Leopold is Back! Big Tech Earnings, Defense Tech Deep Dive | Richard Craib, Trae Stephens, Blake Resnick

25:36I got a golden retriever algorithm or something. This happens all the time where I will see the backlash to the backlash. I don't actually see the first backlash. I just see people dunking on like whatever's going on. It's so unacceptable. No, I'm sure it's there. And there's also like you can sort of feel it in the replies and the annons and the snarkier people a little bit. I think it's out there. This is an interesting scoop from Berber Gin over at the Wall Street Journal related to this. Situational Awareness tried to sell a$3.5 billion stake in Anthropic to a group of investors led by Green Oaks and Sequoia.

26:09Obviously, there's a lot of demand for the stock. The parties reached a deal late Wednesday, but then Situational Awareness pulled out Thursday morning. They turned it down. They turned it down. They turned it down. They went off for like$3.5 billion, something like that. Something like that. And they turned it down just to grind for the public equity book. So they sold that to Citadel. That obviously cleared a lot of the risk out. And they said, hey, let's keep this position. We're extremely excited about this. We're bullish. And so I don't know. I think, will this be the subject of a book? Will this be the subject of an actual movie?

26:44Is it drama enough? Have we gotten the FTX movie yet? Because that's way more dramatic. And I don't think that ever happened. And then there was Infinity Machine. Not Infinity Machine. There was Going Infinite. Is that the one? That was the Michael Lewis book. Michael Lewis book. But that was written before the blow-ups. And so it was sort of, it didn't really tell the story day by day. But an in-the-room, fly-on-the-wall, minute-by-minute account of this would be interesting. But it's not that dramatic because it doesn't end with an explosion. It ends with like a, okay, we're back in the fight, which is cool.

27:17I mean, it's maybe a more positive outcome. And so Augustine LeBron has taken a victory lap because he tweeted a SHA-256 hash December 29th of 2024, saying Leopold Aschenbeiner has terrible instincts and he will fail spectacularly. This is, of course, the Dwarkesh on Dwarkesh guest battle that's playing out. And so this is an interesting thing that you can post a cryptic, a literal cryptic. I've seen a bunch of people do this. Yeah. They post some prediction. Shouldn't you just post every possible prediction then and then just delete the ones that don't come true? I think some people accuse other anons.

27:56You just post one trade and the opposite of it and then you delete it the next day. Everyone's wrong. Then you look back and you're like, wow. This is another way to get started in the hedge fund game. You start two hedge funds, true north capital, true south capital. One goes extremely levered short the market. The other one goes extremely levered long the market. And then after a year, one has exploded. The other one has ripped. And then you wind down the one that didn't work and you're like, I called it. I mean, it isn't a bigger fund. I'm good. Exactly. I don't think that's what Augustine did.

28:28I think this is his real take. And maybe he is the example of someone who has been like not so secretly rooting against Leopold or just skeptical. And he continues to be skeptical because he's betting Sholto$1 ,000 that Leopold will not be bigger than Citadel. What if Citadel just pivots and just becomes something way smaller? Like it could just spin out, fracture. He could divest something, break up the company. Sholto could win on a technicality here. Yeah, yeah. No, I'm riding with Sholto here. You're riding with Sholto? Yeah. Okay. Yeah. Well, let's go through a quick, we have like one minute until Richard joins.

29:15So let's just go through some time. Like we'll take you through some BitMag 7 earnings later. But the interesting recap is that there's absolutely turmoil in the big tech markets based on earnings. Big tech's AI spending is continuing to produce blockbuster financial results, even as investors have become increasingly selective about which companies they're willing to reward over the past two weeks microsoft apple amazon meta alphabet all reported quarterly earnings that largely exceeded wall street expectations it's very boring when you pull the did they beat on top line did they beat on bottom line it's like everyone beats and then the stock goes down 10 or up 10 based on capex forecasts and also just messaging around ai diffusion and ai uptake so um microsoft led the group with shares surging after reporting fiscal fourth quarter revenue of 90 billion dollars of 18 year over year and ahead of the 87.4 billion that analysts were expecting uh that was the consensus estimate uh eps came in at 474 versus expectations of 421 so they beat top line beat bottom line uh azure revenue accelerated 43 percent over year over year yeah so they gained 450 billion in one day 16 percent 50 billion in one day yeah um that's for biggest one day market cap gain for any u.s company look at that but god god that's really really impressive it's up 25 percent over the month uh very impressive apple also beat expectations reporting 109.4 billion in quarterly revenue earnings per share of 202 uh stock briefly pushed the company market cap cap uh above the five trillion dollar mark but it has been absolutely tanking today down, what, 10 % today or something like that?

31:03Let's see. Down 9.47%. Last, we'll go through two more. Amazon has also impressed investors with revenue climbing 20 % to$200 billion, $200.6 billion. AWS growing 37 % to$42.4 billion, sending shares sharply higher in after-hours trading. Here's Amazon. We can pull that up as well. The market is up 13.76%. and the day is looking pretty good too, up 15 % today. The market's reaction wasn't universally positive. Meta posted stronger than expected revenue of$60.8 billion, up 28 % year over year, but earnings per share fell$6.18, fell short of the$7.22 analysts had expected. Investors focused on the company's$31.1 billion in quarterly CapEx, along with$3.6 billion in one-time legal and severance costs, sending the stock sharply lower.

32:01Let's see what Meta's doing. Down just a bit. Alphabet, meanwhile, reported revenue of$119.8 billion, while earnings per share of$9.11, comfortably beating expectations while Google Cloud revenue surged 82 % year over year to nearly$24.8 billion. Even so, investors remained focused on the escalating cost of AI infrastructure as hyperscalers continue pouring hundreds of billions of dollars into new compute capacity. And here's Google. So we can dig into this more. There's a whole bunch of deeper questions about what is the actual efficacy of meta spending on AI. How much are they spending on tokens?

32:37How much are they spending on headcount? All these things matter. But we will dig into it another time because we have Richard Craig from Numerae here with us in the TV pin ultram. Richard, how are you doing? Hey. Doing great. How are you? Thank you so much for taking the time. I'm so glad that you had a chance to hop on the show on such short notice. Very excited to talk to you. But could you kick us off with a little bit of background for anyone who's unfamiliar with your career, your business, and why it's relevant to talk to you today? Yeah, so I am a hedge fund manager. I started my hedge fund Numeri in San Francisco in December 2015.

33:17Before that, I studied mathematics. and I was very, very interested in AI from a very early age. And in 2012, some of the key breakthroughs happened with self-driving cars and things like that. You could really see that this would be a really good thing to kind of bet on in the future. But Numero, we're a quant hedge fund. So we trade stocks using AI. We don't simply invest in AI companies. Although pretty much every company is in some way entangled with AI. So, you know, it has a lot to do with us. And in terms of like the fund structure, how similar or different is it to what we're talking about with situational awareness, where there's like a few LPs, maybe some institutions invested?

34:09How broad is the LP base? How concentrated are the bets? How big is the investment committee? How are investment decisions made? So, yeah, I mean, we're trying to make alpha, which is kind of a technical term. Like, we can't take any market risk. We can't take any factor risk. We can't go off on anything we think is, you know, something's going to be big. Okay, we can't invest in that except for through our strategy, which is a low volatility strategy. The fund has been growing a lot. assets are up 100 % a year for two years now. Congratulations. Well, remember, that's a lot of that's AUM growth.

34:56And but, you know, the point of the point of the company is to make this this kind of thing called alpha, which I feel like is a term that gets abused a lot. And we're trying to make sure that our investors can make a better portfolio by holding a piece of us. Yes. So help me understand alpha in the context of situational awareness, because I've heard a lot of people throw around. It's just levered beta. It's beta. But when I think about situational awareness and the ideas and the thesis that was contained in that PDF that was released almost two years ago, that felt contrarian. It felt like alpha in the sense that you can understand the future in a way that other people can't.

35:44Is that not alpha? Yeah, it is. It kind of isn't in a naive sense. It is. And it's obviously the situational awareness, you know, blog post that came out was sort of super visionary and fun. I mean, I read the whole thing. We had a mutual friend. I think we were at Joey's wedding together in Vienna. And Joey, I said, Joey, can you please introduce me to Leopold? This is so cool. So, you know, there's a place for that type of fund where you're going to take a big bet with a lot of risk. And those types of funds can obviously produce extraordinary returns. But the trouble is the driver of the return is the risk.

