Pop Mart: The History & Economics | Max Levchin, Jim Belosic

27:35Look at this culture. This is crazy outfits for this. Siobhan Lawrence in the chat says, my startup has done 75 million in unboxings. Say more. Yeah, elaborate, please. Tamagotchi for real should come back. AI-powered Tamagotchi. That's a good business, Daniel Cook. added our own flavor to that. Yeah. Look at how international it is. Europe, all Southeast Asia. When you decide to splurge on a Popmart blind box, which could cost around$20 to$30, you don't go in totally blind. Take this collection. There are six possible characters you could unbox, and a secret one that you have a 1 in 72 chance of getting.

28:191 in 72. One of the things that the brand can do to keep engagement, to encourage consumers to get a little more excitement out of it is to label the box. This one says, have a seat. I know the rain. You know, people throw the satanic panic around a lot. Like, white monster, monster energy drink. There's like a whole 666, it's satanic. But it's always unclear if it's like the founders are like poking fun at satanism. Like, no one accuses like John Carmack of being satanic by, I mean, I guess people did when he released Doom. but in Doom it's like you're clearly playing as a mortal, like killing the demons.

29:00And that's the name of that. That's the virtual of the game. Aaron just sent me the stock chart for Build-A-Bear. Have you seen this? Build-A-Bear's ripping too. Does Build-A-Bear have loot boxes yet? That could be the next unlock. Build-A-Bear is up 2 ,473 % over the past five years. It's absolutely ripping. Who's clapping? Build-A-Bear blind boxes. no more building just just gambling children just come come into the store yeah yeah if laboo is like the slot machine that you could be pull out of the uh the vending machine build-a-bear should turn it into like a game of like high stakes has anybody a lot done like remote laboo openings so it's just actually like i think i've seen that yeah uh who is it blake robbins posts about this a lot how there's like apps in the app store that are oh it's probably happening on like whatnot to be honest well have you seen have you seen the claw game uh so there is a there is a an app that you can download and you can pay real money to use a claw in the real world to pick something out of a out of a you know a machine or like a bucket and whatever you pick out you get to keep and they will mail it to you wow and so it's not technically gambling somehow they You got some loophole there.

30:16Right now on Whatnot, there's seemingly hundreds of streams selling Labubus. Wow. Don't gamble, folks. Don't gamble on compliance. Get on Vanta, automated compliance management risk. Prove trust continuously. Vanta's trust management platform takes the manual work out of your security compliance process and replaces it with continuous automation, whether you're pursuing your first framework or managing a complex program. Anyway, the last two years of sales of Lububu have been heavily driven by international expansion. They've definitely figured out how to take the brand abroad. It was predominantly growing in mainland China.

30:58And I believe it's still growing. It's doubling in China, but it's also like seen maybe like a 10x increase in international sales over the last two years. So it's on a tear. It's on a tear. We'll see. We'll see how people respond. We'll see how the American toy companies respond. I feel like this is like the horse has left the stable. The cow has left the barn. The dog has left the dog. The children yearn for the slots. They do. They're going to figure out how to gamble one way or another. I mean, what's the alternative? Like ban LeBouBou? Erewhon blind boxes, combo plates. Yeah, combo plates.

31:37You might just get the worst slop bowl of your life. How about sweet green blind boxes? Or you get 12 ounces of blue caviar. You might get a bunch of steak. You might get a bunch of kale. You might get some caviar. Never know. Anyway, should we pull up this old clip? We're going back nine years ago. Apple missed earnings and Tim Cook went on Mad Money with Jim Cramer to talk about the business and explain what was going on. It's called Executive Decision. I want to play this and revisit Apple CEO Tim Cook on Cramer. It's a very interesting discussion. Let's play it. Pull it up. There's a curious, really strange disconnect between what I read and hear on Wall Street about Apple and this.

32:24Because if you, it's going to be an impossibility to pry this for me. Cold dead hand time. You can't. And yet when I read the stories, it seems like people think it's over. How could it be that you can't have this ever or the ecosystem, but it's dead? Yeah. It's crazy. The narrative in 2016 was like Apple's dead. It's Hewlett-Packard of the era. Like, it's going to just be flat. Let's keep playing. $50 billion plus in revenues and$10 billion in profits. To put that in perspective, the$10 billion is more than any other company made. We literally made the most money of any company. And you're hating.

33:05Clearly. what we're seeing is that people are upgrading at a different rate a lower rate than they did last year okay pause but still higher than if you go go back a couple frames to where it's on the close-up of him this one it's very weird framing you're not supposed to frame someone where they're looking off to the side and they're framed like this if you go to my close-up like this so go to Yeah, so if I'm like this, it's like, and I'm looking off, it looks like I'm cornered in a wall. Like, it's bad framing. What you're supposed to do is you're supposed to have me in this third, and then I'm looking across the frame, and this looks more cinematic, and it looks like there's room.

33:47I'm not, like, backed up against a wall either way. Yes, a 2016-era CNBC team. Free alpha, free game. Yeah, I'm sure. I don't know, but it is an interesting question, because sometimes this stuff's deliberate and sometimes it's just accidental. Like sometimes like the cameraman is just like, I want to put the TV in the background. Are you saying that they're trying to make him look like he's backed up into a corner? That is something that happens in production. Like it also happens accidentally every once in a while. But it was just something that stuck out to me that it's like, it makes it look like Cook is like kind of, I don't know, it looks like he's in this like more tense scenario than just like having a nice conversation.

34:25It doesn't look as like cinematic and relaxing. and Kramer's in this odd position because Kramer is relaying what the, what Wall Street is saying about Apple, but he's actually kind of steel manning the bull case. And he introduces the whole segment by saying like, I always say, Apple's not a stock you buy. It's a stock you own. Like you're supposed to own it. You're supposed to just hold onto it. It's a great company. He's super bullish, but then he's like, but I got this hedge fund guy who just sold and he thinks you guys are done, like explain this, debate this. And so he's doing, I think he's doing a good job.

34:58And I like the way he frames the conversation. But we can continue. I want to get to the part where he talks about the upgrade cycle. So let's keep playing. At a different rate, a lower rate than they did last year, but still higher than the year before. And so we had this abnormally high upgrade rate last year as people bought into the iPhone 6. And now we're comparing to that along with the other things going on that many companies are facing with currency rates and macroeconomics, et cetera. So basically what he's saying is like, we'd been on this tear where no one had an iPhone. And so people were just like coming on and then there were huge leaps between iPhones.

35:45So everyone and was like upgrading constantly. You go from, you know, not having 3G to having 3G or not having a retina screen. Or, you know, for the first time, you have multiple cameras. The cameras get dramatically better to like that kind of slowing down. And he's kind of defending that and being like, but it's going to be fine. And he actually calls out services revenue for the first time saying like, hey, it's like a pretty good business. Or basically a toll booth. And it turned into an absolute monster of a business where now he has to say like, oh, don't even talk about that. Oh, services?

36:15You want to talk about movies? Yeah, we make some movies. Anyway, continue. I couldn't disagree more. So here's what I see. We're in some incredible markets. The smartphone market, eventually everyone in the world will have a smartphone. Penetration today is in the 40s. Long way to go. Emerging markets like India. LTE penetration is zero. We've got great innovation in the pipeline. new iPhones that will incent you and other people that have iPhones today to upgrade to new iPhones. I will need something else because I don't think, but I can't think of anything else that I need. This is good. But we're going to give you things that you can't live without that you just don't know that you need today.

37:02Okay. This is great. This is great because Tim later, he says like, I don't want to like leak what we're working on, But they came out with AirPods, Apple Watch, AirPods Pro, HomePod. Some of those were not huge, and the Vision Pro is still early. But the AirPods and the Apple Watch went on to become massive, massive drivers of growth for Apple. But you just can't really leak it. Versus what we know, which is that other than, say, the Netflix bill, maybe the Amazon bill, you can put things on this, whether it be my music. I've got the family plan, because I've got a lot of pictures and I do the iCloud backup, the Apple Pay.

37:42Why do people not talk about the fact that this is not a dead device? It's something that we belong to. I think in fairness, we didn't talk about it a lot until recently. And so I take that. But as you say, ServicesNow is the second largest revenue segment at Apple. It was for last quarter. It was for the first half of the year as far as that goes. And so last quarter we were at$6 billion, up 20%. It's a fast-growing. And you look at what it is. It's things like the App Store. You go and you buy apps far after the sale. You might subscribe to Apple Music. You might use Apple Pay. You might buy songs.

38:25You might rent movies. And so it's all of these things. It's a toll booth for your digital life. And that, of course, is based on how many people are using our devices, how many devices out there. And there's over a billion devices in use. This is huge. See, because I, exactly, I figure when it gets to 1.5 billion, there's a number where we'll be thinking of the average use each month and the average pay to you. It's not there yet. In the interim, what defines the story would be that China's fallen off, that China, which you said in the previous quarter, was going pretty good, but the beginning of this last month, of the last quarter, was not that good, has now become clouded out of everything else.

39:12Right? Wrong? Should be? Shouldn't? You've talked endlessly about China, middle classification. What's happening there, and how did it happen so fast that many didn't see it coming? Here's what we see going on in China in the short term. In the short term, the iPhone upgrade rate affects all countries, including China. The great thing is the switcher rate in China is huge, 40 % up over the first half of last year, the first half of this year. This is huge. So these are people switching from Android smartphones to iPhone in China. Economy, clearly not as strong as it was a year ago, softening. Currency, weakening.

39:57And so you've got a confluence of items in there, some that are Apple-specific, like the upgrade. that we talked about, some things that are more general that affect everyone. However, here's the way I look at it. Two years ago, we had enormous sales. And so last year, and last year we did even better, 80 % better. So we grew 80 % over the previous year. This year, in constant currency in mainland China, we were down seven. So if you look at it on a two-year basis, Apple grew 70 % in China. It's hard pressed to say those aren't good results. I want to stay on China for a second because the first leg down in stock last week was because of your guidance.

40:43Second leg down was a man, Carl Icahn, who had been closely affiliated, talking about a no-brainer Apple, who says, look, China's an issue. Now, he sold before we knew anything about the China state administration of press publication, radio, film and television blocking Apple iBooks and iTunes movies but was concerned at least uh yeah you can sell iPhones but not we don't want your books we don't want your American books in this country how about the fact that there is an encroachment issue at the lower end and is that something that could have slowed up sales down no I I think what you see in China in in uh general is the smartphone industry isn't growing.

41:23There's movement between different suppliers of smartphone. But I think in the areas that we play, we're doing quite well. And in the last month, I'm thrilled at what we've seen with the iPhone SE launch that's been there. This is the phone that we just shipped that packages a whole bunch of our technology from iPhone 6S into the 4-inch form factor. And so that looks very strong. In terms of the books and movies. It is interesting. A lot of the China issues have really just started to hit. Totally. In the last couple of years. Yeah. And so it was like, Icon was like correct that there was like something happening in China.

42:06And like, maybe you should read into the iBooks ban and the iTunes ban. And like, Apple is not in the top five. Yeah. But it took, it took almost a decade for that narrative to actually play out. And even now, I don't think that they're like weighed down. I think they're just kind of flat. And so like they still have a big business there. And it's just like that thesis like didn't really play out. And I feel like Warren Buffett invested like right around this time. And so must have like seen this interview and been like, yeah, the market is wrong. The price to earnings ratio was like crazy, crazy low at this time.

42:45It was very much like this huge, stable business. Tim was certainly right about AirPods or just net new products that people didn't even know that they would want. Last year, AirPods did around the same amount of revenue as Square and Cash App combined. So Square blocked at$24 billion. AirPods did$22 billion. That is insane. Okay, I think we can wrap that up there. there's a bunch more there. You can go watch the full thing. It's on YouTube. Anyway, let me tell you about graphite.dev. Code review for the age of AI. Graphite helps teams get help to ship higher quality software faster. Get started for free at graphite.dev.

43:27This is a crazy story from Eric Bergman. He says, I got scammed for 1.25 million. I feel ashamed and stupid. The story starts with me getting a phone call from Mr. Beast and Mark Rober. They asked me to donate money to Team Water to build wells in Africa and help people get clean water. I'm surprised by their call. we've met before but haven't spoken in years. I take a few days to think. I focus on learning more about the water crisis in the world. I decide to donate$1 million. Mr. Beast gets excited about this and tweets to the world about the donation. I'm proud and excited to be part of this amazing campaign.

43:58About a week later, I get a message from Team Water on WhatsApp on my personal phone number. They are excited about the donation. They invite me on a trip with the top donors to Africa to see the wells being built and to do a few days of wildlife safari. To go to Africa and see wells has been a long time dream of his. He says he's excited to go. He immediately says yes. Then they add him to a WhatsApp group with some other top donors. Mr. Beast is in the group, Mark Rober. There's other folks. Toby Lutke from Shopify is there. Aiden Ross, the streamer is there. He says he can't believe he's in this group.

