IBM Nukes, Demis Govt Plan, Paramount WBD Deep Dive | Dylan Byers, Noah Schochet, Saam Motamedi, Ioannis Antonoglou, Jack Dent, Evan Burns & Jamie Seltzer, Tyler Page

28:13I want one. Don't you want one just floating around answering your questions? This has the potential to be a massive hit at a consumer product. It uses helium and flapping fins instead of propellers. extremely cute the result is quiet lightweight and safe to touch it can follow people give reminders and act as a study buddy so you can be studying and this whale can come up next to you and answer your questions about your math homework see i don't even need it to be smart no i just want it to fly around yeah load it up with gpt2 it's good enough no we don't need any we don't it fly. Just have it fly around.

28:59Oh, you don't even want to have it talk? Yeah, I just want it. You just want it for the... I personally would demand that they install Codex on this thing. Let me tell you about Codex before we bring in our next guest. Codex is a powerful workspace for getting work done with AI agents. Whether you're writing code, analyzing data, creating content, or automating business workflows, Codex helps you move projects forward from start to finish. And our next guest is in the waiting room. We have Dylan Byers from Puck. He's the founding partner, and he's here to get us up to speed on paramount warner brothers discovery and the acquisition how you doing dylan i'm good gentlemen how are you doing we're doing have you been on vacation you look incredibly tan yeah what's going on what's the secret tan i'm unkempt uh i i eat no i'm i'm in the pacific northwest i've been traipsing around the pacific northwest for the last month for you've been traipsing business or pleasure yes like a lager a little bit of both uh business and pleasure i was in sun valley uh uh during the allen and company conference to meet with a bunch of folks who were there.

29:56And then I'm from here. I grew up in Seattle. So, you know, what better place to spend the summer? We had a question about Sun Valley. Who had the bulkiest security guard? Who's security guard was the strongest physically? Oh, yes. Bigger? Historically, it's Bezos. I know Barry Weiss has some beefy security guards. I read about that in the New York Post. Yes, I did hear about that. I didn't see them. I didn't see any security guards there. You know, here's what I will say about Sun Valley, about the Allen & Company conference. It is remarkable how little, I mean, they create a security perimeter, but it's very subtle.

30:32And it is remarkable how comfortable all of these executives who are used to security details, how comfortable they are just moving around the property. They really feel like there's minimal attention even to the fact that they're there from the locals. Other than like myself and reporters from Bloomberg and CNBC, They are largely left alone and they feel that. Sure. How, what is the interaction? We always see those photos of like the line of microphones at the fence for the, you know, ad hoc interview. Obviously there are scheduled interviews with CNBC and Bloomberg sometimes and sit down interviews.

31:09But what is the day to day of actually reporting on Sun Valley? Like, are you grabbing quotes from people or are you meeting with folks? Different strokes for different folks, right? I mean, there are historically, there have been like New York Post reporters who go there and once in a blue moon try to breach a security line and get color and quotes. I go there to meet with people off the record. For me, that is the world I cover, those executives, be they in media, tech, entertainment, whatever. And I have off-the-record meetings with them at a cafe on the property. There are others who go there and do get interviews, like Julia Borstein of CNBC always gets three or four interviews.

31:50It depends. But what I do not do, thankfully, gratefully, I do not stand there at the front and shout questions at people who then just sort of like wave at you, which is really their way of giving the finger. Save for David Zasloff, who's like a moth to the flame of a microphone and will come over and always give a good quote. I love it. How real is the meme that like this is where the mega mergers are birthed? This is the place where the ideas come together. the merger that you'll hear about in a year for$100 billion. It all starts at Sun Valley. Well, look, here's the deal. I have tried to set the record straight on this.

32:32Deals do happen there. Oftentimes they happen as the culmination of conversations that happened well before Sun Valley. And occasionally conversations start there. And I don't want to downplay that. It is true. This year, there's not much that I know of at least yet. Sometimes we don't know about it until later. If you look at last year, like, yes, Apple got the rights to F1 at Sun Valley. And there were meetings between Liberty and ESPN and Apple and Apple won. Sun Valley last year was where not only Larry, or sorry, David Ellison, but also Matthias Doffner at Axel Springer and the Murdochs came and tried to court Barry Weiss.

33:15And of course, David Ellison won that one. So, yes, deals do happen. I think what I reject, and I've written about this, I reject the notion that all of these people with their private jets who basically run on similar circuits throughout the year, that somehow, like, if Sun Valley didn't happen, they would have no way to make deals happen. And then somehow these brilliant people, these brilliant entrepreneurs and executives who have managed to run their businesses successfully and are always thinking not just months, but years, if not decades ahead, are like, oh, I happen to be in Sun Valley with this person and therefore I will buy the Washington Post.

33:54Sorry, that's not the way it works. But that said, everyone loves coming here because it is the same reason I love going there. It's shooting fish in a barrel. It's just like speed dating with everyone you want to see. And it's just extraordinarily convenient. And then going back to my point about the Pacific Northwest in the summer, there are worse places to be than amid the quaking Aspens, you know, in Ketchum in July. Yeah, that's great. So get us up to speed on what's going on with the Warner Brothers Discovery acquisition. Maybe a little bit of the prehistory just to refresh on where the deal stands.

34:31And then the latest back and forth that emerged last week trickling into this week. Yeah, look, David Ellison has had to jump hurdle after hurdle to try and get this deal done, obviously. $111 billion deal, bring Warner Brothers Discovery into the fold with Paramount. And the last hurdle, he might face some challenges in the UK, but really the last hurdle here in the States, now that he's cleared everything with the Trump administration, are these Democratic state attorneys general led by California AG Rob Bonta. finally uh bonta came out this week uh sort of very cinematic he was like on a trail in front of the hollywood sign and uh and and effectively said like yes we are suing we are trying to block this deal here's why we can get into it it is very hard for me to see that he has a um a strong case for blocking the deal, that he and the other AGs have a strong case for blocking the deal.

35:36Because if you think about it, like David Ellison wants Warner Brothers Discovery to have some semblance of the scale that would be required to compete in a world that is dominated by, you know, like pick your brand, Netflix, YouTube, TikTok, Apple, Amazon, like the list goes on. And so what Bonta and co are doing is sort of presenting this very strict definition that is rather archaic. It has to do with theatrical distribution, cable distribution, issues like that. And I get from a political perspective why he feels the need to do that. And I think there are probably political ramifications for him if he didn't do that.

36:19But the notion, I mean, just think about it on his face. We all live in the real world in 2026. the notion that somehow a combined Paramount Warner Brothers Discovery, a combined CBS, CNN, a combined, what are the streaming services, HBO Max, Paramount Plus, is going to be this massive dominant business that is going to somehow corner every aspect of the market. That's just not real. That's not the world we're living in. So I think Bonta has an uphill climb in that regard, but he can certainly create headaches and certainly legal fees for Ellison for many months. And so zooming out, Hollywood is under attack loosely or facing competition from tech platforms, YouTube, Instagram.

37:09And so time and attention is more broad than just Hollywood. And so with that backdrop, while consolidation might not be good within the view of Hollywood, there's less buyers for movies. It might be a defensive move in a world where you're facing extra competition for attention across the Internet. Yeah, that's right. I mean, it's just how do you define the competitive marketplace? Yeah. And if you're talking about, you know, the fact that, look, Hollywood has Hollywood is in decline. I don't think anyone can dispute that. And frankly, like there are comparisons to Detroit, you know, of decades ago.

37:49And I don't know, you guys are in Hollywood. I live in Hollywood. Sometimes it certainly feels that way. so there's this notion that like okay we used to have six studios and then we have five studios and if we have four studios that's going to be a problem and so all of this sort of you know there are all these negotiations over okay well we'll release 30 films a year we'll keep both studios open we'll have a 45-day theatrical window and i'm sorry but that's just that is not where the that is not where consumers are that's not what consumers care about that's just not what the market cares about.

38:21Like you're not, people aren't, people don't think that the one form of entertainment that they have in the world exists in a theater and they care about a 45 theatrical day window. Like we live, I mean to even say that we live in an era of like Netflix and YouTube almost seems passe when you think about everything coming down the pipeline in terms of AI platforms and everything else. So it just seems like remarkably outdated, which I suppose is an evergreen commentary anytime you have Washington going up against business, entertainment, media tech. And again, I just don't see how Bonta wins that case.

38:58Jordy, do you have a question? Yeah, it was just how did the threat to leave California come up? Yeah, because it feels like there's a short-term incentive to stop consolidation in Hollywood. But if you wind up with studios leaving Hollywood, well, you've lost the war, even if you won the battle, but how conscious is that? Yeah, it's just reminding me of the whole Getty Images Shutterstock deal, which was announced in January of last year. It was a$2 billion merger at the time. Now both companies are worth roughly like$300 million in the public market. So two companies that are under attack trying to consolidate.

39:43the idea that that this does create like a stock photo monopoly but in the world of ai image generation like a monopoly in the real world stock photos actually taken with a camera is probably the only thing that can go up against just random image gen and so it's a very logical move but yes well look let me let me just say first about the threat to leave california yeah one everything that you every headline we see um needs to be viewed through the through the lens of brinksmanship Right. Everything is basically trying to win the hearts and minds of anyone who's paying attention to this deal. And the threat to leave California all of a sudden would seem like if you take it at face value would seem to reverse the narrative.

40:30It's like, OK, Bonta's ostensibly coming out here to try and fight on behalf of Hollywood. And like lo and behold, his measures are going to drive Paramount Warner Brothers Discovery out of Hollywood. A lot of people, I think, looked at that and thought that that was a bluff and there's no world in which Paramount WBD can leave Hollywood. I don't know. I mean, look, I do think it is a bit of a bluff. I do think it's brinksmanship. On the other hand, as folks I spoke to reminded me, David Ellison did not get into this business either to just have an old-fashioned Hollywood business that couldn't really compete with the big tech players, nor did he get into it in a David Zaslav kind of way to just like flip the business in three years.

41:14He's young. He has ambitions of grandeur. He has ambitions of empire building. He really does believe that he can position this company to compete with all those other companies we've already mentioned. And if you think about it through that lens, is he nostalgic about Hollywood itself and like the actual location of Los Angeles? No. If you look at what his father did with Oracle. He moved Oracle from Redwood City to Austin. I believe now it's moving from Austin to Tennessee. And there's other precedent, right? You have Tesla, you have Chevron. You have Hewlett Packard. Disney too moved a lot of people to Florida during COVID.

41:58And there was a lot of backlash and not everyone moved and they still have a huge presence. And now is it like, Like, you know, 30 years ago, if you said, yeah, I'm going to have one of the biggest entertainment companies in the world, it's not going to be based in Hollywood, you would have been laughed at. But now you talk to anybody here that's like actively making movies, TV shows, et cetera, and they're already traveling a bunch. So it really doesn't need to be here. No, you're traveling a lot. Different states have different incentives for filmmaking. And by the way, like go back to the Oracle Tesla examples, like you still have businesses here.