36:35more than the alpha. Okay. So the alpha is there, but the driver of the return is the risk. And so when people retreat to a more classic example of alpha, what are we talking about? What is the purest source of alpha? Yeah. So, I mean, here's the naive way to have alpha, right? If you beat the market, you have alpha. Okay. So natural. What's so hard about that? If my portfolio is up 20%, but the market's up 9%, I have alpha. But that's actually still kind of missing the point in actually a very deep way. And so the problem is there's not just one factor. You don't have to look at do you beat the market.

37:20You just have to look at do you beat all the factors that there are in the market. So there's a factor called momentum. There's a factor called technology. There's a factor called U.S. technology. There's a factor called momentum times beta. Yeah. Okay. All of these things in the, as a term of art in quantitative finance, you call them risk premia. Sure. It might, they're risks, but they, and they might have a premium, but they, but they're actually not the types of things you would call alpha. And so a fund like Numeri, we're trying to hedge to things, so many things, thousands of different risks.

37:59So that if someone ever looks at our portfolio and wants to say, do you have an alpha or are you making money just from risk? They can't argue that. It's very hard to say that. So that's the goal. And that's the goal of all hedge funds, Citadel or a Millennium. They're trying to make this kind of alpha. How much should I, if I'm trying to understand, if I'm looking at a fund's returns over a number of years, how much should I be able to identify alpha purely by uncorrelated results with the broader market? Like is if the market goes down 10 percent, the fund goes up 20 percent, then the market goes up and the fund goes down.

38:47Is that is that giving me like a sense of alpha that at least this fund is searching for that? Or is that just uncorrelated returns and they're just throwing throwing? If you're uncorrelated from all the factors, you have alpha. OK, I think there's a sort of sleight of hand that discretionary investors, hedge fund managers tend to pull. which is they say, well, look, we believe in the U.S. We believe in AI. We want to take that factor risk because that's part of our return. And to which a sophisticated investor would say, we can take that risk ourselves without paying fees. There is nothing stopping any LP of situational awareness from buying anthropic shares themselves.

39:39Right. There's there's nothing there's nothing stopping them from going long micro. Micron or something. It's really like almost childish to think that they sophisticated investor wouldn't be able to pull those trades themselves. And so to take a personal example, here's a fun thing. So I bought it's a good day to say this. I bought some Amazon options. I bought some coal options on Amazon I'm a hedge fund manager I don't really trade very much but I just think it's a cool company and it's going to benefit from AI and one of my friends said it would be a good thing to buy that's it now, my coal options are up whatever, 300 % today whatever it is does that mean I'm on a generational run?

40:34i'm a genius uh investor uh no it just means uh a gamble i took paid off and it paid off actually probably appropriately for the risk i took so in the hedge fund industry you know that the banality of that is extreme uh no one is uh no one is numerized talking about how i bought amazon options and made money. It's just like, oh, boring. Okay. But so even the timeline, like the length that Leopold was, you know, it was like a year and a half. He was on this like generational one, as people say. Is there no difference between that and just a single day? When does a generational run stop? Yeah, how do you define?

41:14Is it 11 months and 30 days? I think it takes a generation actually. Oh. I think that's how you measure the investment performance of someone over a very long time. I think you're right there. So that's why It's kind of a funny term. Okay. So, wait, but what do you think about the idea that certain managers, it might be possible in theory to like copy them, but they are getting paid to do something that you might emotionally not have the resilience to do. I'm thinking of this Jeremy Giffon post. He says, people really miss that buy and hold means the ability to buy and hold, not that you should buy and hold.

41:56And he quotes this screenshot from the Financial Times. It says, since 2010, Warren Buffett sold his entire holdings in 63 positions with an average hold time of four years and three months. Combs and Weschler, two other managers, exited 48 stocks holding for just two years and 10 months. And so even though we all know buy and hold, buy low, sell high, psychologically it's hard to do. So that's maybe what some hedge fund managers are getting compensated for. Sure, I might have read situational awareness, agreed with Leopold, but do I have what it takes to actually go and buy on margin and do all this crazy stuff and not paper hands?

42:38I love that discussion. I think there's a sort of feeling that he was the one with the courage to take all this risk or something. But even that falls flat on a hedge fund manager, I'm afraid. because it's like you know it's like someone goes all in with pocket sevens and he doubles that money if you learned anything about his courage or his skill really he's it's a bit like it's a bit foolish really so it's basically like I also used to actually think this I was a young hedge fund manager I feel like maybe aging out now But I was a 28-year-old hedge fund manager. And I did also have this perception that surely these big hedge funds are just so risk averse that it's almost like for psychological reasons, they refuse to take enough risk.

43:37And I've come to learn that they're taking nearly the exact amount of risk that you should take because these things are mathematical. There's a right amount of risk to take if you have a certain sharp ratio. And those numbers are smaller than you think if you want to run money for a very long time. Right? So, you know, Leopold was up 400 % in H1 of 2026. Well, Warren Buffett was up 5 million percent by basically being sensible for a very long time. Sure. So do you want to do the 400 and then lose everything? Or do you want to do the 5 million that it takes 30 years? So I think that's kind of like the orientation you have to think about.

44:29So it's not that some people are unwilling to take risk. It's that they are already taking that risk. It's just a small part of their portfolio. So there's no doubt that in the markets, numerized AI models that are trading thousands of stocks at all times that we intersected with situational awareness. And we bought some of their positions and sold some of their positions and maybe had similar alpha if you constrain our portfolio to just look at that segment of the market. But we didn't do it at the wrong size, you could say. Yeah. You actually ran the numbers on or you had Claude run the numbers on how likely a catastrophic down, down, drawdown would be based on a certain leverage ratio.

45:24what does that math say is the optimal amount of leverage the optimal amount of risk is it all based on the timeline if you think okay well i want to be the next warren buffett he's been investing for 60 years i need to work backwards from that number and then is that different than if i say look i actually believe the singularity is going to happen in 2030 and so i only need to survive another four years and then I'm done because it's whatever the singularity is. Yeah. Well, that's in some ways almost the problem. You really have to have a long horizon for investing. The market is not pricing that the world ends in 2030.

46:18In fact, the market's pricing, I mean, just not like on every level. If the world was going to end, you know, the volatility of the stock market would be as high as situational awareness is fun. Sure. So it's like, you know, we basically we have to have this orientation of long term. And if you don't have that orientation, kind of all bets are off. I mean, if you if you're if you're gambling and you're playing poker and it's late at night and you you only have 30 minutes left to play before you have to catch a flight. Yeah. Okay, let's up the risk. Yeah. Yeah, I mean, there is an element. I'm not saying that this is what's happening there, but there is an element where you're like, if I believe that the world is ending in four years, I want to spend the next four years on a yacht.

47:05And so I need to get as much liquidity as possible in the short term. Sort of like the, you know, you have, what does that mean? You have like six months to escape the permanent underclass? Sort of like the hedge fund version of that, I suppose. But you clearly don't believe in that. What are your beliefs about the future technology, the financial markets broadly? How are you feeling? Is that even something that you interrogate or are you preoccupied with other sources of alpha that are less macro and long-term trend-based? well any yeah any any long orientation so if you're long the stock market the problem is all of our investors are already long the stock market you don't have to tell them uh you know it's a good idea to buy stocks um and so you know if i was running a fund and maybe this personal trade of buying amazon if i had sold that to an investor they'd be like well bro we already had amazon and we already sized the risk appropriately so all you did was add risk and not any reward.

48:14Really, it's that kind of tension that forces all these issues. I also want to say, I think one of the first things I said in my post is, I think there's a place for these kinds of funds. I've invested in funds like this. There was a fund, it was basically the crypto version of this was a fund called Polychain. and good and i was a big lp in that um in fact the first lp and the biggest i think the biggest one for for a while but um i guess i never got that enthusiastic that if someone had made a thousand percent of the past two years or whatever it was that this would be some permanent property of that manager do you see what i mean like if there's no there's no amount of looking back on a track record of a manager that's just buying risk will basically be able to overcome the the reality of investing which is that it's always going to be hard to make money yeah so let me defend the situation more not just that these funds are cool because i've been invested in one but but i think they're cool because many investors want a high return on the risk that they're taking because they already have their portfolio entangled in all these investments so they have you know bonds and stocks and all this stuff and this marginal 500 million that they're going to give to a small fund they want that fund to kind of kick kick ass with that money and and so that's where i would say i I don't think it's right to say Leopold did something wrong in a certain sense.

