due to the, you know, they're basically going to reimburse them.

1:59:48Apparently, they expect to spend quite a lot of money, hundreds of millions of dollars to reimburse those people. But Michael is saying that the true cost is much higher. And apparently, there had been just like a bunch of other issues here. I mean, who knows what's actually going on? I'm sure that. I do wonder like how much of a cost center is customer service for Coinbase? Like it seems like it's a big company, very profitable, has done very well. Like if they doubled the cost of the expense, like would it get better? Is customer service really like something that we're spending more money on?

2:00:25Is a lever or is this something that's like a little bit more intractable? the other interesting thing is like i do wonder like the internet is pretty locked down i feel like like it it is like yes there are addresses that can be sold on the dark web but like it's pretty hard to just put up something that is illegal on the internet like like all the major platforms take it down google shadow bans it uh the links get banned uh the browsers can And like, it's not that crazy for this information to just be like a file. Yes. An Excel file. Yes. But at the same time, criminals can transact and sell multiple times.

2:01:04At the same time, like, let's say that I'm like a, you know, the type of criminal that does, that does just show up to a house and put a gun in someone's face. The immediate risk is social engineering. It's somebody calling you from a number that's spoofing Coinbase and saying, hey, I noticed some activity. I need you to verify this. Give me this code. So that's the immediate risk. Second order effect is that a criminal could just show up at somebody's house and demand. Yeah. Yeah. Yeah. Yeah. So the type of criminal that just shows up at people's houses, like how are they actually going to get this information?

2:01:34Because they're not just going to Google it and it's not just going to show up there. They're going to have to find it somewhere on like through some sort of hacker network. Are they paying for this? Like it feels like this information can be somewhat controlled. Like credit card numbers leak all the time. and like the global cybersecurity industry is pretty good at making these not just proliferate to like script kitties and like random criminals. Like, yes, there are organizations that try and like programmatically like to run up a ton of charges and just like spam the network. But in terms of like these one-on-one dangerous interactions, like I'm not so sure that it's gonna happen like in mass.

2:02:16Obviously, it'd be terrible if it didn't. It's a very big deal and it should be taken very seriously. but I do wonder if there's a way to kind of like, like not allow this information to proliferate. Ironically, like what if it goes in the blockchain and it's just available? It's a very naughty issue with like, you know, censorship and things. But Balaji had a good response here to Arrington. I don't have a clip, but we'll have to talk to him about like the future of KYC. His argument was that like part of the problem is that Coinbase is required to keep all this information when they might not actually need to if the government didn't require it.

2:02:55And so it's this double-edged sword of the more information that you keep on someone, the more information that can be leaked. Anyway, we'll dive into that more next week. For now, we have Austin Allred coming in to the studio. How are you doing, Austin? Good to hear. Hey, good. How are you guys doing? I'm good. What's going on? How are you? I guess, yeah, hanging out. yeah I wanted to have you on the show for a few reasons obviously there's a lot of stuff happening with AI coding agents what's this whole AI thing yeah what's this whole AI thing haven't heard about it yeah I mean maybe just start with like an introduction on yourself and what you're up to now what you've done in the past and then we can kind of go into the structure of of AI in the workplace, how people are learning to use AI, and then kind of some of the disruption that's potentially happening with AI tools actually replacing jobs.

2:03:52Yeah, for sure. So a little bit of background, co-founder of BloomTech, which used to be known as Lambda School before a trademark lawsuit. It's technically still the same company. But about 18 months ago, we started talking to people about this newfangled AI thing and if it had any impact within engineering teams. and frankly I was pretty skeptical in the early days but we sent out a research team they looked at what everybody was doing and at the time it's not quite that way anymore but there were a handful of people who had you know sat in the basement playing with LLMs seeing if they could make them write real code for a couple of years and when we saw that we were like oh wow this is actually working it's not mainstream at all yet and at the time even less so and then working with a couple of those companies that we were so we started training engineers to you know use ai really well um and it's one of those things where there are no best practices everybody's learning more every day the game completely changes every day let alone every week um and then one of the companies we were working with brought us in to do a you know fully intensive 100 hour a week find all the people with 98th percentile iq and above fly them into austin train them over the course of 10 weeks to be expert at using AI and kind of staying on that cutting edge, riding that wave up.

2:05:15And then they hire them on the other side and pay us to do that. Now we're expanding that to more companies, but I basically spent the past several months holed up in a little office with a bunch of sweaty people trying to figure out how to max out AI and figure out how to stay on the cutting edge of using AI to build software. Is the shape of that more like PM who's now able to write code or instantiate their ideas in code? Or is it software engineer who understands some basic programming that can then write more functional code or just be more performant? Like which angle is it both? Or is one narrative driving more of like AI adoption?

2:05:58Yeah, I'd say it's more the latter. So the more experience you have as an engineer, the more it sucks to start using AI because you're going from here to here as far as code writing ability goes. So in the early days of Gauntlet, we force everybody, and the more senior you are, the more you hate it. We say you can't write code manually. We put software on everybody's computer that watches them, and AI has to do all of the code writing for you. And everybody thinks that's the dumbest thing they've ever heard. And they fight against you for a week, week and a half. And then, you know, the more senior you are, the longer it takes for you to actually get to parody.

2:06:40But it's, you'll never go back once you get there. It will, it has fundamentally changed the software industry forever in ways that people don't fully appreciate yet. entire companies are going companies are going to have to rethink the way they do everything um and we're only seeing the very very very early stages of that do you guys have your own kind of messaging internally with the students around uh the framing of like vibe coding because it maybe is it's like this cool viral phrase people yeah but it's kind of different but it's it's it's also different if you're doing it in this hyper intentional way trying to effectively get to the same quality and consistency as regular software engineering but just doing it in a super ai native way yeah i feel like that's muddied the waters quite a bit i mean the when i say vibe coding most people imagine somebody who doesn't understand software kind of blindly trying to one-shot applications, which it's incredible that that works at all.

2:07:49But when we think of, you know, whether you call it vibe coding or some people started calling it super building internally, I don't know if that ever made it out, but using AI to write performant enterprise grade bulletproof software, there's not a great distinction for that out in the market, but we do view it very, very differently. There's a time and a place for both. You know, If you're writing your own personal software or little internal tools, just blindly telling an LLM to do something might work. But most of what our engineers are doing would work in very enterprise, very legacy, very big, large-scale applications.

2:08:28Security is taken care of. The formatting is done correctly. It's scalable and secure and all the things that software needs to be. What are you seeing the most success with in terms of tools? There's so many different options. Every week there's a new tool, right? Maybe they were using Devon at some point, and then they're using Claude, and then they're using now Codex. How are people prioritizing? Are they using things like Replit? What does the stack look like? Yeah, it's not an exaggeration to say that it changes every week in a very fundamental way. So, you know, I remember when Claude 3-7 came out, before Claude 3-7 came out, pretty much everybody was using Claude 3-5 as their daily driver.

2:09:18and I feel like Cloud 3.7 was the first kind of breaking point where that became no longer true anymore. So before Cloud had basically a monopoly. If you were to walk around the gauntlet offices and ask everybody what they're using, 95 % was Cloud 3.5. With 3.7, it worked better for some people's workflows and worse for other people's workflows. Grok is gaining ground. It doesn't, Most people don't have API access to it yet, so you have to use RepoPrompt or something to get it into your IDE, so that's a separate thing. I would say, on average, for people who are working on really big, really enterprise applications, Cloud 3.5 still seems to be winning out, even over Cloud 3.7.

2:10:09And Gemini, I think, kind of changed the game. When was that? Was that two weeks ago or a year ago? I kind of lose track at this point. but it has a much broader context window. So if you have a small code base, you can get most of the code base inside the context window, as opposed to Cloud 3.5. Cloud 3.5 has proven to be better for more surgical stuff. Cloud 3.7 is like Cloud 3.5, but it kind of runs away and tries to do a lot. So some people like that, some people don't. Every engineer ends up with their very ornate, well-orchestrated workflow at Gauntlet, and they do things their own way, whether it's, you know, I build all the front end stuff really, really well and make sure that's all working.

2:10:52And then I'd try to build a backend behind that or I diagram everything and plan everything out with a model like 03. And then I'm creating a checklist and pulling pieces off the checklist. Everybody has slightly different workflows, but it's not like what you see on Twitter. What are you seeing on the other side, on the hiring side? are companies expressing preferences already to you to some degree around, hey, you know, this is the stack we're using internally. We want people to kind of be ramped already on this set of tools, or is it more kind of, you know, bring your own toolkit? Yeah, so there's spectrum, of course.

2:11:35On one side, I would say the companies that I call them the companies that don't really get it yet. They're like, okay, give me somebody who has five years of experience with TypeScript and they understand a little bit of AI and we'll drop them into our traditional engineering org. The companies that are on the other side of that spectrum are more actually this, what was this entire team can now be one person. And what language we use matters a whole lot less than how good they are at utilizing AI. Because anything that you don't know, So AI is better at writing code academically than any engineer you're going to talk to.