44:33He feels like a 13-year-old boy. They're all chatting, having good banter going on. Find myself writing a message, then deleting what I wrote because I didn't feel cool enough. I write it again, then I delete it. I can't believe I'll be traveling with all these people. The conversation goes on for about a week. It's Friday. I'm heading in for a weekend trip with a bunch of my friends. I've been looking forward to this for a month. We have a packed schedule and I'm very excited. On Saturday, Jimmy writes in the chat, it's Mr. Beast, and tells us about this other opportunity. He just signed a deal with Coinbase, one of the largest crypto exchanges that will launch their own crypto coin.

45:09As part of marketing collaboration with Jimmy, he's gotten the chance to buy in early on this coin. As a thank you, he wants to extend this offer to anyone who donated over$1 million. Everything is secretive, and it's important to act fast. This is where I should have stopped. When someone needs you to act fast, it's often to get you to do something without thinking. But I didn't. Everyone in the chat gets excited about this. I know some of them are real crypto experts, and they jump on this opportunity. I don't know much about crypto, but the 13-year-old boy in me wants to belong. If they are excited, I want to be excited.

45:41I also don't want to be the only one on the trip to Africa that didn't join in on the investment. I find myself calling a crypto friend telling him about this. And he says that if Coinbase is launching a coin and you can get early access to it, it's a sure win. I get even more excited. I'm very distracted. He doesn't want to be in his head right now, blah, blah, blah. He says, let's go. Within a few hours, he sent$500 ,000 in crypto to a wallet that he was given over this chat. The chat's going strong. People are even more excited. Other people want in. Eddie from Stake wants in, but he's too slow.

46:14When he asks if he can get involved after the deadline, he's told that he's too late. I read it, and I can't believe a guy like that gets rejected. The next day, Jimmy writes again and says there's a new chance to invest. However, the price has gone up from$0.15 per coin to$0.30 per coin. The maximum investment in this round is$750 ,000. I call my friend again. I tell him the billionaire that got rejected and how everyone else is buying in again. I'm still at the event. I'm still super distracted by other things. And we end up falling for it again, sending another$750 ,000. Now it's Monday. The retreat has ended and I'm heading home.

46:55I still have a good feeling about all this and I'm excited. I'm also exhausted after the weekend lots of experiences to process and far too little sleep on Tuesday Jimmy writes one more time in the chat saying this is the final chance to get it the price is now 45 cents and everything up and up up until now has been taken once again I call my friend and we say let's go we're about to send the money but this time something makes me stop for a second something and I see some of the some of the details are off I know that I know that Aiden Ross is American, but his phone number is British. The first time since the chat started, I called Jimmy just to confirm everything.

47:32And he says, what are you talking about? That's a punch to my stomach. I say, please say that you're kidding me. And I send him a printout screenshot of the chat. He looks at it and says, wow, I don't know what to say. Please tell me you didn't send them any money. And he says, I sent them$1.25 million. The realization sinks in. The first phone call from a few weeks ago was the real Mr. Beast, the real Jimmy. The fundraiser for Clean Water was Jimmy, the real Jimmy. But the person reaching out from his team wasn't on his team. It was a scammer. He just saw the post that he had donated and said, hey, I'm on the team that is involved in the donation.

48:11Come into this chat. I'll set you up. And everyone in that chat was fake. And so it was all very skillfully orchestrated. All the people in the chat were fake. All the banter was fake. The trip was fake. I feel the shame inside, the regret, the sadness, anger. I've been fooled. I so deeply wanted to belong to this group. I acted way out of character. I trusted the fake Jimmy. I followed peer pressure of the billionaires and superstars. I broke many of my own principles of how to make decisions. At least there was a silver lining. He's been scanned before. It was a fortune. The silver lining. The silver lining is that he's been scanned before.

48:47That time he felt so ashamed. He didn't tell anyone. The shame kept haunting me. This time, the first thing I did was tell my wife. Later, I wrote to tell my parents and my brother. Then a group chat with many of my closest friends. I've gotten so much support. He's sharing the story now. It's a pretty wild scheme to set up all these fake accounts and have someone pretending to be Aiden Ross. Aiden Ross, bro raised 12 million for clean water, and he's drinking it all himself, crying emoji, crying emoji. And it's like somewhat believable in tone. And they did, like these scammers really, really did a crazy, crazy job here.

49:28So be careful out there. One of the hottest takes on this is that this guy runs some sort of gambling company or something like that. So people are having fun with that, the fact that his business is gambling and he clearly likes gambling. and so he took a gamble on kind of a wild investment. Yeah, how do you run an online casino and send one and a quarter million to some random address claiming that Coinbase is going to launch a token when they already have a chain that doesn't have a token tied to it? And they have a public stock and plenty of information. I think this is... This reads as like...

50:09This feels karmic. Yes, because it should set off red flags as like, this would be insider trading if it was actually going on even if people i respect are insider trading from first principles i should think like no i shouldn't do that this is wrong he has one of his slot machines is called le bandit le bandit that's the one-armed bandit that's what the slot machine is called when you buy like the actual machine is called it's stealing bandit your coins that is hilarious deter i not a name i i didn't realize that that's that i never put those together Great.com. Great domain. Insane domain. Funny to use it for gambling.

50:48Yes. It's also funny to put it as like a Swedish initiative. It's like, maybe it shouldn't be. I don't know. Like, uh, it, uh, apparently the, the site helps you find like the correct, uh, what were the comments like on this for people? People were upset. People were like, yeah, they're not a fan of this guy's business. But it is a good cautionary tale. And it's a wild story. It's very, I'm sure Eric's a nice guy. But the fact that he's advertising his online gambling website as great.com, a Swedish initiative. It's pretty crazy. Pretty crazy story. It's a Swedish initiative. Online gambling. To do what?

51:33Buy Sweden. Yeah, I don't know. Anyway, stay out of the trenches, stay out of the casinos. Just focus on analysis, data analysis. You should use Julius. What analysis do you want to run? Chat with your data and get expert-level insights in seconds. Ask Julius to analyze your data. You pour all that information in Julius, you'll probably get a better result. That's right. Or you get that new Garmin. horse tracker. Take that data. Pop it into Julius. Understand your horse. Better than anyone else. Another more enjoyable thing you can do. This is extremely important. There's a new food item at Air Force football games this year.

52:20Our B2 bomber nachos. It's amazing. This is American innovation right here. This is great. The chips are the chips are not uh b2 bomber shaped so uh they are the chips are b2 bomber shaped and the box is b2 bomber shaped this is capitalism at its best oh this is this is like the air force academy like every single one of their football games will have yes that's really cool yeah uh has bubble crazy nominative determinative sorry has hubble i just read it as has bubble has has a banger here overheard at YC an investor just took a call outside the hospital while his wife was giving birth and then didn't invest this this is insane levels of angel investing uh addiction seriously this is like can you how is this different than going to gamble I mean there are some crazy crazy stories I heard one about an influencer who's like the the kid was like in the pool did you hear this story and he was placing a bet very very dark very very dark yeah uh one of my buddies is like very uh Sagar and Jetty is very very uh acutely worried about the uh online gambling epidemic and has been tracking it very closely and uh we we gotta have Sagar on the show and just chat about that because he has a bunch of good takes um anyway yeah uh maybe log off touch grass touch the inside of the hospital when you're uh giving birth get yourself some grass get yourself some grass and uh uh you know maybe maybe you get into the series a have you heard of concentrate or just text and say i'm in i'm can you can this wait 24 hours totally yeah can it wait 24 hours or also just like hey i'm the type of person that will turn down your phone call while i'm at an important family every time i'm having a kid and my wife is giving birth, I won't be available.

54:19Yes, exactly. And you can expect that out of me for the duration of your time. Yes. And that should be a massive green flag for wanting to work with someone. It should make you want to work with them more. It should be like, okay, you're the type of person that actually has some family values. I'm going to sneak you in late to the deal. I'm going to let you in on an uncapped note so you can get into the next round. I want to work with you because you actually have some back bump. It's crazy. I posted last year, imagine Imagine you're three years old and your parents are addicted to angel investing.

54:49Nonstop refreshing Carta and AngelList and cold emailing founders. Sad that many kids in SF grow up like this. It's crazy you were joking and it's like a real thing. It's terrible. Anyway, let me tell you about Profound. Get your brand mentioned on ChatGPT. Reach millions of consumers who are using AI to discover new products and brands. You can get a demo. Go to Profound. This post by Steve McGuire. Let's read through this. They were cracking up not simply because grades had gotten so high, but because they knew how little students were doing to earn them. Harvard faculty recognized that grade inflation has become absurd.

55:26During the final meeting of the spring 2024 semester after an academic year marked by controversies, infighting, and the defenestration. We were thrown out of a tower. Defenestration. Yes. But this is a metaphor. Yes. Harvard's faculty burst out laughing, as was tradition. the then dean of harvard college rakesh karana karana had been providing updates on the graduating class when he got to gpa karana couldn't help but chuckle at how ludicrously high it was about 3.8 on average the rest of the room soon joined in according to a professor present at the meeting just like yeah everyone got an a plus every the average was a plus i'm pretty sure 3.8 is A plus, right?

56:12Like, isn't 3.5 A? 3.2 would be A minus. And 3.8 would be like A plus. It's different in high school though, right? I don't know. I mean, like, it's supposed to be out of four. And 3.8 is really, really close to four. And so I would assume that I thought it would be, yeah, 4-0 is a perfect score. So it's like extremely close. And Steve gives more context here. He says, 25 years ago, Harvey C minus Mansfield decided he would, quote, distribute two sets of grades to his students an initial grade he thinks they deserve, and then a second grade, the one that will go on their transcript, which will be based on Harvard systems.

56:49What's the point? Really? Because he wants to at least give the feedback of like, you don't understand. I'm not saying what's the point of grade inflation at a school like Harvard, right? If 99 % of the value is that you went to Harvard and got the degree, and then GPA is like tacked on. Well, HBS does that. HBS does grade non-disclosure, so you cannot find the grades. Like, if you are hiring someone from HBS, I believe, I don't know, this was told to me by somebody who went to HBS, you can't email Harvard and say, like, I want to know their grades. And so there's a whole bunch of other, like, whereas law school, I think it's, like, perfectly ranked.

57:28And so you just know your ranking. And so even if there's inflation, it's like we still know where you are on the curve. Just very different cultures. I would imagine that in undergrad, it's more about basically NPS. If it's discovered that employers are seeing that, oh, everyone that goes to Harvard is dumb because they get C's and everyone that goes to Yale gets A's and they're smart, then it's like the the buyer the the person that pays full tuition will say well i'm gonna pay and donate and get my kids into yale because that's where they get a's it's like a very weird perverse incentive but i think that's probably a little bit of what's going on um and then there's just like immense pressure from from everyone in the ecosystem and and there aren't that many people that want you know fair grades or like or downward pressure on grades well speaking of a student of the game pat mcafee is set to play the role of u.s marine drill instructor in the mosquito bowl which is directed by peter berg and now in production following the attack on pearl harbor four of america's top college football stars set their fame aside to enlist in the marines as they prepare for the brutal invasion of okinawa they'll play in a legendary game featuring some of the greatest players in history a game that for many will be the last they ever play doesn't this is gonna be crazy he looks this role it's crazy you see this image and i'm like oh yeah he's been acting in hollywood for two decades like i feel like i've seen him in this role before it's amazing congratulations to pat mcAfee uh pat says an honor of a lifetime thank you for the opportunity it's fantastic this is gonna be amazing and then and then how's he gonna fit filming into his college sports only are like need this in the film it's battling on the ground drinking a beer.

59:12It's great. It's so funny. Anyway, if you're planning a movie, you're trying to plan everything out, get on Linear. Linear's purpose built tool for planning and building products. Meet the system for modern software development. Streamline issues, projects, product roadmaps. Maybe your project is building a movie. Start building it. Linear. The New York Times profiled Snackshot. Let's go. Congratulations, Andrea. She says, it's been the most fulfilling five years of her life getting to work with the biggest food and beverages companies in the world and swaying the conversation around what we find in grocery stores.

59:46Thank you to everyone who has supported her journey. Really amazing to watch. And this is why I love the internet. You can be... You can build a business obsessing over topics that one would have thought at some point that just weren't large enough to justify. Yeah, very deep but very insightful. And she's a huge impact. Focusing on something that I think is real. She says, I like to call our generation the snacking generation. Says Andrea Hernandez, the creator of the Snackshot newsletter and Instagram account. She knows your favorite snack before you do. Your next favorite snack before you do, says the New York Times.

1:00:26And she really is a snack critic. It's not all new CPG is good. She's willing to call out the silly stuff. Maybe we don't need the 20th prebiotic protein, creatine, although that does sound pretty good. What was the latest thing? It's like combining protein with a psilocybin. That was it. An a psilocybin gainer. Mask gainer. I think that's what's on trend right now. With Snackshot, Miss Hernandez is doing the antithesis of what I grew up doing, positioning herself less as myth buster than as cultural anthropologist. whether prebiotic sodas are effective is less interesting to her than why everyone seems to suddenly be obsessed with them.

