Markets Surge, Apple's Tariff Strategy, Tracy Alloway, Justin Lopas, Paul Klein, Akshay Krishnaswamy

27:37Just, you know, basically over-ordering against what they would normally do. To that end, I would imagine that Apple is going to try to hold the line on pricing in the US for as long as it can. For the iPhone specifically, I wouldn't expect any changes until the next iPhone launch in September. While Apple has changed prices mid-cycle in countries facing significant currency changes, they have studiously tried to avoid that in the US market, which has the added risk of angering President Trump, even as the company will be seeking some sort of exemption. Obviously, if people are complaining about the prices of iPhones, Trump's not going to like that.

28:13And so he's been documenting for several years now how Apple has actually been cutting iPhone prices in real terms, in inflation-adjusted terms. And we've seen the two-year-old iPhone went from$499 to$411. And the iPhone Pro Max, The top of the line one went from$1 ,100 down to$900. And so they have been reducing prices. And again, I think that's driven by the increased value that they get from software. And from people losing their AirPods. I mean, they are monetizing in so many other ways in the Apple ecosystem. My average Apple order is so funny. I walk in and I go, yeah, I just want five sets of your wired earphones.

29:05They bring them out and they're like, you're sure you want these? I'm like, yes. That's ridiculous. One for the car, bag, desk, et cetera, et cetera. Yeah, I'm getting extremely close to just throwing away every Sonos product and going with the Apple speakers because I just know that they will, I don't know if they'll sound better. I don't know if they'll work it better, but they can't work worse than Sonos. Sonos is truly terrible. Sonos, you may as well just hire live musicians and schedule them to come. They'll be more reliable. I think of the Sonos app as like a meditation app because you click it and it's just a blank screen for like five minutes.

29:43And it just gives you a second to like reset and be like, okay, clearing my mind. Nothing's coming in because it's just a blank screen for five minutes before you put on a single song. It's a good reminder. It's getting worse by the day. I was expecting it to get better. I thought they just rolled it back. Anyway, let's go to tech's compliment risk. This is Ben Thompson's big takeaway. He says, whatever a disaster this is for Apple or for tech generally, he wants to go back to what he wrote last fall. Apple could not only not manufacture an iPhone in the US because of cost, it also can't do so because of capability.

30:19The capability is downstream of an ecosystem that has developed in Asia and a long learning curve that China has traveled that and that the U.S. has abandoned ultimately though the benefit to Apple has been profound the company has the best supply chain in the world centered in China that gives it the capability to build computers on an unimaginable scale with maximum quality and for not that much money at all it is crazy China doesn't really Apple it's fantastic computer and uh yeah works great and it was dirt cheap they don't get much credit for being the backbone of what people love about Apple, which is just fantastic, reliable devices.

30:58I mean, you buy a car and it's like, there's a lemon law, you know? Like you could just get a car where it's like, oh, the engine doesn't work. And that's a thing. Like I've never even talked to someone who's like, oh yeah, my Apple, like my Mac, like the hard drive didn't work when I got it. Like it just doesn't happen. It's always 100 % perfect every time. It's crazy. The benefit has extended to every tech company. he has cooked he has cooked over several decades uh whether they make their own hardware or not it is fascinating though so when buffett really started dumping yeah apple yeah tim cook like that that was like that that one must have hurt for tim because tim was starting to realize that he was a little bit cooked and buffett buffett knew too right he was just like you know he could kind of see the writing on the wall.

31:46Trump presidency, you know, loves tariffs. Apple, you know, Apple not being able to move their supply chain without trillions of dollars of investment. Tim just sitting there being like, well, I'm going to give Apple intelligence a good shot here. So he concludes, to that end, the risk for tech is that tariffs specifically in Trump's approach to trade generally do not do more damage to the golden goose than expected. More expensive hardware ultimately constricts the market for software. Tariffs in violation of agreements like the ITA give the opening for other countries to impose levies on their own.

32:27And the US tech companies could very well be popular targets. Yeah, I mean, I was thinking about, so there's this whole idea that like, if you bring down the cost of hardware, all software needs to run on hardware. Every app company, every software company that we know and love, of like Uber only exists because everyone, the iPhone got so cheap that everyone got one, right? And you think about, it's very easy to say like, oh, well like everyone kind of has an iPhone, they don't really need to upgrade. If prices go up by 30%, you just upgrade every four years instead of three years, it's not that big of a deal.

32:59But what about for the next platforms? We've talked about drones and humanoid robotics, but even VR, like the current Apple Vision Pro, great product, super expensive. I think like I bought like a max spec one and it was like almost five grand. And you add tariffs on top of that. You're just going to be fighting tooth and nail to drive that down. John Carmack, when he was at Meta, said that he wanted to get to a hardware device for VR that was 100 grams. So extremely light, like the big screen beyond. The big screen beyond, that's 100 grams, but it's like$1 ,000. the meta quest has been down in like the three to four hundred range but still nowhere near a hundred dollars carmack wants to get 100 grams hundred dollars because at that part at that price like everyone has one glasses it's like glasses yeah the sunglasses the the install base gets so big that developers can say yeah you know um there are a hundred million americans with these out there and if i can make a breakthrough app i'll make a lot of money whereas that's just not the case.

34:06And that does get very, very difficult if you see that there's just no way to manufacture new hardware devices cheaply. So it's a complicated problem. U.S. tech exports are primarily software and services, which aren't calculated in things like trade deficits. One suspects that that means that the Trump administration isn't very concerned about them, although countries looking for retaliation targets surely will be. That, though, pales in comparison into the cost of blowing up the hardware supply chain tech's most essential compliment this isn't the end it's just an apple story this this isn't in the end just an apple story so yes the this idea that like if if all the hardware devices get more expensive because the supply chain blows up you could actually see like google suffer and apple and and and meta suffer is a very interesting take um anyway should we move on to uh some ads everyone wants to hear ads yeah let's talk about public investing for those who take it seriously, multi-asset investing, industry leading yields, trusted by millions.

35:08If you're looking to get in on the action, you know, we had leaf on, a lot of people were buying yesterday. They did great, I guess, because the market's way up. I won't give you any financial advice, but anytime there's news, people buy good or bad. It is, it is crazy. I mean, look at this. No, but we are the generation. We are the generation that is, we're the buy the dip generation. We are the buy the dip generation. Yeah. we're someday all going to be, you know, 90 years old. And our, our younger members of our family will be like, grandpa, like, don't buy the dip. Like, I think you're really built for T-bills at this point.

35:46You're like, I'm buying the dips. No, no. You know how they used to say like, you should have a mix of stock and bonds and the percentage of bonds should be your age. So if you're 30 you should be 30 % bonds 70 % stocks uh and then if you're like 80 you should be 80 % bonds 20 % stocks like our version of that is going to be like you should be you know uh if you're 80 you should be 80 % like levered long bitcoin and 20 % nfts pack he had a pack he had a good line uh a post from earlier he said like the proper hedge right now is just to buy like just basically go for uh democrats on polymarket the markets aren't even up packy uh polymarket doesn't do midterms yet but they will in a year uh probably do like county level stuff you know county level stuff just people are like i can't take these tariffs like i'll vote for anyone like i'll vote for a democrat in my city council uh that's hilarious um anyway uh ben thompson's clearly reflecting on this a lot.

36:52This is his third post of the week. He also did this interesting thing where he thought that his Monday post was a little bit too casual. So he made that more of an update, put it, I think it put it behind a paywall. Then he posted a new front page article, breaking a bunch of his rules. He says, don't post more than one front page article a week. Well, it's a special week. So he's posting too. And he starts with - And he's fired up. He's on vacation. And it's super, it's super important to him. I mean, it affects tech super deeply. It affects China, Taiwan, America, all the places that he's involved with.

37:23It's fascinating. So he starts by kicking it off with Professor Clayton Christensen, who coined the term disruption, a little minor coinage, I love it, in a seminal paper called Disruptive Technologies Catching the Wave, and of course, The Innovator's Dilemma, which we've talked about a lot. His most concise summary comes from this, and we'll give you a little refresher on disruption. So disruption describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. Specifically, as incumbents focus on improving their products and services for their most demanding and usually most profitable customers, they exceed the needs of some segments and ignore the needs of others.

38:05Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more suitable functionality, frequently at a lower price. Incumbents chasing higher profitability in more demanding segments tend to not not to respond vigorously entrance then move up market delivering the performance that incumbents mainstream customers require while preserving the advantages that drove their early success when mainstream customers start adopting the entrance offerings and volume disruption has occurred so when cnbc starts um posting uh unhinged you know sort of highlighting unhinged posts from the timeline will know that it's working.

38:46Yep, totally. But we're counterpositioned. They can't do it. They're built different. So it's over for them. Notice what did still happen in the United States, at least back then, actual chip fabrication. This was the main driver of innovation. It's kind of Silicon Valley 1.0. That was where innovation happened and where margins were captured. So of course, US chip companies kept that for themselves. So when chips started to boom, US companies kept the innovation and the fabrication. It was tedious and labor-intensive assembly and testing that was available to poor Asian economies led by authoritarian governments eager to provide some sort of alternative to communism.

39:28And so that's why the chip manufacturing went abroad. One important point about new market disruption, which Asian manufacturing was, is that it is downstream of a technological change that fundamentally changes cost structures. In the case of Asian manufacturing market, there were actually three. Number one, in 1963, Boeing produced the 707, the first jet airliner capable of nonstop service from the United States to Asia. In 1970, the 747 made this routine. In 1964, the first transpacific telephone cable between the United States and Japan was completed over the next several years would be extended throughout Asia.

40:11So you could fly there with nonstop service. So you wouldn't need to stop in Hawaii anymore. So you could get there like in a day instead of two. You could also call. And then ISO 668 dropped in 1968. Good timing, I guess, that one. Standardized shipping containers. And that dramatically increased the efficiency with which goods could be shipped over the ocean in particular. These three factors in combination for the first time enabled a new kind of trade instead of manufacturing products in the United States, and trading them to other countries, multinational corporations could invert themselves, focus on design products in their home markets, then communicate those designs to factories in other countries, and ship finished products back to their domestic market.

40:52And thanks to the dramatically lower wages in Asia, supercharged by China's opening in 1978, it was immensely profitable to do just that. So it was just basic economics. And so, yeah, we can go through some more of this um but uh he talked he goes back yeah it is fascinating how there's this narrative in silicon valley startups venture broadly that you know we used to do hardware like we were this sort of like you know hardware culture it's called silicon valley for a reason yet all that silicon was actually scaled from a manufacturing standpoint pretty quickly from asia yeah I think it's silicon.

41:33That's silicone. Silicone. Is that what goes in? Wait, are they different? I actually don't know. Anyway. Silicon. I think they must be related, but just slightly different pronunciations or something. Yeah. I don't know. Wouldn't be the first time I botched a pronunciation. Me too. Especially a person's name. I'm terrible at that. Anyway, let's move on to iPhone stuff again. Ben Thompson writes, there is one other very important takeaway from disruption. Companies that go up market find it impossible to go back down, and I think this applies to countries too. Start with the theory. Christensen had a chapter in the innovator's dilemma entitled, What Goes Up Can't Go Down.

42:16Three factors. The promise of upmarket margins, the simultaneous upmarket movement of many of a company's customers, and the difficulty of cutting costs to move down market profitably. Together, create powerful barriers to downward mobility. In the internal debates about resource allocation for new product development, therefore, proposals to pursue disruptive technologies generally lose out to proposals to move up market. In fact, cultivating a systemic approach to weeding out new product development initiatives that would likely lower profits is one of the most important achievements of any well-managed company.

42:50You've got to keep your profits high. Now consider this in the context of the United States. Every single job in this country, even at the obsolete federal minimum wage of$7.25 an hour, makes much more money than an iPhone factory line worker. And critically, we basically have full unemployment. That is what full unemployment. No, we have full employment. Vibes-based economy. And we do. We do. Even post-COVID, we bounce back very quickly to like 3 % or 4 % unemployment. By the way, Ben shares, now it seems obvious, silicon. Silicon is a synthetic polymer. It's different. Made from silicon. Silicon.

43:27Silicon. God. Let us know, Chad, how you pronounce it. We're working. It's kind of a good one. Anyways, yeah. But silicon is just silicon element symbol, SI. All right, we got it now. And so he points to White House Press Secretary Carolyn Leavitt making a, what he calls, ridiculous statement in response to a question from Maggie Haberman of the New York Times about the types of jobs Trump hopes to create in the U.S. with these tariffs. Levitt said, the president wants to increase manufacturing jobs here in the United States of America, but he's also looking at advanced technologies. He's looking at AI and emerging fields that are growing around the world that the United States needs to be a leader in as well.

44:12There's an array of diverse jobs, more traditional manufacturing jobs, and also jobs in advanced technologies. The president is looking at all of those. He wants them to come back home. Haberman followed up with a question about iPhone manufacturing, specifically asking whether Trump thinks that this is the kind of technology that could move to the US. Levitt responded, Trump believes we have the labor, we have the workforce, we have the resources to do it. As you know, Apple has invested$500 billion here in the United States. We covered that, and it was kind of like money that they were maybe already spending, but still like a move in the right direction, I guess.

44:45So if Apple didn't think the United States could do it, they probably wouldn't have put up that big of a chunk of change. So could Apple pay more to get more US workers? I suppose so, says Ben Thompson. Leaving aside the question of skills and whatnot, but there is also the question of desirability. The iPhone assembly work that is not automated is highly drudgerous, sitting in a factory for hours a day, delicately assembling the same components over and over again. And again, it's like, I hear all this, but when I think about what's happening in humanoid robotics, AI. And not even humanoids, just robotics.

45:21Just one robotic arm or just a six axis. I mean, you look at what Hadrian's done with, I mean, Chris has raised a lot of money, but it's not that much money. And he's been able to build, he has a couple of robotic arms. And this is what Sam said yesterday. He has a couple of CNCs and stuff. Onshoring, reshoring is not a jobs program. Yes. I think there will be jobs created, but we're not going back to this idea that, you know, 50 % of Americans will be assembling iPhones. It's like America will do the iPhone assembly, but at a more efficient rate. It's a huge challenge, but I just, people say it's impossible because we're not down the learning curve and it's so hard.

46:01But when I think about like, in the same way that China took R &D materials from Apple willingly and sometimes unwillingly, a lot of that strategy should be able to be ported back. Apple probably knows at a very, very high level of detail how Foxconn assembles an iPhone, right? They can tour the floor. They probably have badges. They can walk around. They can just see the stuff. They probably have plans. they probably have all this stuff so if if they really wanted to build a foxconn also knows how to make an iphone yeah yeah yeah true true and they do for other companies um it's uh quite a yes yes yes but but like just this idea of like of like foxconn is an amazing light cell factor so many interesting amazing things that are really hard to copy but at the end of the day it is just a building with a bunch of machines and people inside and if you get the right machines and you tell them right to do and you have the right code like you should be able to copy it and then there's the question of you know at what point does the labor ratio to automation ratio flip where it is competitive at all in the united states and is a 45 or 100 tariff or a 200 tariff or 400 tariff enough to offset that yeah it doesn't it doesn't seem impossible to me it doesn't seem impossible that America could wind up developing automated manufacturing capacity that could assemble an iPhone with robotic arms and three axes, you know, different pick and place.

47:33The question is really, really hard, but it seems possible. I don't know. Clearly it's one of those things. Clearly Apple doesn't want to do it. Yeah. Clearly it's not in the immediate and direct benefit of the shareholders to do it. Yep. At the same time, the China supply chain is a, is this massive, massive, massive risk to the business that will also impact their market cap over time if they just don't actually address it and don't try to. And the question just becomes like, how, you know, how hard can they lean on India, right? How hard can they lean on Vietnam if they spend hundreds of billions or trillions of dollars to sort of rebuild these supply chains elsewhere?