2:12:16Knowing how to get it to write the right code at the right time in the right place is where all the magic happens. So on the other end of that spectrum, there are companies who are, I mean, the average company that we bring into Gauntlet and we show them what students are doing, they walk away saying, oh, my gosh, I need to rethink our hiring. I need to rethink our entire strategy. Our roadmap needs to change. change uh it is a fundamentally different world when you're utilizing ai in the correct way and and then i guess even further on the other end of the spectrum there are a lot of companies who tried it once and wholesale rejected it and aren't going to really use it or if an engineer does it at all it's on their own time and against the will of the manager um there's more of that than people would anticipate if you're spending all day on X like I am.

2:13:05But yeah, there's a pretty broad spectrum. And I go back and forth with, frankly, how much time I'm going to spend trying to convince people to do it all the right way or to experiment with new ways of building companies versus just, okay, you know what? I'm going to go create a holding company and spin up 10 companies myself and show everybody what can happen. I go back and forth on that. But yeah, it's wildly, wildly different. what is the what what's your read on the on the hiring market right now obviously there was big headlines maybe it was last last week i believe midweek microsoft that again our our read on that situation was microsoft has always taken taken the approach of kind of cutting the bottom three percent there still was a bunch of stories that came out from people being like i've been here however many years working 12 hours a day says they're not going to hire anyone but kind of went back on that?

2:14:00Like, yeah, overall hiring market temperature? What's it looking like? I mean, I think, so first of all, I agree with you that when there's a 3 % riff, that's rarely actually a riff. That's performance management being done in as kind of way as possible. So you can give people severance, which if you're a company like Microsoft with as much cash as they have, you probably should do it that way. That said, generally speaking, what we're seeing is a, if you're really, really good at being an AI engineer, I mean, we had, there were times when we had multiple billionaires wandering around our office with printed out offer letters for people begging them to come work for them.

2:14:42That's what it looks like if you're really good at AI. Most companies are not really understanding that. So that's not everybody. It is interesting. I think it's fair to say the junior engineering market is completely decimated it's pretty well gone um even i mean if you're at stanford maybe you can get an okay internship somewhere but it is it's armageddon to be what does that mean does that mean that like junior engineers should be vibe coding companies and starting more apps and trying to just like build lifestyle businesses almost like what what is your advice for people entering the workforce in software engineering capacities Yeah, that's a really good question.

2:15:25It's a tough one. Because the way that I describe it is someone who's not very good at AI and AI engineering can still get roughly the output of, you know, starting junior engineer out of AI. And that's what a lot of companies are doing. Instead of hiring a junior engineer, I'll just get, you know, the output that I need. There always is crazy demand for senior and high-end and everything else. I think it'll take a while to figure out how that plays out because the flip side of that is you don't get super senior engineers if you don't have junior engineers. um my and then you talk to the universities and the average university that i talk to is closer to explicitly and permanently forbidding any type of ai usage in the classroom than they are to interweaving it or adopting it in any material way why is that because it's cheating it's so much better at writing code than you are that the professor has no idea if you know how to write code because the ai will write the code for you um i talked to his post i was at the i was at the park a couple days ago and uh was you know at the swings you know pushing sure a little guy uh and there was a another dad there who was a teacher and he said that that a high school teacher he said they basically now weight homework at effectively zero.

2:16:58Like it's like kind of check the box. It maybe contributes to like a few percentage points of your grade. And then tests are now just 100 % because it's the only environment in which you can actually prove. Would you advise people to learn to code now? Or has the idea of learning to code changed in some fundamental way? So I still think I feel like I'm almost on an island on this. I still think you should learn to use AI. And if you want to use AI in software environments, you should learn to code. Now, to me, that looks very different than it did five years ago. And our learn to code business, we've basically shut down.

2:17:40It no longer operates. I'm not interested in teaching people to code in the traditional way. now the flip side of that is normally when you would train people to code you would start kind of close to the metal and at the bottom of the stack and so you would start with okay let's write binary and then we'll figure out how to write some you know low-level java and eventually a year and a half later you start actually building programs that can do things that are interesting to you the right way to learn to code is actually in my mind the inverse where you start by building applications and then you figure out what's broken and what's missing and what you don't understand.

2:18:17And the thing that is different about that than just creating a different curriculum is AI understands that. AI understands. So we had software that would basically watch what you were doing on your computer. And from that, we could derive what CS principles you understood, what CS principles you didn't understand. We could have AI generate a custom curriculum that meets those guidelines specifically. And we can fill any gaps in a way that I would have killed to a decade ago training people how to code. So I think you can actually just start by building stuff and then figure out how it works down and start at the top of the stack and slowly work your way down.

2:19:01And to what extent you get down the stack depends on what you want to do, right? Not the average engineer today isn't playing with a Linux kernel or writing C. They're writing JavaScript and they're building applications. To be at that level, you can probably get there relatively quickly. But I think I'll credit Martin Casado from A16Z with this, who said basically, to be a good engineer, you've always wanted to understand one layer of the stack beneath what you were actually working on. And I think that remains true. Yeah. Give me your view on the AI software engineer market. OpenAI now has like three offerings between, you know, oh, three, we'll just write code randomly for you.

2:19:48Codex is a new product. They now own Windsurf. There's top down enterprise companies like Cognition and Devon. There's bottoms up enterprise like Windsurf and Cursor. How does this all play out? What are you seeing in this entirely new market of AI tooling? Yeah, my first point here is we're in an incredibly lucky position because as a consumer, you don't have to predict who will win. You can just figure out what's gaining momentum and latch onto the best. And so I have a lot of empathy for the companies trying to build those products and spend a billion dollars building a model and if something is one percent better i'm switching to it tomorrow um so that's a great place to be in as a consumer how is that playing out i think everybody's trying to fight similar battles um cursor and windsurf i think are uniquely positioned because they're focused primarily on the ux of the experience as opposed to the data um it's kind of been AI companies DNA to think that every problem is a data problem.

2:20:57And they're generally speaking, right. But where Christian Windsor for getting better and better is, okay, it's really cool that there's this model. I'd say, on average, that is the problem that AI companies have, people have no idea what they can do with the models or how they should be using them. I think that gets simplified over time, the same way every product becomes, you know, I shouldn't have to know whether I want to use O3 mini or 4.0. No normal humans ever going to care about the difference between those. So I think they'll just get better and better. Who wins? I don't have a clue. Trillion dollar question.

2:21:35Yeah, it is. If you probably be a VC if you're in that game. But thanks so much for stopping by. We'd love to have you back. This is great. Yeah. Keep us posted. We'll talk to you soon. Cheers, Austin. Bye. Have a good one. Next time we have Jeff. morris jr jr himself coming coming in from chapter one ventures he's got some big news today we'll let him break it down are you ready to press this button okay welcome jeff jeff how you doing welcome to the studio welcome come on guys there he is our technology brother this is a uh a life goal achieved i feel like i'm like let's go let's go no i've seen i've seen this progress and i'm just such a big fan of you both and um i won't flatter you for 20 minutes but but really you guys are are killing it it's awesome well i remember i think we got breakfast burritos in santa monica like right around the time that we were starting the show and uh you probably thought i was a little bit crazy for going full-time on a podcast but uh but you you never you you always had faith i think you saw the the potential from the beginning so it's great great to have have you on and maybe give a quick intro and then I'll let you talk about the news today and then we'll get into a bunch of other stuff.

2:22:51Yeah, so I've been an investor, I guess, for the past five years, full time, started a firm called Chapter One. We call ourselves the Product Fund mainly because all of our backgrounds are in product engineering, design, data science, and kind of take a product eccentric view towards what we invest in. But part of that grew up in the Bay Area, probably most famously as an operator, was the VP of product at Tinder for a bunch of years, ran revenue over there kind of during the hyper growth period of 2015 to 2019 when the company was growing. And then now we're in the venture firm full-time. And yeah, we've evolved quite a bit and today we're sharing some of that news.

2:23:36Amazing. What's the news? We're not quite set up to have multiple guests on, but we'll have to have your new partner, well, new GP. So why don't you break down the news and kind of talk about the evolution of the firm? Yeah. So the big news today is Jameson Siddell is being promoted to a general partner. We started the firm in 2019 when... There we go. You know, I think it kind of marks a moment in time for us as a venture fund, but also maybe more broadly in venture. We started chapter one as a solo GP firm when being a solo GP, I think, was pretty new, but also I call it trendy in 2019. And it's been just really interesting to see the peer group go in different directions to people who were solo GPs at the time.

2:24:24Some have continued on that path. other people have gone back to operating. And then I think there's another cohort of people who want to build partnerships and firms. And so I think, you know, there's all these right ways to do venture, whether it's building a firm, equal partnerships, so the GPs, and there's this constant debate. But I think we've really been clear on what we want to become. And today, building a partnership is obviously see what we're announcing today. That's amazing. Had this been your plan from the beginning? Did you realize quickly that you wanted investing at the firm to be a team sport versus something that was more of this, again, solo endeavor, at least like it was in the beginning?