50:02It was very likely to go badly, but I don't think it's intellectually wrong for any LP to have invested in that. In fact, maybe I would have invested in it or something if I could have understood it a bit more and so on. But obviously there were a lot of red flags and the fact that the volatility was obviously much higher than 100%. You can't make 400 % in six months without having that kind of volatility. Then you're basically saying we're literally doing a coin flip here. And I just hope that all the investors knew that. And by the way, if you're a huge investor and you put$500 million in and you lost it all, on the very day you lost it all, you might still be up on your portfolio.

50:50Sure. Because your other stuff went up. And so that's how investors should be managing it. It's on their whole portfolio. So I don't want to say anything bad about anyone who invested in that fund. I'm sure they're some of the best, wealthiest investors out there. So I'm sure they're fine. And I mean, from the letter that he sent today or yesterday, it seems like the Citadel deal put a lot of new cash on the balance sheet, cleared a lot of things out and that there might not be permanent capital impairment as he put it in the letter so uh there he is living to fight another day what do you make of this idea that the optimal number of blow-ups for a hedge fund manager is one not zero not five but do you agree uh we had one uh we had one losing year so far with do right right so we are not uh i'm not you know if you're in the business of being an investment manager you're almost putting yourself on the hook to be like yeah one time we lost money in fact about 50 percent of days we'll lose money right um so you you really don't want to be you know negative about that um yeah sorry continue no so i think that's that's that's one very important piece um i would say the the key thing that i think matters is is not just um leverage which i think people are saying oh you use leverage you lost money we use leverage i'll bet you we use way more leverage than situational awareness interesting long we're not levered long We're not levered factors.

52:41So if you were to plot our performance on a graph, you would see and you would say, show me the unlevered performance. It would basically look like the X axis. You wouldn't even notice it. Sure. It's so much kind of risk constraint that it requires leverage to get to appropriate vol. Got it. So with more leverage than situational awareness, we have one-tenth of the volatility and risk is volatility squared. So if they have 150 squared units of risk and we have 10 % squared, it is a whole different ballgame. So I'm mostly critical about the high volatility. I think that was the mistake, not the leverage.

53:38Interesting. Where do you think the fund goes from here? It feels like he's set up for a second act. The fund is not liquidated, not private only, not converted. How do you think this evolves? Like, what is the lesson to learn? I think I think first of all I don't think that we should have a culture of thinking people are intelligent anymore because AI is smarter than all of us so if one of the reasons is you think there's like a super genius investor out there that's clearly got something like a kind of same type of reason you might have invested in SPF um he's clearly on you know doing so well that don't do that don't do that hero worship thing just pick up take out your pocket calculator and calculate the risk of ruin sure uh okay and then you'll like probably avoid a lot of these types of mistakes um but i think you know I really believe in AI and I'm a singularitarian.

54:52I mean, I'm seriously a believer. I'm not moderate about it. But because of that, guess what? AI is in the stock market. We, you know, AI is in Citadel. AI is in Numeri. So if, you know, if someone comes up and says, oh, my thesis is we're going to buy AI stocks because AI is going to be big. Okay. The stocks are in the market. The market is an artificial intelligence. So don't take it lightly, man. Like, yeah. What is the process psychologically for dealing with a career where 50 % of your days are going to be bad days? There's a lot of people in most careers, I feel like, can show up and have a day that's successful.

55:49Like they moved the needle forward. They didn't make backward progress. And yet with the job of a fund manager in your role, half the time you're going to wrap up your day and you're going to be worse off than the day before. Right. I think, well, you see my terminated hand in the back, right? Yeah. I think you need to lean on math and AI. You need to basically say, you know, if the volatility, if you know what volatility means and you know what your volatility is, can there be anything to shake you if you can just rest on that mathematics? I mean, so when our fund had a down year, we lost a bit more over the whole year, a bit more than one standard deviation of volatility.

56:41okay but guess what that happens to practically any investment yeah you're you're guaranteed to lose one standard deviation one one unit you're guaranteed to lose your volatility so the question is were we running 100 volatility when that happened no we were running a survivable amount um so we didn't lose everything um but yeah it's uh so i think there's some there's really a lot of comfort to be had in math and AI and just kind of trusting that, you know, things will work out. You know, all you need to do to be Warren Buffett is just get 9 % alpha per year, and add that to the S &P, right? So if you have a hedge fund that's making 9 % alpha per year, and they can repeat that, they're going to make 5 million percent return.

57:37And all the people taking too much risk are going to lose it all over and over and over again. And so, you know, that's how you have to think about it. Last question, and we'll let you go. Retail froth. There's an interesting arc here, and I want to know if you think it's real or the shape of it. But it feels like when the situational awareness PDF drops, no one's thinking about bottleneck stocks or memory. Like the smart money gets in. Everyone in Silicon Valley was already thinking about that. Yeah, yeah, yeah. But that's like maybe the smart money and then it gets bigger and bigger. And then pretty soon it's like retail meme stock.

58:22And it feels like one of the knock-on effects of that is just more volatility. Like the last little leg up can be more tumultuous. Is that the way to think about that? Is it important to think about the meme stockification of a particular asset class as a factor and then how to deal with it? Yeah. Our fund was operating with high leverage during 2021's meme stock rally. And it is a phenomenon. And Cliff Asnes, a famous quants, AQR, talks about how the Internet sort of making the market less efficient because there's so many people who almost get the same message at the same time with the same media and then have the same trading account systems like on Robinhood or whatever.

59:17that can instantly express that. But I think, you know, I don't think that's something to lose sleep over. I mean, it's very easy to handle that type of thing. What happened to Leopold wasn't something extraordinary. It was banal. It was, you had higher volatility and you had a standard deviation drawn down. It's going to make for a bad movie then. Well, it'll be a great movie, I'm sure. The movie won't have any math in it, but it probably has one. It should. It should. It should. Well, thank you so much for taking the time to come chat with us. Have a great rest of your week, great weekend, and hope to talk to you soon.

1:00:03Thanks so much. Thank you. We'll talk to you soon. Goodbye. Let me tell you about CrowdStrike. CrowdStrike secures AI and stops breaches your business's AI. Their business is securing it. Head over to CrowdStrike. We have Trey Stevens, the co-founder of Andrel, general partner at Founders Fund. Trey, how you doing? Hello, guys. Welcome back to the show. I don't know if you've met Tyler before. Yeah, Jordy's out today. Jordy's out six. We have a guest co-host, but great to see you. How you doing? I'm good. Can't complain. How is the market turmoil affecting you in the venture world? You mean the public market turmoil?

1:00:44Well, I mean, first time in my career that I've seen trillion dollar stocks, Mag seven companies moving by 10 percent in a single day. That seems crazy. You have the situational awareness thing going on. Like the public markets seem insane. And sometimes, you know, gyrations in the public markets reverberate into private markets. Sometimes they don't. Sometimes you're insulated as someone who can hold longer, who doesn't have to deal with that. But I'm just wondering if any of that chaos is bubbling up to what you're seeing in your seat. Well, I think there's certainly different places where that intersects.

1:01:22One of the things that Brian Singerman, who's one of the former partners here at Founders Fund, he used to tell us, venture capital is a micro game, not a macro game. What matters is, have you invested in the generational companies in every kind of era? And, you know, I think Founders Fund has performed incredibly well in that regard. We have large positions in some of the most important companies of the last 20 years. But obviously there's, you know, questions around things like, you know, SpaceX has gone public. There's been kind of a reset back to like basically the IPO price. The lockups haven't even released yet.

1:01:59So there's like all these questions about where that's going to stand as that kind of lockup happens over the next really two years almost. Yeah. Um, so I don't know, uh, is, I guess is the answer. And I'm not a finance person at, at heart in any way. So I, I understand very little about the public markets, but, um, one thing that I hope happens is that as there's a reset on the public market side, I'm hoping that there will be somewhat of a reset on the private side as well, because the, the, the market, it makes absolutely no sense in venture capital right now. Okay. Okay. Is there a steel man here where the CapEx intensivity that we saw work out in hard tech companies like SpaceX, like Anduril?

1:02:43This is a company that's doing something very important. It's going to take a little bit more capital to actually build something really hard. It's not just a couple lines of code and then an elegant website that just prints money. You're going to have to invest some real money to make SpaceX work, to make Andrel work. And that's coming for AI companies now. They have big training budgets. They have very expensive talent. Isn't there a reason why valuation should be higher because the rewards that people are going after are so much more, not just capital intensive, but potentially bigger? Well, I mean, certainly if the outcomes are these like multi-trillion dollar businesses, then yeah, you know, you can kind of blend that risk over many rounds at higher prices.