42:31You could theoretically have a Paramount Warner Brothers Discovery based in Austin or Nashville or anywhere else that still had studio lots in California. And to the folks in the writer's room, the showrunners, the talent, they wouldn't know the difference. And the only person who would feel the difference is Rob Bonta, who suddenly would not be on the end of what David Ellison is touting as a$30 billion investment. And at a certain point, Bonta is walking a very fine line because he's trying to fight for Hollywood, but he is running the risk of alienating one of Hollywood's most valuable players right now.

43:11And so it's just – it's politics. It's pure politics. And another point I brought up this week in my writing is like just to underscore how much this is politics, I want you to imagine that David Ellison, who, by the way, is not some like right-wing MAGA guy. Like he's not, he's, he's donated to Biden, whatever. He's really just a pragmatist who's trying to get a deal done. He would, he took Trump to a ringside at the UFC. He went to the state of the union address. He held a, he held a private dinner for Trump and his administration before the white house correspondence center. All of that to like the folks in the newsroom at CBS news looks like, uh, you know, he's like the, the, the new Rupert Murdoch.

43:52Sure. The truth is, is if Kamala Harris or Joe Biden were in power, he would have done the same thing. It just would have been at like, you know, the U.S. Open or Wimbledon instead of a UFC match. And and like and the fact of the matter is, is that in that scenario, Rob Bonta would probably not be bringing this case. And it would probably be Republican AGs who would be who would be trying to bring this case. And I think we have to be honest about the politics there. Yeah. I like the idea of tennis at the White House. Maybe that'll happen soon. Right. Yeah. U.S. Open on the White House lawn. Yeah, maybe just all sports.

44:27It should just be a sports venue, and they should just have the hockey, and then basketball, and then baseball. Was there adequate sponsorship? I didn't watch the UFC match on the White House. Was there adequate sponsorship? Did they milk that for all they could? Not nearly enough. We could have gone way further. Yeah, it's unclear. There were a lot of sponsorships. Yeah. Yeah. Yeah, I remember a specific image of Justin Gaethje, the, you know, the American champion who won his fight doing a backflip with a Polymarket logo. And you can see the White House in the background. It was a very iconic image.

45:04Yeah. Can you talk about the debate that sprung up, I think a little bit earlier, once the merger was confirmed around the duplicative studios, Paramount, Warner Brothers? They have two. When we say studios, there's the abstract concept, but there's also like the physical historical locations that are very meaningful there was this discussion over is one going to be turned into apartment buildings and uh that feels like sad from i love hollywood perspective also if you're a housing person it feels like maybe it'd be good to bring down housing prices but um right but but at least uh the reporting that i saw from from puck uh was there was a lot of pushback towards like don't ruin this amazing financial history this historical institution.

45:48Is that chip still on the table? Has that been resolved? Because there's been a lot of like, okay, we're making this pledge. We won't do this. We won't, we won't cut. And I'm just wondering if any of those chips come back on the table. Well, here's what, here's what I would say to the one thing that Bonta has gotten right. Forgive me because I forget verbatim what he said, but effectively, like in, in, in spirit, it's, I can't regulate pledges. Right. And that's true. And like, there is so much that is going to be said, which you should effectively take with the same grain of salt that you take from like a political candidate who tells you everything they will and won't do in office.

46:27Like, yes. Is he committed right now to 30 films a year? Is he committed to a 45 day theatrical window? Is he committed again? I don't have the latest on this, but to keeping both studios open, sure. Once you've got the deal and once all of this is behind you, are there ways in which you can sort of finesse one of those lots into something else for your business and then maybe finesse that real estate out of the portfolio to save some money? Yes. And that will 100 % happen. I think about this. I cover this deal a lot at the news level and the sort of tie-up of CBS and CNN. The minute this deal happens, folks at Paramount are going to start looking how to offload the real estate that is currently used by CBS News and move CBS News operations into Hudson Yards at CNN.

47:13And why you do that? Because you have$80 billion of debt and because you have promised synergies. And there's no world in which you're sitting there with two lots that are duplicative, that do the exact same thing and think like, in order to honor the history of Hollywood, we will continue spending twice as much money as we need to. It's just not going to happen. Especially not in the news business. No, and definitely not in the news business. Like, you can sort of make the claim around specific film studios being historically important to Hollywood. Hollywood means films. But when you think about what it actually takes to run CNN and CBS News, like, there are tons of overlapping, just pieces of equipment that you're like, oh, that teleprompter there and that backdrop and that lighting is, like, all the same.

48:00And sure. And look, like I am sure there are some Scott Pelley types who have very warm feelings about the labyrinthine halls of the CBS News headquarters up in uptown Manhattan. But there was a group of folks from CBS News who went to Hudson Yards, who went to Atlanta to tour it. And they're like, holy shit, these facilities are a lot nicer than ours. These are great. This is it would actually be a lot easier to create TV here. So that that will be really easy. And look, I think there is, as someone who covers change in the media space, there's always so much panic and nostalgia anytime anything changes because you think that thing that changing is sacrosanct.

48:41And the truth is, is that it usually takes a matter of weeks or months before everyone sort of comes around to the new status quo and gets very comfortable with it. And that inevitably is what is going to happen here. Speaking of change in the media industry, have you noticed, I mean, you report and operate at what I see as like a very, very high level, the executives, the mega deal makers. But have you seen any knock-on effects from the summer of YouTube blockbusters that we've been talking about here from the creator economy perspective? You have Iron Lung from Markiplier, Obsession, Backrooms.

49:18There's a number of YouTubers who sort of labored away in obscurity and then just put up incredible numbers at the box office. It feels like Hollywood might be looking for more scripts, more interesting IP, less sequels, less bought-in things. But is there any individual studio that's excited about that trend or anything that you're seeing that's actually rising to the level of your reporting? I do not have as good of an insight into this as I do into other things we've been discussing. But here's what I will say just from a distance. Every studio is thinking about how do we, like all the way to A24, right?

49:58Which is sort of like the bell of the ball when it comes to quality content in Hollywood. Is thinking about like how do we incorporate AI into what we are doing? And I think the signal that those creators sent with films like Obsession and others is like, this can be done and this can be successful. Does it mean that, you know, like every human being is going to go away and we're going to stop? Like, no, it does not. I think that most folks will learn, will find ways to incorporate this in ways that does not significantly like degrade the value of the content that they're making. But I think the sky's the limit.

50:34I really think that those examples have shown that this can be done and that there is more opportunity here than the folks who are sort of clutching to Hollywood's past have realized. And by the way, that doesn't need to be disruptive in a bad way. That can represent extraordinary opportunities. In the same way, you guys talk about this day in and day out. AI creates extraordinary opportunities in every aspect of business, industry, commerce, everything else. And that can happen here, too. in ways where the human element remains. How much are you tracking these AI short form vertical drama apps?

51:16I'm counting three in the top 25 of the U.S. iPhone app store right now. There's Vibe Shorts, AI comic dramas, Net Short, exclusive short drama video, space exclamation point, and then Story Reel, exclusive drama. I'm not following any of this. It sounds just hearing you see it, read it. It sounds like, is this just Quibi AI? Yeah, it's AI Quibi. Katzenberg entirely vindicated on the format. But yeah, I've just been, I don't know anyone that uses these apps. I think we need to have Tyler on our team just spend like an entire weekend, watch every single one of these and review them for us. But it's funny to me that these apps are seemingly being created not within the tech industry, their technology products, and not within Hollywood.

52:14So it's like entirely just, you know, outsider groups that are ranking. The hoverboard of content. like net short and vibe short are both outranking calci paramount polymarket like during these massive sporting events right i mean i guess yeah i get like and like vibe short is outranking gemini and anthropic by a very meaningful margin yeah i guess here's what here's what i say and i i'm granted like i'm a very poor authority on this because my entire content has been like World Cup in Wimbledon or just staring at the quaking aspens in Sun Valley. Here's what I would say. As in every other industry, like technology has democratized the ability to do things, right?

53:06And so to bring this conversation full circle, there's no real reason anymore that this has to happen in Hollywood. Now, I'm not suggesting that like, you know, every institution just goes away, obviously. But what I am saying is like there is – you cannot look at something like the success of the YouTube creators or the engagement that these short-form platforms you're seeing – like the engagement that they're seeing and just dismiss that as a fad. That is a total reorientation of the possibilities that exist for people to come along and just create something that is going to be a massive hit.

53:49And again, to bring this back to Ellison and to Bonta, you cannot argue that people who can put movies in cinemas on Hollywood Boulevard are somehow in a different business than the people who are making AI-generated shorts. It is solely a question of where people are spending their time and then whether or not that time and engagement can be monetized. And it does not matter what category that falls into. It's just a matter of a question of eyes on screens. Do you have a view on how U.S.-China relations might evolve with regard to Hollywood? Because it feels like some of the video models coming out of China are a little too good.

54:36And they might be training on some Hollywood intellectual property across different studios. studios and it feels like in order to actually take a lawsuit to the finish line or have any sort of settlement or retribution or some sort of uh even just truce to not allow you to put mickey mouse or spider-man or batman in an ai generated open source video model or something like that uh it might require hollywood sort of teaming up going to washington asking for some sort of concession or, you know, deal within the construct of like the larger trade negotiations around rare earth. And it could be one of many bullet points in a new deal.

55:24Yeah. I mean, I do say like, and we were here and we've been here for a long time, like China somehow seems to be the great unifier when it comes to businesses saying like it basically as the antithesis, right? Like the, the, the, it has been years that I have been hearing tech executives invoke China as a way to try and push back on regulation of U.S. companies. I can certainly see a world in which China becomes like the, you know, what's the term, the bugbear, like that gets Hollywood to basically come together, work with regulators and say, like, we need to protect this because this is American.

56:03And that is a very palatable argument for the folks in Washington or the folks in Sacramento. Yeah. Yeah, I can totally see that. I guess the thing I would say, though, is I think what businesses really want is to be able to play in that market. And I think at a certain point, your ideal outcome is a way to protect your own IP, your own technology, while also being able to open up what is obviously like an incredibly robust and large market and work with them as well. And that's a negotiation that obviously Tim Cook has been involved in for a long time. A lot of this, when it comes to the U.S.-China stuff, is above my pay grade, but that is sort of my sense of what will happen.

56:49Last question. Quaking aspens, you've mentioned them twice. Are you an arborist? Arborist. Are you into trees, or is this just something everyone that goes to Sun Valley recognizes about the trees? Here's what, thank you for asking. I've been wanting to talk about this for a long time. No, here's what I think. I wish I could convey to people. I'm very privileged in my position as covering the world that I cover to get to go. Like, it is sort of a treat of the media tech entertainment space that these guys all sort of choose to convene in the Mountain West. Yep. So depending on where you are in the sort of hierarchy, like you're either going to Sun Valley or Jackson.