2:25:12I think a lot of us in 2019, we had a plan, but it wasn't... It was concepts of a plan. what we've become and so i think i realized in like 2020 probably a year and a half two years in that i didn't want to just do it on my own and i think there's a lot of people who are who are really happy with that lifestyle and um frankly it's probably a better financial decision just to do uh raise funds do it on your own but but i think to be competitive and to build a great product for founders you likely can do a better job of that if you bring on partners and build a firm and so that was the goal in 2021 it took a while to figure out who that person would be and also the right way to do it so a lot of people will tell you to kind of like promote people from within build you know you kind of like people buy into the culture they know what what what you're doing and you you kind of um uh elevate internally then other people say go they go find a superstar are externally, which at times we also thought about doing.

2:26:20So do you want to go bring in like a fancy GP spinning out or maybe a former CEO type? And those things are just really hard to get right. And so I think we were really lucky where Jameson was doing an outstanding job internally, bought into what we were doing. And it's kind of like a head coaching search, right? you guys kind of on the TBPN model, like it's really, I think, alluring to go higher, like the big fancy head coaching name, but oftentimes like promoting the person from within is the best move because they know, they know your players, your players trust them and they know the system.

2:27:05And I think, I don't know, maybe like the Boston Celtics did that really well. Right. And so I think it's really, um uh i think that's kind of the decision most most firms have to make as they're growing their teams she's focused on i mean in her bio she says uh ai ml infra how you guys making money off of stargate there's 500 billion floating around what's the angle we were talking about just go set up a chipotle there become uh become uh uh you know uh uh don't just set up a chipotle They set up like the, the basically recreate the product, the 2007 Chipotle in Abilene. In Abilene. Massive opportunity.

2:27:45There's 357 workers there. But I mean, seriously, like obviously there's this AI boom. A lot of the, a lot of the trains have left the station. I don't imagine you're participating in the next open AI round. But, but, but how do you make money in the, in the current AI boom? Or, or is it, or are we into like the next, next trend? Yeah, I think there's a couple angles. Like one is location. So there's Jameson lives in London. I think there's a popular narrative right now that all the like all the value is happening, value creation is happening in the Bay Area. And so obviously, I grew up in the Bay Area and I live in Los Angeles, and we've made a decision to focus kind of on the other most important areas in tech.

2:28:29And so her view, and it's my view being Spain Mortem in London, is that there's actually a lot of talent in the universities of Cambridge, Oxford, etc. app and also we we had a conference in london maybe two months ago we had the founder of granola we had you know anthropic we had um all a lot of people from deep mind and so i plan to help those founders like escape the backwater that is the uk and the europe because i can't imagine that they're going to try and build businesses there right that's crazy yeah so like but it makes sense because you go there you give them money and you tell them here go to san francisco because then you have an actual shot is that the plan i think i think it's a it's a bit um like there's the there's like the the project europe movement which obviously like love harry and think that's important but there's another view is it's like meeting founders where they are today and often that that is hey we want to raise a seed around and and go you know i mean that's the story of Anthropic and granola, right?

2:29:38Like international founders who eventually came to the US. There's always this question I have about capital flows. There's also Sweden, right? Sweden's pretty goaded, pretty good. The Nordics. The Nordics. There's something in the water. There's something through in there, yeah. But yeah, I mean, there's always the capital flow. There are a lot of great LPs there that want to invest in American companies. There's a lot of founders that want to come invest in America. Obviously, there are some great companies in Europe. We're joking around. But getting that capital flow right so you don't just expatriate US dollars to underperforming countries is probably a risk you want to avoid.

2:30:10But at the same time, it's probably really underpriced assets that are going to go find niche markets all over the world. And, you know, who knows? Maybe the next power law company comes from some bizarre country. Do you have strong beliefs around the intersection of AI and crypto? There's been a lot of different attempts and people attacking it from different angles. You obviously backed a bunch of crypto companies historically. uh yeah how do we make money off of stable coins ben thompson was writing about this today how stable coins are going to power the agentic web and it's kind of get it on the action i'm super long stable coins but they haven't moved at all my portfolio is flat no it is it is a tough thing where everyone's just so bullish on stables and yet and yet it's kind of unclear can we do like a meme coin about stable coin usd on pump.fun just usd coins potential potentially just one trillion there might be something there usd it should be a dollar eventually no but but more seriously zero zero fiat backing it's just a completely it's just completely yeah unstable coins i think people have tried i think people have tried everything's been tried but but seriously like stable coins uh what is exciting or again like uh with the bridge acquisition is that the end of the story or the beginning i think you've seen a lot of um at the application their payments use applications are using stable coins um to enable their payments uh but there's not there hasn't been a lot of value accrual to like net new um circle competitors are trying to compete with a tether or usdc yeah and so stable coins like the easiest thing to talk about at a agm or LP conference because it's like, okay, like, um, I can kind of see that use case.

2:31:59And so I think there's, there's a shift to, to emphasizing stable coins today. I think the combination of like stable coins and agents starts to get, like, it does make sense, but it's, it's, it's gets pretty, pretty blurry. And like the current use cases of, of, of agents and what's possible today. I don't for what it's worth we don't have a strong belief on the intersection between crypto and AI today being there aren't a lot of the primary use case we like is giving open source developers a way to actually make money like I think that's a pretty clear thing that's been missing if you look at any open source ecosystem so you look at I don't know like now as research or different like BitTensor is trying to do this a little bit too, but I think the worlds are very separate today.

2:32:56If you go spend time in the Bay Area and actually talk to the best AI researchers, nobody cares about crypto in the Bay Area for the most part. And that's totally okay. I kind of like that crypto is still very weird and unlike by most people. Let's get Linus Torvald's mega yacht. let's get Guido Van Rossum a private jet. This guy created Linux. Guido created Python. Open source software. He didn't get comped. Let's get him some stables. Immense, immense value. Let's get him some greenbacks on chain. Exactly. I want to talk about the venture dynamics for these mega platform funds and smaller funds.

2:33:36There was this trend during the Zerp era where it seemed like the mega funds were just preempting everything. You had the crossover investors, and that made it pretty hard for early stage investors to kind of make the decision on whether or not to write pro rata checks into their earlier portfolio because they just wrote the seed check. Maybe they did find the great company early, but then there was this pressure to say, hey, these companies are graduating to Series A immediately. Yeah, you want to defend your ownership. Exactly, exactly. And so has that dynamic changed or has the early stage market adjusted to spinning up growth vehicles so that they can ride that wave as the overall market gets hotter?

2:34:23I mean, some of these rounds for these AI companies, they get up Series A and 100 million, like happens pretty frequently now. And how do you set yourself up for that as a manager? I think that's probably the hardest part of 2019 to 2021 vintage, right? Yeah. And you look back at your follow on decisions and at least speaking for ourselves, I think that was probably the part of our investment we wish we could get back the most. Yeah. And so like today, the markups are just as crazy, except there's obviously more revenue that you can kind of lean on to underwrite the companies. And so it's actually, it might be harder today because you have like before it's like, okay, like Excel or Index is marking up the company.

2:35:11We did the seed, you know, we should maybe do the Series A out of principle. Now it's like, okay, one of those firms is doing it. Plus they have, you know,$10 or$20 million in revenue. And so it's equally hard. And I think for seed managers, the growth fund thing for seed managers is pretty much done from what I've seen. Like people aren't going and raising growth funds. And if they do, they have to have a very special reason why they're the seed fund who can do both. So I think there's a lot more. Like we've seen SPV volume pick up again. That's become a bigger part of the ecosystem. And then I think a lot of LPs are looking for co-invest.

2:35:51Like that's always been the case. but especially so today, I think you see a lot of LPs coming into funds so they can co-invest. And that's, I think, a bigger trend today than when I started in 2019. What's the sophistication level when they're looking at co-invest opportunities? Are they saying, okay, I'm going to back an emerging manager, let's say a$30 million fund, and then I'm planning to do one or two, you know, take one or two co-invest opportunities per fund and really just try to get into those winners or is there more of a you know we just want broad direct exposure and you know i'm curious what what you've seen or what you're seeing broadly yeah i think it's both our preferences that you do broad exposure mainly because the odds of doing one co-invest and having that be the right company are just extremely low and so um we you know we We don't do a ton of SPVs, but the messaging is always like, please don't overshoot on any single deal because if you're doing a Series B SPV, we all know the amount of risk even at the Series B, especially today.

2:37:07That's even more pronounced. Series B risk is more pronounced now? I think if you look at the amount of competition, the amount of change happening on a daily basis in just technology advancements, and then the pricing and size of these rounds, I would think if we look back two or three years from now, we'll see the Series B risk in 2025 was probably on par with the 2021 vintage would be my guess. Calling a bubble. it's crazy i mean i i just see this having probably 60 plus different angel investments now i'll get an update and see that a company is getting a markup and i'm like i don't really think like they're there they've made progress yeah are they any closer to being a business that truly has the intrinsic used to be like pre-ipo yeah it used to be like this is an extremely solid business like within you know within sight lines of like true profitability and like i think we need i think we need a new stock exchange probably in texas just called dogs which is like venture back venture back companies that like have a little bit of revenue so i've got a lot of work to do let's just get them out in the public market let's let them trade it like two three million bucks clear the press stack and then maybe they 100x right maybe they figure it out right uh so anyways the well what was that what was that SPAC uh that that holds there's that one there's that one destiny right now I don't know I don't know if you've seen this yeah yeah yeah the inverse destiny of the dogs the companies that are underperforming private markets you wrap all those into a SPAC yeah investors can kind of sell to dogs take a little bit of a loss and then penny stock and then you're like yeah maybe there's one banger in here it's actually there's something there there's already businesses that buy that buy the bad performing but yeah this this this uh index destiny i don't know if you've seen it they hold a bunch of basically sp like they have like some exposure to spacex but they trade it like 10 times the underlying asset value yeah that's crazy it's like i mean people want access to this to the stock so they're going for destiny tech 100 anyway um last question i have what's your updated thinking on incubations i know there's some stuff in the works that you probably can't announce, but is that, is part of bringing on a GP to, to free you up to, to kind of be able to spend a bit more time on, on internal stuff?