1:03:30But that's the question is like, is that necessarily the case? Are we going to have$10 trillion IPOs over the next five years or is it going to look more like a reversion to the mean where we have companies like Anthropic, companies like OpenAI, companies like SpaceX? But then a lot of companies that are really successful, really interesting companies that are, you know, Uber scaled or Airbnb scaled or even, you know, when meta first went public, you know, those would be tremendous venture capital success stories. But not if, you know, you're pricing a seed round at a billion dollars. Yeah. Well, how do you how do you advise founders who might have the option to raise that billion dollar seed round?

1:04:10because you're in this sort of conflict of interest territory where if I come to you and I say, hey, I got an idea. I think I'm going to raise a billion dollar seed round. You could be, you know, say, I don't know. This doesn't seem like it's going to be$10 trillion anytime soon. Maybe you shouldn't do that. But then I come to you and I just say, hey, you're just the VC. You want a good deal. Yeah. I mean, there's two kind of schools of thought. The first school of thought is to say, you should do that. You should raise as much money as you can at the highest price possible, build up a war chest and survive until you can justify that price.

1:04:41And that might actually be the right answer for some companies. I don't want to say that that's always a bad idea. That might be a right idea. Obviously, the worst thing you could do is raise a very small amount of money at a very high price because that's where you're going to get yourself into trouble. But then the other side of this is like, can you build a financing strategy that allows you to grow responsibly over time and that you will see continuous momentum with every fundraise. And you're never going to have your back against the wall. That's been the approach from the very beginning with Anderil.

1:05:11This is what we've tried to do. And I don't think we have any regrets about doing that. We could have raised it a higher price at every round, but it's been nice to be able to go back to our employees and our investors on an annual basis and say, look, we just did a 2X markup. Look, we just did a 2X markup. Look, we just did a 2X markup. So it feels more sustainable and keeps us tethered to our company performance um more than this belief that it's going to pay out at some point you know i'm sure you guys watch the hbo show silicon valley but there's the hilarious scene uh where uh the the what's his name rich or whatever the yeah no the trace comas guy yeah um yeah where he has that famous line where he says no whatever you do don't get revenue once you have revenue, you're going to be judged on the basis of your revenue.

1:06:00Yeah. Is a billion dollar seed round, is too much capital, is it increasingly intoxicating? Is the level of intoxication with overfunding at the early stage, is that problematic? Are there some founders that can work it out and not develop a culture that overspends early? Because your point was like, if a bunch of money shows up, you need to actually have it as a war chest if you just have it flowing out easily. You're just going to run out of it and then you're in a corner. But I'm wondering, is there a path to actually setting your company up for war chest mode as opposed to just, oh, we're just spending freely and we're just going to burn through this?

1:06:42I'm sure there is a path. You just don't see that discipline exhibited often. And you can see this in every bubble that's happened over the last 20 years is that everyone believes that they can have a billion in the bank and be responsible with it. And very few people can actually pull that off. So I think there is something wise about kind of metering that out and having a plan rather than just kind of YOLOing into the abyss. But it's so hard because like I said, in some cases, it might actually be the right decision to raise as much as you can at the highest price possible. In Defense Tech specifically, it feels like this was a category that was extremely hard to get revenue because you had to work with the government.

1:07:28The government is just a little bit slower than selling to your friend in B2B SaaS or something like that. And the traditional path that I remember talking to you about was SBIR. And then at some point, there's the Valley of Death and you try and get to the program of record. But following the new programs from the Department of War, it feels like there's more of a menu. There's more ways for hard tech companies, defense tech companies to work with the government just to get to revenue. Can you explain a little bit more of what you're seeing in terms of early, mid-stage, different ways for defense technology companies to actually grow their business, prove what they're doing?

1:08:09and has it actually changed over the last decade that I'm feeling like there's a change? Yeah, it really has. I mean, I was at Palantir very early and, you know, that early era of the, you know, 2005 to 2015 range where Palantir and SpaceX were really the only players that were doing this. I mean, it was a wild, wild west. Like both companies had to sue the government for contracts to go through on the basis of this thing called Title 10. USC 2377, which is like a commercial preference authority. So there was really no path. It was like, you know, if you got to the point where you had a product that was worthy of going into production or going into scale with the government, they would do everything they could to block you and go back with the primes.

1:08:57That's shifted. You know, that's not the case anymore. There are much better pathways. You know, in the early Palantir days, we worked with In-Q-Tel, which is the CIA's venture capital firm on these work programs. And that's the same way that we got started at Anderil, actually. And, you know, right around that same time, Raj Shah and Chris Kirshhoff were standing up the Defense Innovation Unit and making that like a relevant contracting pathway. You know, all of the like Softworks, AFWERX, Army Futures Command, they all like started developing pathways for companies to get to get funded. Now there's StratFi funding, which can come through under the SBIR umbrella that allows you to get tens of millions of dollars in matching funds from the government as you're scaling.

1:09:42There's bridging funding to go from pilot to prototype to production. It's much better understood. But the problem is that a lot of these are still, at the end of the day, funded out of the research and development budgets rather than production budgets. So the U.S. government has a history of kind of this let all flowers bloom strategy where they are always happy to give out low single-digit millions of dollars to hundreds or thousands of different companies. But there's a big difference between having, you know, 10 to 20 million dollars of research and development funding and having billions of dollars of production funding under like major weapons acquisition programs, program offices, things like that.

1:10:20And that muscle is still it's still needing to be developed. It's early days. When you say the let all flowers bloom strategy, I'm thinking back to when we talked about like this idea of the anduril for X is anduril. There's a lot that Anderil can solve. At the same time, you've partnered with companies like Dirac. You've partnered with other new startups in the hard tech, defense tech space broadly. And I'm wondering if there's maybe more opportunity now, now that we're maybe a decade into the defense tech boom, maybe five years, a couple, we're deep into this. There's a path. You've charted it.

1:11:01Is there more opportunity for new entrepreneurs to pursue deeper in the supply chain opportunities, see an Anduril as a customer maybe instead of the government as a customer? Absolutely. I think not only instead of but also in addition to. Oh, sure. I think a lot of these companies that are working down the supply chain, they have relevant government customers. They have old legacy customers like the Primes that are still needing to correct some of these problems or become more efficient, as well as the big successful tech companies like the SpaceX's, the Tesla's, the Andurl's, things like that.

1:11:40So I think that the opportunity is definitely there. It's just a matter of having a novel idea and being really passionate about driving that single thing forward. And I fear that when you look at the defense tech industrials kind of ecosystem right now, it's a lot of hype. It's a lot of people that want to be part of a moment. And the reality is that's not how tech investing or tech startup creation has ever worked. Once a thing is a category, it's kind of too late. If you were a space tech investor and you didn't invest in SpaceX, you probably lost money. If you're a crypto infrastructure investor and you didn't invest in Coinbase, you probably lost money.

1:12:19I think that we're like nearing kind of overhype of volume in defense tech that is going to make it very difficult to separate signal from noise. I assume you're referring to on the venture side specifically. I'm interested in an idea of like, is there an opportunity for an entrepreneur who says, look, I'm not building a next trillion dollar company. I don't want money from Founders Fund. It's not a fit, but I need some private equity dollars to go buy an old factory. And I'm going to make drone motors, small drone motors in America pretty cheaply and efficiently. And I'm going to sell them to a bunch of people.

1:12:59And it's going to be, you know, a$50 million revenue business after a decade. And it's going to continue chugging along at 10 % growth. And the EBITDA is going to be reasonable. We're going to pay back the debt. And we're never going to IPO it. But it's going to, at the same time, provide a career and jobs, but also a financial return for the right person. But we're not going after the, you know, hype and venture funding and the big raises and all of that. Well, I think the intersection of both of our points is that, yes, I think there's a ton of room to do that. And secondly, all of those companies that are doing the things that you're mentioning are trying to raise oodles of venture capital dollars.

1:13:39So if someone actually wanted to build this business in a more normal financial structure, yeah, I think it makes a lot of sense. But there's 20 of the companies that you just mentioned. They've all raised tens of millions of venture dollars, and I'm not really sure what the endgame is. Yeah. I guess we'll find out. We'll find out. Take me through some of the recent Anduril announcements. I want to know about the Thunder autonomous attack aircraft. How did that come together? What is the program? What is the scale up? What's the manufacturing look like for that? Yeah, so Thunder is an autonomous attack helicopter that we just announced at Farnborough in the United Kingdom last week.