1:01:10In the five years since, Ms. Hernandez has become, at least in certain circles, a kind of snacking Nostradamus. When Andrea covers a product or a shift, it tends to ripple within the industry, says Melanie, the founder of non-alcoholic aperitif brand Ghia, in an email noting that Ms. Hernandez's observations have a way of showing up in group chats, brand conversations, and beyond. Snackshot offers observations, analysis, and industry scoops presented breathlessly, often without punctuation. A new nicotine energy drink is evidence we have entered an era of the cocaine-induced opulence, a sharp pendulum swing from the past decade of adaptogenic and mushroom coffees.

1:01:51J.Crew retail releasing limited edition pasta is just the latest example of youthful appetite for affordable affluence and man cereal, which we covered here, packed with 2.5 grams of creatine per serving. Well, that remains to be fully deciphered. But if you think that's the craziest thing I've seen containing creatine, you'd be wrong, says Andrea. Anyway, congrats on the post. The New York Times even got BJ Novak to comment. He said, at the same time, she still operates with a modicum of anonymity, a whole swath of her followers, among them the actor and comedian BJ Novak and Ellie Sussman, the chef behind the Sussman's Instagram account, know her only through Snackshot's Instagram, where she posts a steady stream of brutally precise memes.

1:02:37It's a little bit for everyone, says Mr. Remandios. Precision memes. Precision memes. Well, did you see that company, Buddha Juice? Yes, they're going public. Going public. Buddha Juice, which makes branded and private label citrus drinks, filed on Wednesday with the SEC to raise up to$22 million in an initial public offering. Buddha Juice states that it is pioneering the ultra-fresh juice category through its end-to-end cold chain platform. Anyways, a company was founded in 2013 and booked$12 million in sales for the 12 months ending June 30, 2025. And so you don't see this much. What is this screenshot?

1:03:18Because the screenshot of the financials looks like something that was made in the Microsoft Excel template. It doesn't look like a normal SEC filing. It's not a screenshot of what I would normally, I don't know. It stuck out to me as particularly early stage financial aesthetics. But I don't know. Good luck to them. If they're going to get out and wonder what's going to happen. I really have very little idea of what's involved in going public as a small cap or micro cap. I'm only familiar with the traditional IPO, the DPO, the big, big companies going out that way, direct listings. And then the SPAC route, which seems to always hover around$4 billion.

1:04:10It's like you go out at$4 billion. When you're ready to be a$4 billion company, you go out as a$4 billion SPAC. I don't know why the number settled around there, but that seems to be the kind of default price. I mean, look, John, growing 20 % a year,$3 million of net income. It seems like a fine company, but this is probably like a$20 million business, maybe a$50 million business. I don't know. We've got to get the Ridge guys on and get the actual value. It's very possible that retail loves the stock. Do people love Buddha Juice? This is a popular... Well, I've never heard of it before, but it's just funny.

1:04:44Well, they probably have to pay sales tax. So who did you see? You've got to get on numeralhq.com. Sales tax on autopilot. Spend less than five minutes per month on sales tax compliance. Let's go through... John, they didn't put this... I don't know if this ended up in the S1, but they have 7 ,000 followers on Instagram. Whoa, okay. That's got to count for something. Do you mind you and Tyler running through... They've posted once this year, by the way. Only once? Wait, hey, that's strategy. I mean, we've posted like hundreds of times. I don't think we have 7 ,000 yet. Yeah, it's a barbell strategy.

1:05:15I mean, one post that just does that well, that's very impressive. So congrats to the team over at Buddha Juice. We have some breaking news in the chat. XAI has sued a former employee for stealing trade secrets about Grok and taking them to OpenAI. I want to learn more about that. The lawsuit said - I also want you and Tyler to talk through this chief scientist of Meta Super Intelligence Labs, potentially threatening to resign. I can give a little bit of info here. I'm just pulling it up now. Sorry, XAI's lawsuit against Xu Shen Li says he took trade secrets in July, shortly after accepting a job from OpenAI and selling$7 million in XAI stock.

1:05:58Li admitted to stealing XAI files during a meeting on August 14th. XAI later found additional stolen material on his devices that he had not disclosed. XAI asked the court for an unspecified amount of monetary damages and a restraining order blocking Lee's move to open AI. I'm not sure if there is much more info on this, but... Yeah, this is like just breaking, right? Yeah. it's kind of weird to to like physically like take materials right like you can imagine most of the secrets are just like oh it's like this new kind of like you know activation function or something that we use that you can just kind of like you don't have to like actually store like a big file i would imagine for like training secrets stuff like that yeah you you can imagine that a lot of what he learned at xai he would be able to pretty quickly implement over at openai when starting he wouldn't actually need the files but but who know who knows sounds like if the complaint is correct sounds like he already admitted to doing this so we'll see what the damages amount to but it'll be interesting to see if he can actually according to his profile right now it doesn't appear that he's at OpenAI at the time.

1:07:26So we'll see if they're successful in blocking the move to OpenAI. But clearly Elon is not playing around. He's happy to use the courts to further XAI's goals. There was some more reporting. Shangjia Zhao, which is the co-creator of ChatGPT, within days of starting at MSL, Meta Super Intelligence Labs, threatened to quit and return to OpenAI. He actually even signed employment paperwork with OpenAI to rejoin. That's crazy. That is very, very crazy. This is extremely dramatic, in my opinion. Tyler, what's your take? How much do we know about this particular AI researcher? This is not a good sign for MSL.

1:08:10I mean, he's the head of MSL, so he's leading the entire team. Yeah, he was on the board when you put up the whole chart, right? Yeah. I mean, he's the head of MSL, directly to Alexander Wang. Yeah. So do they have anything in here about his motivation? One of the few remaining big tech founder CEOs, Zuckerberg, has relied upon longtime acolytes, such as chief product officer Chris Cox, to head up his favored departments. But in the battle to dominate AI, the billionaire shifting towards new and recently hired generation of executives, including Jiao, Scale AI CEO Alex Wang, and former GitHub chief Nat Friedman.

1:08:44There's a lot of big men on campus, said one investor who's close to some of new meta's. Let's give it up for big men on campus. I love it. It is a campus. Adding to the tumult, a handful of new staff have already decided to leave after brief ten years. Like, what could you have possibly learned in, like, a month? By the way, we spend so much time on the show in normal, everyday conversations that I have off air. When someone says something like, there's a lot of big men on campus, my immediate reaction is in the actual conversation. Let's give it up. Let's give it up for bringing your work everywhere and randomly clapping.

1:09:20when you're interacting with people. It really adds to the conversation. Okay, so he said that while... So Rasab Agarwal, a research scientist who started at Meta in April, announced his departure in a tweet on X on Wednesday. He said that while Zuckerberg and Wang's pitch was incredibly compelling, he felt the pull to take on a different kind of... I mean, this just sounds like he's starting a company. Well, so that researcher was never in MSL. Okay. He was just... I think he was... valour so it's like they wanted me but like that you know you guys are incredibly compelling yeah and i know i just gotta go a different direction ask me to join the team but i'm gonna i'm gonna take my talents somewhere else yeah we're actually good you never you never yeah he was on i think i don't know exactly if it was fair or just like meta ai team yeah i i don't think the msl team was like even really there when he was during his tenure yeah it is an entree it is it is such a funny dynamic because like msl is like the hot new thing but like at the same time like you could wind up being at a different in a different org not like that new hot thing and actually have like a huge impact and have a great career and like really enjoy it and be comped well and so uh it's got to be a whole bunch of like you know odd odd dynamics back and forth um they don't i don't think they got anything about this motivation this is just purely like you know some some leaked like um like you know this is uh one one meta research scientist um me mansa josh wall said one more reorg and everything will be fixed just one more that's hilarious said that on x yeah wow i think like it's good to have a little fun with it the only possible reasoning i can imagine is like the promise to join meta was basically that like you're gonna have a ton of free compute you can work on whatever you want.

1:11:10And then you get there and then Zuck or Alexander Wang is just kind of like, Oh, actually we're going to do, you know, Instagram companions. Like you have to work on this like random project that it feels like, yeah, I don't know. We have to work on ads or something. I mean, even the, even the Instagram companions, like even if you like say, if you want to tell that story of like, Oh, like, yeah, stepmom and cow or whatever, like that doesn't feel like an MSL project. That doesn't feel like, oh yeah they built a team they launched something yeah the idea that the idea that those those that chat with a celebrity thing that's been going on for like a year yeah and the idea that he would you know have this maxed out offer to some cracked researcher and then say like get ready to work on the ads product like that that that doesn't seem like what you would immediately put somebody like no no it feels like don't work on any product work on the foundational research build the build the amazing model, get us to the frontier.

1:12:09I think it could also be like, imagine like, okay, you give these massive offers to a ton of people. You can probably expect some of them are going to be like, okay, I just made like a billion dollars. I'm not going to work that hard. And then the rest of them are just like, well, the team is like only really half into it. I'll just go back to open AI where everyone is like actually grinding. Like they have this vision of AGI. Everyone is super driven, even though here I might make a little bit more money. At the same time, like just the idea of like being on any sort of implementation, I just would be, we'd be shocked if any of that's left up to MSL.

1:12:42It feels like their job is to build like basically an incredible AI API that can be vended into every single product team at Meta. And so like, if you're on the ads team, you're like, cool, we're going to get a new capability. Like we're going to get better AI researchers, but it's not like the AI researchers can be like now in charge of ads. I don't know. I don't know. Anyway, So Financial Times says multiple company insiders describe Zuck as deeply invested and involved in the TBD team, while others criticize him for micromanaging, saying that being surprised that Zuck is going to micromanage something that he's investing tens of billions of dollars in.

1:13:22Seems silly. Wang and Zuckerberg have struggled to align on a timeline to achieve the CEO's goal of reaching superintelligence for AI that surpasses human capabilities, according to another person familiar with the matter. obviously this is going to be a debate it's like how do we move as fast as possible but at the same time what's realistic yeah Meta said this allegation was quote manufactured tension without basis in fact that's clearly being pushed by dramatic navel-gazing busybodies I think that's the real line it is the real story like someone went to the brass with like a very salacious headline that's like sort of ridiculous and doesn't really It doesn't really have a solid narrative.

1:14:04Meta also said, while TBD Labs is still relatively new, we believe it has the greatest compute per researcher in the industry, and that will only increase. That's fun. That's cool. Well, instead of chatting with the cow, chat with an AI agent for customer service. Go to fin.ai. Number one in performance benchmarks. Number one in competitive bake-offs. Number one ranking on Jeep, too. Go to fin.ai. Let's go over to Doge Designer. He has a video of SpaceX landing. He says this isn't CGI. We'll be the real judges of whether or not it's CGI Doge designer. Let's play the video of Starship coming down and landing.

1:14:43What do you think, Jordy? Real or CGI? Maybe it's not CGI. It's generative AI. It's nano banana. It's Grok 5. No, this is incredible. Obviously, this is the higher res video from that camera that was live streamed. Wait for the explosion? Oh, oh, oh. Wait for the explosion? You think they're going to fade to black beforehand? Wait, wait, wait, wait, wait, wait. A fade to black. Fade to black is technically a computer-generated image, right? Because you are taking the frames of the video, and you are adding an opacity. You're adding a black layer. What do you think? Can't you do a fade practically?

1:15:27Yes, but do you think that was a practical fade? Do you think that they? It could have been on film, yeah. You think they had a neutral density filter that they were rotating over the lens at that exact moment? On the kiddie pool. Or do you think that was done in post using computer-generated imagery? I'm calling CGI, not on the rocket landing, but on the fade. I think the fade is CGI. I think you called it. I think the fade of black, that looks like CGI. Let's pull up this video of the liftoff. Yeah, yeah, let's see the liftoff. This is the real tinfoil hat. Ah, he in the chat says, clearly VO3.

1:15:56Yes, VO3 could pull it off. I would love to see if somebody tried to generate that on VO3, what it would look like. Anyway, let's look at the liftoff of Super Heavy, the most powerful launch vehicle in history on Starship's 10th flight. I believe this is slowed down, right? I think this is a slowed down video, but it is incredible. So this, the first question is like, how are they filming this? You would immediately imagine that the camera would melt. Apparently, they're using a high-speed Phantom camera in custom water-cooled nitrogen purged housings. They use sapphire windows and protective enclosures to survive the extreme heat from Super Heavy's Raptor engines.

1:16:40Either that or Photoshop, one of the two. Just kidding. It is remarkable. Sapphire and really strong air conditioning. Basically, yeah. yeah well water cooling uh like an eight sleep eightsleep.com get a pod five five-year warranty 30 through 30 night risk-free trial returns i got a little cocky last night yeah how'd you do i had so many good nights of sleep this week yeah look at jordy's drip the chat loves the outfit they're really they're really happy eight sleep how did i do i was up late last night i got an 84 got a 93 Monday, 86 Tuesday, 84 Wednesday, 68 Thursday. Thursday I got a 95. I did great.

1:17:24What about last night? I got an 84. What'd you get? 68. Hit that soundboard for me. I think it's a clean sweep this week. Wait, what did you get Monday night? Monday night? I don't know. Let me check. Can't say. Monday night and 83. 93. Oh, okay. You beat me then. So not a clean sweep. But I think I won best of five. Anyway, there is a battle. The timeline's in turmoil over a partnership between Cloudflare and BrowserBase. Paul Klein, who's been on the show a few times, says, Today we're announcing an unlikely partnership. We believe that agents need reliable, responsible web access. That's why we're partnering with Cloudflare in support of web bot auth and signed agents, a new standard to allow good bots to authenticate themselves.