48:17is there a world where in 2040 suddenly we have problems with another country? Yeah. And this is the question of that center of gravity. And this is what's so interesting is that right now, let's read from Ben Thompson again, and then I'll give some extra context. At the same time, it is important to note that this drudgerous final assembly work, the stuff that can't be done for$7 an hour, it's a$3 an hour job or something like that, is a center of gravity for the components that actually need to be assembled. And these parts are all of significantly higher value and far more likely to be produced through automation.

48:53And so there's this question of like, if Apple goes to India, you might get the component manufacturers popping up in India. And then we haven't reshored that stuff, even though that's higher value and more automatable. And so there's this weird scenario where I don't know exactly what you could do to stimulate this, but maybe iPhone assembly in the United States is what you need to do to get to kickstart all of this. And so any economic policy that you can put in place that gets the iPhone assembled, even if it really is, yeah, we're paying people $20 an hour and like college kids are doing it.

49:29And it's just the best option. It is grueling, but we know that we're going to automate that. And you don't go into the career of iPhone assembly knowing I'm going to be doing this for my entire life. You go in knowing I'm here to do this really hard work under, under American, you know, human rights rules. And so it won't be as brutal, but it'll be rough. I'll do that for a couple of years and then I'll move up and become a manager of robots or I'll become an engineer or I'll become someone who works in componentry and it's higher value. That's not that crazy of a trade. It's not great, but it is possible.

50:06I always have this riff about like maybe what we need to do to reshore manufacturing is make Happy Meal toys here. Like everyone's talking about, oh, we need aerospace and defense parts made in America. And it's like, yeah, those are really, really key. We got to make our drones and we need our andrel stuff here. But maybe part of the reason why DJI exists in China is because the Happy Meal exists in China. To be clear, that's a big issue with the China tariffs is just how much of the supply chain for the toys that our incredible young American children depend on for joy and happiness. Yeah, we were talking about this.

50:44The American toy manufacturer. Yeah, yeah. I got a pitch just the other day for one. Really? Yeah, people are starting to think about it. I thought it was cool. The Advanced Toy Manufacturing Company of America. I mean, you've used these toys. Some of them are so rough. No, I hate it. it's so sloppy and you're just like this thing is going to last three months and it's going to be in the landfill they don't they don't last three months yeah a lot of these things last 24 hours 12 hours yeah and it's not like i have like a toy a day yeah and i'm not even that panicking about like oh we're gonna run out of landfill it's more just like the aesthetics of it or just like like the emotion of like like i was i was reading a book last night and the inscription was like to john like to me yeah because like we passed that down because it's a 25 year old book or something a 35 year old my son plays with my legos exactly that i had when i was a kid exactly my dad had yeah and it's like what what are the new toys that you're going to pass down certainly not some some sloppy injection molded like robot that's gonna yeah you know completely explode in three months or 24 hours as you put it um and so uh let's close out with a little bit of Ben Thompson's takeaway.

51:54He is defining a better plan. A key distinguishing feature of a better plan is not that it doesn't seek to own supply, but rather control it in a way that U.S. does not today. So the question is, do we actually need to own the supply chain, or do we just need to have really confident control over it? And so he says, first, blanket tariffs are a mistake. I understand the motivation. A big reason why Chinese imports to the U.S. have actually shrunk over the last few years is because a lot of final assembly is being moved to countries like Vietnam, Thailand, Mexico. Blanket tariffs stop this from happening, at least in theory.

52:29And so that's a reasonable argument, but it could be risky. The problem, he argues, is that those final assembly jobs are the least desirable jobs in the value chain, at least for the American worker, assuming the Trump administration doesn't want to import millions of workers. That seems kind of counter to the foundation of his candidacy, the United States still needs to find an alternative trustworthy country for final assembly. This can be accomplished through selective tariffs, which is exactly what happened in the first Trump administration. And today, it seems like that's maybe where we're going with these selective tariffs.

53:03Secondly, using trade flows to measure the health of an economic relationship with these countries, really any country, really, but particularly final assembly countries is legitimately stupid. And this is what you were talking about with like Switzerland, right? Yeah. It's like, well, Switzerland's another example. Really make a great sense. Yeah. But it's like, yes, we buy a lot of Swiss watches, but yes, they also buy a lot of digital services. Yes, of course. Our movies and our Netflixes is a point. Yeah. It makes a ton of sense. And those are, we're not getting factored into the calculus.

53:34And so simply looking at trade flows where an imported iPhone is calculated as a trade deficit of several hundred dollars completely obscures this reality. Go back to the iPhone. The value add of final assembly is in the single digit dollar range. It's all the components that are expensive, the glass and the chip and stuff. You put it together, that's a couple bucks. The value add of Apple's software, marketing, distribution is in the hundreds of dollars, and that's where they extract their actual profits from. And so moreover, the criteria for final assembly country is that they have low wages, which by definition can't pay for an equivalent amount of US goods to said iPhone.

54:11And so they're making the iPhone. We're bringing it over here. It feels like we have a trade deficit of hundreds of dollars, but really we only got$5 of value per iPhone out of this country. And of course, because we're paying them a dollar an hour, they're not going to be able to buy, you know,$200 worth of Netflix. It would be, it would be interesting for Apple to do effectively a request for startups. And I know they highlight like a lot of their top vendors and say, Hey, these are the companies that we're spending the most money with that do various things. But you have to imagine if Apple put out the challenge to bright, young, or mature technologists and said, hey, we need to make this button.

54:50The cost needs to be half a penny and you need to be able to hit, you know. Well, that's interesting. Kind of like an Apple-driven warp speed where it's like, if you can produce this, we will buy it. And then VCs can underwrite it and everything. Yeah. That's kind of interesting. I like that. Yeah, that's really cool. I bet you that the problem with that is that if they open source their supply chain economics, that opens them up to a bunch of different attacks from other countries and stuff, or companies. Let's continue with Ben Thompson. At the same time, the overall value of final assembly does exceed its economic value.

55:24For the reasons noted above, final assembly is gravity for those higher value components. And it's those components that are the biggest national security problem. This is where component tariffs might actually be a useful tool. The US could use a scalpel instead of a sledgehammer to incentivize buying components from trusted allies or from the US itself or to build new capacity in trusted locations. And so, yeah, if the US could sell the higher value components, that makes sense. Like it's much easier to imagine. Oh, yeah, we have a we have a amazing like even even Intel reshoring chip manufacturing TSMC is going to Arizona.

56:00Right. Like you can imagine that, oh yeah, iPhone lenses for the really crazy seven layer pancake wide angle lens. Like, yeah, there's some amazing company in like San Jose that's doing that, right? Yeah, and people don't realize it's tough. So when you look at the Apple supply chain problem and you say, okay, Apple might have to invest or somebody would have to invest trillions of dollars to bring it to America. Yeah. That looks insane, right? Because it's basically like saying, take all of Apple's profits for the last 10 years and don't distribute that out to shareholders who do buybacks or anything like that and just invest it in this sort of new ground up supply chain.

56:36But then you look at how much money Foxconn makes a year in their revenue, which is in the hundreds of billions just on mobile devices. Right. And so there is probably an economic equation where some combination of Apple, Apple, you know, its own sort of off balance sheet investment and other private capital that could could over time. We could make it in America. Yeah. It's just not as easy as Trump asking nicely or slapping tariffs around and expecting things to happen immediately. What a chaotic week. What an interesting week. I'm excited for our guests. We're going to be asking more folks about their tariff takes, how they're processing all the market turmoil.

57:21We have Tracy Alloway from Bloomberg Odd Lots coming on the show, which would be great. But you know what isn't tariffed? Time. And what is time? money and how would you say both i'd go to ramp.com john why uh easy to use corporate cards bill payments accounting and a whole lot more i couldn't have said it better myself go to ramp.com sign up for ramp.com go to ramp.com it really is there's never been a more important time to save time and money yeah it's always been important but now more than ever yeah i mean when these market shocks happen like you know all the vcs get on their podium and say hey you know here's my memo, there's economic turmoil, you need to buckle down.

58:04We don't know what's gonna happen in the funding rounds and the funding markets, but never a bad time to save money and never a bad time to understand what's going on in your business. So that's why you should sign up for RAMP. Get clarity into what's happening in your business on the expense side. And we have Paul from Browserbase coming in the studio, breaking down computer use, the next generation of large language models and artificial intelligence. very excited to talk to him and he's here he's here he's ready welcome to the studio how you doing the basement hey guys the base what's up looking good came prepared looking fantastic looking sharp you know uh do you wear that every day you know you gotta you gotta dress up to impress so yeah dude i love this uh is this a green screen background whatever this is a lot this is live people are working people there we go i like it i love the whiteboard i love the whiteboard action in the back it's fantastic somebody's actively whiteboarding some integrals yeah it's math yeah why why why do you got a human doing that uh can't you just uh wire up one of these uh computer use uh tools to do it for you that's that's that's all in the cloud it's all in the cloud this is in real life yeah yeah you need the analog stuff every once in a while hundreds of engineers running in the cloud right now fantastic yeah those are just paid actors yeah in the background.

59:24Anyway, can you introduce yourself, the company, kind of what you do for everyone? Yeah. Hey, everybody. I'm Paul, founder of BrowserBase. We power web browsing capabilities for AI agents and AI apps. So we're kind of building like a web browser for AI. Basically, we think the future of software is software going to have to go out and do work on your behalf. But a lot of the work that we do is in a web browser on a website. So we want AI to do work on our behalf. We're going to have to have AI use a web browser and we provide that web browser. Now, We mostly sell to developers, people who are building these cutting edge AI features and applications, and they integrate our AI web browser into their applications to give them superpowers.

59:58What that might be is like going out to a thousand websites and finding the right screw for your procurement team. Or maybe it's going out and booking demos to help figure out what your customers are doing or trying to automate all the tedious work that people have to do every single day. We do that with BrowserBase. I want to talk about MCP APIs and kind of the future of how agents and LLMs will interface with the internet. There was a meme for a while that was just like the front end is the API. Just get good at web scraping because the API might change, but the front end is going to stick around for much longer.

1:00:37And so if you can be really dynamic there. And I always wondered about, you know, are APIs just kind of going to go away as LLMs get better and agents get better at computer use? What's your take on how we will see companies make their content or their websites available to LLMs going forward? Yeah, we really believe that computers are going to be just as good at people at browsing the web. And for a very long time, there's still going to be humans using the web, doing the same tasks they do every single day. So why do we have to rebuild the internet for AI when AI can use the web the same way people do?

1:01:13So there's certainly going to still be APIs and MCP servers, especially for high volume stuff. You know, if you're booking a flight, you probably should do that through the Delta MCP server, not through a website, because that's just not the efficient way to do it. But when we talk to companies that are not the cutting edge companies like our customers, like Perplexity, but more cutting edge companies that are old school, been around for a long time, there's a lot of websites that aren't going to have MCP servers. The Nigerian immigration form won't have an MCP server for a long time. And AI needs to automate that just as much as automate kind of the more high volume tasks.

1:01:45So we view the browser as kind of really the most primitive MCP server that can work on every single website without having to have, you know, first party integrations. Can you talk about how you thought about the opportunity early on? because I imagine you've made a tremendous amount of progress, raised a bunch of money, working with some of the most important companies in the space. But early on, I imagine some people would have said, hey, browser automation software has existed before. We don't think the market's that big. And clearly, you didn't agree with them. And I'd love to hear you kind of speak to why you understood the opportunity is so much bigger than people might have originally thought.

1:02:30Well, yeah, there's a lot there. I mean, frankly, I just love this browser automation stuff. If it wasn't, as popular as it is, I still would be doing it because I just love the stack. I love the problem. It's really interesting to me. It touches on the programming I did when I was a developer starting out, which was, how can I automate something and help my life and make things easier for me? And that often was interacting with websites on my behalf. So there's a bit of luck there because I just love the space. Now I'll reference one of our angel investors, Jeff Lawson, the founder of Twilio.

1:03:00When he was starting Twilio, people were saying, well, SMS is going to go away. Like, why would you build a company on SMS? And his point was that it's a very long bridge. I think it's the same thing here with browser automation is that sure, when we have Neuralink and all of our brains are talking to each other, software is going to be a lot different. But I think we have a really long time until software, especially software on the web goes away. and taking that perspective where browser base is going to build for that short medium term future and really build great technology to help agents run and do tasks on the web that felt like an opportunity that was a bit contrarian and you know when you're contrarian you find alpha and that's what we've done at browser base and as you can see today the public markets are reacting you know after our q1 results yeah triple q up 10 i don't know i think they may have gotten wind of what's happening at browser base and have really corrected accordingly i love it i love it uh can you talk Talk about, you said you sell to developers, obviously perplexity it sounds like as a client and a very large company.

1:03:56Do you have kind of self-serve offering where someone can just kind of start import this in one line and start to get hacking? And kind of how do you see the market developing from like prosumer, just some no-code developer is gonna be using a browser-based like product or you're gonna be under the hood maybe to someone who's you know building a business on top of browser base yeah for us you know you can get started self-serve you can sign up there's a free plan you can upgrade accordingly and then you know as you get to a certain volume we want to give you pricing that's right for your use case so there is more of a contact sales option longer term yeah but you know what we think about most is our business model we're a consumption-based business model which means that we only win if you build something that's successful so our incentives are very much aligned with helping our customers actually build applications that use browsers a lot, that are used by lots of customers.

1:04:47And a lot of my job as founder and CEO is going out and helping our customers really think about how can they use AI in the best way to help impact their users? Because you can kind of map one-to-one the browser hours they're using on BrowserBase to the time that they're saving for people. And we get really excited seeing that number chart up every single month because that means there's hundreds of thousands of hours that are being saved by people instead using BrowserBase. how do you uh was deep research the studio ghibli moment for agents or is there one on the horizon in your view it feels like you know we've talked about this on the show over the last year there's been a lot of you know we were at yc demo day there was a lot of like ai agent infrastructure companies i don't remember getting pitched that many uh individual ai agents but it does feel like as the underlying tech gets better and people figure out how to actually build quality agents that that will flip at some point.

1:05:41But I'm curious, do you think that agents are even priced into the market yet? I imagine you're seeing a lot of stuff in using browser base that isn't really in the public domain yet. Yeah. It's interesting because I really like to think about the vastness of our customers. Sure, we have cutting edge companies, but we also have a 55 year old dairy trucking company in the middle of America. And they hadn't hired a single engineer in all 55 years, but then they hired one and the first thing they got was browser based to automate, hey, how do we know what the gas prices are along this route? Previously, like an ops person calculating all the gas prices and they're like, Oh, maybe we can hire an engineer to make this easier with AI.

1:06:21So it's certainly AI has escaped Silicon Valley. And every company in the world is thinking about how to use it. And thankfully, browser based, since it's pretty easy to get integrated and get started with. We have a framework called Stagehand, which makes it easy to tell AI how to control a browser. Stagehand team behind me. Those guys, it's much easier to on-ramp to use AI. So we really try and think about like, you don't have to know what the cutting-edge models are. You have to keep up with the research. If you're using browser-based, we try and bring it all to you. In terms of it being priced in, I think there's a lot of people who maybe moved a little too early to AI agents.

1:06:54I think the Klarna story is a really good use case here where they went all in on AI agents, they threw away all the software. And then I think they had to walk that back a little bit. So it's still early days for agents. And a lot of that's limited by great infrastructure. And we think that if we can build good infrastructure that works best with the models, it can really help ease adoption. How do you, everybody's been really worried about AI agents and their sort of potential to be used in nefarious ways. So like, you know, releasing agents across the web that are just like, you know, effectively spamming people.

1:07:28Is that like, were you at all? I'm sure you can see if somebody is using BrowserBase in a nefarious way, you can kind of identify it quickly and eliminate access. But I feel like people have been just like worried about this idea of AI spam, but it hasn't seemingly had. It isn't so prevalent yet that it's that we're in like a crisis. Yeah. Yeah. The only place that I've seen it is LinkedIn. And we just disable LinkedIn on BrowserBase. It's just not a business that we work with. And we think the LinkedIn, you know, everyone at my LinkedIn inbox is crazy. It's just something we don't want to contribute to.