1:14:23the proliferation of drones has turned the near-surface fight into a robotic kill zone. And so crewed helicopters or crews, they're tremendously at risk. And so basically the same way that we approached FURI, the collaborative combat aircraft that we can talk about as well. We just rolled our first unit off the line to the Air Force earlier this week. But the same kind of concept with collaboration with manned crews is what we're talking about here, except with helicopters instead of with fighter planes. So that process is, you know, fully in flight. We have we've been working on this project for years now.

1:15:00We've completed test flights with a full scale surrogate and we're planning for Thunder's first flight for next year in 2027. What is like the shape of the autonomy? Is it like you have one person kind of overseeing a bunch of these different crafts? Or how do you guys think about that? Yeah, you can kind of think about the helicopter pilot, whether it's an Apache or whatever. They're like Ender in Ender's Game. And they have this fleet of autonomous vehicles that they can kind of command and control from the cockpit of their own aircraft. and there's this really cool anime video that's the third in a series that just came out when we did the launch last week and it kind of explains the concept of operations for this which is you don't want to be putting the Apache and the human beings in the helicopter in harm's way when you're engaging with all of these autonomous assets that are creating risk out forward so you want these to be able to go out and take shots give you a better sensor view of things, or even become a tradable and take the shot for you so that you're not the one that's eating that missile they are.

1:16:13We talked years ago about the idea of building a tradable system, not building capital assets, these huge aircraft carriers, these exquisite systems. But if I'm charting the size of what you're building year over year, we go from the anvil, we go from a very small drone, something bigger and bigger, If I chart it out, it looks like, you know, C-130 is coming up any day now. Am I off? Is there a limit to this? Or is there a world where, you know, everything up and down the stack is on the table? Well, at some point, it becomes non-attractable, right? Like, you know, the danger of an aircraft carrier is that there are 5 ,000 service members on a 20-plus billion dollar vehicle that can be destroyed by a single missile.

1:16:57That's a bad trade. We don't want to be doing that. Yeah. But, you know, to the extent that there are assets that are physically larger but would be better suited to robots, yeah, I think that's very much in play. You know, the DOW has been talking for a long time about autonomous tanker aircraft for aerial refueling. That's the sort of thing that if you could actually get an autonomous system to do that really well, logistically it becomes easier. It reduces risk, in theory, if you can get it to work really well. and it also is kind of like a prime target for risk reduction. So I think there are larger assets where it does make sense, but the tradeoff is really in human lives and total cost because at some point in either of those calculations, these things are no longer considered to be a tradeable.

1:17:46Yeah. Talk about Fury and the Ohio production line, Arsenal 1. How did that project, 18 months from start to finish I think is roughly the number But was that the original plan? Were there setbacks? Was there a risk of not hitting that? What did it take to actually nail that? Because that feels incredibly quick Yeah, it was incredibly fast We kind of did the ribbon cutting For the land that we were building on In January I think it was January of last year Of 2025 And then factory is up and running in May of 2026. We rolled our first fighter plane off the line on Monday of this week with the governor.

1:18:33And so, you know, things were very, very rapid. We can talk about this for a long time. There are a lot of advantages that we had going in. We had an existing building, an 800 ,000 square foot building. It was just a shell, just a concrete shell. But we weren't starting totally greenfield. We had utility support to the site. Jobs Ohio, which is the economic development agency for the state of Ohio, was partnered very closely with us on making sure that we had the resources that we needed to get that facility up and running. But of course, there is like a tremendous operations effort that had to go into building, like designing the facility, building out all of the office space, setting up the factory line.

1:19:13And that's still a work in progress. We're not totally done with building one, but we've already stood up the shell of building two next door. So that will be in flight as well. You know, internally at Andruil, the person that eats all of the garbage around this is Matt Graham, our COO, my co-founder. So I would hesitate to pretend that I know what I'm talking about. But Grim is the man that made this really difficult project happen alongside his team on the manufacturing side, on the operations side. They really put off a heroic effort. So are there, is there, I don't know if you can actually share this, but are there long lead times for specific machines that you sort of needed to think about sourcing and even signing contracts with like years in advance?

1:20:03And then you were like, okay, we have the site so we can go drop this one expensive machine in the facility and get going faster. Because when we talk about semiconductor supply chains, everything's stretched out 24, 36 months. And it feels like if you were to sign, get the building, and then start ordering things and actually building the production line, you'd be behind schedule on day one. Yeah, I mean, if we're comparing it to the semiconductor supply chain, nothing like an ASML EUV machine or anything like that, to be clear. But yeah, of course, there's all sorts of things you have to figure out in the supply chain.

1:20:38not only the tooling, but also the materials that go into construction of the products that we're building. So, you know, natural resources are very challenging. Rare earths are very challenging. And we're working closely with the Department of War to ensure that we have offtake agreements to get those natural resources that we need to build the things that are important for them. They've been a great active partner with us in that. And in addition to that, I would say that labor becomes a big bottleneck. You can't, you know, say 18 months ago, yeah, when we're ready to open the factory, when everything is built, we're going to start hiring people.

1:21:12No, we started hiring people the day we announced that we were doing this and we had them work out of our headquarters in Orange County. The entire team of people that are building Furies at Arsenal One in Columbus, Ohio today, we're doing the exact same thing a few months ago in Orange County where our headquarters is located. So you have to really get ahead of every aspect of this. And it's a very complicated task. But again, we're really happy to see that we have things up and running and rolling off the line today. Speaking of jobs, what is your pitch for mandatory civil service, engaging, solving the jobs crisis that may or may not be coming?

1:21:54Walk me through your latest thinking on the role of civil service in the modern American society? Well, you know, I've actually had this thought for a long time, for probably close to 20 years now I've been kind of beating this idea around. You know, it's not like a super contrarian idea, actually. There are a bunch of countries across the world that have some version of mandatory civil service. In fact, we have aspects of this inside of our own society. If you think about things like jury duty or being subpoenaed for court or there are instances throughout the last even 50 years where people were called into service to do things like road construction and maintenance.

1:22:36So I understand there are all sorts of questions that you would have about the 13th Amendment. I am not in a position to adjudicate those complicated constitutional issues. But I think that there's something really important about ensuring a sense of civil duty into our next generation. And I don't think that needs to be in the military service. I think it could just as easily be like going and working as a clerk at a county courthouse. There's all sorts of things that we can do to pull people in and have this feeling of shared progress that we all owe a responsibility towards. And I think if you were to go to Singapore or to Israel and ask them, like, is this a societal good or has this been a disaster?

1:23:21Is it forced labor? Is it involuntary servitude? I think they would all say, no, this is actually pretty great. You know, it was it was a difficult thing that I did. And I'm glad that I did. I learned a lot. I met a lot of people that are still part of my life today. And I think that it would be wise for Americans to take a hard look at ourselves and say, is what we're doing right now working? Like, are we happy with the path? The pathways have been created for our own kids. Are we happy with the political tribalism that's resulted from a lack of civic duty? I would say, no, I'm not particularly happy with this.

1:23:55Is my particular recommendation the right answer? I don't know, but I think we should try things. Yeah, no, I love it. I have a hot take I want you to react to. I believe that the TSA is underrated. I think people complain about the TSA constantly, say it slows me down, I'm just trying to get to my airplane. But when I look at the record of the TSA, it seems pretty much flawless. It seems like they've done a great job securing our airways. And when I actually experience and think about the people there, I have positive interactions. I haven't actually been offended by anyone or anything. It feels like a great, yes, maybe it's a jobs program, but it feels like a great job.

1:24:37It feels like people, they're going and they're working in a clean, air-conditioned building. They're interacting with other Americans, meeting other people. I think that TSA might need a re-evaluation after being the butt of every comedian's joke for two decades. I mean, there are aspects that I would probably agree with you. I still do think it's sort of a jobs program, but again, that's maybe not the worst thing. Mandatory service in the TSA. Yeah. Well, yeah. How does it fit in with mandatory civil service? Yeah. I mean, it could definitely be into something like that. I mean, the reality is it's actually gotten pretty efficient.

1:25:13It has. I don't know if any of you, this is CBP, not TSA, but I'll use it as a similar kind of counter. I don't know if any of you have gone through a global entry at one of the large international airports, but you just literally walk through now. It's amazing. It's unbelievable. Like, you know, I think that we have the ability to lead the world in the way that we, you know, process travel safety, that we handle, you know, visas, that we handle immigration. And I think the Department of Homeland Security has actually done a pretty remarkable job, despite all the criticism that they've been levied.