2:39:44That's been a part of our stretch we want to expand on. I think we're doing one incubation, which I'd love to come on the show in like three months to announce. And it's um partnering with a really big piece of ip like a globally known piece of ip to build an application for that property and so i'm i'm really excited about this because obviously building software payroll software it's mickey mouse payroll software for sure honestly good execution and payroll you're at least a hundred million dollar company yeah and so you slap the mickey mouse ip on that that's actually kind of genius it's mickey mouse just hyper commodity like you go after these markets that are just hyper commoditized yeah just like yeah we're partnering with with disney it's just gonna be disney themed oh you don't want the batman vpn why don't you want the batman vpn you don't want the dark knight protecting you while you're browsing online uh you're gonna go with what nord what's nord honestly why not this is your new this is your new playbook you live in la let's yeah let's go on a road show let's build some genius enterprise sass meets legacy ip buying it for pennies on the dollar you give him like five percent of the company yeah good to go anyways i do know i do know what what if tony stark built your erp iron man erp stark stark erp stark enterprise erp this is the Jeff could actually run this playbook.

2:41:13It'd be great. I kind of love this. Yeah, definitely come back on. I think it's going to really break the internet when you launch it. So I'm excited to see it. All right. Thanks, guys. Congrats again to the whole team. Cheers. Next up, we got Cliff Weitzman coming in from Speechify. Great entrepreneur, great founder, good friend of mine. Are we talking about business or lifting? We're talking about lifting mostly. So he's been on an absolute tear in the gym. He's super jacked. No, it's not a joke. It's not a joke. Hit the Ashton Hall. Hit the Ashton Hall. Bring Cliff in. Welcome to the stream, Cliff.

2:41:49Welcome to the stream. Oh, we were expecting shirtless. John said you were going to be shirtless. We can do shirtless as well. Yeah, no, no. We're making TVPN stringers. Yeah. I worked out with him in this building where we record this. He put up some fantastic numbers on the bench press. Showed me a spreadsheet where he's, what's it called? Thor 2.0. That's right. He's trying to become Thor 2.0. And so I've been telling him I'm trying to do Thor 3.0 and it's been getting under your skin. But... He has a list in his gym. How's it been? Of all the PRs of anyone who's worked out in that gym. Yeah, yeah, yeah.

2:42:27We're getting there. Are you in LA now? Well, where are you at these days? I'm in LA. Nice, nice. I'm in LA in Studio City. But I'm about to... We move every four months or so. So I'm about to do SF, New York, Prague, back to New York, London, Rome, back to London, back to New York. Those are all four months. Those are all four months. So you're playing like 10 years out? That's the next 40 days. Okay. Then we're back to Basin, Florida for a set period of time. Okay. Yeah. So, I mean, take us through the structure of the business. Obviously, you can travel a lot, but it's a fantastic story. And I just want to hear what you built, how you wound up there and kind of the state of the union with Speechify.

2:43:13Yeah, I guess to give people a sense for the scale, which I think is important. Because typically people just think companies are big if enough VCs post about it. But you haven't raised very much money. Speechify has over 500 ,000 five-star reviews, over 50 million users, Chrome extension of the year, app of the day. I'm just going to keep it. I'm going to hit this a couple of times. but anyways, continue yeah, take us through it yeah, happy to share more so I'm super dyslexic and I have ADHD so first, second, third, fourth grade I had a really tough time learning how to read and when I was right about to start college I built this text-to-speech tool that would read out everything to me and in high school my mom used to read my summer reading books to me and just we didn't have time to finish the summer reading book for college so I cobbled together this thing that would read the stuff into my iPhone.

2:44:07And then I'd listen to that on the plane and it worked. And when I was in school, I studied renewable energy engineering at Brown. I ended up building about 36 different products, everything from 3D printed skateboard breaks to iPhone apps and websites and payment systems. Wait, skateboard breaks? Skateboard breaks. I'll show you an example. Yeah, tell me about that. You want to go slower? So if you ride a longboard or a skateboard and you go down a concrete hill, you don't want to stop by putting your face against the pavement. So what I did is 3D printed the series of brakes that would attach to the back axle.

2:44:38That's hilarious. Oh, wow. That actually works really well. Oh, that's great. That's a good product. That's probably going to be huge on Shark Tank. That's like the perfect product for that. Yeah, you could have been on the tank. Oh, you did? No way. That's the most Shark Tank coded product. I was considering going on a show, but it's like you end up sitting for like 48 hours in a trailer waiting to get called. Oh, wow. Another big opportunity that I had at the same time was like Shark Tank isn't worth it enough. Yeah. So at a certain point, I realized that software is much better. So I built this kind of meme maker on a flight from an airport to SFO, published it, checked in on it 30, 40 days later, and it had 90 ,000 users.

2:45:13And I was like, oh, software is way easier than injecting molding stuff and way easier than like boron doping silicon wafers. My thesis was on a more efficient solar cell that I was building. I was like, all right. And around this time, I read this paper about narrow applications of deep learning. A bunch of academic papers. One of them was called WaveNet, about autoregressive speech. It came out of DeepMind. And I was like, I can make a 100x better text-to-speech experience and a 100x better audiobooks experience. And I wasn't sure what to work on. I knew I didn't want to go get a job at Google or Palantir or Meta.

2:45:48And I was like, all right, well, I don't know what I want to do, so let me just write. So I wrote a 30-page paper about my worldviews. And the conclusion was I wanted to be the person that I needed the most when I was a kid. And the thing I really needed was someone to do my readings for me. okay i'm gonna fully send it on this so i convinced two of my professors to sponsor me to stay in school as a visiting scholar basically i guess taught classes i got to be on meal plan live on campus use the gym but not pay tuition or do homework jim's important amazing i was gonna do that uh work teaching computer science over the summer unlimited indefinitely until something took off and so six months in it took off um and so now there's like 50 million people who use it but the goal is to make sure that reading is never a barrier for learning for anyone no matter what your background is so if you download the speechify iphone app or chrome extension or mac app or android app it lets you take a picture of a physical book it reads it gives you play buttons throughout the internet it's like the voice of the internet you click play it reads and it coaches you to listen fast so i listen to two audiobooks a week i've done that since i was 14 so i've read more than 1 800 books by listening listen on like 3x or something yeah i listen on 3x so intense and so you can listen to the whole show in just one hour because it's a three hour yeah it's a one hour show why streaming doesn't work for me it's got to be something that i can react we're in rss we're in we're in we're on youtube so you can pull it in there listen that's exactly what i do i show up to live streams you know 80 yeah yeah yeah catch up at the end um but look i i learned english when i was 13 so in the beginning i would listen at 0.75 x speed built up to 1.5, 2x, 2.5, 3x.

2:47:20And I'm obsessed with biographies, theology, philosophy, fantasy. And so in the beginning, nobody wanted to back a dyslexia education startup. AI was not yet hot. The toughest point was around 2017. We didn't have the level of engagement and retention that I wanted. And there were a bunch of other sexy projects I could have done. But from first principles, my conclusion was I think that the trend that I most back is in their applications of deep learning, today we call it generative AI. From a supply side and from a demand side, it's audio as a user interface. And I was like, the intersection of these two, if I wanted to build something in that intersection, it's speechify.

2:47:58So I might as well stick with it. I ended up putting a gigantic help button on the app. It made like 20 % of the screen real estate, bright red, helps message us. And if you clicked it, it just put you into an iMessage conversation with me. So like, I didn't need you to enable notifications. There was no intercom. There was no email. And if I messaged you back and you didn't respond, I would FaceTime audio call you and spreadsheet of all of our users. And if for whatever reason you didn't use the product, I would call you every day until you used it. And then the product became really good. We, when we were 25, 18 of the folks who worked at Speechify were previously either CEO, CTO of VP of engineering at their last company.

2:48:36A lot of them were XYC founders or folks who exited their company after their Series A. Nice tidbit on fitness. 12 of the original teammates got six packs within 10 weeks of joining. And we had at least 17 people who gained 10 pounds of muscle in the first 10 weeks.

2:48:57And we get a big Airbnb in a different city every four months or so. And so at the time we were in LA and I convinced one person to move from India, one person to move from Bulgaria, one person to move from Mexico, one person to move to San Francisco. And I went and bought a bench press and I rented a truck, installed it in the apartment in my room. And so we had me and Valentin were sleeping in. And that's like the only kind of weights you need, right? It's just a bed. And actually it gets even more deep because I went up to Marin to make sure that I was buying food for my parents because I didn't want them to go out during COVID.