1:18:13Here are the details. And Varunam Ganash says, I get why BrowserBase is doing this, but if Perplexity doesn't step up, we'll be in a world where, for no reason, Cloudflare gatekeeps the entire internet and dictates how agent-to-agent interaction will evolve in the next few years. What's Perplexity's role in all this? I don't know. Maybe Perplexity has the ability to get around Cloudflare's user agent blocking. I don't know. I mean, I know Google has the ability to get around Cloudflare's user agent blocking because they have two bots. One is the Google bot that scrapes your and indexes your website.

1:18:54And the other one is the Gemini bot. And you can turn off the Gemini bot, but you can't turn off the Google bot without not showing up in search rankings. So, like, they're going to get your data and you're going to show up in the AI search review, like the AI overviews. maybe perplexity is building something similar where it's like the option perplexity has leverage over cloudflare potentially because if you're using perplexity and perplexity says look if you don't let agents interact with your website we won't show you in perplexity at all i guess that might be a theory i don't know yeah uh anyway gary tan's not happy with it he says the cloudflare browser-based Axis of Evil was not on my bingo card for 2025.

1:19:41Legalize AI agents. And Paul Klein quote tweets it and says, good morning from the Axis of Evil. And they're all wearing bucket hats, having fun on the timeline. I don't know how Axis of Evil this is. I mean, I guess people are unhappy with the Cloudflare thing. I mean, it is just a default. People can go. Like, if you want to legalize an AI agent coming to your website, like even if you use Cloudflare, you can go turn that on. But the main thing is that by default, Cloudflare blocks AI agents. So you have to go and configure it, but you can. I don't know. I don't know how disruptive it is for Cloudflare.

1:20:21They don't control 100 % of the internet. And then also there are plenty of other companies that are being probably way more proactive about blocking AI agents. And really it's a cold war because Because the company says, oh, we don't want to be disintermediated by an AI company. And then the AI company is like, well, we're going to go and build an RL environment with Verify Reward and be able to get over your CAPTCHAs. And when you watch ChatGPT in agent mode, it's often like, oh, I hit a CAPTCHA. I'm going to try a different browser. No, it just did that for me yesterday. Tyler, what you got?

1:21:00Yeah, you can also, like, you can kind of always get around these things. It's like the, there's like the meme of like the Chad web scraper versus like the virgin like API user. Yeah. It's like, you can, you can kind of always just the front end is the API. Yeah. Yeah. Commonly. I don't know. I think it's not like a massive deal. Yeah. Um, I don't know. Um, well, we'll have to keep tracking it. It doesn't seem like it's a, it's too much of a fight just yet, but we'll keep monitoring. Uh, anyway, Adio customer relationship magic. Addio is the AI native CRM that builds, scales, and grows your company to the next level.

1:21:33Get started. Coterie, according to Drew Fallon. Coterie nearing deal to be acquired by Mammoth Brands for$650 million. Reuters reported that Mammoth Brands, owner of brands like Harry's and Flamingo, is nearing an acquisition of the Baby Care diaper brand. Coterie is reportedly doing over$200 million in revenue with$50 million in EBITDA. A$650 million price tag would represent three and a quarter times revenue. 13x EBITDA. I remember when Coterie launched and it was long before I had children. And I thought, is this that great of a business? You get a customer and then they use diapers for a little bit and then they're going to churn because they learn how to use the potty.

1:22:22And then I realized I've spent like thousands and thousands of dollars in Coterie. They probably, who knows what our family's CAC was early on, but it seems like a fantastic business. And they're always, like we've been on a subscription I think for years now, and we run out and then we go to Whole Foods and they're out. Like it just seems like this infinite demand for the products they make. Yeah, I wonder how big the actual market is for diapers because that seems like the cap is that you actually can't get a user for life. Kids do grow out of them eventually. But it seems like the business is certainly solid.

1:23:06What's interesting is, are you familiar with Mammoth Brands? Are you familiar with where that came from? So Harry's, you know the story of Harry's, right? Yeah. So Harry's D2C shaving company, they launched with this massive fundraising round. They buy their supplier. They buy a razor blade manufacturing company. The razor blade and shaving industry was highly oligopolistic and very hard to break into because there were only a few companies that owned basically everything. I think it was Unilever and Gillette, and there were a few others that had vast majority ownership. and so Harry's figures out that if they want to break in, they've got to buy the manufacturer.

1:23:49They do that. They scale. I believe they tried to sell the company and they got blocked and then they were thinking about IPOing or something, but they just rebranded as Mammoth Brands. Is this going to be another antitrust victory where they end up getting blocked and then scaling? Maybe. I mean, the thing I like about this acquisition is Mammoth, it feels like if Mammoth just executes for 20 years and starts acquiring the breakout brands Instead of P &G, they'll actually be a real, a new consumer conglomerate. Yeah, and there's something sort of maybe differentiated about, so Harry's rebranded as Mammoth Brands.

1:24:28It's not like Harry's sold to some sort of roll-up Holdco. They just became a Holdco. The parent company, still Harry's. Well, no, no, no, no, no. The parent company now is no longer Harry's, it is Mammoth Brands. I know, but Harry's is what they sell products. Yes, Harry's sells products, but then they also owned Flamingo and then they're going to buy Coterie. And Harry's, like the team at Harry's, the owners of Harry's have become like this holdco. And so instead of trying to spin up new D2C products and try and become like launching new things, they're actually just going out and using the cash from the business that's working to acquire new stuff, saying if we can't sell, we're going to buy.

1:25:10This is basically the takeaway. I don't know. Interesting data point here. So Align Ventures led a$23 million Series A in Coterie in 2022. Align is the venture fund that was meant to lead Figure AI's round at a$39.5 billion valuation. Wow. So Align had invested, I think, previously in Figure AI. And so when the news broke that Figure AI is in talks to raise$1.5 billion at 15 times its last valuation, everyone's like, okay, who's leading? And it's like, okay, it's just like CPG fund. Yeah. That's interesting. That feels not aligned ventures. That doesn't feel particularly aligned. It feels misaligned to invest in both babies that wear diapers, new humans, new human labor, and then robots that don't wear diapers, new robotic labor.

1:26:05Those two things are actually at odds. What if the figure robots have diapers back here that they can pull out? And then they can diaper the babies. It's a beautiful symbiosis. How much would people pay to not have to change a diaper again? Potentially billions. Potentially billions. Potentially billions. Jeff Dean made the Time AI 100th list. Hit the soundboard for Jeff Dean. One of the greatest ever. Congrats to Jeff Dean. He finally is going to pat himself on the back and think, I'm good at AI now. I actually might be decent at this stuff. I made the Time AI 100. Yes. And I saw in the chat, I didn't verify this, but somebody said that Google is hitting all-time highs.

1:26:47Congrats to everyone at Google, including Jeff Dean. If you're looking to go long or short Google, do it on public.com. Investing for those that take it seriously. They got multi-asset investing, industry-leading yields, and trusted by millions. Dave Grampel in the action. It says TLDR diaper. LTV. LTV industry. sources confirm the average spend per U.S. child over their diaper-using years is between$1 ,800 and$2 ,100. That makes sense. That tracks. And with Coterie, you get to spend even more. They're clean. Microplastics or something. Tyler, would you mind pulling up the Time AI 100 list, putting it in the truth zone?

1:27:27Let me know who the - See how it tracks with the Metis list. Who didn't get on? Did they include Sholto? Did they include - Wait, I think, wait, Ilya has a new profile picture. We might need to update the Metis list because it's a great picture. Oh, for sure, for sure. Okay, so anyway, Tyler, dig into the Time AI 100 list. I want to know who sticks out to you, who's interesting. In the meantime, let's go over to Mechanize. They said, we built a Twitter vibes engine for AI labs. Evals are important, but the vibes are hard to fake. And it's the vibes for OpenAI and Anthropic over time. And you can see Anthropic had great vibes throughout 2024.

1:28:06Then the vibes started dipping a little bit. After 3.7 Sonnet, they were on a high, and then they went negative, negative net sentiment score, and then have been climbing back up. Anthropic's about even. OpenAI has been lagging a little bit. And the vibes seem to be flipping back and forth between the two. Very, very interesting analysis. Of course, you know, you got to take it with a grain of salt. It's just a bunch of scraped posts and then run through sentiment analysis. We, of course, love looking at the Polymarket best AI model and seeing who's tracking there, the vibes. Google is running away with it.

1:28:45They're now at 71 % by the end of the year, predicted to have the best AI model. And they seem to be chopping wood over there. The vibes are getting better, too. I saw Logan posted an interview with the team behind Nano Banana. People are loving it. They're getting good with the naming. And Nano Banana, I mean, major reversal from some of the earlier Google AI image projects, which were kind of hated on for a variety of reasons. This just feels like it's a very useful tool. I was playing around with it. some amazing results where the generated output looked so much like the input that I couldn't even tell if it was doing generation.

1:29:31It was actually just like, oh, did it change anything? Had a few errors where I was trying to get it to swap outfits from one person to the next, and it was getting confused or it just wasn't doing it. It was sending me back the same image that I put in basically. But you had some luck with it. You were trying to turn yourself into a centaur or something. That was kind of a bizarre outcome, but I've seen some good ones. Tyler, have you been having fun with Nano Banana? Yeah, mostly I've just done like change the outfit or something. It like works perfectly fine. But I did try like making myself look more jacked and it didn't work.

1:30:10I think I was already like max. Yeah, TJ Krasinski says takes longer than GPT-5 but does better at turning people into chads does better interesting maybe my prompt was just wrong then yeah so uh let me uh let me show you uh i i think it's it's interestingly particularly good at uh at posting um let me see if this works so did i did i post this uh i'm putting this in the chat. I took one of these trade deal alerts, kind of like the meme formats that we do, that we would normally do in Photoshop, and I fed it an image of Ilya and the logo, and just asked it to kind of recreate the same image. And if we can pull up the ESPN one, there's an alert for the Green Bay Packers.

1:31:03The Packers are trading for Micah Parsons, and you have an image of the football player on the left. You can see this, and then alert and then the logo. And then the other image is from Ilya Sutskiver, changes his profile photo. And I put the corporate logo there. And like, look at, this looks like it came from Photoshop, but this was actually just a nano banana prompt. And I guess it's like, it kind of re-rendered his face. It's probably not 100 % perfect, but in terms of just like - And they watermarked it. Yeah. The watermark is weird because the watermark in this image is, it just says sports.

1:31:38It's not, it's like a random hallucination of a watermark. But it, so in terms of just like take some images and make the meme, it can now do that very, very reliably, which is just kind of a new unlock. And we were talking, Tyler, about the nano banana chat GPT moment. And I feel like I'm starting to see that on the timeline with people posting, take Sam Altman's face and put him at this pose on this background. Yeah, like a ballerina. Yeah, the ballerina one, you saw that. And I feel like that's kind of the meme, is like make a super photo real image of this person doing this funny thing in this funny place.

1:32:23And it requires a lot of creativity to come up with a good concept. But once you do, it can instantiate something that's photo real extremely quickly. So very cool. Yeah, I mean, that's what we kind of talked about. It's like the consistency is vastly better. so you can actually do photorealistic stuff. Yeah. I think it's at a point where it's good enough to put on a billboard. If you have an out-of-home advertising campaign idea, generate in a nano banana and then head on over to adquick.com. Out-of-home advertising. This ad is brought to you by Diaco. Easy and measurable. Say goodbye to the headaches of out-of-home advertising.

1:32:55Only Adquick combines technology, out-of-home expertise, and data to enable seamless, efficient ad buying across the globe. We were debating whether or not we should do a Cheeky Rack and react to Cheeky Pint, the podcast hosted by John Collison at Stripe. Cheeky Rack would, of course, be where John and I drink a 30 rack during an episode of Cheeky Pint. Three hours of John Collison interviewing founders while drinking. He drinks one Guinness. We would drink 30 light beers. But there was some debate over how much he was drinking. And so obviously, uh, the bar has been, the gauntlet has been thrown down.

1:33:32Is any podcaster capable of drinking a 30 rack and within, within the context of one podcast. Uh, but I think we just solved, uh, how bad that would be because even a single diet Coke makes me, uh, you know, incapable of doing a clean show. Um, anyway, uh, Forbes is undefeated says Rob fruned. Yeah. Do you remember this company IRL? Oh, I remember they got marked up to a billion in 2021. Of course, led by none other than SoftBank. At the time when I saw this round, I didn't know a single person that was using it, but I also just realized that people still use Snapchat because the younger guns on our team use Snapchat.

1:34:17And I didn't, I don't know anybody. I didn't think I knew anybody that still used Snapchat, but it's out there. It's real. So I I wasn't quite, I thought maybe it was real. And there are these sneaky social networks that pop up from time to time, the anonymous social networks. There's always something new. And if you're not really tapped in, you can miss them. So the narrative around IRL was if you're not using it, maybe you just missed it. Yeah, or maybe you're not in the demo. But I remember the timeline kind of turning on them as they raised more and more money and more people started saying, wait, does anyone know anyone who uses this product?