57:33There are many retreats sort of in Colorado. A lot of these guys own ranches from like Montana down to Utah. There's, of course, like the Aspen Ideas Festival. It is just like a real pleasure that these guys chose to convene there as opposed to, say, Cleveland. Right. Or like just do everything in New York City. Or even Vegas. Like CES is in Vegas, and that would be where you'd be if you were on the electronics beat probably. Thank God I'm not. Thank God I'm no longer the politics beat and have to go to like Iowa and New Hampshire every year. And I just – if there's any way to just sort of convey the atmospherics of that world, I know of no better way than like the lull of the quaking aspens and the occasional sound of like a Gulfstream jet taking off on the tarmac.

58:21beautiful are you writing a book right now I don't know yet. Should I? I think you should be. You're tan. You're hanging out in the mountains. It seems like you have an incredible energy. Maybe an audio book. It seems like since the last time you were on here. It's called a river runs through it. Okay. Maybe an audio book and it's just a recording of the quaking aspens and the sound of gulf streams passing by. There you go. To fall asleep. There you go. To fall asleep to. There you go. Thank you so much for coming on the show. Thank you, gentlemen. Great to see you. Great to see you. Appreciate you.

58:50Have a great rest of your summer. Hope to see you soon. And we'll talk to you later. Have a good one. Cheers. Goodbye. Let me tell you about Figma. Agents, meet the canvas. Your AI agents can now create and modify your Figma files with design system context. The quaking aspen, it's a tree. They're defined by the natural feature of Sun Valley, Idaho landscape, famous for their pale white bark and shimmering autumn foliage. The quake is a flat leaf stems that cause the leaves to flutter and rustle at the slightest breeze. So when you look at Dan says Gulfstream ASMR Gulfstream ASMR might be a market Tyler I need you to watch a few vibe shorts a few net shorts and a few story reels by tomorrow Deal deal deal and we're gonna I don't know if we can watch them on the show No, we can probably play a trailer on the show Maybe we have pick your favorite on the three apps and we'll circle back tomorrow Well, our next guest is with us in the waiting room.

59:55We have Noah from Terra Firma. He's the co-founder and CEO. Welcome to the show. How are you doing? Doing well. How are you guys doing? In the safety vest, looking great with the flag in the back, too. I love it. Please introduce yourself and the company. Tell us a little bit about Terra Firma. Yes. So Terra Firma was founded by my co-founder and I after we were working at SpaceX. And we were trying to build Starship rockets down in Boca Chica. And the construction was just too slow. We're like, why are we able to build rockets the size of skyscrapers at like one a month? But like building a road or a factory is taking years and years and years.

1:00:31So we quit our jobs to start a company to change all that. We're basically becoming a new type of construction company, like a full stack construction company. It builds our own robotics software and we actually operate as a construction company ourselves. OK, robotics software. So are you how deep in the supply chain are you going to buy equipment? Are you buying from Caterpillar and retrofitting them? Are you buying from the people that make the tracks and the treads and the motors and then building your own bulldozers and cranes? Are you using custom software and robotic automation just as a harness for the project management layer?

1:01:07At what level of the stack are you operating now and where do you want to go? Yeah, on the hardware stack, you can probably see behind me. We take existing Caterpillar machines and we retrofit them. Caterpillar, John Deere, Komatsu. So those machines, they're pretty good. They're robust. They've been around for hundreds of years. They're 100 years. They're pretty good. Everything else we build ourselves. So we're building all of our own software from scratch, kind of the manufacturing engineering software that we built at SpaceX in order to operate large-scale factories. We're building that for construction.

1:01:35And how did you actually go from zero to one? At this point, you've raised$115 million. What was the first project? Was it find the customer to sort of do it all manually? or did you actually build robotic tools first and then go and prototype them? What was the flow? This is a great question. So 12 months ago, we were only four people. So for the first year of the company, it was just my co-founder and I, we wanted to make sure we had the product market fit before we started like raising a bunch of money and spending it. So we actually built a bunch of robots using Tupperware containers that our lunchbox came in and like Raspberry Pi and Arduino from our college like kits.

1:02:13And we got robots working And then we went around asking, like, who is willing to let us make some money with these robots? And our landlord's like, hey, I got a building for you to demolish. You think you guys can do it? We're like, I mean, it's not rocket science. So my co-founder and I literally operated the robots ourselves. Like, the brain was a little Tupperware container. And we knocked down a couple buildings and got paid our first check. And we're like, whoa, you could just become a robotic construction company. It's Texas. Like, you could do whatever you want down here. That's awesome.

1:02:41What I feel like you'll quickly get to the point where permitting is like the gating factor where like you get to the point where hypothetically we could build this, you know, we could build this whole, you know, shell in like the shell they're in right now. We could build something like that in in three weeks. But then you're limited by sort of local government and approvals and things like that. Is that is that right? And if so, how are you thinking about approaching that problem? That's a great question. People bring it up a lot. For starters, I just want to say permitting is an issue, but it's not the issue.

1:03:17At SpaceX, once we had the permits, theoretically, it should go super fast. But construction still took longer than it should have. We're operating at maybe 25 % of a work week, 9 to 5, 5 days a week. We could operate at 168 hours a week. We could be at 100 % utilization rate, and we're not. So you can make construction four times faster once you get the permits before permits are the issue. Now, our approach to this is very similar to how Elon approached building rockets. Like, okay, we have to solve manufacturing. We have to solve supply chain. We have to solve testing the rockets and designing them.

1:03:46And now the rockets on the launch pad fix the permits. And I believe in the bureaucrats of this country wanting to make the country better. If you have everything else ready to go and you make their jobs easy and you chew the food for them, they'll start approving permits faster and faster. They're not currently the main bottleneck most of the time. I imagine that we're firmly in the Centaur era at best. I imagine that every robotic piece of equipment has a human in the loop somewhere at this point. But walk me through your vision for where this goes. I imagine that in the long term, it's sort of, you know, you create a, you know, a spec for what you want to build or destroy or the construction project that you're working on.

1:04:30And all of the robots go off and do everything. But before that happens, it'll probably be one human overseeing two machines. Like, how does all of that play out? Another way to think about it is, like, you probably don't want to be, like, taking the approach to, like, the same approach as, like, vibe coding with, like, building a building. Because it's like, hey, go build this ditch. and then it builds it like slightly in the wrong place. And then you have to like, you know, fill it back in. And, you know, it feels like not as forgiving as the software domain. This is a great question. Do you want the economics answer?

1:05:02Do you want the sci-fi answer? Both. Let's do economics first, sort of like short term. I mean, we're familiar with Waymo. They have, you know, overwatch drivers that might see four screens. They can sort of beam into one at a time. How, what are the economics of that? and then where do we go from there? And then let's talk sci-fi. So in terms of economics, you have two curves that cross. You have the cost of autonomy, which becomes exponentially more expensive as you go from 90 to 95 to 100%. Waymo spent$30 billion or whatever it was over 20 years. And you have the value of automation drops off a cliff.

1:05:37When you have one person controlling one machine to one person controlling two machines, wow, 50 % production and labor. But when you're at one to four changing to one to five, it's if it's between 25 % of your labor and 20 % of your labor. So I think those two curves cross in construction at about one person controlling three or four machines about 75 autonomy that's the goal for us 75 autonomy and then you add a new machine and then you add a new workflow and then you go from dirtworks to subsurface utilities to concrete to steel oh that's building up the tech tree yeah and that sort of makes sense because i imagine that uh when you're actually just one like old school piloting a construction machine uh there's probably about 60 of your time is like downtime like i know i need to get the crane from here to here and i've now you know push put my finger on the button and i just have to hold it there while i get there so while that's happening you can sort of beam into a different machine do something else and sort of cue them all back and forth yeah it's a little bit more video game than that you ever play like starcraft or age of empires oh yeah so we're able to say excavator dig here and you design a task for a minute and it will run for 20 minutes then you say bulldozer run here sure roller run here yeah and this is actually our teleoperation center.

1:06:46Sure. We have like 20 desks behind me and these 20 desks allow us to operate, um, like 80 machines at a time. That's very cool. Uh, so what are, what are your, what are, yeah, on the sci-fi front timelines to, you know, you have a piece of dirt and, uh, robots arrive to the piece of dirt autonomously and you have zero humans in the loop and you just get a structure in a very short period of time. You don't want zero humans in a loop. It's not cost effective. There's so many edge cases in construction. It's a super long tail. But if you continue to execute in the way that you're doing right now, wouldn't we be able to get to that point in 10 years, 15 years?

1:07:28I'm not sure if construction will ever fully be without a human in the loop. I think you'll have a very small team of people that's very efficient building larger and larger projects, and it doesn't ever make sense to get rid of a human. That's my personal belief. Even on Mars, I think we're going to have a small team of astronauts conducting like a large fleet of robots. There's just a lot of things that, edge cases and things that the robots have never seen before. You can't collect enough training data to simulate every possible thing in the world. But if you're asking me the SimCity moment, when I can say, I want a road here, I want a restaurant here, I think we're like five to 10 years away from that.

1:07:59I think it coincides with our Mars ambitions. Coincides with five years to Mars? What are you thinking? We are technologically capable of going to Mars today if we had the political and economic desire. I mean, we've actually sent robots to Mars. Like, America has sent robots to Mars, so it's possible. He's like, send me. Send me. Yeah. Yeah. It's not a technology problem. It's more so like an economics problem. But I think we will solve both within the next 10 years. But I imagine that the machines that you build for the moon and Mars will be much more highly specialized. When I think about the helicopter we deployed to Mars or the rover, Or like those are science experiments meant to take samples and test specific factors of what it means to move around on Mars.

1:08:46But I imagine even in terms of building, you wouldn't just plop down a caterpillar, would you? No, diesel engines won't work in vacuums. So you've got to redesign the hardware. But at the end of the day, it's like a smart shovel. Like you're moving dirt. It's not the most complicated thing in the world. Sure, sure, sure. Very cool. Well, let's hit the gong. Yeah, last question, just because the crowd is loving it, and I wish we had more time. But do you expect any changes to the building materials side as robotics become much more a part of building various types of structures? Or is it like, let's just change one thing at a time?

1:09:28This is an awesome question. Are you familiar with the term DFM, like design for manufacturing? Yeah. At SpaceX, we literally had to The materials were pretty simple Stainless steel, the most common type But you had to change the inputs to your system To be assembled by a robot Starlink couldn't take V1 Starlink And make it at the speed that they're building V4 Starlink They had to change the piece parts I think we're going to change the way we connect pipes I think we're going to change the chemical formulations of concrete We're going to change how we weld steel structures We're going to redesign the building codes To match something that can be built quickly by a robot That's amazing Tell us about the round, how much did you raise?

1:10:03So we've raised$115 million. Great job. Who did you raise it from? So our Series A was$100 million, led by Kleiner Perkins. Kleiner Perkins. Oh! We've got Main Capital, Banner, VC, Saga Ventures, Trust Ventures, Magnetart. Wow. Saga? Saga? Saga? You've got a bunch of great folks around the table. Congratulations. The American Industrialists. We're glad you have the capital to build. We need it more than ever right now. So thank you for everything you're doing and have a great week. Do us a favor. Raise another massive round. Yes. Come back. Maybe take it up from nine figures to the next zero. I like it.