2:49:30And so two of the guys were in the apartment working out just body weight. And they did a DEXA scan before and after. And they found that they had, like, not gained any muscle, even though they were working out like animals. And I was like, no, you guys need more weight. And so I brought the box press. And we had two guys sleeping in a bedroom in the living room that we partitioned with a window. Two guys sleeping in the bed in the room. And then one guy on an air mattress. And that was, like, the best time ever. Like, incredible time. And then we found just a very strong product market fit. Ended up scaling really quickly.

2:50:01We closed partnerships with all the top publishers to resell their audiobooks and e-books. My little brother Tyler started coding when he was seven, building dry quality websites. When he was 18, he taught himself assembly to hack video games. He went to Exeter for high school, skipped four and a half years of math, skipped five years of computer science, did Stanford as an undergrad, dropped out to run a cybersecurity company, went back to Stanford to do his master's in AI. And I was like, hey, if you can help me build a model that will compile in 3X real time, has better quality than any API that's currently out there, and meets the following requirements, I will do anything.

2:50:32I gave him a very nice compensation offer. And he did it. It took him about 10 months. He joined Speechify five years in as head of AI. So now we have a 40-person AI engineering team. And we make the highest quality digital voices in the world. We are the largest supplier of speech AI in the world for consumers. And then, so that's like level one, level two, level three. The vibe now is we make everything multimodal. So if you imagine that 5 % of the population would read books for fun on their own. And let's imagine 15 % of the population would listen if you provided it as audio. Now we're using text-to-video models to turn everything into a full audio and visual experience.

2:51:05That's super high level for Speechify, but happy to riff on anything. How big is the company now? We're 176 people now. Wow, that's huge. About 32 countries. That's awesome. So 105 software engineers, 40 people on the AI engineering team, and the rest is growth. Talk about the things that Venture has tried to make you, that the Venture industrial complex has maybe tried to make you do that you've rejected because in an alternate reality, you would have raised$500 million by now and decided not to do that. And that's influenced a lot of decisions, I'm sure. So part of it is the fact that between the ages of 14 and 18, I read 461 books.

2:51:49A lot of them were about economics, philosophy, biographies. And I also listened to a lot of fantasy. And when you listen to fantasy, you think, would I make the decision this character would have made in this point in time? So my favorite book is The Way of Kings by Brandon Sanderson. I'm obsessed with this character named Kaladin. I based my entire leadership style after Kaladin. And so when I was writing that 30-page paper to figure out what I wanted to do in my life, I became one of those lucky kids who, when they were 21, figured out what they were put on earth to do. And for me, it was to solve dyslexia.

2:52:22And so I love what I do. Like, I wake up every morning early and I go to sleep very late. I sleep very little because I just can't get enough of working on this. And so I don't want to sell it. I want to own as much of it as possible. And I consider equity holy. Mind you, I was a solo founder for five years working on Speechify. And again, we had an amazing leadership team that blood, sweat, and tears we figured out how to hire. Last year, 50 ,000 people applied to work in the technical positions of Speechify, 10 ,000 people took the asynchronous engineering challenges. But we had like incredible offers for our series A from like literally the top firms.

2:53:00We said no. They doubled the offers. We still said no because I didn't want to sell 20 % of the company. And even with Seed, we just picked folks who we thought were really good. So founders of Instagram, of Twitter, of Robinhood, of, you know, all these companies that I could learn from who did consumer subscription really well. And that was key. So, for example, Dylan Field from Figma taught me a ton very early on. And my nuance is if you take money from a fund, by and large, they have a fiduciary duty to their LPs. If you take money from an individual, they have just a duty to themselves. And so you get a Rolodex of someone who's really great, but you're not beholden.

2:53:41That being said, there are some businesses where it makes a lot of sense to raise money. In our case, we have a very simple business, and we understand the user extremely well. And it's a very niche audience initially for people who have dyslexia, ADHD, low vision, autism, anxiety, concussion, second language learners, and then the entire productivity suite. And at this point, we've worked on Speechify for eight and a half years. So it's really hard to catch up to the product innovations as well as the AI side. And so we are always talking to investors. And don't get me wrong, we have raised money from funds as well.

2:54:11But we've just done it where we typically look for three things. Number one, it's folks who either have an evergreen model so they can ride with us because I'm going to be CEO of Speechify in 80 years. They have a history of philanthropy and education or an experience with dyslexia and their family. And we think really highly of them. They can see around corners that we can't. Either they've done an amazing job taking multiple companies public or they've backed founders in ways. So you would go public? We would go public, but into the future, not in the short term. Yeah. Yeah. Well, what are you thinking about competition from the hyperscalers, the big tech companies, Google IOS today, Microsoft had their build keynote yesterday.

2:54:53It seems like an obvious place that competition could come from. And yet on the product side, a lot of the big tech companies just don't seem to be iterating on the application layer side as fast as most people expected. So what's that been like? Has anything slowed you down over the past two years at the competition from the big guys? Oh, they've helped us a ton. So I'll give you two heuristics that are relevant to any founders. Then I'll give you the specifics on Speechify. The first one is, in my personal opinion, value accrues at the application layer more than it accrues at the model layer and models become commoditized.

2:55:26Did you ever doubt yourself? Did you ever think, oh, maybe value is going to accrue to the model layer? Because there was like an 18-month period where everyone was like... Models will do everything. Well, I'm giving you what my opinion is today. and the only reason I have a strong opinion is I've gone deeper into it than almost anyone has. We bought millions of dollars of H100 GPUs. We set them up in our own data center. We have a 40-person team who does research and development on models. So the second part I was going to say is, but if you really want to be indestructible, you've got to own both the model and the data and the application layer.

2:56:00That's what made ChatGPT and OpenAI so successful is they had Brockman work on the user-facing side and they had Ilya work on the research side. And if they just had the research, they'd just be another lab. It's an application layer that made it incredible. And that's the first thing. Because you want to be able to control the quality and the cost as well as the user experience. And then why did WhatsApp get acquired by Meta for$19 billion? It's because they had all the users. And so you own the end relationship. You want to have the phone number, the credit card, the email of that user, which we can talk in a minute about kind of the changes that came with Apple.

2:56:33So that's the first thing. The second thing is, and this is very unique. Sorry, not unique. ubiquitous. If you are Apple, Meta, Google, Netflix, there is no point in doing any project unless you think that project is going to make you one to a hundred billion dollars per year in the longterm. We had a point where we introduced translation into speechify. This is in 2020, 2021. And Mike Krieger, who is the founder of Instagram, um, CTO of Instagram, uh, was like, you should consider removing this feature. And I'm like, are you kidding me? Do you know how long I spent building this feature, but I have respect for Mike.

2:57:06So I took it out. install to trial increased activation increased users use the product more and I was like shit I gotta remove this why? why? because it was distracting speech advisors one thing to give you the best experience listening to something the second you add an extra button users go down that path so you know from work interesting you guys have such insane scale that you could immediately see something that again just removing some complexity back then we didn't have mad scale but you could see it in three days of usage Like, there's nothing. No. So Clippy is horrible because Word is horrible because the design is terrible.

2:57:42But you know who has amazing design? Google. One text field. Who else has amazing design? Chachi PD. One text field, one button. And that's why they're successful. If they had multiple buttons, they would be far less successful. Now, here's the key. Text-to-speech is buried five levels deep in the menu. When I was 19, I made a video on YouTube under an anonymous account because at the time I was embarrassed for people to learn I was dyslexic. and it was called how to text to speech Mac free. And if you search that phrase on Google, even today, my video from when I was 19 is number one. Why? Because it's so difficult to activate text to speech that you need 19 year old Cliff to show you how to do it.

2:58:18And you can't pause, you can't play. And by the way, if you want to listen like me, what I ended up doing in college is I would use the terminal to change the speed because the GUI didn't go fast enough. And it backed down, I had to restart my computer. So I was restarting my MacBook multiple times a day when I was in college. And then I was like, screw this. I'm going to build a Mac app with keyboard shortcuts. I'm going to build a thing that OCRs the screen. And so my dream is for Google in mobile Chrome to add a gigantic play button that appears in every website that lets you listen to it. Why?

2:58:47Because it will make everyone addicted to listening. And then when they want to listen to a long PDF and they want to do it offline, or they want to do it in my voice or Snoop Dogg voice or their own voice, or they want to translate it to another language, or they want to scan a physical document, Google doesn't cover that. Apple doesn't cover that. And people use multiple platforms. So you need to use Speechify. and so speechify is the premium experience for text-to-speech what i need is for people to become educated about the idea that you can listen to stuff and so a lot of our work over the last eight years has been to educate the market and so there's really two goals number one build the most exceptional product like extreme product we have four core principles extreme product quality leading with love frugality and speed so we talk to users a lot we take really good care of each other we don't waste money on anything we build our own sass tools and we move really fast we ship a lot to production.