1:07:59For us, we really want to think about how can BrowserBase be an arbiter of good bots long term? I think there's this cat and mouse game and anti-bot blocks all bots, but there are good bots and bad bots. And we're in this really great position where we can actually be advocates for our customers that can talk about how so-and-so customer has 20 ,000 employees on Workday and the Workday APIs aren't really cutting it for them. And this is why they're using BrowserBase to automate it and build that relationship. That's why in our last round, we brought on Octa Ventures as an investor, the founders of Clerk, the founders of Stitch, the founders of WorkOS.

1:08:31These are people who are really thinking about authentication. And my view is that the Antibot problem is probably solved at the authentication layer. Antibot is just proof of personhood, right? So if an agent can log in on your behalf, that's going to be really good to match their actions to the person that they're saying they're acting on behalf of and hopefully match the rate limits there accordingly. Can you talk a little bit about the LAMA evals for LAMA 4? I saw that I believe someone from your team posted that they had done some kind of, I don't even know how you describe it, like private evals, stuff that you guys just look at directly.

1:09:04And how do you build that stack up? What are you actually testing for? And then what are your vibes around LAMA 4? Yeah. So what we did over the weekend, of course, whenever something comes out, we want to move quick and try it out. We're all engineers here. I'm an engineer and I love to try and play with new models. And with Stagehand, you can kind of imagine it like a burst cell SDK just for building what's called a web agent or an agent that browsed the web. So we can slot in any sort of model into that. And we have a standard eval set that we run Stagehand against. Common tasks on the web that we've kind of built up to evaluate different performance, like websites with dropdowns, website with date pickers.

1:09:40you know, the many different types of elements you see on the web, we want to see how our automation framework can stack up against that. We spent a bunch of money this weekend evaluating every single model that we could get our hands on against that eval framework. And we actually found that Gemini was one of the best performing models. I think it was Gemini 2.0 Flash. And Lama 4, a little bit more disappointing. Now, Lama 4, we used it with an inference provider, and we know the different inference providers can have different performance based on these different open source models. So I think it's still too early to call on Lama 4, but we're definitely excited about the stuff that Gemini is cooking up and we seem to have really figured out some of this interesting stuff with long context models.

1:10:16Yeah. And also Lama 4, they haven't released the behemoth model, like their biggest and best. So maybe that changes the conversation when that happens. And then there was also a discussion about, they might've used a different one on LM arena is getting, getting a little spicy on the timeline. What's your, uh, what's your Paul doom? What's your P doom? P doom. And specifically, I'm curious how you reacted to AI 2027 because I just want to go out and say if any of AI 2027 becomes true, I hope that you'll turn into a defense tech company really quickly and help unleash an army of good agents to protect humanity.

1:10:57Fighting on our behalf. Fight the good fight. Yeah, exactly. In terms of PDoom, my Paul Doom right now, very low. It still feels like there's a lot of capabilities they need to improve. Infrastructure needs to be built. And everyone seems really willing to work together, which is positive. I think I see a lot of partnerships happening in the ecosystem. For us, BrowserBase will be a partnerships company. We need to work with the cloud flares of the world, but also the OpenAI, the labs. When computers came out, we were able to launch alongside OpenAI and kind of get early access to that model and give them feedback.

1:11:28So it certainly seems like everyone is being collaborative to solve these problems. I mean, we'll see what tariffs do to model prices. I don't know if that comes down one of these days, right? But in terms of what's going to happen in the future, it's still too early to really tell, but I'm feeling pretty confident. I was going to say, what are use cases that you want to see more of? Like maybe you see it happening on browser base today, like the example of a dairy company, like trying to more strategically route their, you know, basically like manage their logistics to drive down costs is cool and sort of random.

1:12:04But I'm curious if there's other areas where you think there should be more people building these sort of browser use type experiences. Yeah, for us, we really look to like all these issues cases that probably don't need to be standalone products on their own. but really help individual businesses. We get really excited about companies that are kind of building things in-house. One insight that I've had is that as code creation has become easier, more and more companies are kind of opting to kind of semi-build in-house where they're pulling some primitives off the shelf, like some infrastructure, like browser-based or maybe super-based for the database, but then still building their own agent internally.

1:12:39And it's kind of interesting. It's like, if you have all the primitives available, can you just stitch those together using cursor and actually build something that's more bespoke to you? What we found from some customers is when they buy black box solutions, they aren't able to really tune it to their specific use case. And agents still need a lot of tuning for each individual use case. On the wider side of use cases I want to see, I really love seeing stuff around like every CEO should be looking at what do they have an operations team doing? Is it going to an insurance website and doing a credential check on a provider or insurance verification?

1:13:09Is it doing some interesting procurement task? Is it doing some manual research? And how can they automate that? There's a lot more tools out there than there were before. and it's easier to integrate than ever. Can you talk a little bit about the actual tech decisions you've made? I could imagine one version of computer use on the tech tree is like, take a screenshot, use a diffusion model to understand this. We're seeing this with images in ChatGPT. It's getting very good at recognizing text. It can recognize people within images. You could imagine taking a screenshot and just asking the vision model, where is the call to action?

1:13:44Define that in pixel terms so I can click that button. At the same time, you could imagine just passing the entire view source, like the entire DOM to an LLM and just saying, hey, write some jQuery that clicks on the call to action and make an educated guess based on that. You could imagine hybrid approach. What has been most successful? What are the paths that you are not looking at these days? Yeah. For our framework, which really kind of abstracts all of this, we use everything. And I think that's the important thing is it's not one size fits all. If it's just screenshots or just DOM or hybrid, you really need to kind of think about what's the context size of the website.

1:14:19It's a very long, complex website with a lot of HTML. You probably want to go vision approach. If it's craigslist.org, DOM is probably sufficient. So I think every single website has different configurations that work well for it. And with our products, we really try and help developers make those right choices or not have to even think about that and just give us all the models they have access to. We can route between that model based on the type of website that's important and help them build a reliable web automation. For us internally, we do really love the DOM based approach or the HTML based approach, just because it's frankly more cacheable, such that instead of having to send a screenshot to an LLM every single time, if the website doesn't change, you could probably reuse the same button you used last time to perform a workflow.

1:14:59So that DOM based approach seems to be like the more performant and cacheable longer term, it's also a little bit cheaper, but we'll see as computers models keep getting better, maybe there's gonna be some model level caching on screenshots where they can say, this screenshot we've seen before, this is the prompt we've seen before, we can say this is the same button. So as computer sponsors get a little bit better, it might be on more equal footing with the DOM based approach in terms of cost, but it's going to be up to the labs to really do some innovation there. Yeah. What's the team's take on vibe coding right now?

1:15:26Is it not a fit when you're needing to build reliable products that customers depend on for business processes or are you guys making it work internally? Yeah. So, I mean, the team doesn't vibe code very much on critical infrastructure, Sure, you know, that goes under a lot of review. But it's made shipping integrations with BrowserBase and StageHand easier than ever. And we've been able to integrate, you know, with LaneChain or Llama Index or Crew AI. And those kind of come out a lot faster. So this interconnected world that you're seeing with every tool integrating with every other tool, that's a lot easier.

1:15:56Vibes-wise, you know, something happened one day where the whole team switched from Cursor to Windsurf overnight. I'm the only Cursor user left. Maybe that means I'm slow to adopt. But it seems like people are moving between these IDEs pretty damn fast. And the next tool that comes out maybe could, it's like the great flippening, you know, between cursor to Wimserf. It just kind of happened at BrowserBase. Yeah, it feels like there's this Cambrian explosion in like AI tooling. And there's a lot of businesses that have built pretty solid businesses. We've seen like the crazy charts and the revenue ramp.

1:16:26And in the past, like cloud era, a lot of the companies actually went public, you know, like Twilio and MongoDB. are very point solution companies in my opinion, but they both built fantastic businesses eventually. But you could imagine a future where there's more competition and you're building into adjacencies or there's mergers or acquisitions and you kind of get some sort of like new age roll up of all the different AWS style tools in this infrastructure. How do you see the market evolving? Because at the same time, I imagine the hyperscalers are thinking about could browser-based be an option in AWS with the other 25 ,000 tools that they have up there?

1:17:11But yeah, I mean, obviously you're very partnerships driven right now. How does that evolve over the next couple of years? Yeah, you know, we are seeing hyperscale interest for sure. Amazon just launched Nova and the Nova SDK took a lot of inspiration from what we've done at Sagehand, right? And we really appreciate that. That's the DX that we're all settling on. It's the right way to do things. Now the model performance is a little bit subpar. And I think trying to build a model while also building a great framework is just a really impossible mission. For BrowserBase, we think about how do we build best-in-class infrastructure and are able to go super deep on a single vertical in a way that a hyperscaler might not be able to do.

1:17:41If you've used Amazon RDS versus maybe a more focused database provider like PlanetScale or Superbase, I think you'll find that the product just, it's not as exciting for developers to use. I think Stripe is a good example of a company that's gone very focused on something like payment infrastructure, but then layered on this product platform on top of that. When we look at the expansion opportunities for browser-based, I think it's a lot of interesting stuff. You know, think of every Chrome extension you have. You have your password manager. You have your payment information saved in there. You have your browser history, which is like memory for an agent.

1:18:09So we can think about more areas within the browser to offer as agent primitives longer term. But we're really focused on just building best-in-class infrastructure that developers love, building a framework that really works well for everyone, and just continue to move up the stack and find things that we can do to help developers build browser automations easier than ever before. Can you talk a little bit about some of the optimization vectors that the various foundation model companies are kind of sprinting towards? We saw this with Lama 4. They were claiming, hey, we got a 10 million token context window.

1:18:39I think that was 10 times bigger than what Google was touting a year ago or even a couple months ago. There's obviously the length of time a reasoning model can stay consistent. And that's like doubling every couple months now. There's different things about just, maybe it's not the highest IQ model, but it doesn't make stuff up because it's got a rag integration or something. And it's actually pulling real facts instead of just hallucinating constantly. And you can imagine that if I'm just thinking about like, what does a computer user need? Well, I don't want them to lie, but I also don't necessarily need like a chess grandmaster.

1:19:13so maybe I'm not optimizing for IQ, but where are you most optimistic about where the foundation model companies will go and what kind of problems or vectors or the shape of that progress looks like? What does the shape of the progress need to look like for you to really succeed? Yeah, for us, I really like this paradigm of splitting up reasoning models to other types of models. I think trying to make a generalistic model that's great at everything is going to be really, really hard. And you can fine-tune different types of models and different types of tasks if it's code gen or reasoning or even you know ui automation like a computer use model so more models means more choice for our customers in the end you know our customers are trying to choose the best model for their task and that varies because the internet is so big you know there's billions of websites and billions of choices on what you know you can use and or should or shouldn't use for us like we do see the reasoning models being closer to the agent loop whereas more like a 4.0 or a Gemini 2.0 flash being more close to the tool calling makes a lot of sense.

1:20:13You want the expensive model making the decisions and the cheaper, faster model maybe making the individual tool calls. That's been a great paradigm split and more of our customers than ever are actually using models from different providers. So it does seem like more choice means more innovation and more ways to kind of mix and match the best of every sort of eval. Very interesting. I want to get your take on the latest from Microsoft today. They just, this just leaked out or something that Microsoft said it would no longer move forward with its plans to build data centers in Licking County. The company had planned to invest a billion dollars initially towards three data center campuses in New Albany, Heath, and Hebron.

1:20:49Microsoft plans to ensure the land at two of the three sites will be available to be used for farming. And Nick on X says, yep, it's over. So how are you feeling? I mean, obviously there's a lot of turmoil in the markets around tariffs, but I feel like the whole narrative of like, maybe we're getting over our skis on CapEx and hyperscaling. Is all this just noise to you because you're just focused on product experience and you don't really need a 10x improvement in the foundation model performance that might come from a bigger data center build out? Or are you still like inference bound and you're like, yeah, it'd actually be great if they move forward with that.

1:21:27What's your take? Yeah, from what I've seen, the labs are still innovating. And I don't know if Microsoft is a lab that I really think is going to be an innovator as much, you know, so I don't think OpenAI or Anthropic are holding back on investment. Now, does that mean they're signing massive data center contracts right now? I think people are kind of waiting to see what happens in the macro sense. For us, I'm very downstream of that, right? And of course, we're, you know, a private company, venture backed, things that happen in public markets tend to trickle down to private companies. So being aware of it, but with browser-based, with the traction momentum so far, we've had no shortage of inbound, and it feels like there's a lot of room to run for us, so not really concerned.

1:22:06My last question, and you've covered some of it before, but can you talk about just general capability overhang? there's this like you know with with all the evals and the sort of pressure for the labs to constantly be number one or at least be you know at the top it feels like that's almost like a distraction at times from just like delivering all the capability that is now possible but i'm curious what your take is on that yeah maybe answering this in another way and we can go deeper but for browser ways to exist there needs to be healthy competition at the model layer and we see that models are more fungible than ever people are switching between models all the time And people don't want to switch their infrastructure.

1:22:46They want to have a piece of infrastructure that works. They can kind of integrate with a little more deeper. And if that means plugging in different models, that's just going to help them long term. I think there's a lot of innovation that needs to happen at the model level. Some stuff like multimodal tool calling being supported by all model providers and not just anthropic. This is like a lack of capability. But it seems like every time someone innovates, that does trickle down to the other labs. So it doesn't seem like there's going to be a shortage of choice from customers. And there's still a lot of innovation happening, especially in long contexts.

1:23:14Like we think that long context is going to do a lot for DOM based web agents. And there's still a lack of true performance there. But we think with time, all this stuff does just get better, cheaper, faster. And it's inevitable. I want to ask you about this other story that kind of broke recently that OpenAI is considering acquiring a hardware device manufacturer that was started by Sam Altman and Johnny Ive, the ex-Apple designer. potentially designed includes a phone without a screen and an AI enabled household devices. And I'm curious to know your take about like, generally we saw like the first wave of this with like the Rabbit R1, the Friend, the Humane, and some of those didn't go so well.

1:23:57Some of them are plugging along, but I could imagine that maybe the Studio Ghibli moment or the Turing test moment is when, yeah, I don't need a screen because I trust that I'm not just using this pin or this device without a screen as a knowledge engine, but it's actually able to go use a web browser on the back end and just talk to me in conversational. I know that's a little like sci-fi and maybe like, I don't know, maybe it's like three months out. Who knows? But I want to know your take on kind of devices and how you could see browser-based plugging into all that ecosystem. Yeah. You know, for us, like consumer web automation isn't really a focus just because that i think that is one on the device level and i think that google the apple i mean apple intelligence not really something i use every single day and oh i hope it gets better right but you can imagine the amount of data they have access to the integrations with your existing life they're really well positioned to offer more consumer web automation you can tell siri hey go book that restaurant and it's going to have a lot more capabilities to do that maybe even on your device right but for our customers customers who are kind building like i said these more traditional rpa or maybe using bpo or maybe they're a company that's building something more verticalized to go sell to someone who uses rpa or bpo those people are still going to need infrastructure the way that they because they're building applications and that's who we focus on yeah i i wish open ai the best with that and i hope it works i want more cool devices i wanted to grab it to work and humane to work and i i don't have a friend avi hooked me up i'd love to get one you know uh i i want all these things to work because I want this cool sci-fi future.

1:25:29So I try and stay super optimistic about that and hope it into existence. Yeah. It doesn't feel like it's super in Apple's DNA. Like if they, even if they just had, you know, an Apple intelligence query, oh, like summarize the news for me, you know, that they're going to do a bunch of partnerships and then they're going to pull that in from an API and it's going to be as, uh, as deterministic as possible. Like there, I feel like Apple does not have probabilistic computing in their DNA. And I'm sure you have to deal with a lot more rough edges. Are you seeing, the thing that we're seeing with like agents, and we heard about a little bit of this with like the dust up with like AI SDRs, is just that the like a hallucination rate of 1 % is unacceptable.