1:10:43Come back on this year. You deserve it. Great to meet you. We'll talk soon. We'll host our next one from the Mars base. Fantastic. We'll talk to you soon. Have a good one. See ya. Let me tell you about CrowdStrike. Your business is AI. Their business is securing it. CrowdStrike secures AI and stops breaches. Our next guest is returning to the show. We have Sam from Greylock Partners. He is a partner there. Sam, welcome back to the show. How are you doing? I'm doing great. Great to see you guys. Thanks for having me back. Thanks for hopping on. Let's kick it off with another gong hit since it's warmed up.

1:11:14Tell us what happened. Give us the news. What's new in Greylock world? We've got some big news today. We're announcing Greylock 18, our 18th venture fund. It's a billion and a half billion.

1:11:26Early stage founders. Early stage founders specifically. Amazing. I want to know opportunities created in AI. I'm interested in the next generation of AI companies. Obviously, there's so many huge private. Now, SpaceX is public. So, like, there's a number, a deep mind. There's a number of, like, first-gen AI companies that are huge. But there still is a lot of opportunity. Where are you seeing the opportunity? There's early-stage companies that are going deeper in the stack, selling to the big labs. There's also niche players. How are you viewing the market? How are you mapping things out? Yeah, I'd say overall is we're very early in this wave and we think there's going to be winners up and down the stack.

1:12:08And I think the only mistake you can make in AI is underestimate the size of the wave and think it's binary and outcome. So, you know, we've invested up and down the stack and the foundation model layer. You know, we're investors in Anthropic and OpenAI. And infrastructure, you know, we invested in Base 10 back in 2019 before generative AI was a thing. Today, they're the leaders in influence, right? Like BrainTrust, I remember in 2023, no one was using the word evals, right? Notion was using their product. And today, fast forward, evals are the core IP of AI and most of the values using BrainTrust for it.

1:12:38So we've done a lot in infra and then, of course, a lot in applications. We're going to see new opportunities up and down the stack. So on the infra side, I think, you know, you guys are talking about agents every single day. There's going to be a new set of abstractions around infrastructure to actually power agents. Of course, inference and observability is going to play a big part of that. but there's more to do there. There's new things in data structures, databases, runtimes, et cetera. On the application side, I think we're just getting started. It wasn't until the set of model releases in December of 25 that you actually had robust agents.

1:13:12And now, and I've seen our portfolio. We led the initial round in Resolve, which is an agentic software reliability engineering. Today, at companies like Coinbase, it completely automates on-call. So engineers are no longer getting woken up because there's an incident because the Resolve agent fully handles it autonomously. Or, you know, we're in 7AI, which does the same thing for security teams. Those products are like coming to life because the underlying models are finally there to really support these long running agent workflows. And so you're going to go into different application categories and be able to build new agent offerings.

1:13:41So I think that's going to be really big. And then, of course, things outside of software. Like we, you know, we were some of the early investors in autonomy, like Aurora, which is, I think, the largest standalone public company in self-driving. You know, we've led the initial round and narrow others. We're now going to see a whole new wave of things happening in robotics. And I think the underlying model capabilities and the data sets that we're building are finally going to get us there where we're going to see a proliferation in the real world economy as well. And we've made some new investments are still in stealth.

1:14:09We're excited to talk about soon. Yeah, we talked about Aurora yesterday because they bought ATG from Uber, the autonomy group. I'm interested in hearing, are you noticing any categories of company that have shifted from venture backable to more likely to be successful as a lifestyle business because they are so capital light in the AI era that you, if you have a friend that comes to you and says like, I want to start a video game company, or I want to start a niche SaaS company, you're like, yeah, 20 years ago, you'd need to raise$10 million to rack a bunch of servers. A couple of years ago, you'd have to go through YC or raise a million bucks to hire some software engineers.

1:14:53But this, you can just build it this weekend and go get customers and be profitable tomorrow. And so are you noticing that trend? How is that changing your investing philosophy or is that just a ruse? I think the lens on whether or not something should raise venture capital is more about the ceiling, not the floor. So I think it's absolutely correct that you can get a lot more done with less capital now. But what's also correct is that the size of the prizes that are available, our whole brand around the new fund is the map is blank again because we think AI just resets the entire map. The size of what's possible now, the size of these categories is so enormous that venture capital, dramatic, even if you can be capitally efficient and get a lot done on a given dollar, if you can increase the size of your capital base, the aggression and speed with which you can move is just much faster.

1:15:41And I think it's an interesting kind of observation. You take the last three years, there's a lot of discussion around what you can get done with AI, etc. At the same time, the capital velocity in companies is faster and at a larger order of magnitude than it's ever been. But we look at this in our portfolio. We're primarily doing the first rounds. And the speed at which companies raise their Series A, Series B, Series C, and the size of these rounds, which often are in the hundreds of millions, very, very quickly. That's an interesting observation. You ask, why is that? And I think it's because we're operating in such big, like in such big and new categories and opportunities that the price to be the number one player is so significant that you need to do everything you can as a company.

1:16:24And so if you can be more efficient, the real lens is like, what else can you go do and how quickly? And that's why we're seeing companies have much faster product velocity, have much faster revenue growth. They're spending, they're getting more out of that spend, but they're spending. And in fact, I would say they're spending more in this last three years than in the prior decade. The map is blank. I love that as a rallying cry. At the same time, I see a new market map in every category and it's stuffed full with AI startups. And it feels like it's more competitive than ever. I'm interested to know, are there categories that are now more oligopolistic, more like less monopolistic?

1:17:03It feels like the software 2.0 era was very much, oh, there's a runaway leader in this particular niche and it's winner take all and they're just compounding. But now I've been so surprised when I check in with the third biggest or third most well-funded company in a particular area and they're accelerating revenue. They like tripled revenue last year and it's a great company by historical standards, even though it's like a laggard in the modern era. Yeah, it's a great question. And yeah, it's interesting, by the way, like we, there's all these market maps, people crown these companies as winners.

1:17:36And I think we forget that like the game's just beginning. I mean, you rewind the clock just 18 months and you look at what the foundation model landscape looked at at that time. And then you fast forward to today and, you know, we fast forward another 18 months and there's going to be more evolution. So I think we all live on Twitter where we're trying to clear everything over like every single minute. Like we should zoom out and remember these things are very nebulous. But yeah, I think, you know, the difference with AI is the size of the prize, especially when you're automating labor and you're shifting these labor dollars to software and technology dollars is so dwarfed, like relative or so dwarfs relative prior software categories.

1:18:15They think you can have more winners that can get larger, much faster. And I'll give you just two examples. In the customer support category, we led the initial round in Cresta. Cresta is north of 100 million in ARR, you know, growing very quickly, doing customer support AI. There are likely there's at least two other significant companies in that category, maybe more, you know, at similar revenue scale. And I think multiple companies in that category will get to a billion of ARR in the coming years. And the reason for that is just AT &T alone spends a billion dollars a year in contact center spend.

1:18:46And you extrapolate that across all enterprises, you think about what's addressable. Yeah, it's way different than IT spend, right? Right. Because there was a war for Zendesk and Salesforce had a solution and there's a number of previous era software products, but it's a very different pool of spending to pull from. That's right. That's right. What are your first checks? What have your first checks been looking like? It's a one and a half billion dollar fund. You're investing. You want to be doing the first. It's like two early stage deals. Yeah, just$750. No, but yeah. So how are you thinking about it?

1:19:26What percentage of the new fund is going to be reserves, follow on capital versus like, you know, net new investments? So, you know, for us, the North Stars, we want to back the most important companies of this era. And we think some of those companies require much more significant checks when they get started because of the people who are starting them, the ambitions, the opportunity. So as one example, 21 years ago, we backed Palo Alto Networks when it got started, got started in our offices. I think that company today is almost at$300 billion in market cap. When we wrote the initial check, I think it was a$250 ,000 initial check.

1:20:01Fast forward, the founder of that company, Nir Zook, left Palo Alto last year. He started a new company with Greylock. That company is called SciLake. It's building a really new, important cybersecurity platform. Our initial check there is$36 million. that's what i think that's yeah that's what i think the largest company in cyber security in history a 300 billion dollar company we want to back him to go build something totally of consequence and that has a different capital requirement and so we've we have a larger fund we just got a goal sorry world comes on who scored who scored spain just scored there we go there we go There we go.

1:20:40Sorry, we had to cut to the fan cam. I respect it. Anyway. Who you got? Who you got in the game? Who's playing? So Spain's up 1-0. I thought France was going to win this easily. Oh, well, Spain's on its hair, I guess. But you are too. And thank you so much for coming on the show, breaking it down for us. And congratulations on the new fund. Yeah, stoked for you guys. Stoked for you. And looking forward to talking to all the new founders out of the new fund. Yeah. we'll talk to you soon have a good one goodbye let me tell you about cisco critical infrastructure for the ai era unlock seamless real-time experience is a new value with cisco so yeah uh what what actually happened there i have not been watching the game but yeah there was a spain goal 22 minutes left okay gel okay one oh spain was uh you thought the pk was fair yeah yeah very nice shot I don't know.

1:21:35He kicked Laminya Mall on his side. It's kind of like a bang-bang play. I don't know how many people are. I want Spain to win. Bang-bang. Okay. Well, our next guest is in the waiting room. We'll bring in Giannis from Reflection. He's a co-founder, president, and CTO. It's his first time on the show. Welcome to the show, Giannis. How are you doing?

1:21:55Ioannis Antonoglou:I'm doing all right. Thank you so much for the invitation. Thank you so much. Hopefully, we didn't pull you away from the World Cup. I'm not sure if you've been following, but it's 1-0. I haven't even seen a minute. He's locked in. But since it is your first time on the show, I would love a brief introduction on yourself. And then I'd love to hear about the news and the deal with Nebius. Absolutely. So first of all, again, thank you so much for having me. I'm Janice. I'm the co-founder of Reflection. Before that, I was one of the founding engineers of DeepMind. Joined really early. And I spent most of my career there working on deep reinforcement learning research.

1:22:29Ioannis Antonoglou:So anything from DQN, which is the first deep reinforcement learning agent to ever exist, to AlphaGo, AlphaZero, NuZero. And I was doing RLHF. I was leading RLHF for Gemini before I left and left with Misha to start reflection. We're building frontier open models and we want to ensure that intelligence remains open and accessible to everyone. So I imagine demand for the business is through the roof because you just signed this big new deal. What's actually driving it? What are the enterprise use cases that you're seeing? Who are the key customers? What's the shape of the customer base? And then why now with this particular deal and why Nebius is a partner?