2:59:33And the second goal is to educate people that, hey, you can practice being a fast listener. And if you practice, anyone could do it. My dad is 65 years old and English is not his first language. And the joke we have in my family is he wishes he had a mute button for me and I wish I had a speed up button for him. And he now listens at two and a half X speed to everything. And so my life is better because my dad listens and talks faster now, but anyone can learn how to do this. It's just a matter of practice. When you come into first grade, no one expects you to be a good reader. First, second, third, fourth, fifth, 12th grade.

3:00:06We expect 12 years for you to become a good reader, but you can become a good listener after listening to 15 audiobooks. You're not going to be good on the first one. You're not going to be good on the 10th one. And being a good listener means three things. Number one, you can do something else and listen at the same time. Drive, cook, walk, whatever. Number two, you can listen to more than two-week speed. Number three, five weeks later, I ask you about the book. You have great retention of everything that you read in the book, and it will not happen when you start. you have to practice. But here's the thing.

3:00:30Reading is a hack we invented, right? 24 characters on some dead trees. Listening, we evolved to be good at listening, right? Telling stories over the fire. So if you were a bad listener, you were removed from the genetic pool. If you're a bad reader, you were not removed from the genetic pool because otherwise I wouldn't be around. And so when you read, 30 % of your brain is dedicated towards decoding. 70 % is comprehending. When you listen, like 3 % is dedicated toward decoding. The rest is comprehending. And so you can understand a lot better. And once you practice listening fast, you have that skill for life.

3:01:02And especially if you have ADHD and you get distracted easily, the speed of listening matches the speed at which their mind is working. And that helps people focus, especially in school, but also in work. And so that's the goal of the company is to just make that accessible to everybody. And right now there's 450 ,000 audio books, but there's a hundred million books. We make all those accessible plus your emails, plus PDFs and everything else. It's amazing. Incredible. You are cracked. I wish we had more time. Yeah, we got to get a workout in soon. We will. Yeah, come by before you take off. We got to make sure you break that PR.

3:01:32Yeah, yeah, I'm working on it. I think I'm pretty close. We'll talk to you soon, Cliff. Thanks so much for stopping by. You're the man. You got it. Bye. A bunch of VCs are going to reach out to him now. He really is a fantastic business. Let me tell you about Bezel. Go to getbezel.com. Your bezel concierge is available now to source you any watch on the planet. Seriously, any watch. They got Rolexes. They got the GMT Master 2, the Batman, the precursor to the Batman payroll suite, the Batman. You're really onto something there. I think it's good. I think that's the feature. The Disney payroll.

3:02:10I mean, Logan Paul has an energy drink. Why not? Jake Paul has deodorant. Jake Paul has deodorant. why doesn't batman have a erp system why not or shack payroll shack payroll would be pretty good before we bring in the google folks we should talk about joe weisenthal he says your neighbor is online he thinks the bricks are creating a new currency that will soon replace the dollar he thinks blackstone owns 60 of single family homes he's long cardano and this is a response to buco capital bloke says your neighbor isn't online he doesn't think about tariffs his honder CRV only has 80K miles on it.

3:02:48Good for another 100K. He doesn't have an opinion on the rating of our sovereign debt. The only flation he cares about is shrink flation, yet his 401K goes up just the same. I think the Blackstone owning 60 % of family homes is the funniest meme. This whole idea of like, oh, Blackstone's the most powerful financial institution in the world just because they index everything. They're turning single family homes into pods. They are. All right. Let's bring in... You know what time it is. There they are. Huge day. How you doing? What's going on? Congratulations on today. What's new? Would you mind introducing yourselves and then just giving a quick breakdown of what's going on today over at Google?

3:03:28Yeah, I can go first. I'm Tulsi. I lead the product team for Gemini. Cool. And I work on some of the Gemini developer tools. What are the top three announcements today? What's the most exciting thing? What is the one takeaway for the audience? Thank you. Ooh, I'll start with one takeaway. I think the one takeaway is Gemini, at least from my perspective Gemini 2.5 is just getting better. and it's not just getting better in terms of like the quality of the models themselves but we're now bringing that capability everywhere so ai mode is coming to everyone which is kind of our advanced version of search um gemini is coming to glasses um and which is going to be amazing uh gemini is coming in even better ways to gemini app um with more rate limits and just more access and better features.

3:04:19I was going to have to spend... Gemini Glass, is this like a return of Google Glass? Is this a new product? Yeah, so part of the issue for us today is that we got to watch like 20 minutes of IO and then we started our own show. So we still have to catch up, but yeah. And then it's good you mentioned rate limiting because I was worried I was going to have to spend this entire conversation moderating John asking for higher rate limits from you guys. I hit a rate limit on VO2. Whatever you need. Thank you. Next day we'll make it happen. Anyways, sorry, Tulsi, continue. No, no. I think it's like an exciting time for us because I think the models continue to get better.

3:04:58We released a new version of Gemini 2.5 Flash today. We introduced improved versions of 2.5 Pro with the deep think, kind of deeper reasoning version of the model. And so I think the models are getting better, but it's also amazing to now see them actually really landing in Google products in a very real way. I don't know what your takeaways or top three are. Yeah, I think my TLDR is Google's firing on all cylinders across every vertical, across every dimension. And like IO is this like weird manifestation of this actually happening where you just like, I'm like, holy, like even as someone who spends all day working with Tulsi, working with our teams and seeing this happen, like IO is this crazy reminder of like just how much breadth Google has in the product areas and just how many people the model innovation touches.

3:05:44And it's, yeah, I think today's a celebration of all that hard work and making all that happen. Yeah. How do you think about the messaging from like the continuum of like, Google is so big that like consumers will watch a developer focused keynote. Some of the products that are launched are very consumer facing. But then there's obviously developers that want to build on top of these tools. And then there's also stock analysts that are probably watching for how things are going on benchmarks or MAUs or any new data points. And so what are you focused on kind of messaging to the different audiences?

3:06:16Is there a concept of speaking to multiple audiences or do you just try and laser focused on devs specifically? No, I think we really do want to speak to multiple audiences. I think you hit the nail on the head in saying like, there are definitely experiences that we talk about here at IO that are very consumer focused. We also know though that developers are trying to build for consumers, right? So when you showcase amazing consumer experiences, you are also able to speak to devs because you can speak to them about how you actually were able to build that experience and what they can do to build experiences like the ones that you're trying to build right and those and so i think there's an art to try to figure out what are the right demos what are the right stories that really can land cross audience and then we try to create sections that are maybe more targeted so for example i spoke earlier today logan spoke in the developer keynote um really targeted at developers and what developers can do and then there are obviously sections around search or glasses or Gemini app that are much more targeted at consumers.

3:07:10Walk those straight off the dev demo stage right here. Yeah, it's true. You said you could do two and you also said your keynote was starting at 1.30. I was like, are you worried somebody might ask an extra question? Well, we can be in multiple places at once. It's a skill. This is amazing. How important do you think those demos are? Because we saw ChatGPT breakthrough with the Studio Ghibli moment. Everyone was memeing the Ghibli's. I was recently using VO2 to generate video of cars with specific liveries and decals on them driving around. And the result was fantastic. But it hasn't broken through in the same way, even though I feel like the model and just more importantly, the accessibility, because I was able to generate a video from a Gemini chat box and I didn't have to go to a different app for that.

3:07:59And I saw in the Apple App Store, the Gemini promoted post is basically like VO2 is here. And the output was so good that I showed it to somebody and they said he was, John had generated an image of a Lamborghini that had full TVPN branding on it. And I showed it to somebody and they're like, when did you do that? And I was like, and they were like, that's right. Was this how you made your promo video? It was really just VO behind the scenes? No, that's our next promo video. But actually also on that note, I think you probably haven't seen that part of the keynote yet, but we shipped VO3 today and it's awesome.

3:08:35And it has audio. It's amazing. Oh, that's very cool. Yeah. I was thinking about that because it was missing audio and I was like, this is the missing thing. I need to go find another model and then figure out how to inference that or whatever. But yeah, I mean, in terms of creating these like memeable moments or something that can go viral, is that something that's even thought of or is it more just like turn it loose and hopefully something happens? Well, yeah, I think the question is like, you know, you want to distribute the capability. And the question is like, is that Google's job or is it the developers building on your guys' platform to do that sort of last mile delivery to users?

3:09:08Yeah, yeah. I think the use case bit is actually really important because I think despite like where I feel like we're all sort of seeing everything that's happening and we're close to it. But like there's so many people who actually have no idea. And it's like every day. I think we need like a tracker of like the number of new people entering the AI world every day. But like, I imagine it's like some reasonable percentage of all people who are using these products. And like, you know, most products are still a blank empty chat screen somewhere. So like showing that use case of what's possible is super important.

3:09:38And I feel like a lot of the demos from IO today were like, pushing that frontier in a in a really meaningful way. But I think also to answer the question of like, whose responsibility is it? Like, I think Google, we get to do both, which is fun. Like we get to go and build a lot of these use cases for developers and make it possible for them to, you know, bring that to their consumers. But then we also get to be like dog food and like really walk the walk and build those consumer experiences ourselves and find a way to make a memeable moment. Yeah. How much of what is announced are more like showcases that could be built into other products long term?