1:26:13How are you thinking about like keeping a human in the loop? And just kind of like, even how do you message to a client the reliability of your model? Obviously, you have benchmarks for all the LLMs that you're using, but what kind of claims are you making? Because I think we all understand that, like, hey, this stuff's new. It's moving fast. It's improving. Like, you got to go, you know, fast and just, you know, test this model and not put it in, like, a life-critical situation yet. And you can still get a lot of value out of it. But how are you pitching BrowserBase to folks? Yeah, short term, you are going to need some human supervision at some point, right?

1:26:46And the way that we allow this with browser-based is we have this thing called the live view, where you can actually embed an iframe that shows the browser working. And with the browser working, a human can take over if the agent gets stuck. And you can imagine maybe the future that's like very immediate is not a browser doing all your work for you, but maybe more of like a devon experience where the browser is doing 90 % of the work for you. And maybe you have to come and do the last 10 % once in a while. yeah and when we talk about with our customers like how do we build human into the loop into the designs that you currently have in your application to make it just super easy to have that escape hatch into the human operator if something isn't working yeah yeah that makes no sense uh well thanks so much for stopping by congrats awesome progress this is great thanks guys to the whole team would love to have you uh back on next time there's news yeah this would be great appreciate it guys we'll talk soon bye uh next up we have tracy alloway coming in to the studio.

1:27:36But first, let me tell you about bezel shop over 24 ,500 luxury watches, fully authenticated in-house by bezel's team of experts. The market's up, baby. Take, uh, what do they call it? Uh, uh, take some gains or whatever. We realize some gains, right. And, uh, convert it into a watch. If you bought yesterday, uh, you're doing pretty well right now. Yeah. If you bought the dip and you, and you're up, you know, treat yourself. You've been working hard. You've been working hard. You deserve it. Go to, go to bezel, uh, download the app as well. and we have Tracy in the studio, I believe. Not yet. She's coming in in just a minute.

1:28:10She's been covering the chaos in the markets very closely. Odd Lots has been on absolute tear. They had Ryan Peterson on. They've had a bunch of people dig into the reactions to the tariffs. She also just put up everything about the basis trade, which I want to dig into with her. She writes, it's worth taking a detour to explain just what the basis trade is and why it became so popular. To do that, we need to go back even further into the dark days of 2020, all the way back to the aftermath of the 2008 financial crisis. Scarred by the near collapse of the financial system, policymakers moved to make bank safer.

1:28:46And here she is. She's in the studio. Welcome to the show, Tracy. Thank you so much for having me. It's been a wild week. It's hard to imagine. It's just been seven days since Liberation Day. Yeah, it's crazy. And I was messaging you about this. I really appreciate you coming on in the midst of the chaos because I think it makes for a better conversation. But also, when the markets are crazy, is your job crazier? Are you doing more episodes, more research, more blog posting? I mean, I'm reading from your stuff. Or in some ways, the job easier because there's just so much attention. Yeah, yeah.

1:29:18You don't have to come up with a wild story. Hey, let me take you on this really obscure deep dive that you've never heard about. What's it been like on the work front? Yeah, we definitely don't have to scramble for content at the moment. It's been a fire hose of content. We've been rushing out episodes. The great thing about OddLots is, as you mentioned, we span this wide range of finance, markets, and economic subjects. We did a lot of supply chain and trade episodes back in the 2020 pandemic when there were all these disruptions. Now we can just tap our previous guests, all the logistics experts, the truck drivers, shipping companies, small and big companies, and ask them, like, what's going on and what impact is this actually going to have on your business?

1:30:04Yeah. I want to start by asking you to explain the basis trade to me, but like I'm a VC, similar to explaining, you know, maybe like a child, like I'm five years old, but to a VC that, you know, considers themselves a macro expert, but maybe isn't. Yeah. What will this look like in the form of a X thread in three months or a memo that's hastily written to every entrepreneur in the portfolio in two weeks from now? Bring it down. Oh, man. It's going to be hard putting it in language for a VC. What I would say most simply, basically, the basis trade is arbitraging the difference between a cash treasury and a futures contract on that treasury.

1:30:48And historically, this has been a really safe trade. The spread or the difference between them has been pretty range-bound, very, very tiny. Because it's been tiny, investors like hedge funds and active funds, what they do is they go out in the market in something called the repo market, the overnight funding markets, wholesale markets, whatever you want to call it, And they borrow from banks, from broker-dealers. And this leverage allows them to amplify the returns they're getting from this arbitrage between the cash and the futures. Now, the problem, and we've seen this a couple times now, is when the entire financial system starts de-risking all at once, suddenly investors can't really roll over these trades.

1:31:36They can't necessarily sell the cash treasury bond in order to close out the trade because the broker dealers, they do not have the space on their balance sheets to actually absorb those extra bonds. That's the big difference. We saw it in the pandemic and we're seeing it now in 2025. The thing to remember is really, you know, the financial system isn't built to handle like a 10 percent decline in the S &P 500 and a simultaneous surge in bond yields. It just isn't. There are supposed to be hedges that banks can tap to manage their risk, their capital. Instead, they're de-risking all at once. And that has consequences.

1:32:22So who's hurting the most? I've been joking that this is a bull market for short sellers. It's a golden age in the VIX. But with regard specifically to the basis trade, is this putting more pressure on banks, hedge funds? Will this actually affect the VCs that we were joking about? Or can they just kind of ride it out because they have LP agreements that date out like 12 years? Yeah, definitely a good question. Who's hurting most? I mean, obviously hedge funds that had the basis trade on active fund managers by the way are are really big players in all of this and we've heard anecdotally in the markets that they've been selling quite a lot too banks probably are not having a fun time at the moment but on the topic of vcs i mean i think we have to step back a little bit from the basis trade and talk about just those surging bond yields in general.

1:33:14So, you know, bonds are supposed to be boring. They're not supposed to be moving around that much. They're not supposed to be talked about as much as they are in general news over the past couple of days. And the reason is bonds are the benchmark borrowing cost against which all other loans are basically judged and measured. You know, So refinancing for mortgages, refinancing for corporates and companies. And this is where it comes in for VCs, right? Over the past few years, VCs have been showered in money. I know there have been breaks in that trend, but in general, showered with money. Cost of financing has been going up.

1:33:57That would seem to be an issue, at least for a lot of VCs. And then the one other thing I would add here is uncertainty in the market doesn't look like it's going to go away. So, yes, we had the pause on tariffs just announced today. We still don't know what's going to happen with China and the U.S. Trump has basically destabilized every form of capital out there. Stocks, bonds, domestic, international. it's not clear whether or not he's going to be able to put the tariff threat toothpaste back in the tube now. So I think that uncertainty is going to stick around. And what that means is less capital willing and available potentially to actually fund a lot of risky activities like VC, like tech.

1:34:48I have this narrative and I want you to tell me if it's COPE or not. But somebody was, I was talking to a friend and they were saying like, this feels as bad as the COVID drawdown or the SVB crisis and the interest rate hike that caused a lot of turmoil in markets. And I was saying like, yes, the magnitude of the move is significant and the economic indicators are significant. But this is fundamentally different potentially because that toothpaste can kind of go back in the tube because it's within the president's remit to just say, hey, everything's going back to exactly the day before Liberation Day.

1:35:26That was a weird fever dream. We're back to what it was before and markets might respond to that. Whereas in 2020, no one could ever say, oh, actually, COVID cases are non-existent now. It was not within the purview of the president. Is that a ridiculous narrative or is there something there? I mean, I think some investors would probably say in certain ways it's scarier right now. And I think you need to remember, you know, the experience of Monday. So we have one person, the president, who's effectively controlling this entire narrative, this entire story. As you mentioned, at any one time, he could have issued a statement announcing a softening in the position or maybe just saying something other than be cool to markets, something comforting and realistic for them.

1:36:17He chose not to do that. And in fact, whenever there seemed to be a positive headline on the horizon, whenever people seem to be talking about like maybe things are going to start to calm down, the administration really seemed to rush out to bat those away. And the big example was we saw that mistaken headline on Monday about a potential pause and the White House was out, you know. From the other Bloomberg. Yeah. That's right. From Mr. Bloomberg. Yeah. They were out within minutes to slap that down. And this is the difference, right? In previous crises, 2008 being a really good example of this, we knew that policymakers were basically all pulling in the same direction.

1:37:02They were trying to rescue the financial system. And as part of that, they were probably wanting asset prices to go up. I don't think that's been certain at all over the past seven days. um yeah three yeah what uh how do you rate the admin's spin on the announcement today like you know you you had said earlier that they just they blinked right a lot of people um you know uh trump supporters historically have just said like oh it's 70 chess like this was the plan all along right and so your your position generally was like no he blanked you know that the tenure was like ripping in the wrong direction and like they basically needed to do something uh is that is that correct i think that's right um the thing to remember here is okay the great thing about 4d chess 14d chess whatever we're so past 3d chess which i think i know the original metaphor.

1:38:06It's like those Gillette razors, right? We just keep adding blades. I saw someone posted a picture of one dimensional chess. It's just one line. I thought that was pretty funny. Right. Okay. So when you have this 14 dimensional chess or whatever, you have a great tool to basically spin whatever happens the way you want it. And, you know, I think it's very clear that Trump supporters are seeing this in a different way and Trump critics are seeing it in a different way i would say the one thing to look at is the administration's own scorecard they've been pretty explicit that part of what they wanted to do on the u.s economy was to bring rates down bring bond yields down they want to make it cheaper for people to get mortgages they want to make it easier for companies to refinance their debt they want that booming market in the u.s a booming economy all that manufacturing to be built, which necessitates quite a lot of capital, and that has to be secured and financed as well.

1:39:10And instead, we saw bond yields ripping, right? Like touching 4.5 % this morning. So I think by that measure, by the administration's own scorecard, this has been a miss. Are there any other levers that the administration could potentially pull to bring down bond yields? What do you think's at the top of their tool chest right now? Yeah, I mean, the 90-day pause alone is having a pretty big effect. And this has been the story of certainly today, probably the past three days, is the whiplash in markets. So, you know, stocks plunge, stocks rise. I think the last time I looked at the S &P 500, it was up like eight or 9%.

1:39:56You have to keep your eye on it at all times on this day because it moves around so much. Same thing for bond yields. So after the announcement, we saw the 10-year, I think it went down to like 4.36%, something like that. That's a pretty big drop. And then just to give you an idea of what the mood has been like on Wall Street and how whiplashy everything has been, Goldman Sachs actually put out a note this morning saying that their baseline forecast for the U.S. economy was now a recession because of tariffs. About an hour later, we had the tariff pause announcement and they had to send out another note saying that they were rescinding their forecast and no U.S.

1:40:41recession was on the table. What percentage of True Socials users do you think are finance bros trying not to miss the next trade? Like I have to imagine that there has to be some edge in being, you know, in the first hundred people to see one of these posts. That was a great time to buy. Is there, is there, do you think there's high frequency truthing where people are trying to get near the, basically get near the. I'm sure the feed's going in somewhere. But yeah, how do you, what's your, I mean, I don't, I don't even know. I was going to ask, like, we don't even need to go there. It's going to get too political.

1:41:23What do you got, John? I mean, I guess I want to know. I was kicking around this idea with Jordy earlier on the show that there are a lot of ways to evaluate these new policies and new regimes. And there's been a lot of discussion of, like, this isn't just a slight change in trade policy. This is, like, a complete flipping of the board, a complete reevaluation. and it seems like the most cautiously optimistic folks are like, maybe this is short-term pain for long-term gain. But there's been a little bit of squirminess amongst supporters to say, oh, well, I was joking earlier that, well, the 10-year is yielding more, so it's a better time than ever to give your money to America and you'll earn more money on that money.

1:42:10And so maybe that's good for that type of person. And you can kind of spin any of these economic indicators in a positive sense if you try hard enough. But the measure that I use is one that I go back to the Trump one presidency and I look at the original tariffs on China. And those were not rolled back by the Biden administration. And so it's what I'm calling like eventually bipartisan. bipartisan. And so I'm wondering if it's like, I don't know if I can really withhold judgment for, I don't know, it might be eight years or four years or however long it's going to take. But if this policy, if we look back on it and we say, okay, yes, like it stuck around, it eventually became bipartisan, is that a win?

1:42:54Or do we need to just look at it through an economic lens in the short, medium and long term? I mean, that's a really good question. I don't know if you watched the Trump press conference that was just on a few minutes ago, but he was talking about how Biden left the U.S. economy in a terrible position and wasn't able to strike good deals with China. I mean, I would say the Biden administration kept a lot of the restrictions on strategic exports to China over the past four years and in some ways actually went harder on China technology as well. So I just don't know how a bipartisan deal would actually be interpreted and viewed by not just politicians, but the general public.

1:43:39It's really hard to tell. Everyone seems to be on their own little plane of reality at the moment. So who knows? Who are you tracking? I mean, you mentioned that you went through the logistics and the shipping folks and the ones that are most impacted, like they have iPhones on planes right now. that's the most immediate impact. What do you think the second and third order industries that are most important to track in order to understand the impact of the tariffs as they evolve? Yeah, I mean, oil is a really big one. And in fact, we had a really interesting survey from the Dallas Fed. I think it was last week or two weeks.

1:44:15I can't remember because so much is happening. But they're basically in charge of the oil patch, right? They're down in Texas, monitoring what's going on with energy businesses. And they put out this survey where they basically go to a bunch of oil companies, you know, drillers, suppliers, and they ask them, hey, what's going on? How do you feel about things at the moment? And the replies are all anecdotal. But, you know, the respondents, they talk about how they feel and they put like little numbers on it. They grade the vibes, as you might put it. But they also get to write written comments.

1:44:53And again, they're anonymous. But if you look at what was in the survey one or two weeks ago, those written comments were dire. I mean, people were talking about how the threat of tariffs, and again, this was before the tariffs were actually unveiled, how bad the threat of tariffs actually was for their business. And I remember there was one quote in there. It was a supplier for energy companies saying that he had gotten a call from a customer in Canada asking them if they could move production to Canada because they were worried about the tariffs. That is the opposite of the, you know, presumably intended effect of all of this.

1:45:38Yeah, I saw actually Mr. Beast of all people commenting on the tariffs. He said, ironically, because of all the new tariffs, it is now way cheaper to make our chocolate bars that we sell globally, not in America, because other countries don't have a 20 % tariff on our cogs, which I never thought I'd see Mr. Beast use the word cogs, but he's in the business now. You know things are wild when Mr. Beast is making coherent tariff commentary. Yeah, no, and it makes sense. He does sell globally. He has a massive global audience, and he makes everything in America now, and then he sells it all over the world.

1:46:12But it makes sense that he would take some other stuff offshore. Where do you look for signal, right? You obviously have your Bloomberg terminal. I feel like Joe shares more screenshots of that than you do probably. But where do you look for signal in a world where everybody is conflicted in a different way, right? Some of the loudest people of the last week are fund managers who have big positions on the line. And everybody's got some conflicts. But I'm curious how you try to see through all the noise. Both Joe and I are glued to the Bloomberg terminals and Twitter X interfaces at all times. One of the things I've kind of enjoyed doing over the past week is just basically looking at what the hosts of the All In podcast are saying online and then assuming that the exact opposite is going to happen.

1:47:04So, you know, we had David Sachs, for instance, talk about like, oh, the crash is over. Then we saw stocks plunge again. We saw Chamath. He was he was very much in favor of the tariffs. He was kind of cheering them on. And he was also criticizing stock investors who were, you know, complaining about their losses. I think he had a David LaChapelle quote basically saying to, you know, shut up about those losses. And then at the same time, he starts talking about how he's buying credit risk, credit risk insurance through CDS. So effectively betting against corporate America. At the same time, he's talking about like how good these tariffs are going to be.

1:47:47Yeah. How do you think about reading into the insider commentary that's happening? There is that take that it's like, oh, like they're wrong and you do the opposite. But at the same time, like proximity to power is a valuable source of information that you have to imagine that there's real information that's being disseminated, even if it's just like, oh, this is the vibe and I'm passing that along. How do you balance those two things? Yeah, I think you're absolutely right. VCs are very good at interpreting the vibes. And in fact, I remember we had Jason Calacanis on the show a few years ago. And one of the important things we learned from him is that the emphasis on the vibe shift.