1:25:49Yeah, I think that there's two steps to the argument, to the discussion around any sort of mandatory civil service is first, you know, yes or no. And I think you made a good case for yes in some capacity. But the second stage is, OK, what will these civil servants be doing? We'll have a new labor force. And how will we democratically decide to deploy these folks? Will they be repairing potholes or building parks or building data centers? potentially that would be great but that would be politically spicy it might make people like a lot more they're like hey i got a hard day's work i feel good i feel like i accomplished something the building's there i don't know um but uh anyway uh another random take oppenheimer or the odyssey which one did you like more uh i liked the first two-thirds of the oppenheimer better than i liked the entirety of the Odyssey.

1:26:47Okay. But I liked the Odyssey more than the last third of Oppenheimer. Oh, interesting. Okay. That's good. What can you tell us about the future? They're both at the bottom, though, of the Christopher Nolan canon, alongside Tenet, I would say. Oh, you were going to put Tenet at the bottom? I like Tenet. I think it's so fun to watch. Tenet's at the very bottom. Tenet is inarguably the worst Christopher Nolan movie of all time. What's the best one? Dark Knight? Interstellar. I've got to go with Interstellar. What did you not like about the Odyssey? I didn't, I'll be very clear. I didn't say that I didn't like it.

1:27:20I just said it wasn't as good as any of his other movies other than Tenet. Okay. Yeah. If it was any other director, I would have came out of the movie theater and been like, that was great. I'm glad that I watched that. But it was Christopher Nolan, so my expectations were much higher. Totally. It was the same thing. I was like, that's obviously the best picture. I can't think of any other movies that are going to be better than that this year. At the same time, I don't know if I'm going to rewatch that this year. I don't know that I would rewatch it. I don't think, like I watch Interstellar every year.

1:27:46I don't know that I would watch the Odyssey, you know, again ever. I don't know. We'll see. Yeah. Also, there is just, it's a type of film. It's like a moment. It's a whole experience. You got to see it in IMAX. It's three hours. It's a, you know, it's very much a slog. Whereas, you know, you can throw on The Dark Knight and it's just like a, it's like a party almost. It's like a very entertaining. It's a popcorn movie. This is not, this is a whole like journey that you're going on. That's the point. And that's the experience. Anyway, what can you tell us about the future of Founders Fund? SpaceX, we were talking about LP in Fund 2 yesterday.

1:28:20I think you said it's potentially the best fund in human history. Are you resting on your laurels? Are you going to be incubating new things, bringing on new partners? You signed some new talent. Tell us what's going to happen with Founders Fund over the next couple of years. Yeah, the worst thing about Fund 2 at Founders Fund is that I was not at Founders Fund. So I do not benefit from that fund. But yeah, it might actually be the greatest fund in venture capital history. That's a lot of booing. But yeah, the fund is doing really well. We have a main venture fund and a growth fund. We have awesome names in both of those.

1:28:58We're still very bullish about, again, the micro level, the companies that we're investing in, even if we are a little bit more bearish on the macro. we just added Ryan Byrmeister to the team as a partner she and I worked together when we were in our early 20s at Palantir and then she went off to Meta and then to OpenAI and we just got her to join us over here so really excited about what the future holds we have a great team we're all vibing really well everyone wants to know is Mafia an official part of the Founders Fund recruitment process now? it is definitely not And the joke that I made on X about this is that Ryan got crushed in game one of Mafia.

1:29:41So if it was actually a recruiting tool, that was not a great interview. At the same time, I feel like she entertained. She seemed like someone you would want to meet with and do business with. For sure. She's very good. She's actually incredibly talented at Mafia. She just had an unlucky run. You could go into a game of mafia and display that you're going to backstab a founder that you're working with, and that might be disqualifying maybe. I don't know. That's true. That's true. Although, isn't that the whole point of mafia is to backstab other people? Yeah. Yeah. So I kind of want the backstabber on my side so I work with them.

1:30:16Exactly. What about RIA? Are you happy that Founders Fund has stayed in the private markets? Or do you wish you could be just writing, just playing Micron a little bit right now with a little bit of leverage? No, no. I'm so, so happy that we've stayed true to our origins. We are a venture fund. We invest in early stage companies and support founders throughout their entire journey. And I think there's all sorts of cool stuff that's happening that Andreessen's doing, that Thrive is doing, that General Catalyst is doing, that Sequoia is doing with their Evergreen funds. These are all very cool concepts.

1:30:55It's just not us. You mentioned Thrive. Any plan to buy a sports team?

1:31:03Ooh. Who day, baby? Let's go. Here we go. Hopefully. Hopefully soon. Well, thank you so much for coming on the show. Wait, okay. Last question. What is that sword behind you? This is Anderil. That's Anderil. Oh, yeah. That's the sword from Lord of the Rings. Anderil. Anderil. Yeah. Yeah. Beautiful. is there is there a criteria for getting one is this like uh five years of the company and you get a sword is there any uh are there any anduril like totems or uh artifacts you can just go online and buy one of those guys you don't have to work in anduril um are there any totems uh well i mean we do have uh an internal like exclusives gear store um and i should point out that i'm also wearing one of our external available swag.

1:31:53This is at gear.androll.com. You can pick up this sweatshirt and a bunch of other cool gear, including our partnership with NASCAR. There's all sorts of Androll NASCAR gear up as well right now. There's an Androll Hawaiian shirt, hearkening back to Palmer's love of Hawaiian shirts. Miller Time's been cooking. Jeff Miller's been cooking. Jeff Miller is cooking, no doubt about it. He's doing a bunch of good stuff. Thank you so much for taking the time to come chat with us. Sorry we kept you a couple minutes late. Have a great weekend, and we'll talk to you soon. It's all good. Have a good one. Let me tell you about Codex.

1:32:26Codex 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 when you're finished, head over to the New York Stock Exchange, because if you want to change the world, you've got to raise capital at the New York Stock Exchange. Up next, we have Blake Resnick from Brink Drones. He's going to be in the show in the TBP and Ultradome in just a minute. Where do you stand, Tyler, on Oppenheimer versus Odyssey? I'm going Oppenheimer as well.

1:32:56You're going Oppenheimer? Yeah. Yeah. I rewatched Oppenheimer within a couple of days of seeing it the first time. And I think it's the movie that I will come back to more frequently. But also, I think I like the story more because it's more recent history and it's easier to draw on, I suppose. Sure. I don't know. I don't know. Let us know in the chat. But Derek Thompson had a funny post here. He said, I went back and read some criticisms of big tech in the 2010s, and it's amazing how many of them bemoan big tech's cash hoarding as a major failure of late-stage capitalism. Yeah, this is the PT point, right?

1:33:32Yeah. Yeah. He literally, Peter Thiel, stood on stage at a Forbes debate, I think, with Eric Schmidt from Google and said, you have$100 billion on your balance sheet and you don't do anything with it. You're out of ideas. You're chopped, basically. And now the hyperscalers are deploying the cash and no one's happy. What's going on? You can't have it both ways. So he said, just a few years ago, popular criticism of software giants, indeed, of American capitalism, was that big companies hoarded their cash piles and refused to reinvest their profits in new ideas. But that era's over. Today, those same companies have depleted practically all of their cash flow to thicken the irony.

1:34:11Capitalism's critics seem to hate this new era of unprecedented corporate investment, even more than they hated the era of corporate cash hoarding. So, fascinating. It's between a rock and a hard place, I suppose, for American big tech companies. Well, let me tell you about public.com. Investing for those that take it seriously. They've got stocks, auctions, bonds, crypto, treasuries, and more with great customer service. You can find a company that's burning down all their cash flow if that's what you're interested in. Just be safe out there. Up next, we have Blake Resnick from Brink back on the show.

1:34:44So welcome to the show, Blake. How are you doing? I'm really good. Thank you for having me. Thank you. I'm going to hand it over to you because it looks like you got a tour for us. Take us through it. What's new in your world? What can you show us? Yeah, 100%. So Brink just raised a new$125 million of capital, and that is all being directed towards putting these on every police and fire station roof in America. Amazing. What are we looking at here? Break it down for us. Wow. Yep. So these are drone recharging pods. And you're currently watching one of our dedicated 911 response drones launch. So, yeah, that's really the focus of the company.