3:10:15Because I was looking at somebody was saying like Google Assistant has less five-star ratings than Gemini but you could imagine Gemini being like a demo for what's coming in Google Assistant but it seems like Gemini has just gotten so big that it's like bigger than Assistant now and so you have this weird thing where you're experimenting in this fun sandbox but if you're really successful then people just start using that and then you just move off of the other thing is that is that like a deliberate part to the strategy or just like a natural outgrowth of like the modern AI development strategy that you put stuff out and if it goes really big, you just let your winners ride?

3:10:52I think it's a good problem to have, I think, if we're in a world where the experiments we're trying or the new kind of surfaces we're building or the new types of use cases we're building actually really resonate with users. And then we're in a place where we actually want to build those and scale those out. I think what we're trying to do, so at the end of the day, what we want to build is products that people love and really want to use. Right. And I think there's three ways you can do that. You can try to build new features into your existing products. I think in a lot of cases that makes sense.

3:11:20Right. So for example, like AI mode on search today. But in some cases, if you do too much of that, you bloat the existing product. It becomes harder to use and understand versus being able to create a new surface where you actually can really rethink the UX, really rethink how users are supposed to think about the product. And then you can look at that and say, well, does this really make sense as a standalone or does it actually merge with other ways that users are using different products, right? And actually fits into their existing workflows in some way. And so I don't think we want to pigeonhole ourselves into just, hey, we need to consistently build on one product, right?

3:11:54We want to give ourselves the flexibility to create ways for users to build new mental models and then figure out how those things come together. And I think this search example is actually a great one because if you saw, we announced deep research in the Gemini app came out, I think all the way back in December. And it was like pioneered the deep research category and Google launched that in the Gemini app and people love it. It's a crazy product experience. And then like, that's now like, I think the, you know, the feedback was, this is an incredible experience. Not everyone in the world is a Gemini app customer.

3:12:24There's a whole lot of people in search. And like now I think it's called deep search is available as part of AI mode inside of just like basic Google search, which is going to reach hopefully even many, many millions of more users than are using the just a couple billion. Just a, just a B or two. Talk about MCP. Was there, was there like a sigh of relief that Google's leaning into MCP? Was it ever a question or was it something that was like pretty easily adopted across Google? I think it's been fascinating to see like how quickly the world has like, I feel like with standards, like people I feel like are often like very slow moving to be like, do we adopt this?

3:13:07There's like a whole, you know, many year battles with different standards competing. And I feel like everyone was just like, MCP came out. Everyone's like, okay, we'll use MCP. It's that XKCD meme. There's 10 standards. We need another, we need to just need one standard. Now there's 11 standards. But in this case, we actually got the good ending. It's important though. Like I think developers are building stuff. I think in this moment where like, you know, the world is still trying to figure out how to build robust agentic systems, like having people not spend all the time just rewriting the same framework 50 times over, like is I think is like actually a net benefit for the world.

3:13:41So and I think the team that built that built MCP at Anthropic did a really, really good job. And it was a smart move by them to like actually make it an open standard, which they could have easily not done. And I think it's it's the right thing for the ecosystem. Yeah, it puts the overall messaging to developers? It seemed like Satya on stage at Microsoft's build was very much like, we host every single model. We'll give you DeepSeek if you want. We're partnering with X. Google, in my mind, has always just been like, look, we invented the transformer. We have the biggest, like best models where we're dominating the Pareto curve.

3:14:19Are you guys seen more as like a one-stop shop or do you think there'll be more model agnosticism in the future with regard to GCP? I think GCP already has this. So GCP, like we do, like I just say, you know, Tulsi and the team do a great job with Gemini models. We want the world to use Gemini, but GCP does actually have like, I think it's over 175 different models that are available through the model garden. You can get anthropics models, you can get a lot of models. So I think the, and like for customers on cloud, like that makes perfect sense. They need that. Like that's a requirement. Like the world doesn't want to, you know, be locked into a single model.

3:14:54But I think we get to see these really, really interesting experiences that can only be built into Gemini because of the stack of Google's model innovation. So we're going to keep pushing on Gemini models too. Yeah. And then on the developers that might be working with Google, I imagine that the conversation is a little more nuanced if you're actually scaling a growing app on Google infrastructure. Like I ran into a rate limit as a random user, but if you're actually thinking about scaling a startup, unless you're thinking about building Stargate, you're probably able to scale pretty efficiently.

3:15:35But have you been seeing companies run into any sort of like scaling or rate limits or challenges as they kind of grow on Google? Email me. My email's online. I'm on Twitter 14 hours a day. So whatever you need, email me. We'll make sure it doesn't happen. I think in general, like this is like, as far as like a class of problems that developers have in this moment, I think like very real, like I hear this and the challenge is like compute is like a, it's like literally a currency almost. So like we have to make sure we get the right compute to the right people who are actually building stuff. And like, it is a, it's not an easy process to do that.

3:16:11But I think if people need stuff, please reach out to the team, actually reach out to Tulsi too. We'll get, spread the, spread the love, you know, don't just send your, don't just, don't Don't just create CX tickets for Logan. Maybe talk about a couple of the other kind of product level announcements. You guys had Jules, an asynchronous coding agent. You want to speak to that a little bit? I'm curious to get your... Yeah, we're really excited about Jules. So actually like at Jules.Google today, you can sign up for the beta. But basically the idea with Jules is we really want to start thinking through more and more use cases for how we can build essentially assistance for an agentive assistance for developers, right?

3:16:55And so you can think about Jules as trying to take aspects of the workload that are frustrating, that are time consuming and can actually operate on them in the background, right? So the example I gave earlier today is node.js, being able to like update an outdated code base for like the latest version, right? But I think it's really about how can you actually be able to assign tasks and let the model run and complete those tasks and come back and actually then have this like relationship with the developer where these tasks can get completed, can come back, can iterate together and build that kind of collaboration setup.

3:17:28And you can run multiple at once? You can run multiple at once. And I think in a classic Google fashion, you can sign up and use it for free right now, which I think is really cool. Like, I think part of this is if you look at what's Google's job in the world right now. Like, I think part of this is like, we have this stewardship role of making sure, you know, developers, people who are using search, all et cetera, et cetera, like know what's happening with this AI technology and can actually get their hands on it. And can try it. Yeah. And can try it and like know that it's available to them.

3:17:56So anyone can sign up. I think the queue time for tasks is kind of high right now because everyone is flooding Joules, but hopefully as they scale up capacity, we'll. Yeah. I mean, also, and I think like what, what's been actually really exciting today is to see and get the feedback on Joules because we've obviously been trying it internally and using it, but actually getting it in the hands of real developers, getting that feedback. That's how we can actually A, prioritize what types of activities do we need to prioritize in Jules? What use cases and features are most valuable for developers?

3:18:24How do we build that up? And so it's actually like a very self-fulfilling prophecy, I think, for how this will go, hopefully. Have either of you had a chance to actually sit and get the Project Starline demo? I remember a couple of years ago, this is the 3D, how would you describe it? 3D video conferencing? Yeah, like video conferencing plus plus. Yeah, yeah, plus plus. And there were a whole bunch of videos from influencers who were there who got the demo and like blown away. And they were like, I filmed it with my camera and you can't really see the effect, but you'll see my reaction. But it's exciting that it sounds like that's going into production in partnership with HP.

3:19:02but is there anything else to say there? Have you had a reaction or any test demos? I'll be honest, which I've had, I had that same experience that the influencers had, which is I used the Project Starline room to take a meet call, but I was meeting with someone who wasn't in one of the other rooms. So I have no idea, like maybe I looked different or something like that, but they weren't, they were just like - Like they were a normal mirror. They were in their home. So, but it looks cool. Like I'm hopeful. yeah it's a very cool setup as somebody who works at home too much um i'm interested so that people can sort of feel my presence hopefully in the future well if you get in your car and drive you're gonna miss all the dms from developers you know need logan to stay home with his star line set up stay locked in yeah i mean we've been kind of in like i mean i i remember i bought a 3d tv like a like a decade ago probably and we've been waiting for like okay yeah 4k we can't really see anything past 4k but something like this would be very very cool uh notebook lm number four in the charts big launch new mobile app uh did uh i'm sure you guys never lost faith internally but i think people externally were kind of had been frustrated because they liked the product so much we felt like it just disappeared like it wasn't getting kind of the investment uh any any color to add there lots of notebook lm progress i think people sort of felt this which is interesting and we had a bunch of conversations around why, but it was like the team is still cooking, like they're still shipping a bunch of stuff.

3:20:32I think part of it was like the expectations were just like super, super high now because a lot of the stuff they shipped was awesome, but they had a ton of new features that just landed and it's been awesome. I think also this team is one, even if you look at the history of Notebook LM, like we actually shipped Notebook LM relatively quietly and then it got a lot of pickup because it was just such an amazing product to use. And so I think we've taken the strategy with Notebook LM where we've sort of tried to lead with the product leading almost, as opposed to just trying to like cook up a bunch of noise.