1:48:28So, you know, back in 2020, a lot of technology companies made money hand over fist, but a lot of them didn't. Right. And the criticism was, if you cannot make money in this extraordinary time period when rates are really low and people are scrambling for all these different tech services because they're stuck at home, then there's a real problem with the business model. That was one of the narratives. But the point Jason made was that some of this made sense because investors at that time, they were not demanding that companies actually make money. They were very satisfied if companies were just spending to grow their market share.

1:49:15So I think that's really interesting and something to watch. What are investors actually going to start asking for here? um sorry no i had a i'm curious so we spent the beginning of this show talking about apple specifically in the position that you know apple basically has like a china problem and that like you know if your supply chain is dependent on china and china invades taiwan at some point like you're probably not going to get uh certainly not get as many iphones or components out of there but then they also have a trump problem and that they're just sort of like probably also internally refreshing truth social you know wondering uh what what uh trump's gonna do to their business next but um bill ackman had a post this was uh right around when we started the call he said time is not china's friend every u.s company that sources products in china is in the process of finding alternative suppliers supply chains are time consuming can be expensive and challenging to move but once they're moved they are sticky tick tock i look at this and i'm like if we have a three-month pause on tariffs and you know the Chinese tariffs are still happening like sure you know it's hard for me to see you know for for these big multinational firms like Apple or Nike it's not like like yes they're starting to make moves but I'm not sure that of course time isn't their friend but I I don't know I'm not sure I'd sort of broadly agree with this take yet.

1:50:46I'm curious how you think Apple should just be like responding to this in general, because it feels like it's going to be this sort of like dark cloud, you know, over the sort of share price for basically, potentially a decade, right? The sort of big China problem. Yeah, so a couple things on the China problem. So number one, the 90 day pause on tariffs on pretty much every country except China opens up a pretty big window for companies to actually start arbitraging manufacturing costs between China and the rest of the world. We saw that in the first round of Trump tariffs back in 2018. A lot of Chinese production just moved across the border to Vietnam or it moved to Mexico.

1:51:34And effectively, these were Chinese goods that were just being shipped somewhere else before they were shipped into America in order to avoid the tariffs. That's a real possibility now, especially if Trump sticks with those higher rates on tariffs, the ones he threatened earlier today. And then the other thing I would say on China, you know, the thing to remember is China is in a really interesting place right now. And obviously, so is the US. The Chinese economy has been slowing. And as part of an effort to reverse that, policymakers are really trying to revamp the whole structure of the system and increase consumption domestically.

1:52:17They want people within China to be buying more goods. At the same time, the U.S. seems to not want people to buy a lot of goods or at least not foreign goods. And we're all about manufacturing. The roles have reversed, right? The U.S. wants to be a manufacturing powerhouse and China wants to be a consumption powerhouse. It's very weird in many ways. But the big question is going to be like, how successful is China in transforming its economy? Because if it manages to do that, it never really has before. But if it manages to do that this time, that could be a pretty decent buffer for, you know, some of the economic impact.

1:53:02The grass is always greener on the other side, I guess. I want to talk about the penguins. You know, I saw that there are tariffs on the penguin island. Everyone was laughing at it. But it seems like, you know, entrepreneurs are so enterprising that if I needed to do final assembly on some penguin inhabited island to avoid a 200 % tariff on my Chinese good, like there's an economic equation where I would actually do that. Was it that crazy? Or do you think there's some theory to the penguin island getting tariffed? you're gonna ask the penguins to put together your uh your iphones i mean probably like bring in people and set up a basic assembly i mean it like it has a high cost because you got to get there and get back but at a certain point it maybe makes sense i don't know is it completely crazy i mean look i think moving production around is definitely a possibility are we going to move it to tiny islands somehow i doubt it and this kind of like this opens up the question about why the U.S.

1:54:05is doing this in the first place. So, for instance, one of the tariffs that Trump unveiled last week was, I think it was like a 30 % reciprocal tariff on the island of Nauru. Like, this is a tiny island. It primarily exports, like, pig meat and sausages to the U.S., like a million dollars of pig meat a year. So what exactly do we want to get from a place like Nehru? I don't think they're going to be buying Ford cars when they have basically 12 miles worth of road. Yeah. I want to talk about TikTok a little bit. It's been odd to me that the progress on any news around TikTok has been so slow, and yet the tariffs have been so fast and aggressive.

1:54:53Is there some underlying thesis there? Is TikTok one of the chips in a larger discussion? Or do you think it's just like, it's just low priority relative to everything else? And I really don't know. It's very hard for me to tell what the administration is prioritizing at the moment. And I got to say, you know, on the same day we saw Trump make this huge announcement, Howard Lutnick said it was one of the most important truth social posts ever written. And the same time he announced the 90 day pause, he also signed an executive order to increase water pressure in showers. Oh, yeah. Like this actually happened.

1:55:34You know, he signed the order. There are stories out there where he's saying no longer will American showers be be weak with low water pressure. I mean, I don't know. With everything going on in trade and markets, I might not take the time to fight against low water pressure, but the president is idiosyncratic in that way. He loves a good headline. He loves starting a new cycle. I think if it doesn't happen in a single day, it's a failure. He's like trying to distract the Panikins by giving them you know, uh, uh, you know, more water pressure. That's his strategy. Yeah. Yeah. I mean, so, so, I mean, you've obviously been following this very closely.

1:56:15Uh, we'll, we'll let you go in like two minutes, but, uh, just general like predictions for where this goes or how people should be thinking about this more holistically. Uh, cause if this is what it's going to be like for the next four years, it's going to be a full employment for us. Uh, but a lot of chaos for everyone else that's maybe listening, where do you think this goes? And what are your big takeaways from the last week? Yeah, content for us, but bad news for a lot of other people, for sure. I mean, I think it goes back to that uncertainty element. So the first thing you learn in financial markets is investors hate uncertainty.

1:56:53What we've seen over the past week has been in many ways, unprecedented, Like a single man, the president, controlling this entire narrative around trade. We've seen fake headlines that have had a really big impact on markets. The reason they're able to have such a big impact on markets is because investors are hanging on every single word from the president. And so if they think the president has said, oh, there's a 90 day pause, they react to it. Right. That is really weird where we have this like single source of information that the market is focused on. And that's not going away. Like the threat of the tariff, as I mentioned, like the threat, the tariff threat toothpaste not going back in the tube.

1:57:41And I think even if we see countries really rush to strike some trade deals, which they might actually do, the threat of tariffs is going to be hanging around in the background for the next four years. People are going to be wondering about what exactly America is trying to do here. It seems very clear that Trump thinks, you know, America's special status in the financial system, the dollar's status as a reserve currency is a burden rather than exorbitant privilege. A lot of people would say America benefits from this. Trump doesn't seem to see it that way. I doubt he's going to change that particular worldview over the next four years.

1:58:23but you know maybe he starts listening to some advisors um and he tones things down a bit but i i really think the uncertainty is is here to stay for sure well let's hope we get some certainty uh prediction more uncertainty i think that's a we can lean we can lean on we can lean on that that is certain yeah uh well thanks so much for joining us thank you for joining conversation thank you it was fun yeah hopping on uh have a great good luck with everything we'll be following along we'll talk to you cheers bye and next up we have bass power coming into the studio we got justin lopas from bass power announcing a massive round get the size going ready no idea how big this round was he told me he was announcing like a series b and i assumed oh series b 20 million 30 million it's 200 million it's 200 million he's gonna break it down for us explaining what they're going to do.

1:59:18Let's read through their announcement while we wait for Justin to join. He says, we're excited to announce that Base Power has raised$200 million in Series B funding, co-led by Addition, Andreessen, Lightspeed, Valor, with support from Thrive Capital, Altimeter, Trust Ventures, and Terrain Capital. Addition's Lee Fixel joins the board alongside Antonio Gracias of Valor Equity Partners. What a stacked board. And we'll have to ask Justin about it. He's here in the studio. Welcome to the show, Justin. How are you doing? congratulations congratulations what's going on absolutely phenomenal series b announcement uh how are you doing today Can you hear us?

1:59:58He's locked in. He's locked in. He's building. He's putting the 200 million to work already. How are you doing? Nothing? I'll keep reading. Power demand is soaring and the grid must evolve to meet the challenge. We're accelerating an energy abundant future through distributed battery storage and investing in American manufacturing capabilities needed to make it real. Another company that's focused on American manufacturing. We've talked to a few of them, all major beneficiaries of the tariff chaos to some degree, although I'm sure that there's deeper supply chain stuff that we'll get into and try and understand where all that goes.

2:00:31In under a year since launching base has become the fastest growing, one of the fastest growing battery storage developers in the U.S. More importantly, we've assembled a talent dense team of engineers and operators all focused on modernizing the grid to make more power, more reliable and affordable. And let's hear from Justin. I believe he's in the studio. How are you doing, Justin? Good, good. Thanks for having me. Really appreciate it, guys. Yeah. No, it's great to have you on. Big day for you and the whole team. Congratulations. We've been following your journey for a while now. And it seems like the momentum is just building.

2:01:04Yeah. Can you give us a brief introduction on the company? I actually don't know the prehistory. I'd love to know how you started the company, how you got to this moment. Seems like a quick ramp to a$200 million fundraise. Some stuff must be working really well. So break it down. Certainly, yeah. So I guess I started the company about two years ago, launched the product. just a little under a year ago. Now, let me tell you what we do. So we are developing distributed energy storage for the grid with the ultimate mission to fix the grid in the U.S. I think if you look at the sort of modern energy industry and sort of power companies there within, you'll see that there's a lot of money and smart people and technology going into making more electricity generation.

2:01:53You guys report on it a lot, SMRs and solar and wind and oil and gas and such. And the same thing on the consumption side, more EVs, more heat pumps, and better consumption and cleaner consumption all around. But the grid is the thing that connects those two. And that has been sort of woefully underinvested in from a technology and operation standpoint. And so that's what we're really here to do is to ultimately fix the grid. where we're starting today or about a year ago with our first product is distributed energy storage so what that means is we install batteries on homes that we own and we operate and we use to support the power grid we're based here in austin texas and we have operations in austin houston and dallas and san antonio the kind of the texas triangle and that's the business today we're today we're announcing the series b fundraise as you mentioned and using that to sort of fuel the next stage of growth in and out of Texas.

2:02:51Can you talk to me a little bit about what this means for the grid long term? Is this something where it reduces the variable load on the grid and we can train more AI models in the data center or something? How does this play out? How bad are the problems? Are we fighting the basic fires or are we dreaming of a utopia here? Yeah. So I'd say from the grid writ large, we're still in the fight the basic fire. So here's why batteries, and in particular distributed batteries, are good for the grid and help add capacity. If you look at any sort of average wire going through the grid, whether it's on the transmission side, sort of think the stick-built steel structures on the side of the highway or the distribution grid, think the wooden poles in your neighborhood, any one of those lines is heavily underutilized with respect to its capacity.

2:03:43So let's say that a line can carry 100 units of energy at any given moment, units of power. On average, that line is used on the distribution side with 20 or 30 units of energy. So it's heavily underutilized. But the problem is that certain times of the year, think August 15th at 6 p.m. when everybody came home and turned on their air conditioner and plugged in their AV and turned on their oven, that line is at 100%. And so the grid has to be built for the peak load. It's not built for the average load. It's built for the peak load. And so what distributed batteries allow you to do is reduce those peaks in specific areas.

2:04:20You can choose where those areas are. Our software does that. And therefore, utilize the existing grid infrastructure for far more load. So that's AI data centers, as you said. That's more EVs. That's more electrification of heavy industry and such. Can you talk about the decision to start in Texas? I have some ideas around it. And then I want to ask you about what's going on with the California utility providers. Apparently, I live in Malibu and apparently like our local utility provider is in like an adversarial relationship with like the city government. They're basically just like fighting all the time.

2:04:58And so what that means, they just turn off the power if there's any any ever any issues. But maybe let's start with kind of why you guys got started in Texas and then where you're thinking of expanding to. and then really kind of like that dynamic between cities, utilities, and consumers? Certainly. So the reason we started in Texas was pretty much the obvious place to start building a business like this. So there's a few reasons. One is, folks might know this, Texas is actually its own grid. So there are three grids in the U.S. There's West, there's East, and then there's Texas. Texas is basically an island from a grid standpoint.

2:05:35And so what that simply means is you can't borrow from your neighbors when you need more and you can't share with your neighbors when you have too much. And so that leads to a lot of volatility on the grid where you have sort of supply-demand crunches, for lack of a better term. Additionally, there's a ton of renewables on the grid in Texas. It's a little bit perhaps counterintuitive, but there's more solar and wind on the grid in Texas than in the grid in California or anywhere else in the U.S. And so that also drives the need to store energy when the sun's not shining or the wind's not blowing.

2:06:06Furthermore, in Texas, there's a sort of regulatory aspect. And so our first go-to-market motion is what's called the deregulated portion of the grid. All that means, by the way, there's a ton of regulation. This does not mean it's the Wild West. What it means is that you can sell power to people. So if you're a homeowner in Houston or Dallas or North Austin or other parts of the state, you not only can but you have to choose who you buy your power from so if you're in malibu you're probably your utility providers probably ladwp or maybe socal edison and if you want electricity at your house you got one option the only one game in town here in texas companies like us can start and become a utility provider and what that means is that we buy electricity from the generators we pay the poles and wires companies to get it to the house and then we sell it to the house at retail and that allows us to monetize the value of the batteries behind the meter at the customer home.

2:06:59So again, we own and operate the batteries as opposed to sell them outright to customers. And so what that means is that customers don't have to shell out tens of thousands of dollars to go buy a battery like they would if they went and bought a competitive product or they bought a generator. And so that's sort of the other sort of fundamental reason why Texas. Now, you also asked about cities and utilities and such. We could spend hours on this topic, But very simply, there are a handful of some utilities in the country like LADWP, which I think is your utility, is actually owned by the government, by the city of Los Angeles.

2:07:36It is a government-run utility. Funnily enough, actually here in Austin, Austin Energy is the utility that's owned by the city of Austin. In other parts of the country, like in Orange County, where I used to live in Southern California, that's a private company. That's a company called SoCal Edison. They're publicly traded. And so you have this weird dynamic between cities and utilities that can result in frictions around technical standards and permitting and all this and shutting off power when there's too much wind and all this other stuff. And it's – I think the thing that you guys and maybe your listeners in Southern California is different in the Detroit area where I grew up.

2:08:17It's different in Florida, et cetera. It's kind of a very state-by-state thing. And the state governments typically have a lot of authority and control over how the energy markets are run and how the utilities are regulated. How are you guys reacting to the tariffs? There's a lot of I mean, the only thing you can lean on right now is uncertainty. We don't really know what's what's going on. I imagine there's businesses in the energy space and solar that are specifically low margin, completely dependent on China, and maybe aren't even viable at this point. Base power is sort of got, I think, a more sophisticated model.

2:08:57But I'm curious what your guys' reaction, how you're thinking about it, and then kind of the broader industry, how you think people are reacting to these changes. Yeah, certainly. So, you know, as part of our Series B announcement, one of the big things that comes with that is us building a factory here in Austin. And so that very much puts the supply chain and the manufacturing in our hands. We already do some assembly. This will further that and will really mean that we assemble the whole unit, both the battery itself and all of the power electronics that are built on top of it. Today, the tariffs are certainly uncertain, as you mentioned.

2:09:37And the battery cells, like the individual, you know, things that modules that sit inside of the battery, those are typically made in China. And we are working aggressively to bring that supply chain here to the U.S. and we're very close to doing that. But do the tariffs affect the industry? Certainly. A lot of energy products, you know, even in oil and gas, come from manufactured goods in China and around the world. Yeah, what was your take on the Skydio news that their battery supplier was sanctioned or something, and they kind of lost that aspect of their supply chain? It seemed like a very rough go.