1:35:34See if we can get that camera swung around here. And, yeah, right now we are on top of our factory and headquarters. So we have three stories. Right now we're on our third, which is mostly dedicated towards engineering office space. Our engineering team is pretty cool. It's very multidisciplinary. We employ mechanical engineers, electrical engineers, embedded software folks, autonomy, aerospace and more. So many of those individuals are working in this volume of our facility. Now we are transiting down to our second story, which is mostly an R &D space. You'll see a lot of that in just a second here.

1:36:16This is one of our R &D areas. And to my right is our current product portfolio. So our smallest drone over here is where we started. This is Lemur 2, and it is designed to get eyes and ears in dangerous places. Today, about 20 percent of the SWAT teams in the country are actively utilizing this aircraft to reduce the probability of officer involved shootings and keep everyone safe. And the most dangerous police response missions across from that, put this guy back. We have Responder. And this is the aircraft that you just watched launch. It was really the world's first purpose made 911 response drone.

1:36:56So already hundreds of police and fire departments around the country are using these things to respond to the majority of the 911 calls that occur in their jurisdictions. And our largest drone on this platform is Guardian. And this is really designed to replace police helicopters. Guardian can fly for over an hour. It has greater than a 60 mile an hour top speed integrated Starlink. That is this panel on the top of the airframe, giving it unlimited range anywhere in the world. I'm calling in from Seattle. If I wanted to take Guardian off and fly it into the Pacific Ocean, that is something that I would be able to do without losing connectivity, which is pretty incredible.

1:37:38We also have an amazing camera payload on this drone. These two things are HD thermal imagers. The best thermal imagers on drones in production right now are 640 resolution. So that is a huge step up. And we have two thermal imagers that are built into Guardian with different field of view optics, meaning you can zoom in and out of your thermal picture with Guardian without losing any quality. We also have a pretty amazing HD vision system, two 4K imagers with 640 times total zoom. So even from thousands of feet away, end users can zoom in and read license plate details, all sorts of stuff like that.

1:38:15But behind that, we have a mini LRAD, which is an incredibly loud speaker system. You can kind of see it buried in the back of the drone there. That can emit 130 dB SPL, which is actually louder than a police car siren. So if we had Guardian playing a siren tone and a police car right next to it doing the same, Guardian would actually be the louder vehicle. And then the recharging station for this, you can see on a monitor back here, has a robotic system that is capable of physically swapping batteries. So with Guardian, 911 dispatch doesn't actually have to wait for the drone to recharge between flights.

1:38:52The second it touches down, our robotics will actually physically swap batteries, replace the batteries in the airframe with a fully charged set, and then it can launch immediately. and we use that same robotic system to load different payloads into the bottom of the drone as necessary so if 911 got a call about someone having a heart attack god forbid they could load in a defibrillator go accomplish that delivery come back and then if the next call is about someone drowning in a lake they could load in a personal flotation device so very proud of that i'll show you just two more things and then um would love to chat yeah uh downstairs to my left is where we are actually integrating airframes.

1:39:30So believe it or not, this is one of the larger drone factories in America. And then to my left currently is where we are building our recharging pods. Wow. So yeah, that's Brink HQ and a lot of the stuff that we currently have in production. Yeah, wow. That is amazing. What progress since last time you came to the studio and brought, I believe the smallest of the drones and flew it around for us. That was a lot of fun. What is the scale of each program right now? I mean, you mentioned that SWAT teams are using the smallest of the drones in something like 20 percent penetration. But it feels like that final largest drone is still sort of coming out of the R &D phase at this point.

1:40:17Is this is that correct? Yeah, that's totally a fair characterization. got there about 20 000 police departments in america yeah 30 000 fire departments 80 000 police and fire stations and we think in the future the vast majority of those buildings are going to have a 911 response drone in a recharging pod on their roof yeah today though that number that number is probably four or five hundred and that's spread across all the manufacturers that are interested uh in this segment you know us skydio dji etc um so yeah i would say like one percent of the buildings that eventually are going to have this capability currently do.

1:40:53And a big focus for Brink over the course of the next couple of years is going to be increasing that number from, you know, one percent to 10, 30, 40, 50 and onwards. I remember talking to someone who was operating drones and single rotor drones actually in the Middle East in a military context. And he was saying that at a certain scale, they would actually use gasoline powered drones because the energy density was higher and it just made sense in that context. And I'm wondering about, like, there are a bunch of good reasons to give someone a rechargeable battery if they're, you know, going to be filming themselves rock climbing or something.

1:41:37But this is an this is an industrial company. This is a, this is a, you know, an enterprise level solution. Is there a, like a gasoline powered use case that would make sense? Or are we now at a point with a technology where an electric power train makes sense across every possible, every possible, you know, opportunity or threat? I mean, you are spot on about the power density of gasoline. It is far in excess of lithium ion batteries. However, our drones respond to emergencies in known locations around the United States and the rest of the world. And that means automated recharging and battery swapping infrastructure is actually a pretty good solution to this problem.

1:42:28With Guardian, you get an hour of flight time and then every hour you're only down at a recharging station for maybe 90 seconds as that recharging station accomplishes an automated battery swap. That gives you over 97 % kind of applicability of the airframe. You can fly Guardian for greater than 23 and a half hours a day. So our customers generally are pretty satisfied with that. And I think the way that we'll continue to push flight times up progressively moving forward isn't necessarily with a gasoline powered drone, but instead with larger form factor drones that have intrinsically superior propeller efficiency and maybe also VTOL fixed wing aircraft that can stay in the sky for six to eight hours without requiring a battery swapping operation or recharge.

1:43:24Yeah, not to leak the roadmap, but it just feels like you're just going to get bigger and bigger and bigger until it's, you know, the size of a manned airplane, but probably still autonomous. Yeah. You know, there's a segment of our customer base that has enormous jurisdiction. Sure. Like sheriff's offices in Florida, for example. I mean, they can have thousands of square miles of jurisdiction. So for them, a VTOL fixed wing that can stay in the sky for eight hours is actually a pretty phenomenal fit. Yeah. What What does the go to market look like for this company? Are you selling to every, every sheriff's department or police department individually?

1:44:02Are there conferences where you can meet them all? Are there any that are like collectively buying products together as a group because they might get a better price, but they might also have better service level agreements or some sort of, you know, integration where it's like, Oh, well like the town over is using the same system. So let's go grab a battery from them. There's some value to that. But what does the actual sales process look like? We're seeing all of that. You know, it's early days, though. Yeah. The vast majority of our go to market is focused on building direct relationships with police chiefs, fire chiefs, mayors and city council members.

1:44:43Yeah. And as discussed, there are a lot of these organizations in the US, which, you know, necessitates us to have a pretty large sales team to build all the relationships that are necessary. So we've broken the United States into dozens of different sales territories. And each one of those territories is staffed with an account executive that holds a quota. Then they can pull some various other sales support organizations that we built, like dedicated demo teams and sales engineering teams and other things. Can you get me up to speed on Motorola Solutions? They raised you raised one hundred twenty five million dollar round led by Motorola Solutions.

1:45:20Most people in the consumer world might think of the Motorola Razr V3, the cell phones. Do they have a lineage in public safety or development of emergency response equipment? Is there more synergy there or is this purely just like it's a good deal and they did the deal? No. So the vast majority of Motorola's business is selling body-worn radios and public safety software to police and fire departments, like the overwhelming majority of their business. They are actually the largest company in our industry. Motorola is number two, or excuse me, number one. Axon is number two. Flock is probably number three in terms of scale.

1:46:03So they have pre-existing commercial relationships with literally every single one of our potential customers in the free world. Like that is their market position. So if we ever have to go and meet like a net new PD or RFD, we can just ask them for the introduction. And then when that organization decides they do want to adopt our technology, we can usually also fold it in through a pre-existing contract that Motorola has. So they're an incredible partner. And I would say the relationship is very strategic on the go-to-market side, but it's also very strategic on the product side. We've developed a feature, for example, where if a police officer or a firefighter pushes the emergency button on one of their radios, that can automatically trigger one of our drones to launch and fly to their exact location.

1:46:52Sure. Motorola has a huge percentage of the 911 call-taking software market. So we can grab the coordinates of 911 calls from there and then use those to trigger drone flights. They have an ALPR business. They have a very large computer-aided dispatch business. In fact, most of the very large police departments around the country utilize Motorola CAD. So, yeah, there are synergies left and right with them. They've been great partners. Y Combinator has their request for startups. I want your request for startups. if someone in the audience is thinking about building a company deep in the drone supply chain, deep in the battery supply chain, deep in any industrial supply chain, what is a category or product or subcomponent where you would love to meet an entrepreneur who's thinking about building a new company based in America to solve that particular problem?