1:23:12Ioannis Antonoglou:Yeah, so let me just start by saying that building Frontier Open Models requires two things. It requires a lot of incredible talent. And we've been extremely privileged with the fact that many of the best people in the industry have actually joined us to work on Frontier Open Models and work closely with me. So just really like for that. At the same time, the other thing that you need is compute. This is what fuels AI research. That's the thing that keeps the researchers busy. So to this end, we actually signed this billion-dollar deal with Nibius to just get the compute that we need. Congratulations.

1:23:56Ioannis Antonoglou:Thank you. That's amazing. I'm interested in, if we can shift to history for a second, just your reflections on, no pun intended, sorry, just the progress in computer use. Recently, I saw a demo of Codex and 5.6 Soul playing Slay the Spire, this card game that I played a lot of, and I know how hard it is, and it sat there for five hours and played the daily challenge. And I'm wondering if are we ahead of your timelines in terms of generalization? What is your overall thesis on progress? Where have you been surprised based on what you obviously had a front seat to a preview of years ago? Yeah, that's a really good question.

1:24:48Ioannis Antonoglou:I think that it's actually like I've been in the industry for like 15 years and I've actually seen the progress we've actually made in the past 15 years. and every time that we felt that there was a wall or there was something stopping us, we just kind of overcame it almost immediately. So it's kind of like really, this is the best time for anyone to just be doing AI research. And I think that I'm not surprised anymore. I think I've seen so many things in the past 50 years that it's really hard to be surprised. Sometimes this exponential growth, the exponential curve, it's really hard for the human mind to just like fully understand it.

1:25:30Ioannis Antonoglou:But, you know, just things just change extremely fast. And we should just be really adaptable and really understand that, you know, AI is still on this exponential curve and incredible things are ahead of us. But once you're on, once you're living on the exponential, you sort of internally, like emotionally operate on the second derivative. And so you're sort of like, yes, this is as expected once you've internalized it fully. But yes, I agree that it's shocking. Can you talk about the advantages and disadvantages between Chinese labs that are making open models versus American labs, like reflection that are making open models?

1:26:10Because I imagine it's like, you know, you might have better access to compute, maybe more capital, but potentially more restrictions around, you know, things like distillation that could provide advantages in some way. But how do you think about that competition?

1:26:30Ioannis Antonoglou:Yeah, so one thing is that it's really opaque, exactly like what the Chinese labs are doing on the ground. Some things we know is that maybe there hasn't been aspects of respect to IP and restrictions in terms of use of data. That we know as an American company, of course, we are fully compliant. At the same time, there have been accusations. I don't know if they're true or not, but, you know, from like U.S. labs that the Chinese labs are actually doing distillation of like an industrial scale from their models. And that's not, of course, something that like any Western lab would ever do. And, you know, there are definitely gains in terms of access to compute or like, you know, things that we can get access to like the latest compute.

1:27:18Ioannis Antonoglou:at the same time I've also heard that like the Chinese labs you know have found ways to bypass maybe the restrictions in the self-compute like via getting computers from like other places I think that like we have definitely the advance of like having you know the talent here in the sense that you know the frontier labs the close frontier labs are based in the United States and like many of these people have actually been to the frontier they've seen the frontier and many of them have actually chosen to join us now and just like work on our models so that's definitely a benefit um uh yeah i think it's like uh this is this kind of like the the world as it is but you know there i don't think that like uh the fact that we are a western lab and we might not we cannot cheat means that like we won't just build the most powerful open models i think like it's actually the opposite the fact that uh the closed labs also never cheated, then they are the frontier.

1:28:15Ioannis Antonoglou:It means that we have the talent, we have the know-how, and we now have the compute of all these deals to ensure that we catch up to the Chinese open frontier. And after that, our ambition is to just close the gap between closed and open and ensure that frontier intelligence is accessible to everyone. Awesome. In keeping with bringing access to frontier intelligence to everyone, your former colleague, Demis Hassabis from DeepMind just today is advocating for a U.S. frontier AI standards body. And he specifically says that he wants to apply rules and tests, submit models for testing. They would even include open source models.

1:29:04Have you grappled with that? I mean, you're a large company, very successful,$8 billion as of the last round. And yet, as someone who can be a little wary of overregulation, I don't want to slow an exciting company down that might not have the resources to staff a huge lobbying group in Washington, D.C. to get open source models approved. So how are you grappling with the idea of as models get more powerful, deepening your relationship with the United States government?

1:29:37Ioannis Antonoglou:yeah so i feel like it's important uh now as reflection we also like always want to engage and ensure that like the models are um safe they're like well received and they actually meet standards so we'll just like do whatever is required from us um i don't want i want to ensure and i feel like many people in the community feel the same that like there is a frontier open model in the u.s market this is kind of the bedrock upon which resets uh in the research institutions around the country are building their solutions. This is the tools that developers and early-stage startups use to just build new products and drive innovations.

1:30:17Ioannis Antonoglou:So we need to just ensure that there is room for frontier open intelligence in the United States and in the Western world. And I feel like this would be just a net positive for the society as a whole. So always here to engage in any way we can, just like from, and also like express the voice of people who believe in the open ecosystem. Yeah. I think my nightmare scenario would be some situation where you're slowed down, but international firms are not slowed down by some weird quirk. And so I hope that whatever happens, we at least get a level playing field for everyone, both closed source, open source, but also internationally.

1:30:57You don't want to advantage a geopolitical rival by accident. But that makes a ton of sense. and I'm sure you'll navigate it all flawlessly. Thank you so much for coming on the show. Congratulations on all the progress. Yeah, great to meet you. It's really great to meet you. Have a great rest of your day. Great to meet you too. Thanks so much. We'll talk to you soon. Let me tell you about Railway. Railway is the all-in-one intelligent cloud provider. Use your favorite agent to deploy web app servers, databases, and more, while Railway automatically takes care of scaling, monitoring, and security.

1:31:27Our next guest is Jack Dent from Chai Discovery, and he's here with us now. in the TBP and Altarum. Welcome to the show, Jack. How are you doing? Welcome. Thank you. Great to be here. Thank you so much. Could you quickly introduce yourself and the company, and then I want to go through the news, but I'll let you start with an introduction. Sure. So I'm Jack. I'm one of our co-founders here at Chai. At Chai, we're building what we like to call the computer-aiders design suite for molecules. So think like Photoshop or Blender or solid works except instead of designing a car you're designing molecules these are you know small collections of atoms which are often used for things like medicines and that actually go inside our bodies and do things like like cure us and so we operate at all levels of the stack we're both a you know frontier research lab also a product company also a bit of a science company and tie all of those things together to put that that piece of software in the hands of some of the largest pharmaceutical companies in the world.

1:32:28So specifically narrow to pharma, but I imagine that you will have applications in material sciences all over the place, but is pharma just the best landing zone or is that such a deep market that you'll stay there in perpetuity? Yeah, I think pharma is right now where we're really focused. Our models, they work at the level of atoms and molecules. And you also require different categories of models when you're trying to do different tasks. So it's not like a specialized model that will design an antibody will necessarily like out of the box work for material science as well. That's still some additional work.

1:33:10But farmers also, you know, this is a multi-trillion dollar industry. It's actually larger than the chip industries in revenue in and of itself. And so it's this massive market that obviously does huge amounts for human health. And there's just so much runway to build into that. So what actually is different about the models that you're developing? Do you have the same sort of massive capex around pre-training runs and scale is all you need and you need to marshal all this compute? It doesn't have a different shape. Is there a different data puzzle that you're solving? How important is your feedback loop with your customers?

1:33:50How does your lab look different than sort of a lab that's focused on coding, for example? Yeah, it's a great question. It's really all of the above. So when I say we're a research company, that means that we actually train our own models from scratch. These aren't like LLMs that we take off the shelf and fine-tune some open-source architecture. we're starting at you know pytorch and then below that down even at the kernel level sometimes and creating models which actually look quite unlike the sorts of models that you build elsewhere it's sort of like how if you're training a video diffusion model that's a pretty different architecture to what you train for language these these just different model categories require fundamentally different avenues of research and you know one piece of intuition here is in the same way that video models sort of think in 2D and they put pixels on a grid.

1:34:43And so, you know, auto-aggressive token prediction with a language model maybe isn't the best fit. You know, our models think in 3D, really. They put individual atoms in 3D space to construct these molecules. And so that means we really need to have a command of the entire stack. And then the data as well. This is not natural language data. It's very domain-specific data. It's these vast troves of protein sequencing data sets and structure data sets where people have used essentially really powerful microscopes to go and look atom by atom at the structures that exist in nature. And then we also do a lot of data generation in-house as well.

1:35:24We throw that off as well. And that's just at the research layer. Then there's a whole products layer on top of that as well. It's almost like we're training Claude as we're also building cursor or cognition. And so we need to do those things hand in hand. So there's also this feedback loop with the scientists and both at the pharma companies, but our users, many of whom sit inside the company and dog food and try and push the frontier of these models. So it requires, yes, to be just A plus across both science, AI research and product engineering as well. please have you seen any scientists get uh quote-unquote one shot in the way that certain vibe coders have over the last where they're just like staying up all night with China running at all times yeah because I mean it's such an interesting challenge that that the labs have faced where you're trying to balance like making products that are enjoyable to use effective in a weird way.

1:36:26You know, you are optimizing for engagement. If you're optimizing for revenue, just because someone's more engaged, they're using more tokens. But I'm curious if you've seen any signs of that because so far the labs that have experienced the most extreme product market fit have gotten to the point where there's this idea of like one-shotting and then you have to like, you know, align the model better and improve that. yeah totally and actually you know maybe it's worth just providing some historical context here on just how quickly the research has moved in this field you know a year a year and a half ago basically none of this stuff worked you know it was or the success rates were extremely low you know 0.1 percent and over the course of 2025 these models went from being these research curiosities and that they were maybe interesting things to study in some academic labs but they weren't really being used in real drug discovery workflows.

1:37:24In June, July of last year, we put out a paper called CHI-2 where the title of that paper was Zero Shots Antibody Design in a 24-Well Plane, literally getting at this exact point where you could start to design these molecules without needing to fine-tune them on a lot of data. You could really just prompt them in the way that you'd prompt an LLM with an input, a target, maybe some disease you're going after a target that's implicated in that disease. And it would, you know, design a number of candidates that would help do that, essentially. And so, you know, I created some really, you know, interesting situations where, you know, we would go into, you know, a pharma company and we'd be presenting some data.

1:38:08And there's one that comes to mind in particular where somebody pointed to one of our slides and says, oh my God, you solved that one. Did you choose that on purpose? And we're like, no, we didn't choose that one on purpose. Why? And they said, you know, I spent five years of my life working on that target, trying to find a binder to it. This technology has really moved beyond, I think AI and Android Discovery has been in the realm of promise for a really long time, where there's been a lot of hype and attention around it. But in 2025, we really crossed the Rubicon in a way. And now these technologies are, you know, be actively being deployed in companies like Eli Lilly, Novartis, Pfizer.