2:10:18Now, you focused on the consumer market, so probably a little bit less. But even Skydio, I don't know that they have a big DoD business. And so it was a weird shock to the system. Yeah, certainly. I don't profess to have a ton of insight into them, in particular, having spent a lot of time at Anderol, though I can't say there are a number of, you know, sort of commoditized products, batteries, one of them, that the supply chain is primarily in Asia or in China. And us and a lot of others are working quite aggressively to bring that here to the U.S. or at a minimum to more friendly nations. So yeah, the batteries are, go ahead, sorry.

2:11:00Just given that you spend time at Anderol, can you walk me through the decision to go consumer first? You could imagine that someone's saying, oh, I'm building battery packs. And yep, I'm going DOD with this. It's a defense tech company. We've seen that even with some like nuclear energy companies where they've said, hey, yeah, we will sell the oil and gas companies, but this is going to be, you know, a power unit that's dropped on a military base instead of a diesel generator. Is that on the roadmap? Or do you think that like the real opportunity is just in consumer? And how'd you get there? Yeah.

2:11:33So, you know, I don't think we looked at it from like, is it B to B, B to C, B to G? Like that wasn't really the sort of initial thinking. It's more about if you look at the grid writ large in the U.S. or even in a more microcosm like it is here in Texas, where are the where's the actual problems to solve? and a majority of the load on the grid comes from residential single-family homes, which is where we're starting. And so we more looked at it from that perspective rather than like what is the sort of hypothetical best go-to-market. On the consumer side also, it has allowed us to build a brand.

2:12:07So we're very focused on the brand of base power, the resiliency and reliability that it adds to homeowners with the backup power, and that can carry itself into a more B2B model. As we grow, we're moving towards working with the regulated utilities. So some utility like LEDWP, like SoCal Edison, like DT Energy, where I grew up in Michigan. That's a different business model, but it's the same technology stack. In that case, we go deploy a battery on a home that that utility serves. We don't sell power to the homeowner, but that utility actually pays us for access to that battery. It's like a basically a distributed power plant in a box, so to speak.

2:12:50That is a not B2G, but sort of more B2B motion that we're starting. And we've actually already announced our first partnership here with a regulated utility starting in Texas near San Antonio. Can you talk a little bit about the actual customer experience on the consumer side? If you is this is it like a prepper argument? I just don't want to. Or is it purely economic? Who's the ideal customer? What's motivating them? and then walk me through the actual installation process? Is this something I need to get permits for? Does it take months? How does all that work? Where does it sit in my house?

2:13:23Is it in my garage or basement or outside? Is it huge? Is it small? I want to know everything. Yeah, yeah, all great questions. So in terms of the ideal customer, it's really a very wide swath of today's single family homeowners in Texas and in the future, renters and small commercial business owners. our view is that batteries and generators have been sold as a luxury good previously that basically rich people have put these on their homes so that they don't have power outages and you'll see a lot of these in wealthier neighborhoods and such and our view is that the battery really should support the grid and it also support the home and the power outage but really it should be a grid asset and so again by this business model whereby we own the battery We don't charge the customer for the capital cost of the battery.

2:14:13That really opens up the market. And so we have sort of first-time homebuyers. We have elderly folks. We have everybody in between. Certainly there are some people that are thinking more about their energy resiliency and sort of the maybe prepper mindset that you're referring to, but that's definitely not all of our customers. We've got now thousands of customers that are, again, from all walks of life. In terms of the experience, this is an area we put a lot of focus into and a lot of our software stack is built around. And we think about it from start to finish like a factory. My background is in manufacturing, and so the concept of having a customer sort of start at the beginning of the line, which is put their information in on the website, and end on the end of the line with the battery installed, operating and providing them backup and supporting the grid.

2:14:59And every step in between is this sort of regimented, highly documented, and relatively automated process. us. What that actually looks like in practice is a customer puts in their information. They send us a handful of photos of the side of their home basically to make sure that there's a place for us to put the battery. Then we go and handle all the rest. So some cities require permits, some do not. We handle all that. We also work with the utility to do what's called the interconnection. Again, it's kind of like another permit. And then we have our own installers come out and install the battery.

2:15:30That typically takes a few hours. It's installed on the side of the home right next to your meter or very close to your electric meter. And you can see on our website base power company.com, but it looks like, kind of like an air conditioning unit, roughly. It's a white box that's about two and a half feet cube, roughly. And that supports the home for a day or more, depending on usage during an outage. How, how much has, you know, your time at SpaceX and Anduril influence, like just the way that you guys operate, obviously, you know, 10 years ago, investors, you know, shied away from these sort of like businesses that are capital intensive and just sort of like logistics intensive, but you went and worked at two companies that have done this and basically set the bar of like how quickly you can spin up these sort of like real world operations.

2:16:22But I'm curious, like the kind of key learnings from both companies. Yeah, I feel extremely fortunate to have worked for excellent leaders at both companies and have learned a tremendous amount. Yeah, I think you're right. Look, I mean, you guys talk a lot about this. There's a large number of startups in the sort of hardware, physical, real world space funded by venture capital than there was not, you know, five, 10 years ago, in large part thanks to companies like SpaceX and Andrel. You know, I think the big learnings from those two companies are a combination of operational, technical, and cultural, maybe starting with the cultural.

2:17:03You've likely heard this, but there's, you know, the cultures at SpaceX and Andruil, both were extremely high ownership. They had a really high talent bar. They're very execution and operations focused, especially in the areas that I was working in, which are more manufacturing, production, operations. execution and how do we get how do we produce more units more drones and androal more rockets at spacex how do we install more batteries here at base power there's a lot of similarities on the cult the culture that you sort of build around that and being very data-driven and metrics focused and how do we get dollars per kilowatt hour down kilowatt hours per day up and we're like laser focus as a company on that so i'd say that's some of the cultural learnings On the technical and operational, right, we're taking a pretty vertically integrated approach, right?

2:17:52So we're developing the hardware. We're writing all the software that runs on that hardware, all the software that manages the operational stack that I outlined from the customer journey. We're directly interfacing. And so both of those companies take a very vertically integrated approach, and they're able to drive costs down over time because they've been able to do that. And so that's something we're also sort of lessons that, you know, I learned and that others that joined me at the company here who have worked at SpaceX and Android learned from both of those companies as well as Tesla, Ramp, Apple, et cetera.

2:18:26That's awesome. Well, I think we'll let you go. I'm sure you've got a busy day with the launch. Thanks so much for joining us. We appreciate you taking the time out of your busy day. Yeah, you're our new energy, official energy correspondent. So get ready for regular appearances. Yeah, yeah. We'll have you on again soon. Happy to report. I have a report live from the field, guys. Really appreciate it. Love it. Awesome. We'll talk to you soon. Congrats again to the team. Bye. You know, if you're managing a Wander, maybe you should throw a base power on that. Do it. Great idea. Luxury home. Go to wander.com.

2:18:59Find your happy place. Book a Wander with inspiring views, hotel-grade amenities, dreamy beds, top-tier cleaning and 24-7 concierge service. You know, the power goes out. You call your 24-7 concierge. That's a luxury. Fixed immediately. You get at Wander. It's a vacation home, but better. We got some other news from Layer Hippow. They launched their next fund. This is their ninth seed fund. They've been in the game for quite a long time. $200 million new capital. They'll invest in pre-seed and seed stage companies. This fund represents an increase from the last fund, which was$140 million. Continued commitment to supporting the next generation of founders while maintaining a focus in approach.

2:19:39This fund also includes several dozen LH portfolio founders as limited partners. they love it taking the money from lh now they're putting the money back in lh one hand washes the other you love it to see it yeah it's great that might that must be one of your favorite phrases oh it's the best it's the best um so yeah go raise some money go raise a pre-seed from uh layer hip out and then and then yeah or seed uh and then uh buy a billboard for your company on adquick home advertising made easy and measurable say goodbye to headaches of out-of-home advertising Only AdQuick combines technology out-of-home expertise and data to enable efficient, seamless ad buying across the globe.

2:20:17And breaking news, TBPN will be having a billboard. Our first AdQuick campaign is going out pretty soon. We're not going to leak the strategy. We're still debating it, exactly what the image will be. But you can expect to see it in the timeline. We're going to be spamming that thing. We have been, this has been in the works for a while, and in close collaboration with the AdQuick team. So very, very excited. Yeah. I like this post. Since we have a couple minutes before our next guest, let's go to Matthew Prince, the founder CEO of Cloudflare. He says, I'm playing everyone's favorite party game.

2:20:53Guess the Trump administration strategy. Like most of you, I have no inside information, but that's what makes it fun. Here's my best theory. Some assumptions first. One, they're not crazy. There is a strategy. It doesn't align with conventional economic principles, but there's something they're playing toward. Two, they're not stupid. I know enough of the players involved to know that they're not idiots. They may be making what will turn out to be accurately predicted to be horrible decisions, but they do have a plan and it's coherent. As part of this, while I think that they, while I think they can bring, while they can increase U.S.

2:21:27manufacturing, they don't really believe they can bring everything on shore. So they're not completely naive about that. Three, they're intentionally being opaque as to what the real plan is. Trump fashions himself a negotiator, holding his cards close to his vest, even lying about what cards he has as part of the game or the deal. Four, they're not just in it for themselves. I get that this has become non-conventional wisdom, but I'm going to assume that for this, that the goal isn't merely grift. Even if you believe it is, suggest that's an easy out to thinking through what may be more complex motivations.

2:22:04And number five, which we are starting to see today, China is the real enemy. China has done some things in the last two years that have made even the China doves in the last administration into hawks. Again, I know there's lots of media saying Trump wants to kiss up to Xi Jinping, but having spent enough time with folks in this and the last administration, they really worry about China morning, afternoon, and all night. So with this context, I posit the strategy is entirely destabilize and ultimately decapitate China. If that's right, you could just to impose tariffs on China, but China has lots of export markets, so goods will flow through those.

2:22:40What if instead you impose tariffs on everyone? While China and the U.S. have similar GDPs, China is much more dependent on exports. That means while the countries of the world like cheap Chinese exports, they don't depend on the Chinese market for their exports yet. China has actually been on a nationalistic spree recently, so foreign brands are more out of favor. We saw this with Tesla and some of the luxury goods manufacturers declining in sales in China, meaning they're an even less interesting market to sell to. The US, on the other hand, is the world's largest buying market. We are the consumers to the world.

2:23:14If we stop buying, everyone suffers. That means nearly everyone needs to come to the table with the US if there are universal tariffs. The US is also unique in that it is among the only countries that don't need to import anything. Don't get me wrong. We want to import iPhones and Playstations and French wine and German cars, but we don't need oil or food or water or most of the other raw materials to make sure people stay alive. So the U.S. will hurt under a high tariff regime, but it won't collapse. Some manufacturing will move back on shore, but the biggest thing is every country needs to negotiate with the U.S.

2:23:48So what does the U.S. ask for? I'm sure there's a bunch of nits with every country, but what if the big ask is it's us or them? You either trade with the United States or you trade with China, but trading with both isn't acceptable anymore. For some countries, Vietnam, Indonesia, Philippines, the promise is to be the next China, but this time under more careful rules dictated by the United States. For most of the rest of the world, they're already massive net importers from China forced to make a choice between selling to China or selling to the US. I guess that most would pick the US. German automakers are terrified of BYD and the Italians and French haven't proven they can sell wine or cheese to China at any real volume.

2:24:27So what's China's response? It's tricky because they've preached self-sufficiency and internal focus, but if the world order suddenly aligns against them, what do they do? I have no idea if this is the Trump administration's actual plan, but it is the only thing I've come up with that passes the sniff test. What do you think, Jordy? Yeah, I mean, this is already somewhat out of date, but in the sense that where I think it could make sense is that Trump is basically saying, you know, 90, you basically have 90 days to like recommit to aligning with the United States. Otherwise the tariffs are back on for you.

2:25:03Yep. And, um, yeah, I think I, I like, uh, these sort of like thoughtful attempts at analyzing what's going on. Um, I think the, uh, I think Trump is happy for people to believe that he's crazy because it sort of plays into a strategy but i don't necessarily believe that they're you know everybody involved is completely crazy yep um and i believe that they're they they aren't very um clearly being uh as intentional as they you know can be but um yeah i was who knows i was this is i'm hoping that i'm hoping that that candidly we can uh shift back to talks you know sass espionage and yes yes i mean seriously i i do get a lot more energy from deep diving llama than tariffs although this is a very important story so we are covering it because this is the technology business production network programming programming network tvpn uh technology and business is our focus but politics creeps in there every once in a while but as you know we never talk about politics never um but i but i was thinking about in terms of like geopolitics there was this you know alignment of like you're either with China or you're with the U.S.

2:26:19and China has the Belt and Road strategy and they've kind of brought like when I was doing I was interning at a venture capital fund that was investing in Africa and India and a lot of the deals like on the ground level the government would kind of have to decide like do we want to align with an American company or a Chinese company to do this like infrastructure build out right are you going with like Halliburton or some Chinese company and what one of the things that leaked in the Cablegate news was like on the ground, a lot of American embassies were highlighting that developing nations were more inclined to work with China because they felt like the government was more of a backstop.

2:26:57Whereas in the US, if you had a deal with an American company and they didn't come through and they went bankrupt, you weren't just going to ask America to, hey, the company that we were doing business with is an American company and they didn't come through. Can you come fix it? But China would. And that was kind of the Belt and Road strategy, a lot of debt stuff. And so you can kind of imagine that there's a new order kind of building around China aligned with Russia and Iran and some African nations and some other nations in Asia. And then on the flip side, you have America, the West, and that kind of bridges us into our next discussion.

2:27:32I'm sure we won't get too into geopolitics, but we are joined by someone from Palantir. So we have Akshay here. Please welcome to the stream. Thanks so much for joining. How are you doing today? I'm doing great. Hopefully you guys can hear me okay. Yeah, you sound great. Look great. Everything's fantastic. Thank you. With the fake plant in the background, of course. I know it's good to be with you guys. My name is Akshay. I'm the chief architect of Palantir. I've been here for about 12 and a half years, lived a lot of lives. Things are still moving super fast, but I'm excited kind of given where you guys are taking the discussion and everything you guys have been talking about throughout the day and morning as well.

2:28:09Yeah, yeah. I mean, I don't want to go too into the whole thesis of Palantir in the West, but maybe we could start with like what you're working on today and really what does Palantir actually do? I'm kidding. I'm kidding. It is a meme, right? How do you describe it? And I think it's funny because it's been this, in some ways it's been so consistent in intention, but I think the way the technology has evolved has been because like we had to kind of keep pushing the frontier here, what we were limited by, what we built originally, and what we had to kind of fulfill. It long went away of saying, like, it was always about how do we help people in operational context make better decisions.

2:28:46So it was very simple early on of, like, these are people who are working in counterterrorism and specific defense workflows. And it's like, they need to be able to do their jobs better to avoid roadside bombs, to be able to uncover intelligence networks. Like, these are the actions, the decisions they're taking. And like, you know, the cheeky kind of naive first version of that was like, can't we build like a find terrorist button or do some cool like algorithmic, you know, kind of analysis to do this. And it's like, well, you first need to build like the dirty, dirty data integration plumbing to be able to then enable people do the interesting stuff.

2:29:16Right. So that's the whole data integration, bringing together disparate systems piece of Palantir. And then it's like the requirements keep changing on you. Right. Because it's like, OK, that works for the first intelligence workflows. What about the next set? What about then going into warfighting, which is much more kinetic, much more real time. And so you have to keep building new parts of the stack to be able to enable different types of decision making. And then there's kind of the whole commercial journey, right? Which is like, okay, if we think about all of these pieces of technology, being able to reconcile complex systems, enable decision makers, it's like at BP, those were now petroleum engineers.

2:29:48Or Airbus, those were like people working on the A350 ramp up. And it's like kind of a different problem set, different nouns and verbs, but kind of the same kind of OODA loop of like, how do we get people to be able to make decisions better in these contexts? And so then you see kind of more layers of the platform and the architecture evolving to kind of meet all of these different needs. And it's like, I joke, it's kind of like building something through backpropagation. It's like you keep doing this forward deployed approach, seeing what doesn't work, seeing what you built isn't sufficient, and having to understand kind of from the coal face what to build.