1:47:51I mean, camera payloads come to mind immediately. There are very few American-made gimbalized camera payloads that have high-resolution thermal, good zoom optics, three-axis stabilization, and that don't cost an obscene amount on a per-unit basis. yeah um so yeah that that would absolutely be one they're nice like self-contained components that you know a lot of drone manufacturers don't want to make for various reasons even andrel is actually a consumer of a lot of these parts like they're not doing totally um their own their own payloads in that category yeah uh so yeah that that would be of interest um i would say you know very high energy density batteries of course always are are of interest to drone manufacturers uh brushless outrunner motors mesh networking radio pcb like the whole supply chain just do anything in there no it makes sense it feels like it feels like a decade ago you would have been you probably were called crazy when you started the company but uh you would have been called crazy for trying to just build a hardware company because hardware was hard you had to be a billionaire to start a defense tech company etc etc uh and now you know there's enough motion and there's enough energy that you can, you know, build this company, hire, raise, get to market, sell it effectively.

1:49:12And now the next challenge is deeper in the supply chain, which is exciting. There's a lot of opportunity there. Tyler, do you have any questions? Yeah, I was wondering, like, what's kind of the shape of autonomy in response terms? Like, how important is this? Is this like getting autonomy much better? Is that like a big bottleneck to selling more of these? Or how do you think about that? Yeah, no, that's a great question. I mean, the way our technology works in general is someone will call 911 in a jurisdiction. We will grab the GPS coordinate of that call from computer aided dispatch or 911 call taking software from some other source.

1:49:48Our software will then find the nearest 911 response drone in a recharging pod that has sufficient battery state of charge to actually respond to the emergency. Then it will plot out a path from that location to the emergency, taking into account manned air traffic, no fly zones, altitude limitations, and so forth. The doors on one of our recharging pods will open up. Drone will launch. It'll follow that pre-programmed flight path out. But if it encounters anything that it doesn't expect, it also has an onboard obstacle avoidance system. So it'll be able to deal with those unforeseen events. Then when the drone arrives, it can engage in a number of pre-programmed on arrival behaviors.

1:50:34Like it can orbit a structure fire and just keep on circling around, you know, with its camera gimbal pointed in the right place. Or it can be programmed to stop at a specific GPS point, but then move its gimbal to point at an area that might be of interest and a number of other things. Or at that point, the drone could then be manually controlled in order to interact with the scene. Our drones have onboard red and blue lights and sirens. So an end user might decide to turn those on depending on the circumstances of the call. They can deliver, as discussed, life-saving emergency medical payloads.

1:51:13So an operator might decide to engage in an action like that. Or they could just follow a person or vehicle. That can be done manually. But we also have automated tracking features that can be utilized in those instances. So an end user could click on a person or click on a vehicle, and the drone would just sort of follow for that end user. Do you have benchmarks? yeah in terms of the impact that we make on communities no technical benchmarks uh every ai company is like trying to get their llm to solve math problems and there's a very clear battery of progress and i'm wondering if you have like you know there's is there a standard benchmark for like drone agility or like something that's measurable but uh but a little the thing with the benchmarks is that they're not, they're not purely quantitative in the sense of like, uh, you know, uh, how like response time is in milliseconds, like for a computer system, that's very quantifiable.

1:52:16It's often like you need to solve this puzzle. And so what I'm wondering is when we will enter, or maybe we already have the, the era of there's like a standardized drone agility course and, and you can unleash a drone on it and say, Oh yeah, I did it in this time. Or it was 90 % effective at this or no one else can do this. I'm wondering if there's any of that going on in just the drone community broadly. That does exist, actually. NIST has put together something very similar to what you just described. Okay, cool. So yes, that absolutely happens. I would say, though, mostly customers are focused on specs right now.

1:52:52Yeah, I'm sure. So they're curious about, you know, exactly. Flight time, top speed, HD camera resolution, thermal resolution, recharge time what integrations exist all of that sure sure sure we gotta get we gotta get the police department's bench bench pilled so that they're just like oh what did you do on on humanity's last drone competition anyway that'd be funny we we do bake-offs you know there are a lot of instances where brink drones will go up against skydio drones Sure, sure, sure. Charlotte Mecklenburg in particular ran a pretty extensive evaluation of different companies' aircraft, and we ended up winning that.

1:53:33Congratulations. So, yeah, no, this is definitely on people's minds. Yeah. Well, thank you so much for breaking it down. Thanks so much for the tour. This was fantastic. Have a great weekend, and we'll talk to you soon. Cheers. Bye. Thank you. I can't wait, truly. Let me tell you about Console. Console builds AI agents that automate 70 % of ITHR and finance support, We're giving employees instant resolution to access requests and password rate resets. Take us through what's going on with OpenAI pushing the model frontier access across efficiency. What happened? They dropped the cost of Luna? Yeah.

1:54:04So there's Luna, TerraSoul. This is the cheapest model. Yes. Massively reduced cost. You can see on the kind of Prudhoe curve, this is like actually much cheaper than a lot of like open source models. Because we've been talking about this recently. Yeah. Like there's cost per task, not just like can it do it and how much do it. Like it depends a lot how token efficient the model is. Yeah, because you could measure it on cost per token. But if a certain model takes 10 times the amount of tokens and it's only half the cost, you'll wind up spending more. Why is the Pareto frontier in this graph flipped?

1:54:36I feel like the Pareto frontier used to be this direction. Am I hallucinating that? Has it always been this way? You always want to be on the left side? I thought you wanted to be on the right side or something like that. Well, it depends on where you are in the Purdue. I suppose. I think I see what you're saying. I suppose. Anyway, we also, I don't think we touched on this, but ArcGIV3, the leading labs have been going back and forth. Opus 5 put up a very, very impressive number. Then OpenAI fired back with 5.6 Sol used to solve open problems in mathematics. So why was it struggling with Arc AGI V3, which you at one point were in the top 10, right?

1:55:17Yeah, I was globally ranked Arc AGI V3. I don't think it's still up, but yeah, I was. Ranked Arc AGI V3 player. That's up there. You were like, you were pro-am. Yeah, yeah, I would say. You didn't go pro. You turned it down. I turned it down, yeah. You had the opportunity to be at Arc AGI V3. They were going to give me like 10 more tasks, 5 more tasks, something like that. Something like that? Yeah. But apparently OpenAI was able to investigate the low score of 5.6 SOL on RKGI V3. And the harness was not letting it remember what it had learned. We found that enabling two API settings tripled our scores with 6x fewer output tokens.

1:55:54So very interesting to watch these. Yeah, this is fascinating. I mean, we've seen this a lot over the past, like, I don't know, year and a half almost, where the harness, like, really matters a lot. And if you have the wrong harness or it's, like, limiting the model in some way, I mean, it can have massive effects on the downstream task. Yeah, people were not expecting this. It was definitely like the model, the god model will be just one model, and you'll just ask it to predict the next token, and it'll just do it perfectly. There's a lot more that goes into the integration here. I still think ArcGIV 3, I mean, fantastic benchmark, love the team.

1:56:26Obviously, Mike's been on the show multiple times. But it's also just a great way to actually illustrate AI progress to someone that maybe just doesn't want to build software or hasn't built software before and can't really feel that viscerally. I can't say viscerally. I don't know. Especially the famous time horizon task doubling every six months. Yeah, meter. That's basically, we can't actually measure the high end now. It's too hard. We don't have enough tasks to measure it efficiently, basically. Yeah, and a lot of people are just like, what's a task that takes me 12 hours? What is that? I don't even know.

1:57:02Yeah, it is a bit hard to understand. It's hard to think of that off the top of your head. Like, what does that mean? Like, building a whole report or something? Or like, a lot of people work in like various ways. Like, yeah, 12 hours of meetings. Is that one task? I don't know. Yeah. But if you show someone the ArcGIS V1 puzzle, and it's very easy, and V2 is very, very easy, and then you walk them through the story of how AI has progressed on this and how hidden the answers are, you can pretty easily help someone feel the AGI, which is very, very, very, very fun. Anyway, that's our show, folks.

1:57:38We will see you at 11 a.m. Pacific on Monday. Have a great weekend. Have the best weekend ever. Be like a golden retriever going after the tennis ball. And also leave us five stars on Apple Podcasts and Spotify. Sign up for our newsletter at tbpn.com. And we'll see you on Monday. See you. Bye. See you!