1:38:53You know, these are some of the most scientific, highest tech companies in the world. And they're putting them into real drug programs and, you know, making them part of their core discovery engine. And I think that's, that's what might get missed here. But, you know, so much has changed in the last year on the technology side. And it's created this wave of new applications. And what's amazing is the scientists themselves are the most happy about it. They don't love the fact that they fail 90 % of the time or that their work... Yeah, or they could dedicate half of their career to one disease and make modest progress or maybe their entire career.

1:39:31Do you think there will be something... The music industry is funny right now because every artist is using AI, or not every artist, but many of them. both casual artists, non-professionals, you know, amateurs, but also professional musicians are using it, but no one wants to talk about it. I expect that pharma will be much happier to talk about it, but is that the right intuition? Yeah, I think that's exactly right. I think 2026 is the year where these technologies are going from being fringe technologies, which people are adopting on the side to actually technologies which, you know, entire discovery programs are built around.

1:40:16And so the, you know, pharma companies are not necessarily the loudest. You know, they care a lot about their IP and they, you know, there's obviously some alpha in figuring out some, you know, an advantage in getting a drug to market faster than someone else. So I think that will be lagging. And then I think there will also be some time for some of these de novo drugs to get into clinical trials in humans. And there will be validation there still. But what's important is that adoption curve is well underway now. It's kicking off. It is the most sophisticated companies. And some of the stories we're hearing already are just remarkable.

1:40:57On the business model side, you're very full stack already. You're building the harness, the model, and then the research that goes into the model. At some point, I imagine you'll have a customer that develops a new drug using chai, and that drug goes on to generate tens of billions or hundreds of billions of dollars of revenue. To me, that's like what success. Blockbuster. A blockbuster drug created with chai. Depending on how you charge for that, it's possible that you end up capturing. 200 bucks a month. Yeah. Yeah, just some very minimal amount of value, which is good. Every company wants to capture less value than they create.

1:41:41But at some point, would you consider or have you considered a model where you're a true partner to these companies and you're doing sort of joint ventures where you're basically giving them access to the product in exchange for long-term upside? Yeah, that traditionally has been the model. If you look at how biotech deals tend to work, a lot of them includes things like royalties and upside sharing in the drugs. This is really just all partner-driven for us. We live to serve our partners, really, and what do they want to do? And what they want to do right now is a lot of them want to take our technology and deploy it fairly broadly across the portfolio.

1:42:25and that means that we get rewarded financially for that. We also can reinvest some of the money they're paying us into building even better models for them. And so that way of doing business is working well for us right now. There may come a point where some pharma companies turn around and say, hey, we'd love to do a joint venture or go 50 on this thing with you. And I think suddenly open to that, but really it's partner driven for us. And we're trying to, you know, what we see ourselves as, as this, you know, core platform layer, which enables their, you know, their discovery engines. And, you know, if you look at the top pharma companies, they might spend five, 10, 15 billion dollars a year in R &D.

1:43:10And so that's not even, you know, what they're spending on royalties or anything. That's just their R &D costs. So it's a massive market to be building into. In fact, it's even larger than some of the money that's spent on semis R &D every year. Farmer is one of the most enduring and durable categories of applied R &D spend in the world. That's a good point. Well, you have some new partners on the financial side. Tell us about the round. I want to hit the gong. How much did you raise? So we raised$400.

1:43:46Who came in? Everybody. Everybody came in. We raised$400 million at a$3.8 billion valuation. We're super lucky to be partnered with Index, Kleiner-Parkins, Sequoia, and Dimension, who are the largest checks in the round. And it's an all-star cast. Some people we've known for a very long time. Nina from Index, Ilya from Kleiner, Pat Grady from Sequoia, and then Zarb, Manny, but really the whole Dimension team, you know, they're all, you know, it's rare to get this caliber of investors on the cap table and especially rare in one round. So we feel, we feel incredibly fortunate. Well, congratulations.

1:44:30And thank you so much for coming on the show. This was fantastic. We'll talk to you soon. Have a good rest of your day. Goodbye. Let me tell you about the New York Stock Exchange. Want to change the world? Raise capital at the New York Stock Exchange. I think Chi Discovery might be there any day now when you're putting up multi-billion dollar rounds. Anything's possible. Our next guests are Evan Burns, the CEO and co-founder of State Affairs, and Jamie Seltzer, the co-founder of State Affairs. Very excited to be joined by both of them. How are you guys doing? We haven't seen each other in, what, a year and a half?

1:45:03Hereticon? I think that was the last time we hung out. How are you doing? Welcome to the show. Quick introduction to yourself and the co-founder. So great to see you guys. Good to see you guys. I'm happy to be here, guys. Jimmy, you want to go first? You got it. Yeah, I'm one of the founders of State Affairs. I'm also a GP at Light Shed Ventures. I fashion myself as a poor man, Delian's, or a poor man, Josh Kushner, doing kind of both. But yeah, I founded State Affairs with Evan four years ago. Very cool. And you're an absolute dog. A very humble one at that. And a dear friend. so it's great to see you here at long last evan over to you hard to follow that uh entrepreneur most recently built and sold finished long drink i should have come on here when we had that exit a couple months ago boys were so ready to crack them open in the in the studio today they were they were they wanted us to be they wanted you guys to join and we go yeah they were like this is huge anyway sorry state affairs yeah and so also the co-founder and CEO of state affairs Yeah.

1:46:07And just set the table on the shape of State Affairs business, why it's unique, how the footprint, the strategy, because it's fascinating, I think, under-discussed. Yeah. Jamie, why don't you tell me about how you didn't even mention or tell me to invest until about a couple of years had passed and you guys were at tens of millions of revenue. No, I'm just kidding. Evan, go for it. i think jimmy was worried about that when we're coming on here he's like i don't know we might be uh might be asking for this um look we had to do something different than everybody else doing finance so of course we picked this but um but the the problem that we saw and that we're focused on every day is and it's probably true for most of your guests these policy and regulatory markets affect so much of what companies do but everybody just acts like they're a thing that have to happen to us.

1:46:58We're all reactive to them. So Jimmy and I had this idea, like, what if we could build a platform kind of like Bloomberg? Instead of focusing on financial markets, we're just focused on building a knowledge graph around the day-to-day movement, federally in all states and eventually cities around these policies that change around regulations. And in the day, we think they affect most businesses more than what the financial markets do. But if you're a leader of a business, how do you pay attention to them? How do you hear what the discussions are about SNAP benefits access or about AI data center building or about public safety tracking.

1:47:29Are we going to have tracking or not? Like these things are massive. And I think most people in America just decided, oh, they are, these things are what they are. So we said, let's try to build something around that. And so how much does this look like a media business? How much does this look like newsrooms across the country? Roll-ups? Are you hiring people? Are you acquiring whole businesses? walk through how you actually get a broad footprint out there to track all those topics you mentioned. Yeah, I think what we didn't realize getting into this was, if you look at the legislative process of making policy, there's so many pieces to it and so much data to it.

1:48:03So you have all the hearings that happen in every state. You have all the bills that are introduced. And every bill, if it even makes it, is going to have hundreds, if not thousands of data points that change along the way, whether it's the wording or the votes or the committees or the sponsors. And, of course, we did actually build out journalists, a team of journalism. And it's very important that they're nonpartisan, going and doing coverage, what's happening in the state of houses also, asking questions around this policy and regulation. So it's that whole mix together that becomes this knowledge graph that enables the users to plug in and say, okay, what's happening today with Snap Access benefits?

1:48:36What's going to happen next year around GLP-1 access with Medicaid? Like, these things are changing kind of by the day, but you might not see it in a law for another six months, a year, two years, either. And so for the pre-AI, the last few years, the experience of the customer was a subscription and then sort of like a fire hose of facts that were not previously reported about things that are happening in areas that they care about or all over the nation. How is that changing in the AI era? What are customers asking for? And then what are you building? Well, the first thing that we're able to do is map the relationships of all of these different data sets using AI.

1:49:18And so sometimes something will happen in one state and it can affect states that are tendentially down. And so without basically having built out through journalism, we have on the ground people that input data that sometimes doesn't make it to the government websites, budgets, bills, hearings, fiscal notes, executive orders. We're mapping the relationships of all these things through our models and we're finding net new insights for our customers. Yeah. Talk about how legislation and ideas flow between different state and local governments. We were covering New York's data center ban or moratorium earlier today.

1:49:58We were talking also about how Paramount and the Ellisons are up against a number of different AGs. And so it just feels like you guys could get to a point where you can almost forecast the way that policy is kind of shifting and moving around the country. We do do that to a certain extent right now. I don't say we do predictive, but we do model the momentum of how bills are likely to get picked up or the likelihood of a certain policy picking up more and more steam in a particular state. So, you know, we basically have our models have 150 kind of unique data points that we source from on a daily basis that are kind of constantly resetting the momentums on these.

1:50:45historically big companies let's say fortune 500s like how many how many how many individual what what would the teams look like you know the the government affairs teams look like to try to get the level of coverage that you guys are now offering i imagine they're buying data working with maybe more local companies but but uh the the pitch now is like you know one platform access to intelligence across tons of different counties and states and things like that. But how are you pitching it? I think the main thing you have to, when we talk to all these folks, and we've sat down with a ton of Fortune 100 brands and have brands like MasterCard and McDonald's and Walmart that are already subscribers, the problem with what everybody is facing before is they've got lobbyists or old-school data platforms that are often much slower than real-time information.

1:51:37So you're waiting for a firm to send you a PDF deck from like something that happened two weeks ago. And you've got 50 different states with 50 different formats. And so the ability to plug in and understand real-time movement on what's happening with discussion around data center licensing or power build-outs, it's very tough and it's late. So we want to switch people from being kind of late to the game to understand what's even happening to proactively involving themselves in the democratic process. and ideally trying to get their voice heard involved before the bills are even introduced, let alone waiting for them to get all the way to the governor's desk, which happens a lot.

1:52:10We were talking to the CEO of a publicly traded company that I think the CEO's been on here. I won't say his name, but their company business model was basically banned in a top 15 state. It got to the governor's desk and this CEO didn't even know about it. So it got to the governor's desk until their business model would have been banned. And then they had to pull all this very painful, very painful strings and favors to kind of get it fixed at the very last second. But if they had just been involved a year before, they would have seen it coming. What does your guys' team look like? I imagine it's extremely distributed.

1:52:44Well, we have about 187 employees. It's about half editorial, half tech and sales. The editorial newsrooms are on the ground in each state. So, yes, they are distributed. Like we do believe that being in the room is the difference maker on a lot of this intelligence from the from an editorial side. And then engineering, we're in D.C., San Francisco and Miami. Are you seeing acceleration or value in sort of like vibe coding integrations to government websites to scrape and organize data? I think it's very difficult to do that. Really? It's the final. That'll be AGI. We need super intelligence to get filings into a database.