1:34:53Yeah, and it was employees that were also wondering, do people actually use this product? Yes. So the allegations were that they were cooking the books, and it was a rough go. And now a federal grand jury returned an indictment charge of a Hawaii man with wire fraud, securities fraud, and obstruction. I think that's the founder. The founder. Yeah, apparently 95 % of their 20 million users were fake automated bots. Wow. and the actual number of human users was around 1 million. Yeah, what's so interesting is like Reddit started as a platform that was seeded with fake users. But I think that from an early day...

1:35:33It was also Alexis just using accounts to seed. Yeah, yeah, yeah. So it was actually just humans. And it's very different if he was telling... I'm sure at the time he was telling investors like, yeah, we're trying to kind of kickstart this network. So we are using the product ourselves. Yep. and he wasn't necessarily saying, you know, we have millions and millions of... Yeah, totally. It makes a ton of sense to have like some sort of flywheel early on. But you have to disclose that and it's wire fraud if you don't make it clear. And so if Alexis Ohanian had gone to investors and said like, yeah, look at all the usage.

1:36:07It's all real. Instead of being like, no, like we're seeding it. Like don't value us on the basis of our MAUs yet. Value us on the promise of what this platform can do. And I'm sure the first round was like, you know,$5 million or something like that. Like super, super low. Not$175 million going in this crazy company that had a lot of fake users. Yeah. So anyway. Sad story. What should we talk about next? Should we talk about bezel? Go to getbezel.com. Your bezel concierge is available now to source you. Any watch on the planet. Seriously, any watch. Blind boxes, Quaid. Yeah. Oh, yeah. Do them.

1:36:42It's easy money. Make it happen. It's the only. It's the end of the. We would just be hitting that button over and over and over on the show. Should we talk about the$25 million home that's listed in the mansion section? Isn't there another article here in the journal about Lovable? No, that one is in the Financial Times. So in the Financial Times. This is crazy. Page six in the Financial Times. AI startup nears$4 billion valuation. Swedish vibe coding startup Lovable is fielding inbound investment offers. It's a Swedish initiative. Valuing company. I mean, I like the company a lot more than that gambling company, for sure.

1:37:19We talked to the founder. He's a nice guy. Swedish Vibe Coding Startup, Lovable, is fielding in inbound investment offers, valuing the company above$4 billion, more than double the price at which it raised funding just weeks ago. So that's like the rare double tap. We saw this with, I mean, Ramp did this. There are a number of companies when if you're on fire and all the metrics are up and to the right and there's more and more demand for your stock, it's not the craziest thing to sell one tranche at one valuation and then go back out to the market and do the second tranche at the next valuation.

1:37:53So Lovable was valued at$1.8 billion in a deal by Excel in mid-July, cementing its position as one of Europe's hottest AI companies. Now, this is one of those things where did Excel do that deal three months ago? And it just released now. And then we're getting leaked information about a new deal happening. Is it early talks? Is it advanced talks? Exactly. Saying that the deal was actually done. I mean, the question here is - But in February, they just raised$15 million. So that is a big jump up going from$15 million raised to$200 million raised in something like six months. I mean, the company is on fire, apparently.

1:38:30People with knowledge of the new investment approaches said that Lovable's chief executive, Anton Osika, was not engaging with investors on the latest proposals, but he was weighing fundraising options for the coming months. So again, we're talking going forward. Jason Turner in the chat says, lovable is the ish. I have like 15 prototypes. Do you have any production products? Yes, plan for production. Because I mean, the big question around lovable is like clearly they've caught fire with the product. People love it. But what is great metrics? So ARR crossed 100 million just eight months after crossing the$1 million threshold.

1:39:12That's a huge ramp to do two orders of magnitude in eight months. You can see why VCs are piling in on the momentum. And that more than 10 million projects have been built on the platform. So if it's 15 per person, that's pretty crazy. However, it is yet to demonstrate that it can generate a consistent profit amid questions from some investors about whether AI coding tools can make a margin in a highly competitive market. So, I mean, everyone... Look at this beautiful app in the back. What we got? Louis Vuitton? Looks nice. Love it. Very nice. Print ads. It's a new meta. Yeah. So, the trick is, like, I think that reporting suggested that for free projects, they're definitely losing money because they have to use reasoning models.

1:40:00They generate a ton of tokens. Inference is pretty expensive. And so if you go to, just let's zoom out to website creator tools, if they're for free and you're just generating a bunch of them, you're probably losing money on inference because you don't own the GPUs, you don't own the foundation model, like you're paying pretty high inference and you've gotta use the best to be competitive. But the light at the end of the tunnel is that you get someone who stands up a website and then they use that as their front end to their business or their restaurant for a decade and people stick around. And so that's the pitch for everyone from Weebly to Squarespace to...

1:40:45There's a whole bunch of these companies that have all done... And what's weird about those companies is that they've all done very well. I've seen tons of Squarespace ads on YouTube for a long time. I've seen a bunch of those website builders. And this is kind of like the next generation of them. And if you can get someone to build a website that they get value from and they don't want to replatform from, and the hosting cost is zero marginal cost, even if there is a non-zero marginal cost onboarding process, which is the generation of the website, you can imagine that most people would spend a ton of tokens generating the first version of their website.

1:41:24And they'd be like, yeah, I'm good for like a year. My business is basically the same. They're not hammering it with prompts every single day. So there is a way where the math can math out. And I feel like that's probably what the VCs who are underwriting Excel. And we just talked to the Framer guys yesterday. It's a kind of similar business model. Get someone to build a website. Maybe it's expensive up front, but if they stick around for a long time, you can be reaping a reward. Yeah. And when Anton was on the show, he was saying they're clearly fixated on enterprise and that that will be an important market for them.

1:41:57That's very interesting. And I don't think it's the market that they're dominating in. No, no. I know them as particularly good at go viral on social media for building an app in a second, and then people go and build a bunch of stuff. My weird question about all the next generation site builders. Obviously, I'm biased here as a Figma power user for a decade. and obviously they're a partner of ours, but Figma is just so dominant in the enterprise, and people love Figma Make, right? Yeah. So they have lovables, I think, in a struggle in the enterprise. So this comment in the chat from Paraclete says, I'd imagine lovable customers will have high churn and not stay long because it's for starting and not finishing ideas, and you won't be finishing them as final web products.

1:42:50And that is like the second act that I think the lovable customers stay for a few months, whereas a real platform like Webflow has lifetime customers. And I think that that's probably the second act that all the VCs are betting on. They're saying that you've filled the top of funnel. You've gotten people to show up long enough to actually build and deploy a website. Can you charge them$20 a month forever? Can you charge them$100 a month for 10 years? which is certainly the story of Webflow and the other site builders. Squarespace, if you remember, another site builder did$1 billion in 2023. $1 billion in revenue.

1:43:31Yes. Okay. But was taken private at$7 billion last year. Okay. And lovable's at$4 billion on$100 million in sales? I'm sure they're well beyond$100 million. Yeah, they must be well beyond$100 million. Run rate. Yeah. But as one knows. It's fascinating. Well, anyway. Kyla Scanlon has an essay around how do workers actually feel about AI. She surveyed 1 ,200 people across various industries with the main goal of learning what they actually wanted from AI. The results show a workforce that isn't really blindly optimistic or totally resistant, but negotiating a rather messy middle. Makes sense. Workers hope AI will take over repetitive tasks and boost efficiency, but they worry it could erode career opportunities and work quality.

1:44:13Trust is fragile, too. Most people somewhat trust their employers on AI, while some industries lean heavily toward no trust. The biggest ask was training and a seat at the table. 62 % want shared decision-making and how AI is implemented. But overall, this wasn't really about job loss worries. It was about why we work and what makes work meaningful. The policy asks weren't about banning AI. It was about training, transparency, and actual input in implementation decisions. It was about preserving the human parts of work. and that makes sense as AI is making us reckon with what it means to be human in a way that not many of us have ever had to do.

1:44:51One of the human parts of work that I think will endure for a long time is power lunches, right? Throwing a couple back. Throwing a couple cheeky pints. A couple cheeky pints. Cheeky boot. A cheeky boot, yeah. Cheeky boot. Stugging out of the beer boot is the way to do it, for sure. A cheeky round of shots at lunchtime with your team. What are the other takeaways from her article? In the executive summary, she says 85 % of people are familiar with AI, but even among the very familiar, more than a quarter don't use AI at all. Workers want AI to take over the boring parts of their job. That's actually beautiful, the 15 % of people she surveyed just being like, AI?

1:45:34No, not familiar. I haven't heard about it. 62 % want shared decision-making and how AI is implemented at work. 15 % want full authority. Fewer than 2 % are comfortable with no input. There's a trust paradox. Most people somewhat trust their employers on AI, but in many industries, a majority report, no trust. No industry reached a majority of complete trust. Only 60 % of respondents have received training with especially low rates in creative industries and entertainment. That's interesting. I would think creative industries, you definitely want to push the creative tools. You'd want to have training on Nano Banana, but maybe you just want to turn your folks loose and let your teams know if you're in a creative industry.

1:46:23Just go figure it out yourself. The AI tools are out there, so maybe you don't need formal training. anyway there is a beautiful house available in alpine new jersey pull it up we got to pull this up ellie tahari co-founder lists european inspired new jersey home and these photos are i think that's uh i think you got the wrong one pulled up i think that might be 50 cents house which we can do next um arvam tahari co-founder of new york-based fashion brand ellie tahari is listing his property in the affluent suburb of Alpine, New Jersey for$24.75 million. His roughly 21 ,000 square foot home was completed around 2016 with a slate roof and a backyard landscape that reminds him of the south of France.

1:47:10And look at that car, Jordi. Can you ID that? It's a Countach. It's a Lamborghini Countach in red. I love it. It looks fantastic in red. It fits in with that. Doesn't it belong there? You see it in white so often. Yes, you see it in white a lot, of course, in the Wolf of Wall Street. It has eight bedrooms, indoor and outdoor pools. You've got to be having multiple pools these days. He bought the two-acre property 15 years ago for$4.25 million. The previous owner had built the foundation and then stopped. They finished the job. The home has eight bedrooms, a mosaic-tiled indoor pool, and an outdoor pool with cabanas.

1:47:44Walls were hand-plastered and stenciled by an artist from Portugal. The Taharis raised their three children there and had many parties, including a white party and a friend's engagement party for about 150 people. I hate to move from here, he said, but they have children and they decided to move out. They plan to spend more time in Florida. Located across the river from New York City, Alpine is a borough of Bergen County, homes there sell for millions of dollars and often span over 15 ,000 square feet, according to Sir Hunt. Oh, Sir Hunt. Nice. Who lists the home as under contract with a$22.49 million listing price.

1:48:27So go pick that up. There are a few other stories in here that we should cover. In a bunker, no one can hear you scream. The question that the mansion section asked real estate brokers is, have you ever encountered a secret room or bunker in a house you've listed or sold? And Scott Bayans, a real estate broker at Aspen Snowmass Sotheby's International, says - Wouldn't you want to know about the secret bunkers in the houses I've sold? The whole point, if it's truly a secret bunker, it shouldn't be on the listing. So in May, this particular broker listed a property in Aspen for$15.95 million that has two structures on it.

1:49:08One of the structures is a contemporary home with three bedrooms, and the other is a detached three-car garage with a one-bedroom pied -à-terre above. Below the garage and accessed via a hydraulic door that leads to a hidden stairway is what we call the Smuggler's Den Speakeasy, which includes a lounge and bar, LED lights like a high-end dance club, a fireplace, a TV, a sound system, a powder room, a photo booth, and a reverse car lift, which allows you to pull your collector vehicle into an elevator and transport it down into the speakeasy where it's on display behind glass. Right now, there's a classic motorcycle, a drum set, and a disco ball to provide a little something for everyone.

1:49:47The owner who built the speakeasy was one of the founders of a well-known nationally franchised chain of restaurants, so he has hospitality in his blood and a love for a good bar and a well-crafted cocktail. Since he was active on the Aspen social scene, he conceived of a truly unique space designed to surprise and amaze everyone lucky enough to get an invite. When showing the house, we always save the speakeasy for last and enjoy seeing prospective buyers' mouths drop. It's a very specific listing with a feature that cannot be replicated. And I know there's a buyer out there who will love it.

1:50:22Let's go on to Renee Roberts, who says, In September 2018, I met with the owner of a five-bedroom contemporary Cape-style home in Canton about a half hour south of Boston. And it had a lot of desirable features. It had a one-acre private lot, a grand foyer, a large eat-in kitchen, and a wooden stove with high-end appliances. The owner, an older gentleman, wanted a market analysis. I didn't know him. As we were touring the house, we got to the basement, where I learned that the house had two hidden, soundproof, concrete bunkers. The bunkers didn't have any technology cameras or food storage, but there were electrical outlets and air exchange systems in both of them.