2:30:17Can you talk about the potential trap? Because you guys like made the sort of forward deployed model. and you know I think startups now can kind of like look at your you guys and your success and be like okay we're gonna do the same thing but I don't necessarily think that's always going to end up in the same place I'm curious how you thought about kind of you know as you were rolling it out the sort of traps what you wanted to avoid and how to make sure that you know you were actually building a real software business behind the scenes. Totally. And I could make it sound like it was all predestined and perfectly planned out, which it certainly was not.

2:31:02But I think the funny thing to me also is that it's become such a meme because it was the ugliest of ducklings back in the mid 2010s, where it was like, you guys are working for the government deploying and doing what? And it just was the complete antipode of the consumer B2B SaaS kind of thing that people expected to see. And I think now it's become very in vogue, which again, is just very bizarre, I think. But to me, it's like, it is like, I think you're intimating here. It's like, it's easy to say you're doing it and just put a label on what somebody might call like, it's sparkling sales engineering.

2:31:34It's not forward deployed engineering. I think it was one meme, right? And it's like, to me, it's like, it kind of comes from how the organization is run. So like the first forward deployed engineer was Shamsankar, right? Who's our CTO. And like, basically the organization was built around like the field has this primacy. It's the primacy of winning and showing up for the outcome. And product has, you know, it was Bob McGrew and folks back in the day and a lot of talented folks on both sides now. But there's always this dialectic between like field and core, right? And so it's like, as the field is uncovering what needs to be built, like, how is the core responding and how much circulation is there between the two?

2:32:07I think it's very different than the normal construct in Silicon Valley, which to kind of go up and down the peninsula here. It's like we have the kind of high priests or the privileged engineers that sit, you know, eating berries in Palo Alto or in New York. And then if you're like a sales engineer or like a solutions architect, you go into the field or we delegate that to somebody who's like a consultant. Right. And I think that is kind of the inverse model. Right. Where it's like if that if you're just relabeling that team as being a forward deployed engineering team, that's not kind of the same thing as saying the way you do product development is kind of front to back.

2:32:43And like you have to orient kind of your entire organization around that. And I think to your point, it's like you have to think that there are complexities or worthwhile things to uncover through that method to make it worth it, right? It's not something that's going to make sense for maybe, you know, simpler product schemas. Yeah. Can you talk a little bit more about the forward deployed engineer? In a lot of B2B SaaS, if you think about like the implementation of like an ERP or even like an email client or email SaaS product like MailChimp, there are agencies that pop up and effectively act as forward deployed engineers.

2:33:18And maybe they're like partners, gold tier, silver tier, whatever. I can imagine that that doesn't make sense in a security environment. But was that ever evaluated on the commercial side? Or is that just completely off the table? Being able to kind of like have those like automations or sorry. Specifically like independent agencies or companies that are building an entire business just around Palantir implementation. Yeah, it's interesting because like that's now coming to life through alums that we have. Sure. Who have actually gone on to kind of make these kind of like more Spartan, I'd say smaller squads that are kind of dedicated consultancies now.

2:33:54I think the joke back in the day was like nobody who was a consultant or was external would like bother to do this because like we're trying to build this plane in midair. We're trying to like understand like your job as an FDE is not just to service the demand or to implement the use case. It's also to figure out what to build. Right. And like you are given kind of that creative power to say like you now have to spend your nights, your evenings, you know, the off time you don't have talking with product about what to build and then showing up the next day or two days later with a new version.

2:34:21And like it's much more collaborative with a core engineering org. And I think that's where like we tried to outsource that. I think there was always fantasies in the painful moments about like we just get other people to do some of this stuff. But it's like the real magic is saying like you are all part of that shared engineering core. And it's the same, by the way, like kind of hiring profile. of somebody who's kind of a core dev or somebody who's an FDE. And all the people who are like core product leaders now were FDEs before. And so I think that that kind of results in a different kind of profile between the two.

2:34:49Yeah. Can you talk a little bit about where, just some case studies on the commercial side? I remember hearing about the Airbus case study around manufacturing logistics. Whenever when somebody asks, oh, what does Palantir actually do? It's very easy to say like, you have a bunch of parts, you need to know where they are and how they cost and whether or not they're in stock and all this stuff. But are there other, how are you explaining it to like a non aerospace fortune 500 company today? And I think that very much is the kind of progression over the past couple of years. I think as the business has really grown, there is of course like the industrial, like hardcore, I love this stuff, right?

2:35:25It's like, it's the new warp speed cohort. It's like, it's Saronic, it's Anduril, it's Epirus and they're doing, and like, it's like nuts and bolts stuff. But I think what's more subtle and I think what's kind of unifying among all these things is like, what are we actually doing with the software now, especially with the AI platform, with the Gen AI piece? It's like you're modeling the world, right? Of course, the other Palantir meme is ontology. They just say ontology to everything, right? It's like, what do we mean by that? It's like, it's a shared model of decision-making. And it's like, you have to model, of course, all the objects and links, like it's the underwriters, it's the claims, it's the movements across those things.

2:35:58But then it's also all the actions you can take, and it's all the compliance and security requirements around who can take what actions. And then it's like the reasoning or the business rules that govern how all of these like states can change. Right. So it's kind of almost like a digital twin of not just the asset, but the business process. And so in that sense, like you're seeing a lot of really cool workflows now in hospitals. So like Cleveland Clinic, HCA, Tampa General, where it's like they're talking about nurse scheduling. And what's cool is like you have this kind of teaming between human users, like the nurse schedulers, and then AI able to actually be useful in those contexts, because you can kind of measure when and how you're injecting the AI.

2:36:35You can put guardrails around what it can do and what it can't do. And it's kind of right there with you in the same context. So it's not like this weird black box off to the side where you're like, I hope the AI does something useful. And then if it doesn't, like, I'm just going to pivot back to doing my other thing. It's this kind of like incremental rollout within these existing workflows, staff scheduling, you know, patient lifecycle, things like that. One that's really cool is AIG recently talked about underwriting and like how they're driving automation through underwriting, you know, with all their core benches.

2:37:03And Dr. Karp and Dario from Anthropik were on stage with the CEO. And they were talking about kind of how this incrementally happened by, you know, first modeling the underwriting process in the software and then gradually driving more automation through it. So I think domains like that are showing a lot of really interesting and like kind of colorful usage outside of what you might typically associate with Palantir. Yeah, it must be so funny to be using Palantir in the global war on terror and then as like a field medic. And then you get your job as, you know, someone in a hospital and Palantir shows up again.

2:37:35And you're like, yeah, this software defines everything. How do you think that just agents in a B2B context are sort of overhyped, underhyped? Has your thinking around them changed at all? I mean, when you guys started the company, agents were just called bots. And now they've got a shiny new name and it's very exciting. But I'm curious how you're thinking around sort of the high level concept of agents has changed from, you know, basically over the last decade. No, it's a really good point. And I think it is interesting to see kind of the nomenclature shift on you over time. And I think our perspective is there is something, you know, unique and significant about the rise of generative AI, like all the transformer based architectures, what you're seeing, especially with the latest generation of frontier models, as being essentially like a reasoning engine that can be used in concert with decision making.

2:38:29And so like, from our perspective, it's like what these agents are showing is the ability to actually creatively be able to deal with that decision graph, with that model of decision making, and then actually provide real horsepower that first augments human users, then can kind of slide up to automation. But I think to your point, it's like, how is this not just hype from our perspective is like, Is there an actual story you can tell around? It could be 10 % useful with maybe the first phase of underwriting, like the exploration phase. And then I can actually have a smooth curve up as I start to drive more agentic behavior through the workflow.

2:39:01I think where we tend to see the hype bounce off of people, especially enterprises at this point in the cycle especially, is where they're saying, when people are telling them, just trust us, you're just going to flip a bit. It's not going to be a sliding scale. It's going to be a bit flip and hope that it works. Because I think we all know that that's not how it works. And I think what's actually kind of ironic is that's not how it works with any human user either, right? It's like if you're training an employee or like the Japanese call it like deshi, like an intern, it's like you're gradually leveling them up over time, right?

2:39:29And so I think we're very bullish on that. And I think we're seeing a lot of very cool use cases in that sense. Can you talk a little bit about the tariffs? I'm sure that a lot of customers are rethinking their entire supply chains potentially. How does Palantir play into making great business decisions in uncertain times? Yeah, I think it kind of gets what you were saying at the very beginning around ERP systems, right? And kind of these rigid legacy systems. And in some ways, you know, these system shocks, these exogenous system shocks, especially are a bit reminiscent of things like COVID, where it's like, it kind of tests the state of your software, right?

2:40:03It's almost like an environmental pen test against the state of your operations. And so I think where, you know, we've tried to provide value for existing customers and where we're engaging new folks is where they're saying, like, hey, like we feel trapped by the rigidity of the existing system structure, right? Like, you know, our ERP models things one way, our second, third and fourth ERP models things in a discontinuous, slightly different way. Same with our MES systems, our PLM systems, our ordering systems. And it's like, what we really need to be able to do is understand, A, what's going on across everything, and then be able to impose strategy and kind of reconnect strategy with operations in a way that can actually be adaptive, right?

2:40:38I think what we're not doing is going people and saying, hey, there's a magic wand that will magically fix all the tariff issues, you know, no matter what the circumstances. But can we instead give you like an operating system to be able to say you can now actually like kind of like you're a pilot in a jet, be able to navigate through as conditions are changing, test things, get leverage through AI and automation, and kind of be on the front foot when it comes to this stuff. And I think, you know, we've had customers who have talked about their supply chain journey with Palantir, with General Mills, Tyson, others.

2:41:06And I think they're great examples of people who have like, it's almost like they're retaking control from like all those legacy systems. Can you talk a little bit about the kind of the broader Palantir ecosystem? I know that obviously Palantir sits on top of a lot of like on-prem servers and cloud, different mixes of cloud tech. And then now with AIP, there's now companies that are building on top of Palantir. So they're kind of sandwiched there. How are both of those going? Where are where are the pockets of opportunity that you're seeing in like the high growth that's maybe indexed to Palantir's growth, which has been fantastic, but outside of the Palantir direct ecosystem?

2:41:45Yeah, no, it's a great question as well. Unlike the stuff below, I would say like it's like the infrastructure we deploy on. There's, of course, like a broad strategy to keep adopting more and more infrastructure like substrates we can deploy on, right? So whether that's Metal, that's the three major hyperscalers, that's Oracle, that's being able to deploy, you know, in sovereign clouds, like we've built our Apollo platform to allow us to be able to kind of do this in a highly leveraged way without having to rebuild those core components in every single environment. I think like it kind of, there's a general trend towards more options there.

2:42:15I think we're also, to your point, like kind of riding the wave around people have gotten to the cloud or they've lifted and shifted a lot of data and maybe some data science workflows, but now it's like, it's time to operate. It's like, okay, like, am I actually like, are the core business workflows, those nurse scheduling workflows, those underwriting workflows actually changing? And I think there's a ton of like kind of tailwind from people saying, I did the first step now, like what's the operating system I'm using in the cloud? And I think that answer more and more is Palantir. Things on top, I think that are really interesting.

2:42:42There's of course, like there's partnerships with the AI providers, there's partnerships with, you know, folks like Databricks and others. But I think what's really cool. And we actually just announced it, I think a couple of minutes before we went live here is like, it's the startups cohort. So it's people being able to actually build their entire kind of businesses on top of Palantir and say, I like the leverage I get from the integrated, you know, data tooling, model tooling, workflow tooling. It's like, I don't want to start from scratch, like 2016 style with the hyperscale. I want to build like on the 10th floor now.

2:43:11And so there's a ton of great startups there. Yeah. Talk about why companies should be taking that product extremely seriously. Because I remember there was not that long ago when people said oh you know don't like don't build a shopify app like you know uh and then you have like all these unicorns that kind of like started as don't build a chrome plug-in and honey sold for a billion dollars yeah so i think most often yeah if you want yeah if you want to do anything in especially in industries around national security i feel like building on top of palantir is a way to like you know potentially accelerate totally trust and things like that but uh would love to hear it in your words.

2:43:52No, I think that's well put. I think there's two dimensions I think about, right? One is, like you said, like it's being able to get leverage in kind of the, it's access and compliance and these sorts of things. So it's like, I want to work in, I want to get access to problem sets or mission sets. And so our mission manager offering on the government side allows you to be able to get high side, get into these domains and deploy your products. And there's a ton of great examples of that. And I think people see a lot of value. That's kind of more of the infrastructure enabling you as a startup. I think there's then building with kind of the platform that are at kind of the above the infrastructure level.

2:44:23So this is Foundry and AIP. And there are folks saying, like there's Helmgard and others who have presented recently that say like, to build the like the AI enabled applications that I want, this is the toolkit I want to use to build them, right? Because kind of everything from that data integration layer, the ontology layer, the workflow layer, the SDKs, all of that stuff is like now it's the equivalent of like the, you know, in the personal computer era, like the op, it was great to build against core components on my IBM PC or my son workstation, but it's like I could really use an operating system to be able to build at a higher level and build much more sophisticated things.

2:44:56So I think that's what we're seeing. We had our second developer conference three weeks ago, and they had a bunch of startups there kind of telling that story, in effect. I think I already know the answer, but do you feel like you guys are just getting started? I imagine with these customer relationships you have right now and the existing products, every single time you maybe like think you hit the end of the product roadmap for like a certain category it's like you know you you get the next uh you know requests from a customer and it's like hey hey there's this whole area and opportunity that we weren't even thinking about a year ago much less five years ago you took the words out of my mouth it's like it's that it's kind of an incredulous thing to say i realized a little bit of like self-awareness in silicon valley to say like you're 12 and a half years in and it still feels like it's been a blink and there's like, it's just, it's like the joke, it's like, it's the end of doing book one.

2:45:44And like the first, but it's like, it's like, we're just getting like, we haven't even gotten off of Arrakis yet or whatever, or like whatever metaphor you want to use. And it's like, I totally feel that way because it's like, a lot has happened. A lot has transpired and I'm, it's meaningful. And there's so many people that were part of the journey that are now in the ecosystem of folks you guys have been talking to and others broadly, but it does really feel like it's just the beginning. I want to know about the shift in security mindsets, specifically in the commercial sector. We've heard a lot of talks about corporate espionage, even in B2B SaaS, but obviously there's a bigger national story around security, even outside of a government context.

2:46:25Are you seeing increased demand from corporations that maybe don't need to be ITAR compliant, just around taking their software and data more seriously in terms of security? 100%. And I think that manifests in a few ways. One is just like it's the core kind of like hygiene or meat and potatoes part of that, which is like, it does feel like the threat vectors are increasing, the threat profile against any prominent company in America is increasing. So the way that we operate our core workflows, the way we secure our data, I think is more top of mind. It's not just sort of in the purview of the CISO or the CIO.

2:47:01I think everybody's thinking about it now, especially given kind of global volatility trends writ large. I think there's also this sense of like, if we're going to have to take these big leaps forward with AI or with building the next generation of digital applications, like these seem like they're going to be big shifts in the business. And they're going to affect a lot of, you know, not just the technical users, but the business users, the operational users. So for building like essentially the next foundational parts of the business, like I want to be very sure that we're building it in the right way.

2:47:31And I think as you guys probably know, like a lot of people have battle scars from the prior generation of stuff not having been built the right way or there being things that people have had to deal with off the back of those designs. So I think people are definitely tuned into that. You're totally right. Yeah. Culturally, what's changed as Palantir has become a public company? I know you've been there before when Palantir was private. Now you're public. Is it stressful having a stock price out there every single day? Have things kind of been business as usual? What's the shift been? I think, honestly, for those who've been around, I think what's cool is that the hiring profiles and the people that are coming in seem as good now as they ever have been.