1:53:34However unsophisticated federal government websites are, state government websites are that much harder to navigate. I think like only two of them have APIs just to kind of level set on where they're dealing with. And, you know, a lot of this, the syntax on how they label their data is very different. And so there's like a huge cleaning process in Ohio, for example, if a bill has an amendment to it, sometimes it never goes onto the government website. You have to go into an office in the state, go and get it. There's this example we love to give in North Carolina that if you don't watch a Senate floor committee hearing, you have the only way to go and get a recording of that is to go into the congressional library, pay a dollar and 25 cents, get it burned onto a CD-ROM, and then you get custody of it.

1:54:24So, like, yeah, it's pretty antiquated. And you have information every day, right? So we made the joke before that we all think about the Roman Empire a lot, of course, but you only have to label the Roman Empire once. It's done. It's over. And you've got to get the information and data around what's happening in government legislation every day because what the process was last week has changed. And whatever happening today is the most important. What do your customers want you to do next in terms of coverage? Is there demand for international coverage or even more local, like HOA or something?

1:54:58I don't know how deep you could go. Like how low level can you go and then how high? If the mayor in this town of 5 ,000 people sneezes, I want to know about it. I want to know. For the right price, we can definitely figure that out. I don't know about HOAs, though. I don't the sanity quotient. If you look at these major, we have international customers, Fortune 50 brands, you name it. The thing that they're trying to figure out, again, is this real-time movement on things that have a billion-dollar or tens of millions of dollars effect on their business. So for sure, like we do federal now, we do state, we'll get into city.

1:55:33There's a huge ask for international because if you've already got your executive team and government affairs leadership on us and you've got U.S., why not Canada? Why not Australia? Why not U.K.? So the goal is to do this daily, build this kind of daily knowledge graph and platform for sort of all Western democracies. But we're definitely starting here in the U.S. That's very exciting. Well, you raised some more money. Tell us about the round. How much did you raise? $70 million. a bunch of nobodies right who participated i mean how many times a day do you get to do that by the way uh today's like five or six it's great yeah you gotta warm it up sometimes we'll hit it twice yeah i'll i'll hit it yeah who participated in the round uh it's been primarily cosla and founders fund Big shot.

1:56:18Those guys, they needed a word.

1:56:22Never heard of them. Never heard of them. Glad you guys are putting them on the map. Yeah, yeah, it's good. Thank you for what you're doing for them. So great to have you guys on and incredible progress. I'm glad you're talking more about what you're doing because I've been getting updates for years now and I know you guys would only start talking about what you're doing once you were confident you were going to eat the entire market. So congrats. We'll talk to you soon. Have a good rest of your day. Goodbye. Cheers. Let me tell you about console.com. Console builds AI agents that automate 70 % of IT, HR and finance support, giving employees instant resolution for access requests and password resets.

1:57:02Our next guest is Tyler Page here with us in the TBP and Elfrium live. Thank you so much for taking the time to come on down and chat with us. Of course. Thanks for having me. Welcome to the show. Please, why don't you kick it off with a little introduction on yourself for everyone who's watching. Sure. I mean, look, longtime listener, first time guest. So thanks for having me. Excited to be in studio for that. Yeah, look, I'm the founder and CEO of Cypher Digital. We're a developer of AI data centers, a popular trend these days. Over the last year, we've really completely transformed our business.

1:57:33Once upon a time, we were a Bitcoin miner. Also a data center building business, actually a lot closer to building AI data centers than I think is in the popular imagination. but we've really had just a complete transformation over the last 12 months. We've signed a series of leases with hyperscalers or with companies affiliated and backed by hyperscalers. We're currently building 700 megawatts of AI data centers at three sites in West Texas. There we go. Love that. That's huge. That was Bonom-esque. That was awesome. Yeah, so look, we're really busy with that. And then we have a massive development portfolio beyond that.

1:58:16So we've, at this point, sort of proven that we can sign these leases, we can construct these data centers, we can finance them. Also a really big part of it. And then we have a really big development portfolio. So the total portfolio at Cypher is 4.2 gigawatts. Wow. Wow. He's going back. It's even louder. It's even louder in person. Yeah. That's just really awesome. Yeah, so, I mean, look, we're on the path to sort of rinse and repeat on that business. Demand remains really high. Of course, everyone in non-podcast media will point out everything's a bubble or there's challenges or whatever. And, you know, we can run through those things.

1:59:00But, you know, right now, listen, the demand remains really high. I don't see any signs of that pulling back if you've got power available in the next couple of years. and it's a really exciting business. I mean, honestly, with all the things going on in the space, Cypher lives in a little bit of, you know, it's got a unique structure that we're really doing co-location. So building like a full turnkey AI data center for a multi-decade lease and handing over the keys. And on a spreadsheet, truthfully, it's a pretty simple business if you can execute in the real world. It's real estate development.

1:59:35It's a real estate deal. It really is. And there are so many interesting things going on in the space, and there's lots of people trying to be more vertical up the stack and build a software layer, and that's all super cool. And there are big prizes to win there probably. But I love our simple rinse and repeat business. You're in the worm shell business. How are you thinking about site selection across the development portfolio and new opportunities? We had the New York State Data Center moratorium get announced this morning. I would expect other states to follow suit. You guys don't want to invest tons of time and resources into a state that could eventually say, like, hey, you just got to stop what you're doing.

2:00:18Yeah, I mean, listen, so I'm actually based, our corporate headquarters is in Midtown Manhattan. None of our data centers are anywhere in the state of New York. I think that's a little bit of a hangover from our days starting as a Bitcoin miner when not only did people not want to give you the power in New York, but they also decided they didn't like Bitcoin. Oh, interesting. And I think the biggest data center in New York right now is still a Bitcoin miner, or they were and they've been pivoting. I think it's pivoting over. I think it's one of our good friends and rivals. But, you know, look, I think there are going to be layers of challenges from the federal level to the state level to the local level anywhere in the country.

2:01:02Of our 10 sites, nine are in Texas and one is in Ohio. Texas is generally known as a very kind of low regulation, business friendly state, very entrepreneur friendly. That said, the exact same concerns about data centers exist there. And we spend a lot of our time trying to be good neighbors and good partners and deliver the message of how it's going to be a wonderful addition to the community when we come join. But quite understandably, people show up. I mean, it is outside of the universe of the savvy listeners to your podcast. Yeah. There's a lot of like naked dislike of data centers. You see it in the polling data, too.

2:01:42But, you know, it's interesting. Even as recently as yesterday, we had folks down at a local hearing, and I completely understand why people show up and they're not happy. I've heard this stuff's terrible, and it's going to end the world, and it's going to end things that are creative, and everything is going to be an automated chat bot. I don't like anything about that. And then you get all the way to the spectrum of, frankly, just people don't know what happens in the building. So you get questions like, is this going to harm my cows that are next door? Or like, I mean, someone asked, like, is my pacemaker going to have a problem because of the building?

2:02:18And it's not for the record. Well, yeah, there's no immediate upside to them often. And then there's potential downside, like noise and energy prices and things like that. But what have you thought about certain proposals or ideas around doing direct payments to people in towns or counties that are going to have a data center developed and they're thinking, well, I don't – what's a benefit to me other than some construction jobs and a handful of jobs and local tax revenue? But it's not as direct as cash coming into your account. So that may be where it goes, Jordy. Yeah, I mean, I think this needs to be answered on a couple levels.

2:03:02There's like a really, really high up public policy question about do we have the right tax regimes and ownership regimes and large language models and government ownership and things like that. And that's what I mean. Like it goes through all the layers down to the state. I think what I'd start with is just number one, back to the big point about this scary new neighbor you might have. I mean, I try to focus very much on starting with what happens in these buildings. And, you know, I'd say, look, we're a pretty entrepreneurial-driven culture at Cipher. But some people, especially a lot of younger people, a little bit more mission-driven.

2:03:36And I point out, like, you guys are racing on this construction project. And that literally might be the building that has the breakthrough in research to cure cancer or dementia or something like that. Or we've got, you know, one in every five employees at our firm is a veteran. And I point out, like, we may have work that goes on in there that saves our soldiers' lives. So part of it is just starting there. To get to your actual question, though, about money sharing, I'd point out there's already a fair amount of framework in place that envisions this. Not exactly the giant AI build out that's happening, but for example, in Texas, we will pay tens of millions of dollars a year to the Texas public school system.

2:04:17We are the largest taxpayer in the counties, typically, of our data centers. And then we try to go above and beyond that to do a fair amount of community outreach. So in one of our locations, we're refurbishing the small hospital there. We're buying them a new fire truck. We're rebuilding the playgrounds and the pools, little things like that and having job fairs. Virginia has an example of a state that benefited from tax revenue as the AWS campus built out there. And a lot of local people that live there have lived through the data center boom and seen lower taxes on their balance sheets because of that.

2:04:51Yeah, I mean, listen, affordability is a really big political topic right now. And so people say, well, wow, my electricity bill is a lot higher. Must be the data centers. And it's sort of like, well, we printed an awful lot of dollars starting five years ago. And we've had a couple wars. And there's a lot of inflation. And so it's not really the data center. But, I mean, I think, look, we try to be very front-footed on that. We do not want to raise local rate payers' bills. By the way, all the regulators in Texas feel the same way. So, like, that problem will get addressed. I really think it's the big picture thing of like, this is something you should want in your community.

2:05:28It's a big warehouse that's air conditioned and full of computers. It's not, you know what I mean? And where we're building them, and it's really, it's interesting. We've gotten to be a bit of a disruptor to the traditional data centers like in Northern Virginia. When we started our pivot, we almost had an unfair advantage from being a Bitcoin miner. Because when you're a Bitcoin miner, the business doesn't work on the spreadsheet unless your power costs are really low. And where are they really low? In really remote places with a lot of generation and typically not a lot of demand, like not a lot of houses.

2:06:00So if you look at just the map of Texas, most of the people live in the east. There is a ton of generation in the west. You can't ship the electricity that far. And so it's really cheap historically in west Texas. When we started having this idea of like, wow, look how fast, you know, chat GBT is taking off and look at all the implications for how many megawatts you're going to need at a data center. We said, well, surely they're going to have to draw the conclusion that everyone's going to have to move to places like West Texas. And the entire incumbent data center industry was like, no hyperscaler will ever sign a lease at those locations.

2:06:36This is as recent as like a year and a half, a year ago. And the floodgates really broke the place. Just because it was a hassle and they'd want to just locate around their existing. I think they were just using pattern recognition where they're like, I've been in this business 20 years and no one's ever signed a lease out there. And I think – and then there was a second question about like, well, is latency really bad out to West Texas because it's a long way away from the city. But the truth is there's a big fiber line running out there and it's fast enough. You might not do traditional cloud work out there, but even Northern Virginia exists because everyone went there 20 years ago and then built out all that infrastructure.

2:07:13I can tell you because we're the tip of the spear, like all these guys are coming to West Texas. Our portfolio alone is almost as big as all of Northern Virginia. So, I mean, I just I think this is kind of the next thing that's going to happen when people. the sort of next skeptical thing about locations like ours is, well, we're at this really funny time where there's no power available. And so there's a ton of demand. And so people will go to these places, but that's going to be like a dinosaur relic at the end of this lease in 15 years. And we are 180 degrees opposite of that. I actually think the cap rates will be lower.