3:21:00And I think the Notebook LM team has just been silently making the product better and better and better. We are going to have Tulsi cook up a bunch more noise for Notebook LM. This is a great way for you to get more tweets. It's just firing off Notebook LM updates. Well, it's good. I mean, the fact that there was like organic, real pull from the market and it wasn't just like, hey, we have a bunch of distribution. Let's make everybody aware of this right away. Yeah. Yeah. What was the original notebook element? Because I mean, there's research previews, there's developer previews. Now there's alphas, betas.

3:21:30I feel like there's 25 different ways to say like, don't hold us accountable to be launching this product. What is the actual flow these days for just getting a product? I wasn't, wasn't Gmail and beta for like a decade or something like that. This is kind of like in, in tech culture broadly. But I mean, a lot of things, People are just like, if I can use it, I expect it to be a consumer product. But did Notebook LM go through a particular pipeline? Or do you have a structure for these launches over there? Notebook LM came through Google Labs. Google Labs is the... Josh, I don't know if y 'all follow Josh Woodward, but Josh Woodward runs Google Labs and the Gemini app now.

3:22:09Gemini app is obviously generally available and not in Labs. But Labs does all the early stage bets. So actually AI studio, the project that I work on, um, out of labs, same with the Gemini API, notebook. Um, uh, jewels came out of today. Some things we showcased. So we showcased, um, we showcased pinhole, um, we showcased, uh, stitch and with jewels. Yeah. Right. All of these are products that kind of came out of, and it's like, break those down really quickly. Those other labs products, uh, stitch and yeah. So, I mean, you, you were actually demoing stitch earlier, right? Yeah. Uh, I didn't Josh demo stitch right before I got on stage, It puts Stitch similar sort of vibe coding, vibe designing setup where you can go in and ask the models to like go and build native mobile apps, I think is what it's actually building.

3:22:55And then Pinhole basically builds off the magic of VO3 sort of multimodal generation. So I think really what we're trying to do with labs is, or Josh is trying to do with labs, what we're trying to do with labs is use it as a way to take these technologies and start testing what new surfaces, what new UX, what new types of products can you build. And then like ideally like Notebook LM, they're well loved and we actually like can hit a moment in the market where we can find new product market fit. and that's really why we're trying to create this incubation engine and then we can take those ideas and both bring them to our products as well as actually ship them as standalone products and principally they're also like very close to the model teams so it's not this like you know they're the the you know they're collaborating with tulsi's team like the pms they're all sitting in the same places so there is this like innovation at the model level turns into innovation at the product level and i think those teams are like some some of the first recipients of that stuff yeah it's interesting because like i feel like gemini has a voice mode now that you can click over and talk to the llm and it's kind of like almost a separate feature path from just dictating and then having it read to you even though that's a very similar auditory experience you could imagine notebook lm being like a feature inside the gemini app but right now it's kind of going down separate tech trees and major minutes so we brought audio overviews and deep research and like i think between these things are like all kind of connect i think there's like some like very bespoke notebook lm stuff that you'll like probably not have in the demo i think the stuff that works like there's no reason to not it's like all it's all under josh's umbrella so like he gets to easily be able to yeah and i think like the underlying technology like logan said we're trying to make sure that the model teams and these products are very close together so for example notebook lm has now native audio which is one of the things we talked about today which is really like gemini being able to natively generate audio, which makes it more like multilingual friendly, more natural.

3:24:53And so that kind of technology, A, we can use to make Notebook LM better. We're also bringing that to Gemini Live. We're bringing that to, you know, other parts of the Gemini app over the course of the next, you know, months. And I think that kind of synergy means that you're going to get the best of these experiences depending on your use case in different places. Yeah. It's an interesting product challenge i've run into weird scenarios with chat gpt deep research i'll generate some huge research report and then i'll be like listen to like read this to me but it clearly gets lost once it's reading halfway through and starts hallucinating and stuff so like there's some interesting challenge to actually make all of this like if you generate 5 000 words of text actually getting it into the human's brain it's not enough just to be like here's your research report like you actually have to make it accessible deep research audio overview i think is that flow like yeah that makes sense work it's like it's actually awesome because the deep research reports are like 46 pages yeah exactly i don't have time for that 46 full pages 46 pages i'm not reading it like give me a one pager or give me like three minutes of someone like you know having a casual conversation give me a youtube short generated by vo3 that's what i need yeah that makes sense eventually you two are just going to be and I'll deal with you with your, you know, your own spoke tastes.

3:26:14Yeah. Yeah. Yeah. We're not letting Notebook LM disrupt us. We're coming into the show completely unprepared, but we listened to a 10 minute Notebook LM on the thing we're about to talk about. So we have a little bit of context. Anyways, you guys have been chipping like crazy. What can people expect from you now? Are you going to rest on your laurels? Are you going to, you know, you know, just get a little overconfident or is it, you know, business as usual? Back to the grind. A little overconfident, I think, will be good because I think like we've done a lot of there's just been so much stuff that the team has done.

3:26:48So I think like people should be proud of all the work that's gone into it. But I think the work just starts now. I was just I woke up this morning and I was like, I'm writing the doc about how we need to go heads down for the next six months and 50 things that need to happen. because there's like so much stuff that's still cooking in the pipeline and it's going to be awesome to see all that. Yeah. I think also like we're really, I really do think we're hitting our stride in so many of these areas. It feels like it. Even, even some of the posts, like even Sundar's posts, like over the last 24 hours, I was like, he's feeling good going into IO.

3:27:21You can tell, you can tell. So the energy, the energy is palpable. Yeah. And so we want to, I think we want to use that energy. Like, I think, I think the momentum coming out from today is really about like okay how do we take the excitement how do we take the energy how do we take the feedback and like actually really use it to continue to just build awesome things um so i think we're just at the beginning like this actually really is the start of of what's going to be an exciting one of the year i think and we'll make sure that you two are in person for the next uh yeah let's do it more than 24 hours heads up if you want to come in person yeah yeah yeah we need a whole calendar for these things yeah amazing well thank you both for for making time to come on It's really great to hear and congratulations on all the progress.

3:28:03We'll do it again soon. Thanks for having us. Thank you. Cheers. All right. Have fun, guys. Yeah, the interesting thing is - They are cooking. They're cooking. I mean, yeah, they delivered in a bunch of different ways. And I mean, obviously, like, you know, what, like tech Twitter is not real life in many ways. And you see that with the Gemini Maos and Dows and just five-star ratings and stuff. But I mean, you saw it with the video I generated. like like the models are really really good they're really good performing really well and i feel like google has been there's so much chatter on twitter people making fun of oh i was in gmail and i asked it to do this yeah some of the products are misses for sure yeah but but clearly they're aware of deficiencies and like rapidly shipping on a bunch of different dimensions and uh that you know the the energy they even are bringing to this call and the fact that they're going even just going direct um i think the really interesting thing is like super bullish mark andreason had that quote about like uh chat you uh open ai is becoming google google is becoming open ai you remember this he said this to us and and i think his his take was that like um you know open ai is becoming a consumer tech company and google's uh like most advanced in research and i think that's going back to the yahoo question we were talking about is like is like if they're using like they invented the transformer right and so if there is a new architecture and it and it does come out of like an academic lab it's totally possible it's still it comes out of deep mind again right like they did invent the transformer there and ilia just kind of picked up the paper and was like this is amazing we need to implement this and go really hard at this um and then and then everyone did yeah but uh it would be very interesting to to see uh like like we didn't even get to the diffusion language model but what other what other foundational innovations they're trying because they've been ahead of the curve on getting bigger context windows, faster inference on that Pareto frontier.

3:30:07And if there's a new paradigm and they implement it quickly, that could be an entirely new thing. Very interesting. Yeah. Overall, Google has been so successful for so long and so dominant that I think that it creates this effect where people almost want them to lose or want them to get taken down a notch in some way but they're gonna have to go through us because we will take a bullet for big tech we will we we would we will we would we won't we won't because we won't have to because you will never challenge the supremacy of google is one of the greatest high technology companies in history and it deserves to be celebrated and i i we need to just put this phrase to bed but founder mode yeah like google feels like at an individual level people are you know yeah taking you know massive autonomy and and really have a lot of momentum and even i'm on jewels.google.com right now yeah and they're rate limited uh but it looks and feels like the product that a startup would create it's good it looks like they just raised like 300 on 3 billion they probably did from internally internally um well anyways we should get out of here i did get some extra context on the coinbase oh yeah issue uh a friend of the show said re coinbase hack he was sending it live while we were in that uh he said the information that isn't the customer data is sold at a granular level i.e info on the individual so it'll go on a dark web market and be sold individually based on the bitcoin balance of the individual think of it like a standard three tier regular silver and gold would be a balance over 50k uh and these accounts are already vulnerable to like sim swapping and things like that so uh anyways appreciate the intel uh the lone ranger shot that over to us very helpful but uh last thing congratulations to tyler cowan a friend of the show who's made the time magazine list of the 100 most influential people in philanthropy Thank you.

3:32:17So congratulations to Tyler Cowell. And we will see you tomorrow. We will see you tomorrow, folks. Have a great rest of your day. We'll see you on Wednesday. Fun show. Bye.