2:48:10This is the shameless plug for we are hiring, all the things, but it's still a very young and vibrant place, which is why maybe the temporality in my mind is a little bit broken as a result of these things. I will say one thing that's different for sure is your friends and your family and your college friends talking about the stock up and down. People couldn't pronounce the name. and people had no idea what it did for like most of the time I've been here. So like, it's still very bizarre, I think, for anybody who's been along or been around it to be like, people care this much about this. And it's like, of course, we always cared, but like, that's still kind of bizarre.

2:48:41When you get these ping, like, you know, LinkedIn requests from somebody went to high school, and he's like, hey, man, I'm in the retail investor community, keep it up. Or it's like, it went down. And it's like, hey, can you do some of it? It's like one or the other, right? Can the devs do something about the stock price? How do you personally think about AI safety? So not speaking for Palantir on this one. One of the reasons I'm curious is reacting to AI 2027, which who knows if you even had time to read through from last week. I'm not halfway through, but I did the mistake of watching the interview and then reading some of it.

2:49:16Yeah, but like in the sort of like doomsday scenario, like I imagine like you and the Palantir team are like in a war room with the president. And it's like, hey, we got to like figure out how to like, you know, save humanity from the bots. But I'm curious, like, you know, general maybe reaction to that piece. And then, you know, how how you're thinking about it more. I mean, just the shift from deterministic computing to probabilistic computing in JECS, like just so many risk factors. I'm dying to know what you think. No, I think, again, I'm on the same wavelength as you guys. I think, like, A, I like those pieces.

2:49:50I think even if people dismiss them or try to critique them for being kind of sci-fi, it's like I think it's good that people are doing some definite thinking, even if it is a bit forecasted. I think this is true of, like, you know, the piece, you know, Machines of Loving Grace that Dario put out as well. And it's like I think it's worth having these sort of, like, future looks just to be able to at least game theory through some of the implications here, as you're saying. I think what you touched on, John, I think is exactly it, which is like, if you assume these things are probabilistic or probabilistic in some degree and are going to have more agency over time, like what is the outer shell of assurances that we're building to keep the machine subservient to the human, right?

2:50:26In like the grand sense of like human agency, right? As people of the world. And I think like that's where careful system design from our perspective is so key. It's like there's kind of testing the models in isolation, but then there's like the live fire exercises of how do these things actually perform in indicative contexts, like whether that is a battlefield or that is a production line or that is a hospital. And I think like we have to evolve the testing frameworks to take into account more of the operational theaters, so to speak, and then be able to pull back the requirements from there.

2:50:57There's a lot of pontificating. I think that's easy to do when you're just looking at the models themselves against benchmarks. But it's like, how do you evolve past benchmarks to operational testing? And this is kind of what we've done with other sectors, right? With like, whether it's electrification or it's like other kind of core assets that make up the digital world, not in the same level of sophistication, but we had to evolve how we're measuring efficacy, right? Yeah. I feel like Palantir has taken a pretty foundation model agnostic approach, kind of a bring your own foundation model if you're a company.

2:51:29Obviously, you do have some partnerships that are bigger than others, but that makes sense from a commercial or DOD perspective. but what has been your reaction to DeepSeek? It's open source and people think, oh, if I run it on my own hardware, I'm all good. But there's been kind of a sci-fi-esque debate about is it possible to embed kind of a Manchurian candidate in the weights that wakes up when it is like, hey, it turns out I'm in a DOD data center. I want to do something different. Is that pure sci-fi? Is that something that we need evals for? We need extra testing. we need to air gap and then kind of test in an offline environment first before we deploy these?

2:52:10Or do you think it's all sci-fi and it's not worth worrying about? Well, I think there's probably some like Aristotelian mean there, right? Where it's like, I think even if it's not all sci-fi, it's like, I think there are real challenges across like the intersection of different considerations. One is like our ability to mechanistically interpret these models is still limited. So even if you assume it's not malicious behavior on part of the DeepSeek or a CCP proxy, you could still have a situation where the model is not understandable, and therefore you can't trust them for the spectrum of utility.

2:52:44I think given that ambiguity, and also the ambiguity around what was the story behind DeepSeek's creation, I think there's less ambiguity around the control that the government can exert on them in China. I think it all points to like, why would you add up that composite risk profile and kind of go all in on that if you had open source options or equivalent options in the Western world, right? And I think this is why it's important for us to have the ecosystem of proprietary models, commercial models are great, but also open source models like the Lama release that we saw. And you're going to have different cases where like the abilities, the capabilities and the controls provided by each of those different types of models is going to be suited for different domains.

2:53:29Like for instance, there are going to be certain government domains where a commercial model provider will not be suitable. Um, they're going to be domains where it will be. And it's like, we want to have as the West, as the U S especially the full range of options to come to the table with. Um, I don't think we want to be in, in a, in a case where we feel like we're backed up against the option of having to go with a foreign model, especially one from a rival regime. Yeah. Do you think every kind of Fortune 500 company needs their own set of evals for when these new LLMs drop? Because you see what happens on LM Arena and it's kind of driven by like the vibe of whoever's voting that day or even MMLU.

2:54:07And some of these like IQ tests don't necessarily translate into better business value. And so I'd love to know what you're seeing from, you know, Fortune 500 folks or bigger business folks on how they make decisions about what models to use is just cost to benchmark or is there more nuance to it? I feel like there's a great tweet in there. I mean, the evals vibe, like vibes are not enough or something like that. But it's like I think absolutely right. I think this is part of like the idea or the thesis we have for like this shared model of decision making that is this ontology system. Like how we design evals is literally around that, right?

2:54:43You can say there are sample workflows, there are unit tests that have to pass every time you upgrade the agentic logic for that underwriting workflow at AIG or whatever it might be. And it's not just like an abstract set of tests. These are actual like in vivo tests that have to pass and yield certain results either deterministically or probabilistically for us to be able to go forth and continue with this workflow. And even if nothing is changing, maybe we're just periodically running these tests because these models, like you said, are probabilistic, right? So things can change over time. So the underlying model is shifting on us.

2:55:15We want to know that. But I think you're totally right. Like enterprises have to get into a mode, I think, of thinking about the way they're instrumenting and validating the application of AI as being kind of one in the same with rolling out these evals in an operational sense, right? You can't kind of control or improve what you can't measure, right? And I think it's kind of the same concept here for bringing AI into these critical spaces. Yeah, it's kind of like the way a hedge fund would backtest a strategy and see, okay, yeah, if we apply this to all of our historical data, it's like new model comes out, let's just reevaluate every piece of debt we've ever underwritten or every policy we've underwritten and see if we get a better performance.

2:55:54That'll be fascinating. I imagine that there's a business to be built there. Maybe it happens at Palantir or somewhere else, but very, very cool idea. Jordy, do you have a last question? No, this was fantastic. Should we let you get out of here two minutes later? Thanks so much. Looking forward to the next one. Yeah, this was fantastic. Yeah, looking forward to it, guys. Thank you so much for having me. Thanks for making the time. Cheers. Let's run through some timeline to finish it out. Cole Rotman says Mazel Tov to OpenAI Fund for turning$8 million into$600 million of paper gains from just two deals and$175 million fund.

2:56:27Based on his math, did you see this? They did Harvey. They led the$5 million seed in 2022. And now the Series D in 2025 is a$3 billion valuation. Sam Altman is pretty good at being a VC. It's insane. It's insane. And then Cursor, they led the$8 million seed in 2023. And the Series B is at a 2.6 valuation and might be getting like a 4X markup soon. I think we saw some leaks around. So could be a 5X fund off of two deals in just three years, which is remarkable, remarkable. You'll love to see it. anyone who's in that fund, anyone who has exposure to those deals, they're going to be sleeping well, but they could be sleeping better if they got on an eight sleep nights that fuel your best days.

2:57:12Turn an e-bed into the ultimate sleeping experience. Go to eightsleep.com slash tbpn. Lindy Mann says, there's nothing to fear. Smart people adapt. In the 2010s, they went into software. In the 2020s, they will open up factories. It's all the same thing, finding angles and edges. I thought this was kind of an interesting white pill you threw in there. It is interesting that Like that's the nature of capitalism. It's, you know, water finding cracks in the middle midst of a jar full of pebbles or the way sand flows through a jar of pebbles. If tariffs go up and there's a bunch of incentives like, you know, the Hadrians and the base powers, they're ahead of this curve.

2:57:51But that's not the end of the story. There will be plenty of people that see the news if the tariffs stick and say, hey, this fundamentally changes the economics. I'm ready to write checks if I'm a VC. I'm ready to build a factory. and yeah maybe it will be a slightly different in work environment than building b2b sass but uh i'm ready to make it fun i mean a lot of the one of the coolest things that's happened over the last few years has just been like the el segundo movement and like the aaron slodovs and the re-industrialized folks just making you know that that meme obsolete of like everybody wants to re-industrialize but no one wants to work in a factory well like a lot of people are down to work in factories now because it's not that dirty it's actually like oh there's just a big machine over there there's still some offices anybody that is ever you're fine anybody that has ever made made something you know in the in the context of a business it doesn't really matter what it is right even if it's a startup and you get a little bit of revenue and you make make some merch and you can suddenly hold you know a product in your hand it's amazing so i actually do believe that people many people would rather you know work in a factory or work around factories uh and and be involved with producing things, not just software.

2:59:00Well, after you produce things and you start selling it online, what are you going to have to do? You're going to go pay your sales tax. You're going to go to numeral HQ. It's sales tax on autopilot folks spend less than five minutes per month on sales tax compliance. Go to numeral HQ and 25 states are now taxing software sales. Get in front of it. Just do it. And we had a really cool launch video from Zipline. This company has been around for a long time. We should ideally pull up the video if we can. But regardless, Zipline is a drone. They're kind of vertically integrated drone delivery. They make the drones, but then they also run the service.

2:59:40And so they were in Africa doing blood deliveries via drone. So it's very important to get it there very fast. Someone's bleeding out. You need a blood transfer. Send it from the central hospital as fast as possible. So even though drone delivery is expensive totally makes sense in that in that case They built out a ton of technology ironed out a bunch of problems and now they're ready to bring it to the United States And they are launching in a few states Texas and a few other places Seems really cool. And we were talking to somebody here We can watch this video because I think this is so cool.

3:00:11I love to work on things. I'm passionate about I think when you're passionate about something it doesn't feel like work anymore You might observe it as like type 2 fun because often if you're passionate about something, you're willing to do things that other people would find harder than anyone would want to do. But it turns out when you're passionate about it, it's just, you know, it's fun. It's just such a different vibe than the normal hard tech vibe reel that's like really intense with like over-the-top music. We would be proud to hand to our kids. It's just like chilling and having fun. Warm.

3:00:41I know it's been a lot of sacrifice for a lot of people to make this happen. I don't think any of us thought it would be easy. This is such a fun sci-fi future. Yes, the drones are going to be a little bit noisy. But we thought it would be a lot easier than this. Hopefully they can figure out the noise problem. Yeah. The magic now of pressing a button on your phone and getting an item. Totally. In, you know, three minutes. And we were talking to someone who I think was an investor in Zipline, and he said that something like 80 % to 90 % of all of the goods in a Walmart fit in that drone. Yeah.

3:01:08And so, yeah, you're not going to have drone delivery like a couch, but like for most things, you can actually use the service and hopefully the economics pencil out in a viable way. I definitely want to have the team on the show soon and talk about it, but really like above all else, it just stuck out that they went with such a different style and aesthetic for their launch video with something much more ethereal and it just feels like summer and it just feels like you're just relaxing and a drone comes deliver and it's like, yeah, this is cool. This is sci-fi. This is tech, but it doesn't need to be cyberpunk.

3:01:41It's the future feels like the future. there's something futuristic about this, but it's still very pastoral and it feels like something that integrates with just like the kind of vibe of like hanging out on a ranch in Texas. It was just a really nice video. And it was just cool to see someone take a very different direction from what we've seen that it's been a cool meme. We've played into it a bunch, but it's maybe at the end of that road and maybe something like this is what's next. So go watch the full video and sign up for Zipline if you're in the delivery area, I guess. Will Nitzy says, the only career question that matters is what can you be world-class at?

3:02:17Everything else is noise. I like that. It kind of paired with what we were talking about yesterday with the intersection of two novel ideas or areas of expertise being something that LLMs struggle with. And I think this will be a continual - Big opportunity for humans. Big opportunity for humans. Yeah. I mean, I think AGI in many ways has been achieved, but very few people would say LLMs are world class at really anything. And they kind of go through this Gelman amnesia thing where if you don't know about a topic and you ask an LLM to talk about it can kind of get you up to speed. but when you talk to somebody who's much deeper, much more aggressive, much more definitive in their worldview around that topic, they're going to give you much more insight.

3:03:08And that's why, why, well, I would disagree. They're world-class at creating Studio Ghibli copycats or, you know, pennies on the dollar. That's true. They're, they're world-class at creating viral content as I tested it because the actual Studio Ghibli photo I posted from the real movie, Spirited Away, not a banger. Flop. But when I took Oppenheimer and made it Ghibli, it got like 30 ,000 likes. So people like that. Let's go to MDA. They say, VCs told me, build a pitch deck, design a roadmap, hire a dev team. But no one told me, post TikToks, trigger FOMO, make it look like a trend, not a tool.

3:03:44That's when I started thinking like a dropshipper, not a founder. what do you think insight i don't know i don't know where to take this um but i i think if a lot of companies posting tiktok's good way to get customers i talked to a uh a gen z founder who said that uh my distribution strategy is if i'm in if i'm building something for consumers i'll make viral tiktoks and if i'm uh selling something b2b i will hire nepo babies because the nepos will have parents who are involved at businesses. And they will be able to get my product. One thing this made me think of is this guy Cormac, who's built a company called Oasis.

3:04:30He started posting information about water quality, started posting TikToks, and eventually built out a database where you can sort of get access to different data. And he basically tapped into something that was like very much a trend of people wanting to understand what's in their water, what's in other products that they're consuming. So yeah, I think in general, powerful to tap into it, you know, make sure that your tool is part of a bigger trend. Otherwise it's going to be really difficult to get the type of real traction. Totally. Yeah. The hype can get too much and you can get lost in the sauce and you can just become like a TikTok company.

3:05:09But there's something about the communication and casting a wide net that clearly lets things ramp. I think we probably saw that with the CREA team. They had like, what, 20 million users or something? You don't get that without going viral. I'm not sure if they did it through TikTok, but they certainly became a trend and that enabled a lot of fundraising and stuff. Speaking of fundraising, 25-year-old police drone founder, Blake from Brink Drones, just raised a $75 million round led by Index. I met him camping like a year or two ago. He's a Teal Fellow, great guy and uh fascinating i love this photo the drones just hovering oh yeah yeah yeah he's like they come with me everywhere yeah yeah yeah and he has a very interesting uh use case so i i really want to have him on the show to talk about like how do we build the american dji you know obviously like how do you get to market with something reliable he's going after uh drones for police because the police legally cannot buy dji anymore or in many jurisdictions they've been band um but if there's a broader band um i'm kind of getting burned out on the defense tech stuff and i want consumer products now um i want i i want there to be you know world peace and then everyone's like oh yeah actually we can pivot back into hardware well yeah this is the obvious thing with with niros right yeah soren was a drone racing pilot i imagine he wants to you know save the world and then get back yeah into his original passion of racing drones yeah so yeah yeah but imagine Nero's doing something in consumer totally and it's just like a it's just a nature of the market that um if Soren at Nero's had said hey I'm this fantastic drone pilot I'm going to build a consumer drone FPV product people would be like that's too capital intensive you'll never be DJI blah blah blah blah there's a million reasons why this won't work he wouldn't be able to get funding um you know let let's uh let's bring about world peace and then get back to having fun with some drones, making some cinematic videos.

3:07:03That's what I want. Anyway, any other posts you want to close out on? Or I think we're good. I think we're good. This was a fantastic show. Thanks for watching everyone. Don't forget to leave us five stars on Apple Podcasts and Spotify and stay tuned for the next one. Just do it. We will talk to you soon. Looking forward to tomorrow. Bye.