1:51:02both of the bunkers were accessible from secret doors located inside the basement as the owner showed me the basement my heart sank a little bit because i was in the house alone with a stranger and nobody knew i was there when he opened the door to one of the bunkers and invited me to see it everything in my body was saying not to go in but he was excited to show it to me and i was curious so i went in to peek around but then our tour but then our tour took a chilling turn when he closed the heavy steel door, the kind that banks use for their vaults to show me how soundproof the bunker was. I started to get anxious, but after a minute or so, he opened the door, which had a keypad.

1:51:39And when we left the space, when he showed me the second bunker, I didn't go in. It definitely made for one of the most scary and unforgettable listing appointments of my career. Ever since that day, when I go to a listing appointment, I tell everyone and give them the address of where I'm going to be going. This guy was just like nerding out about his silly bunkers and scared the living daylights out of his list. You're scaring the realtors. In other news, 50 cents, former estate has hit the market. Look at this thing. 51 ,000 square feet. It has a nightclub. It has a recording studio. It has two pools.

1:52:17Remove a thousand square feet. He really should have. He should have remodeled and taken 1 ,000 feet off. So a tricked-out Connecticut estate, once owned by both rapper 50 Cent and famed boxer Mike Tyson, is listing for$9.9 million. And, Jordy, tell me, I feel like we could move the entire crew here, and this might be a solve for everything. Look at this. It has 19 bedrooms. That's more than we all have combined, for sure. It's 51 ,000 square feet. Probably more than we have now. The suburban home in Farmington is in central Connecticut, about halfway between Boston and New York. You can get back and forth to either.

1:52:59The 17.6-acre estate has a recording studio where 50 Cent said he recorded the 2005 album The Massacre. Tyson, who paid about$3 million for the property in 1996, sold it to 50 Cent for$4.1 million in 2003. Not that much of an appreciation in, what, nine years. The rapper bought it as a real estate investment following a lucrative tour, he said, on Million Dollar Listing New York. The current sellers are food and beverage investor Casey Asgar and his wife Shira Asgar, who purchased the home from 50 Cent in 2019 for$2.9 million, about 84 % less than what was first sought in 2007. So 50 Cent went out to market trying to sell it for like$12 million and only got$2.9.

1:53:46It's crazy. For a 51 ,000 square foot house,$2.9 million. That's like in LA, that's like a normal house. It's crazy. Two bedroom. Yeah. The property underwent several price cuts and was listed by various agencies until the Ascars purchased it. They live primarily in Florida and own Dunkin' Donuts franchises, pizza places, and chicken restaurants around the country. Another example of owning a bunch of franchises. They spend summers and holidays at the Farmington house with their seven children. Wow, seven children. What a flex. Tyson's former ownership was an added incentive, said Casey, who had been a fan since childhood.

1:54:28The Asgars renovated the circa 1985 house, investing more than$3 million over the course of their ownership. After buying the house, they installed the cigar lounge and upgraded the commercial kitchen. The Oscars also redid the indoor pool and spa, which has a steam room, red light, therapy, sauna, showers, a massage area, and a hair salon. The nightclub called Club TKO, a reference to the boxing term Technical Knockouts, was installed by Tyson. The Oscars used the space as an event venue for parties and company retreats. Recently, they hosted a surprise party there for Shira's parents' 50th anniversary.

1:55:03It was the best family gathering they've ever had in their life, and that property made that happen. The Oscars are selling because they don't anticipate using the house as much now that their children are grown. So if you're in the market for a 51 ,000-square-foot house halfway between New York City and Boston, head over to the mansion section in the Wall Street Journal. And if you're looking to just get a weekend away, head over to Wander. Find your happy place. Find your happy place. Book a wander with inspiring views, hotel-grade amenities, dreamy beds, top-tier cleaning, and 24-7 concierge service.

1:55:39It's a vacation home, but better. Well, in two minutes, we have Max Levchin from Affirm joining. Very excited about that. Tyler, do you want to give us a quick review of the Time 100 list? How are we looking? Yeah, it's pretty mid. So it's like basically, so there's a couple different sections. There's like thinkers, innovators, shapers. Creator of the Midas list calls other AI lists mid. So it basically has most of the lab CEOs, but it's missing Demis for some reason. Oh, weird. So kind of strange. Yeah, yeah, yeah. It has Nat Friedman and Alexander Wang's sheriff spot. Odd. A little bit odd, too.

1:56:20Okay. But it's like, okay, it's like reasonable, obviously. Yeah, yeah. Lab CEOs are influential. They're missing a lot of big researchers, right? Ilya's not there. What? Basically, most of the big researchers are not there. But it's like maybe okay. Maybe it's like not technical. There's some like big. Are there some e-ter eggs? Do you think it was pay to play? Do you think it was pay to play? And Ilya. You're getting that vibe a little bit. I'm not paying to be on your list. Yeah, especially as you go down. You see, there's some good picks. Josh Kushner, great pick. Oh, nice. Love to see him there.

1:56:53I support that one. But then, you know, you go down. Rick Rubin's in there? Rick Rubin, you see the president of the teachers union. Okay. A little odd. Wait, which teachers union? The American Federation of Teachers. I mean, that makes total sense. Like they're on the bleeding edge. Scale is all you need. There's a lot of teachers out there. I suppose. There's like some senders. I think it makes sense in the sense of like influential. They're going for influential. So it's like if the head of the teachers union decides that AI will be used in every classroom in America, that is an influential decision that will steer how AI is implemented.

1:57:28Yeah, but up until now, has the union affected AI progress in any way? Probably. Probably in the sense of like, I mean, maybe not yet, but I'm not exactly sure what they put up. But if they signal that like, we are in full support of AI in the classroom, let's get universal basic chat GPT, let's go all in. That is an important moment for the AI industry. Just like if they say, hey, teachers don't want AI in the classroom at all, we're going to ban it. We're going to ban phones. We're going to ban technology. That is an important fork in the road of AI progress, even if it's not tied to capabilities.

1:58:08Okay, okay. What about this? Minister of Communications, Innovation, and Digital Economy for Nigeria. thoughts on that? I'm not sure I don't know what's going on there I don't know I like this quote in the chat though from Gabe he says Alex Karp never learned AI he was too poor and now he's too rich John in the X chat says the Pope the Pope is on the list let's give it up for the Pope he's a Chicago boy right? isn't he an American Pope? the American Pope should be on the list broadly I would say the list is extremely word cell oriented There's almost no shape rotators. Okay. Rough. I think a good Easter egg, Pliny the Liberator.

1:58:49You know, the ex-Anon. No, you're kidding. No, I'm serious. It's the very last spot. Digital Jailbreaker. Wait, really? Yeah. Wow. Okay, they did get some crazy ones on there. Yeah, but it's like, I mean, sure, it's like a good pick, but like I would like to see Guern. I would like to see Dwarkesh on it. Yeah, totally. Yeah. No, Dwarkesh got snubbed for sure. Yeah, I don't know. A bunch of the researchers, I would imagine. Okay. Okay, download the HTML, fix the list, repost it in the next 20 minutes. Anyway, we will move over to our first guest of the show. We have Max Levchin. Here he is. Welcome to the show.

1:59:29How are you doing? I'm good, thank you. That's cool walk-on music. We're working on it, yeah. A little bit better every day. We expect more sound effects, too. Just fair warning. You guys just had a great quarter, so we might do something like this. Yes. All right.

1:59:50Where should we kick it off? I mean, yeah, maybe we should start with the quarter update. How is the business going? Give us the high-level overview of how you are positioned in the company. What is next on the horizon for you? And then, obviously, I have a whole bunch of other questions that we can dive into. Sure. Quarter space for itself, it's pretty killer if I do say so myself. GMV, which is a fancy acronym for merchant sales powered by us, grew 43%, which is a fourth in a row quarter of accelerating volume growth, which is pretty powerful for a famous company. Incredible. This is in the, for those not watching, the quarter we just reported, the GMV number was 10.4 billion.

2:00:38So compounding at 40 % ish, pretty solid. Pretty solid. Sorry? Pretty solid. Extremely solid. Extremely solid is good. I'll take it. Extremely solid. We're very happy. Congratulations. Accelerating growth at scale. We love it. You don't see it often. Exactly. Exactly. Just hit gap profitability, which for internet companies are not expected to do that. We're 15 years in. It's well expected of us. So we delivered on that. It's not a huge surprise to anybody. We said exactly a year ago, it'll take us exactly one year to exit with Gap Profitable, and we delivered on that. User growth accelerated to the sixth quarter in a row, so it's another really nice result.

2:01:26Anyway, every metric is anywhere between mid-30s to low-40s. How are you breaking down the GMV growth? Like, what do you think is driving that? What can we read into that on, like, the health of the American consumer or the broader consumer market? Like, what's the story that we should be telling around GMB? Yeah, how is macro driving it versus just your team's execution? It's actually a really good question. So normally, every quarter, I get asked 12 different ways, hey, so what's the standout segment? And there's always like, oh, you know, people are really traveling because COVID is over. So airlines have tickets.

2:02:01And then everybody upgraded their electronics during COVID. And then it was like a dead lull for electronics for a year and a half. And then poof, electronics, everybody needed a new TV. So this quarter is special because there's not a single category that is like, oh, wow, that thing's exploding. Like literally every category is generally speaking contributing on par with the average or the weighted average. And the best explanation I got, which these things, you think we know everything about American consumers just given our scale. And we kind of do, but it's also now big enough where parsing it is more and more of a spelunking process.

2:02:38And what I think is really going on is we've hit an inflection point where buy now, pay later as an industry is just such a part of the vernacular. People are like, oh, of course, I'm going to pay over time for this thing and I'm going to use a firm. So I don't have a great like, oh, yeah, it's a standout industry X. The only thing that sort of jumped out at me when I was looking through the category results services like in-home services things like that are really growing nicely in part that's because our card which we launched a couple years ago that's growing at a hundred and twenty percent year-over-year so it has a service zone very very strong earth curve that's a really nice product to pay for things that are not traditionally bought online so as an offline tool it's just surging really nicely so services are kind of a standout story but even that is like just distributed across many many different things.

2:03:26Yeah. What about that narrative that was kind of bubbling up around tariffs where there was this thesis that consumers would be fearful about like the iPhone price going up. And so they would lock in current prices by pulling forward demand. Did you see any evidence of that being true or bearing out or not? A little bit. I would call it as a, I think, a bunch of public company CEOs spoke to this last couple of quarters, sort of pulling forward some purchases people expected, etc.

2:04:34not a major contributor. The critics five years ago, or not five years ago, only a few years ago would have said it's, you know. The model will never work in a higher interest rate environment, right? That was the criticism, and you kind of proved it wrong. But walk me through a little bit more of like the actual flow from interest rates to the business. The interest rates are certainly an input. So we're non-depository, non-bank lender, which means that our own capital or the capital that we lend out is some form of sourced. And there's multiple ways of doing it. We're extremely diversified in our source of capital.

2:05:08You have to be because at any given time, somebody may choose to no longer participate. We generally speaking have an extremely strong set of relationships. At this point, I kind of lost count. It's so many different folks that we work with, both at sort of huge depositories, insurance companies, banks, funds. Some of these people buy our loans. We now are big enough where we securitize in a fairly regular basis, which means people buy our securities, the receivables that we securitize. And then we have a whole collection of what's called warehouse lines where you finance the receivables or you borrow against the receivables as a security.

2:05:42And so all of that comprises our capital markets program. Every one of these people has their own benchmark, which, of course, is dictated by Fed Funds rates to a pretty significant degree. Majority of these agreements, majority of these contracts are reasonably long dated, which means that an increase in interest rates or a decrease in interest rates is a slow trickle into our cost of capital. So it's not a tomorrow morning we go back to ZERP, which I think we won't. But as the rates will come down, inevitably there's now enough conversation about it. It will accrue to us as a tail end to the business, but it won't happen overnight.

2:06:17Just like even the sharpest increase in history, which is what we saw in the tail end of 23, I think, didn't really impact us overnight, but required quite a lot of maneuvering to make sure that we consistently deliver yields to the people who buy our loans or those who lend to us against it. But it'll be nicer. It'll be easier, perhaps, to run this business when the rates come down. But a couple of quarters ago, I had a headline in my letter saying, hire for longer is just fine. We obviously printed great margin. We call our margin RLTC, revenue less transaction cost. It's a very fancy term for essentially the bottom line of the business.

2:06:56And that's been between three and four, with I think one exception every quarter since we were public in the first month of 2021. And so rates have changed quite a lot from then to 23 to now. And we've been able to maintain a very consistent margin that should tell you everything you want to know. Are there any new uses or unlocks in the buy now, pay later world that you're thinking about? We were talking about Coterie Diapers earlier on the show. It's a subscription product. and I always thought that there's a world where you get a year supply delivered, you pay for a year supply and then you use buy now pay later to just do the virtual financial transactions every month but you only have to pay for one shipping fee and so the like the cost of the consumer, there's some savings there for both the consumer and the probably doesn't work if it's a really big object, but for small things that are subscription, maybe there's a match there.