2:07:54That will be a more valuable terminal value for a data center at the end of a lease in West Texas because of what West Texas will become, I think, over the next decade or two. It feels like when new data centers come to town, there's like a suite of questions that local residents have, everything from aesthetics to power rates to water usage to sound to air quality. What of those five have solid regulatory frameworks in place where you can go and say, okay, we did the EPA test and we passed and so we're good? And which ones are more subjective? So it really depends, which is an unsatisfactory answer.

2:08:39But I think we always start on the power side. And so if you look at ERCOT and the way they interconnect large sites, that's generally a low regulation zip code state. And so what I'd say is you need to address all those issues. There are some local permitting requirements around them, but I'd say it's more about what issues could be raised. There's no real framework of we'll just hold up the noise permit because there's a lot of oil and gas in industrial things and places we're building. But I would say probably in our experience, of course, people care a lot about affordability, so we need to discuss that.

2:09:23I think water at our locations tends to be the biggest issue. They say I think whiskey is for drinking and water is for fighting in some of the places out there. It's dry. But what's interesting is, and I know you guys have talked data centers a lot on here before, but with modern closed-loop systems, really don't use that much water. And I think the other thing is you can innovate. So there's actually a lot of brackish, non-potable water underneath the dirt in Texas. And so you can build facilities to filter it and use it and actually help the aquifer. So I generally think all these kind of growth issues are challenges, but they're all solvable.

2:10:12Yeah, it feels like a meat in the middle here is instead of jumping straight to like data center ban, you're focused more on what is the decibel level that is acceptable in this city for any building. Right. What is the power consumption for any building? What is the impact on the water supply for any building? Right. And then that framework. So then if somebody shows up and they're just like, yeah, I have a house where I'm going to be blaring music. It's like, yeah, that can't happen in this neighborhood either because we've determined this. And then that's applied broadly as opposed to just narrowly targeting them.

2:10:42Well, what I'd also point out is like all of those same objections could be raised about almost any industrial build. Yeah, for sure. So, of course, I mean, if you go to the places where we build our data centers, we own hundreds of acres. And in some places, you can see to the horizon in all directions. Sure, sure. So I'm really not too worried about, you know, we'll be cognizant of measuring the decibel level at the edge of our property. But like, I'm not worried about anyone hearing it. Sure. I think it's going to vary by jurisdiction. If you try to plop one down in a neighborhood or something, that's not what we're trying to do.

2:11:16It seems like a lot of them have sort of like grown over time where there was – it made a lot of sense to co-locate some data center for delivering Netflix to a local neighborhood. And then the place just got upgraded and upgraded and upgraded until it's like running diesel generators 24-7 and then people are annoyed. Yeah. I mean – Having it creep up on you is more of a problem than like the new project coming in with a dedicated. I think this is like any industrial build, though, where you've just got to balance. You've got to strike the right balance. It gets back to what you said. Like maybe the end policy solution is a different way of taxing, regulating, sharing the income, whatever.

2:11:54And we will certainly be good citizens. It's not even necessarily like more dollars that are being shared, but it's like how you share the dollars. Because, again, like money going to someone's, you know, city feels a lot different than money going directly into someone's pocket. Right. That they can use to pay their bills. Walk me through your capital market strategy when you're working on a new site, new project. What does your roadshow look like? We're familiar with a Series A pitch, Series B pitch, even an IPO occasionally. But you're talking to private credit? Are you talking to real estate investors, banks, debt?

2:12:34Walk me through the whole picture of who you're calling, who you're pitching, who's around the table, just in broad strokes. Sure. So, I mean, high level, the sites we're developing, and again, this is some of the most lucrative real estate development in the history of real estate development. We have purchased these sites typically really cheap, like a couple million bucks. For 100 acres? The land is almost secondary. It's getting the interconnect for power. So the price has gone up like per megawatt. But for example, we're building a 300 megawatt site right now for AWS. And we paid like$7 million for the site three or four years ago.

2:13:14I mean, it's been a while. Today, that would be hundreds of millions of dollars to sell it. And we own lots of acreage around that. So back to your question about the model. So typically we will try to find a good deal, harder to find these days, but we have a pretty big portfolio. Like I mentioned, it's closing in on the size of northern Virginia, so it's pretty big to still be developed. Next phase is we want to shorten the development timeline as much as we can, and that typically will be an early equity investment. So the longest lead time item to build one of these things typically is the high-voltage to mid-voltage conversion infrastructure, the substation.

2:13:51Okay. And that might be like 18 months to get one and call it$100 ,000 a megawatt. So 300 megawatts, 30 million bucks. We'll get that done and we'll do some early civil work to get the site, like the timeline to build, shortened. That's currently at least, who knows if we evolve over time. But currently at least that's where we stop generally our equity investment until we find a tenant that's interested. That's very hard. It takes forever. You negotiate for months and months, hundreds of pages of documents. But if you get, let's say, a hyperscaler long-term lease, at that point, they will be very opinionated about the particulars that they want for that site.

2:14:35That's a very iterative process with our engineering team. You figure out exactly this is the style they want. It ticks all these boxes. At that point, if we have a signed lease, we will try to debt finance as much as possible. are you buying the actual gpus or is the hyperscaler warm showing no we are to this point that business has been less interesting to us yeah it's not very interesting but the yeah it's like you don't want to is the piece we see the best certainly risk adjusted return and for the last year or two frankly just the best absolute return uh is building everything down to the GPU, basically.

2:15:13So, yeah, walk me through exactly how far you're taking it. So, the building goes up, the polished floors are in, air conditioning. Yeah, we're bringing cooling everything down to the rack. They're going to pretty much wheel in the rack. Got it. Yeah, connect the various connections, and then water lines, power lines. All of that, chillers, everything. Down to the rack. Yeah, it's a very, like, everything ready to go. And the reason why, by the way on a long-term lease, right? Figure they're going to recycle those racks probably twice. Sure. Yeah. So like a lot of the modern design and iteration is how do we build this site to make it as easy as possible to not be outdated when we want to change the racks and the racks are going to be like, there's going to be way more rack density.

2:15:59I don't know. They might replace them in five, six years with one megawatt racks, you know, you might be at 120 kilowatts or something now and it's going to be way more dense. And so, you know, high level, you have to bring basically, you know, electricity and water and air into the building. You have a very big open building, kind of like a lot of these types of studios. And then the ability to dial down those various valves and so forth as you get towards the rack. And probably the floor space shrinks over time and you have cool ping pong. You open the podcast studio in the other end of the, at the other end of the data center in a few years.

2:16:39So just because I didn't finish it. Like, so then we'll go debt finance it. We have gone to the, um, the high yield markets. Uh, we've raised a couple billion dollars at about 6 % and change. So amazing. That's really high LTC. So yeah, um, you know, the market's wide open. That's great. Um, does your team look like a private equity fund with a bunch of people sitting at desks in front of spreadsheets. And then you call people to actually go and build the building and they're off your staff and you're hiring construction firms. Or do you have sort of, you know, guys who can work a shovel? I think it's a really weird company.

2:17:18Like I tell people, so I started the company in my attic during COVID. So we've had to hire like every person knew how to do something better than me at some point, and then that's cascaded down. We only have about 100 employees at this point. It's a very unique firm in that it's a little bit like a Venn diagram of, yes, a finance sort of structuring spreadsheet person. Project management. Let's call it a technology firm to figure out a lot of what needs to be done, like networking and stuff like that. It's not exactly the industrial side of construction. And then the last part really in like the most populated part is the more industrial piece.

2:18:00We do in-house project management and most of the procurement activities. We externalize the like trade work. Sure. So if there's, um, you might pick the transformer to buy, schedule it for shipment, but you're calling a trucking company to bring it out. You're calling other people to unpack it off the truck, planted, bolted to the ground, do whatever else they need to do. We have an external EPC that It really brings all those trades to the site. So if we have 1 ,800 people - What does APC stand for? EPC. Oh, EPC? Yeah, sorry. Engineering Procurement Construction. Got it. Right. So, sorry. Got jargony on you.

2:18:33Yeah. So if there's 1 ,800 people on the site, maybe five of them are Cipher employees. Yeah. The others are like the staffed up folks from the outsourced provider of a lot of that trade work. Do you like railroad analogies to this business? Actually, it's the best analogy. More than oil. Yes, and I'll tell you why. Because the build-out of this industry is so tied to capital markets. It's one of the reasons why we have such a New York nexus. Sure. Like, honestly, even in Bitcoin mining, that was a big part. We went public as a way to raise a bunch of money in a business that's hard to, like, get the CapEx for.

2:19:11All the hyperscalers are now doing the, like, varsity version of that with big debt offerings and so forth. But I like the railroad analogy because the modern capital markets were kind of created because of the railroads. Like there wasn't enough bank lending in the world to get them built. So the idea of like buying equity shares in a project is kind of the railroad. So that's why I like that one. None of them are exactly perfect, but that's closer than any of the other ones I can think of. Yeah. Jordy, do you have something else? Sorry. we like the railroad analogy minus the you know massive bust so true I actually haven't studied the railroad boom and bust as much we should study I mean it was a very long period of history fascinating well thank you so much for coming great to have you here in person great to see you I love going a level deeper like this this is fascinating please send anyone on your team our way when you have news and congratulations on everything that's going on we will thank you so much great to have you on have a great day congrats on the podcast thank you hang out what you're doing we're going to close that um let me uh on before we jump i gotta talk about uh my dear friend brandon jacoby who i saw in the chat earlier launched his uh new studio a multi-disciplinary design practice for those who challenge the boundaries of technology.

2:20:41He combined a Star Wars intro style video with a barrel, a wave. A barrel. Oh, cool. Okay. I'm visualizing that. I think he made this for us. Okay. Do you want to pull it up? There we go. There we go. Look at this. Motion design. Oh, interesting. Yeah, this is both of us. Our interest. Yeah, this is perfect. He made the launch video for an audience of two. For some reason, I was imagining the text curling up like a wave and it being sort of hard to read, but this is much better. I love it. It's a good statement. This is a mission statement. This is an essay. Worked together for a few years. And he was doing this.

2:21:27He was one of the first personnel news we did on the show. We tracked his move to X, everything. thing. But anyways, he's been doing this kind of work forever. He was a design lead at X, as well as Cash App, as well as my last company. And he's incredibly talented. So he's open for business. Fantastic. That's our show, folks. Let me tell you about Public, investing for those to take it seriously. They got stocks, options, bond, crypto, treasuries, and more with great customer service. And that is our show. We'll see you tomorrow at 11 a.m. sharp. Leave us five stars on Apple Podcasts and Spotify.

2:22:00Sign up for our newsletter, tbpn.com, and we will see you tomorrow. Goodbye.