2:08:01Have any of the smaller dollar merchants or more regular purchase merchants been beneficiaries recently? Yeah. Actually, if you look at our average ticket, I think when we went public, I already screwed this up today once, so I don't want to perjure myself again, but I think our first quarter a public traded company, we were on the order of$900 maybe. Yeah, people think about it as like you're getting a Peloton or something. You're buying a TV. You're in the$1 ,000 range roughly, and it makes sense to, and you're going to have that thing for five years. So you make sense to match the payments to the price.

2:08:43So this quarter, our average ticket is just under$300. So that should give you a really good sense for the trickle down. All the while, our transaction frequency went up, I think, over 20 % just in the last year. So as people realize that this is a great alternative to credit cards, we're getting more and more acceptance in all kinds of places. The thing you're describing, kind of this reverse factoring, if that may be the right term for it, I don't know if that happens too much yet, but it's a good idea. I didn't actually think of the shipping savings, but that's very real and it's good for the environment and all sorts of things.

2:09:18So I'll suggest it to our sales team immediately. Fantastic. Let's give you credit for that. My kids are out of diaper age, but this would have been helpful. If it works, I will expect you to send me a year's supply of coffee. Because are you still into coffee? I read that about you. Okay. Oh, yeah. Explain to me coffee. I'm not, I don't know anything about coffee. Where should I get started? What should I avoid? Give me the TLDR on how to become a coffee expert quickly. I think you've opened a can of worms or a can of Folgers that you may not have wished for. Really quickly, so I'm a huge espresso aficionado, so you gotta sort of put that, that's a bucket in and of itself.

2:10:03There's plenty of people who think that the highest form of coffee is something else, but I love espresso. So the easiest way to get into it is find a great what's called third wave coffee shop nearby. And that's typically a place where they don't sell food. They may sell some pastries in a corner, but it's a coffee-centric small coffee shop. And chat up the barista behind the counter and ask them to teach you about tasting espresso. okay and like from i don't no idea what this is to i can understand what you're talking about when you say crema and sour versus bitter shot and all sorts of fun jargon and uh minutia will hit you and you'll either be like oh i can totally taste the sour apple in this shot you're like i have no idea what you're talking about if you're in the former group you've hit the right rabbit hole and like six months later you'll be buying your first lamar zocco for ten thousand dollars Okay.

2:11:04When do you have your last espresso shot of the day? Yeah, what's your caffeine stack look like? So I wake up pretty early in the morning, and before I brush my teeth, because I don't want to mess my palate. Exactly. So I'll have some water, but sparkly water is the right thing to drink before espresso. Oh, okay. I'll head downstairs and do what's called dial-in my espresso machine, which is in fact a very expressive La Marzocco, of course, and not the only one I own either. But you asked. Please. The small competition is now going to be just about coffee. You've got to blow out a quarter. Yeah, let's talk about coffee.

2:11:46We should just talk about coffee for 20 minutes. We should go back to Affirmative. Yeah, I've got a couple more. But so I'll dial in espresso machine, which means that I'll grind and pull. And two is like a good, like I can get to a really good tasting shot by two shots if I feel at the time and feel especially passionate or it's not working out. You mean you're making the first shot, you're tasting it, seeing if it's where you want to be on taste. And then you're trying to iterate on it to get the tasting. Yeah, and dialing in is basically two things. You're setting your grinder fineness setting and then you're playing with the time of the pull.

2:12:31The two are not entirely independent variables. The finer the ground, the longer it takes to pull the shot, but you control when you want to stop it. Interesting. And I have three different tenth of a gram precision scales in my kitchen just to make sure. What's the most you've spent on a single bag of beans? Because that's one thing that's interesting about coffee addiction. I mean, people think the upfront cost of the machine can be high, but then the actual habit, enjoyment of it doesn't actually, you know, it feels like something that everyone can get into. Espresso is expensive, but it's not outrageous.

2:13:11Sure. I think at any given, I mean, it's also amortized over time of consumption. So I don't want him. Yes, you can blow a lot of money on extremely rare espresso. But even if you tried, you couldn't spend more than$100 per bag unless you go into like crazy outlier. But like really rare, very time sensitive, you know, only roasted in this particular time of the year from this particular single origin espresso farm in some faraway land. Like even that will run you like$150. dollars. There's some exceptions, but that's a good high tensile average. I spend probably $30 per espresso bag that I buy, and I try to buy larger sizes to save on shipping, obviously.

2:13:55That's great. Smart. Going back to the business, what do you think is the number one misunderstanding around the category from investors? Because I feel like buy now, pay later is something that people experience as a consumer all the time. They're seeing it all the time. They think they might have a good sense of how the business works, but it's still relatively new, at least in this form. Totally.

2:14:26Today's market reaction actually tells me maybe, you know, we'll see what happens in the days and months ahead. But I think for the first time, the reaction correlates pretty well to our perception of our performance. We've been printing exceptional quarters for a very long time. The stock has been essentially not a good predictor of our performance. Yeah. Fairly uncorrelated. It's gratifying to see, like, we have a blowout quarter. The stock does really well. So that's us. Putting that aside. There's a bunch of things that are still misunderstood, probably, but I feel like they're less misunderstood now, at least today.

2:15:02I think a lot of people think, that's for people that can't afford to buy things. They borrow money and that's why. And that's such an arrogant point of view. It frustrates me a lot. And maybe that's the thing that angers me the most. I'm not sure it's the most important thing that's misunderstood, but it's the angriest thing that I have to have beef with. It's fundamentally a better product than credit cards simply because credit cards are designed to get you into revolving debt, which is an exponential function. Like because it was sort of the simplest form of math. You borrow$1 ,000, make minimum payments, sit on a balance.

2:15:37It looks like this. It just goes up and up and up. And people on coasts, us, generally speaking, look at them like, I don't understand. I just paid off at the end of the month. A lot of people don't. It doesn't make them poor. It doesn't make them dumb. They actually have much better facility with interest rate math because they actually pay interest. And for a lot of those folks, it's not a matter of I cannot afford it. In fact, we will not lend money to someone who cannot afford it. Our whole model is built around the idea of no late fees, no gimmicks, no compounding interest, which means that we can only lend money to those who can afford it.

2:16:10And so they're discerning customers. They're not poor. They have jobs pretty much 100 % of the time. And they are the very middle Americana that fuels this country in every way imaginable. They use this product as a great alternative to credit card. But they're not like this is not the last resort. This is not even near kind of a bottom of the economic strata. And so that's been understood for a long time. I think it's a lot better now that people have seen the performance of our our securitizations are public in terms of their their results. And they're updated more frequently than our quarterly earnings.

2:16:48And so you can pretty easily see that the loss rates are meaningfully below those credit cards, which even a casual observer can be like, OK, So clearly this thing is performing better than what we'll be competing with. Yeah. And how have the competitive dynamics changed over the last few years? It's a competitive space. Payments has never had a monopoly ever in any version of payments, which is not a surprise given how enormous it is. It's the single largest industry in the world. Maybe energy gets close. And it's very competitive, which is good in a sense that it forces people like us or everyone to compete on substance.

2:17:33It's very hard to compete in a highly competitive market on things like clever slogans and temporary promos. Like you have to perform day in and day out and year in, year out. And so our competitive edge has always been underwriting just depth of understanding of the borrower, of the end customer. better usage of data, better modeling, kind of living in the cutting edge of whatever the most interesting math thing that happened in the sort of the research world for us. And so in that domain we're unmatched and that's always been our strength and we continue to win there. But there are plenty of competitors and many banks that looked at us ten years ago and said no one will ever use this thing, it's stupid, it's barely understandable, have now come around and said actually we have our own buy now affiliate product, it's gonna be great.

2:18:17You guys should use us instead of the car. So that's probably, that's pretty. Outside of the narrow competition within this particular category, BNPL, what does it look like to think about the next like 10 or 20 years? There's this interesting dynamic that I've noticed where there are a few kind of broadly fintech founders who are still at the helm. They're in double digits, billions, market cap. They don't seem to be slowing down. And they're somewhat on a collision course where they're starting to build products in the other spaces. And the legacy players, the really big banks are maybe less in founder mode.

2:18:59And so just as like a startup Silicon Valley guy, I kind of root for the next wave. And I'm wondering, obviously like the current product is working well, everything you've been on this for a long time. Like, is there a desire to build like a mega firm and expand into a bunch of different categories? What are the risks associated with that? How narrow do you want to stay? And over what time do you have a vision for where you want to go over the next like several decades? Yeah, for sure. So if you look at our mission statement, which I'm very proud to note has not changed a word since the day we started the company.

2:19:40We're almost 15 years old, so we're still a startup. We're definitely in founder mode. I am founder. But we're 15 years old. Sorry, that's one of our sound effects. Gotcha. Love it. I'm urgently in search of a soundboard here. We'll set you up with one. Excellent. Anyway, so our mission is to build honest financial products that improve lives. That is not nearly as narrow as let's have some loans at the point of sale. Now loans at the point of sale turn out to be a roughly trillion dollar TAM. And so we're pretty busy trying to claw our way. Every quarter, we print 10 billion. That's a round-off error.

2:20:28So we'll continue trying to get our way to a one or multiple percentage points of the overall, just in the current plan. But the consumer that we attract, and this sort of speaks to your broader question, where's this whole thing going? the thing that's really amazing slash what a time to be alive sort of like the thing that i wake up to every morning like we're all getting so much smarter it's so cool like this whole ai revolution and the various sort of offshoots of the idea even before and certainly what what's to come next it's like the general increase of the iq of the universe that we are familiar with like certainly a general increase of the iq of the internet savvy consumer which naturally accretes to the younger player.

2:21:17People 25 years older than me have a harder time catching on to the current thing. People 25 years younger than me, they're born with it. They have no idea what it's like not to have an iPhone. They have no idea what it's like not to talk to ChadGPT about. My kids just pull up their phone and be like, what's the answer to this thing? And I'm like, that's a lot of steps. No, it's not. It's just one bicep movement. And so as we all get smarter, lots of things are changing. And the idea of I got tricked into this stupid financial product, man, I'm so unhappy about the dumb loan I took out or the sale I did with my stocks or all the many things that people have regret about financial products is going to start trending down because you will have a PhD level advisor, as Sam Altman likes to say, at all times in your ear telling you, hey, that's a good idea.

2:22:07It's a bad idea that you will trust, that will be completely dispassionate and will have a really deep understanding of who you are and where you're going financially and in your life with your goals. And so the company that's built to create products that we are proud of, like lending is kind of a dirty industry. The reason we tackle this thing is because I've done payments my entire professional career on and off. And lending is like the thing you don't touch because it's like kind of yucky. Like you want to maybe stay away from that because like ultimately it's all about late fees and compounding interest.

2:22:38And we started the company specifically to not have laid fees, to not have compounding interest, to all the things that people hate. We want it to be on the opposite side. And I was told over and over again by people like, this is stupid. One, that's where the profit is. But two, you can't survive. Like the whole industry depends on this. Like don't be an idiot. And we just kept on going like, yeah, we'll figure it out. And for the longest time, people look at us like, OK, you have less margin and less opportunity for margin. And boy, that's going to be tough. And it wasn't easy. but with every passing day, as people get smarter, it gets easier because the machines will not make the mistake that consumers make when they're like, oh, it's a big zero.

2:23:14Add the asterisk. I don't care about the asterisk. You should care about the asterisk. We don't have an asterisk. The rest of the industry is about to find out what it's like when a PhD level advisor is like, mind the asterisk. It is about to screw you. And so that's like a lyrical digression. But where the world is going in financial services is there's tons of opportunity to apply the same level of purism that we brought to lending to other things from mortgages to banking to auto loans to all sorts of fun things where if it's not good for consumers it will be naturally demoted by the next generation of search engines which are the AI bots so there's there's a lot to do I'm it's not just point of sale loans for sure.

2:23:59I want to play out a hypothetical counterfactual. What would the world look like if you couldn't sell PayPal, no one could ever leave PayPal, and the original PayPal mafia was still working together on that business?

2:24:17Well, you wouldn't have SpaceX, you wouldn't have Tesla, you wouldn't have Founders Fund, you wouldn't have David Sachs, the AI czar. Yeah. The world would be a boring place. I suppose, yeah. Do you think PayPal would be like a trillion dollar, like owning everything, like financial institution for everything? Like, you know, get your mortgage, trade your stocks, crypto, everything. Like, would there be any chance for an upstart fintech company? You'd have a first true monopoly. Yeah, yeah, yeah. You said it's competitive space. Would it still be competitive? if the entire team was there?

2:25:03I don't think so. This dates me, but it'll date anybody. There's a great comedic musician slash math professor named Tom Lehrer. You don't know who he is. He is worth knowing. He had a great quote. I had a great time in high school, but I certainly wouldn't want to repeat it. And I think PayPal was a little bit of a high school for all of us. It was crazy times. We're super young. Some strange things happened. Some tough words were spoken. And the fact that we're all friends now is a function of the fact that we're no longer working together in some ways. And so I think we all graduated with decent grades and went on to everything from graduate school to other fun projects.

2:25:54But I think in many ways PayPal was as successful as it was in spite of some of the decisions we made and some of the behaviors we exhibited and because. I think all of us went into our next set of ventures with a very strong view of, I would love to do that again. And I'm definitely not doing this other thing ever again to myself. And so the learnings of the crucible of PayPal are unique, but I'm not sure the original, the original crew starting another company together would be a really fun thought experiment. That would be quite something because we're all older and presumably smarter. Avengers.

2:26:35Avengers. Yeah. Well, what, what lessons from PayPal have you codified in sort of like the employee handbook at a firm? Or like, what are the stories that you tell to a new hire at a firm where you can go and say, this has been true, not just for the history of a firm, but it's been true for every business I've been involved in for my entire career? You know, it's not necessarily true for every business. So I had my own educational journey, if you will, where after PayPal, one of One of my erroneous conclusions was, man, PayPal was such a tough environment. It was not out of character for any one of us to storm out of a meeting because that is the dumbest thing I've ever heard.

2:27:21You're wasting my time. F this and F all of you. Not quite, but I wasn't kidding when I said tough words were spoken. We could tear down each other and our ideas on any given Tuesday, et cetera. And when I left PayPal, I was like, you know, I'm going to definitely start another company. I would love to start with people like these or even these people. And by the way, one of my firm co-founders was one of my closest collaborators from PayPal. So this is where the band still comes together and builds interesting things. But I was so over-indexing on the tough interpersonal relationship side of things.

2:27:58It was exhausting. I don't want to do that again. And I really overdid the let's make a family, not a team. And that was an error. Like I had since realized that one of the huge benefits of PayPal was this no holds barred, your idea is stupid. I'm going to tell you, comma, and you're not. Like I may be driving this idea of yours into the ground and stomping on it and trying to kill it. But just so you remember, we're here because you're brilliant and I'm not so dumb myself. And like, let's work together to make a better one. figuring out how to package that into a conversation that holds across 2 ,200 people is like the team strategy at a firm.

2:28:46You should be able to tell someone that's a dumb meeting, it's a dumb idea, I'm out of here, please do better than this, while not tearing them down personally, while not damaging their conviction around their place in the team, the company's mission, all those things. And so that's a tricky balance to strike. I think we do a pretty good job here. But that is probably the single most important lesson. Yeah. Embracing disagreeableness as a character trait of a high performing employee or co-worker is so underrated. And once it clicks and you feel it and you feel someone disagreeing with you, but they're not disrespecting you.

2:29:30They're just actually making their own decision and bringing their own information, their own perspective. It's extremely refreshing when you first feel it, at least in my experience. The thing that's stuck in my head, and then we'll let you go, is this idea of the entire lending industry being built, assuming that the average person doesn't have access to legal services. right? This, you know, traditionally a wealthy person will get a loan agreement and they'll have their counsel, you know, review it, spend thousands of dollars, you know, making changes or potentially walking away. And I'm very excited for what you guys can do in this space in a world where anybody in the world can take a loan agreement or find print, drop it and get, maybe it's not the best lawyer in the world, but it's at least decent.

2:30:21It's dangerously close to the best lawyer in the world. Yeah. It's really, yeah, that's exactly right. And I think that's, we built the company on the assumption that that's coming. The fact that it's coming so quickly and in the way that is conversational and easy is just like deeply inspiring. Like I am very pro AI because the notion of everyone's IQ is just getting lifted every day more and more is so powerful. like this whole the sideshow of oh gosh you know the job like everyone has gotten so much smarter they can do the jobs that were always out of reach for them like the whole thing is just going to elevate things that's also one of the most interesting like ai is a is a tailwind for my business theses i've ever heard instead of just like i'm going to use ai to you know lay everyone off and cut my costs it's like no ai will make my cons will make consumers pick me over the competition.

2:31:14Incredibly confident. I love it. That's right. Thank you for sharing. Brilliant. And thank you for hopping on the show. This was fantastic. I'll talk to you soon. Thanks for having me. Have a great rest of your day. Enjoy your weekend. Soundboard. Email me to one coffee advice. I got coffee advice for everyone. We will definitely ping you about more coffee advice. Great notes. I think the entire team in the studio would be happy. Yeah, congrats to the whole team on the market. Thank you. Finally waking up and seeing your guys' level of execution. It's really fantastic. That's getting started. Amazing.

2:31:41We will talk to you soon. See you next quarter. Thanks so much. Bye. Up next, we have James Belosik from SendCutSend, one of the hottest companies in defense tech. Anyone who's building anything, they know SendCutSend. They use them regularly. I'm very excited to bring James. Custom sheet metal MVPs. Yes. World champions. From the Restream waiting room into the TVP and Ultradome. Welcome to the stream. James, how you doing? What's happening? Great. Great. Thanks for having me, guys. did I did I get this right so I'm not a customer but I know a ton of your customers why don't you just like explain exactly who your customers are how you grew the business I'd love to kind of kick it off like an intro on you and the company okay yeah our customers are everyone I guess usually usually had the way I describe it like my mom my mom has a silly sign that we cut for her that says live, laugh, love.

2:32:38And then we also have parts that are in orbit right now. Wow. We have parts at the bottom of the ocean, parts in Antarctica. You know, we do work for 60 to 70 % of the Fortune 500. Wait, how big can you go? You might be the solution. Can you make gongs? We're looking for a bigger gong. Can you make this a gong? Okay. I was hoping you would ask, yes. Because we are trying to get a rather large gong. Yes. And this gong is relatively modest. But it's not big enough. It needs to be even bigger. This is incredible. I think we could even put logos all over it. That might be some sponsorship opportunity.

2:33:15There we go. Now we're talking. You're talking our language. This is fantastic. Do you have any update for the business? Can you share anything about the scale of the business? How many employees or size of the business? Anything you got? Yeah. Yeah. We're in our seventh year of operation. We're profitable. Profitable. That's it. It's not going for a break.

2:33:37I love hitting the gong for profitability. There's nothing better. The big fundraisers are great, but nothing like a little profit. Congratulations. Yeah, we're doing nine figures of revenue, about 350 employees. That's amazing. So, yeah, we're doing it. Yeah, and all in America, right? What does the actual footprint of the business look like? Where are you based? What's the scale right now? Yeah, 100 % in the U.S., including support staff, remote staff. We have staff in 22 states, I think, right now. Our headquarters is in Reno, Nevada, which is not known to be a big manufacturing tech hub or whatever, but we're doing it.

2:34:19Known to be the biggest little city. Yeah, it's known for a lot of things, but we love it. We have a facility in Paris, Kentucky, which is a town of about 10 ,000. Yeah, Paris. Paris. And then Arlington, Texas. So just about 200 ,000 square feet under roof right now. Okay. So 2018, seven years ago, you start the business. Like there was not an American dynamism meme at that time. People weren't writing breathless blog posts. I was going to ask when the American dynamism meme started, did you look? I invented American dynamism. Come on. But seriously, was it a happy accident or was it deliberate that you saw something on the horizon about America's need to manufacture things domestically and you made the conscious decision?

2:35:07Or was it just like, hey, you're here, you're making your thing, you're building the business, why not build it where you grew up? Yeah, I'm not that smart. I don't see the future very well. Really, it was for selfish reasons. I needed parts made. So I've always been a car guy. I'm always working on weird side projects and I needed some custom parts made. No one really wanted to make them, especially in a quantity of one. I could get them made in a thousand or I could wait eight weeks, but no one would make something high mix, low volume. So I was like, well, I'm a software guy. I should be able to figure this out.

2:35:43So that's really how it started. I told my wife, hey, I want to buy this machine. It's like$600 ,000. but I think if I can get just enough customers, it'll pay for itself and then I get to use it for free. And for whatever reason, she was like, yeah, go for it. So I told her it would print money, took about seven years and now it prints dollar bills. So hoping to turn that into hundreds at some point. That's amazing. That's amazing. Talk about the actual automation and software that went into increasing profitability of a given machine I imagine that that's like the secret sauce. That's the proprietary like platform that, you know, keeps, you know, keeps margins reasonable in a world where probably anyone can go out and buy the same machine, but they're not going to get the same yield.

2:36:34How did that evolve? Where's the status of this now? Like how autonomous is manufacturing in America? Yeah, it's got to be a mix. It's got to be a mix of robots and dunes. And no matter what, I think you can over robot, you can over autonomize, if that's even the word, or you can go with just too many humans. And I think we've figured out the right mix. You put guys where guys are really good and put robots where robots are really good. I think our secret sauce was we approached this whole thing as software guys. We weren't manufacturers. We're like, oh, how hard can it be? Software development is supposed to be the hardest thing.

2:37:13We make all the money. You're a computer scientist. How hard can that be? but it was, it was a gift because we approached things completely differently than anybody else. Uh, cause we just didn't know any better. And we made a lot of mistakes. Like we had to throw stuff away that people have learned a hundred years ago. And we were just learning for the first time because we were trying to figure it out by ourselves. But some of the things we discovered, um, you know, being software first, it helped us, you know, like you said, we can beat everyone on efficiency and waste, material utilization, machine uptime.

2:37:53So our original vendors for our big equipment, they didn't want to sell us the machines because I showed them how we were going to use it and kind of hack their software and use our own. And they're like, oh, it'll never run. It'll never run. A few months later, the sales guy came back and saw our numbers and was like, oh, holy crap, can you teach us how to do it? So at one point, we thought, why don't we just license our software? We're software guys, and I keep getting caught on metal, and it's heavy and stinky and whatever. But it's really not possible. Our software would not work for anybody else.

2:38:29We're so weird with the way that we approach things. You really have to start from scratch. And I think really vertical integration is the way to do it. You know, if I could, you know, buy a bauxite mine and smelt my own aluminum and have my own ships to transport the aluminum and everything, I would. I don't know if that's the future for us, but really controlling everything from software up. Yeah, it feels like, I mean, this is, we've had a lot of your customers on the show and this is your first time. have you intentionally stayed out of like the avoided kind of the hype cycle? I know you got a Jason Carman video as of today, but it feels like if you wanted to, you could go out and raise like a billion dollars right now if you wanted to play that game, but it feels like it's just not something that doesn't seem like that's interesting.

2:39:27You seem to be just focused on this. Yeah, that's the motivation. I don't know that world. I don't know finance and venture capital or anything. I have a really tough time understanding our balance sheet. I have a high school education. I just like to make parts. The way that I run this business is like a lemonade stand. We sell lemonade. This is incredible. I make parts. Sir, I make parts. So if we sell enough lemonade, I can take my profit and go buy more machines and make more lemonade. And that's really what I love. So I've kind of had my head down for seven years and we've been doing it. We've been self-funded and able to buy all of our own stuff.

2:40:11That's great. And what I realized is like, if you want to shortcut that and go the VC route, you can light money on fire so much faster in manufacturing than you can in software. The CapEx is just absolutely wild. So thank God we didn't go down that path. We're a little smarter now. We do need to expand at a very, very rapid flip here in the next couple of years. We just got into CNC machining, which is an order of magnitude more expensive. But honestly, I don't want to raise – I want to show people that it can be done with our method, with our dumb finance method, and it can work. That's great.

2:40:49Talk to me about how steep the distribution is in your customers. You said you're in – I think you said somewhere in nine figures in revenue. And I imagine that there is a tension between I want to serve the mom who wants to cut a live, laugh, love sign or whatever your example was. And then the reindustrialization process. And there's a billion dollars on the table. They work with Waymo. Yeah, exactly. And so obviously you want to say yes to both. They're both profitable. But there tends to be a tension in just every company. We have an enterprise. We have a B2B. We have a B2C business. Have you bifurcated the business at all internally?

2:41:33Are there trade-offs or tensions? Talk to me about how that evolves. We treat everyone the same. We try and emulate In-N-Out Burger. I don't care who you are. Everyone gets a double-double the same way. You can't ask for a medium-rare. You can't ask for a filet of fish. The menu is small, but it's good, fast, inexpensive. So we're actually very proud that all these rocket launch companies that use us, they get the same exact treatment as some guy who's building a Harley in his garage. So I think building a system that can serve everyone equally, maybe the Fortune 50s get a little worse service than they're used to.

2:42:16We're not bending over backwards. We're not giving them net 300 terms. they get a little worse service but then the guys in their garage get an amazing service and then they they grow we help them grow i want to see people do a prototype and then 10 units and then 100 units and then a million units you know everyone should be making a business out there yeah and i'm sure at some point like if we're talking about you know the like some huge huge customer that's going to be making trillions of things like they always have the option to bring that in-house and do that themselves and that's their financial calculation but you're going to keep scaling and it's a race between, you know, Hey, yeah, like you might be able to bring it in us and do it a little bit better this year, but I'm going to keep going next year and then the year after.

2:42:59So maybe you stick around. Uh, yeah, it's a, it's a huge incentive for us because, uh, in software and SAS, we had a concept of churn. Churn was absolutely terrible. Uh, here, we don't really have a concept of churn until the company gets so large that they purchased their own equipment. And we've actually advised on that a couple of times, but it's, it's a reminder of, No, we should be the ones scaling. We should be the ones growing with them, and we've been able to do it. That's good. That's good. Jordan, you have something? It's just incredible. Yeah. Our friend David Senrose someday I think is going to make a podcast episode about you.

2:43:34It'll have to be a biography first to reference on. I do have a question. The chat loves you, by the way. It's like obsessed. It's going crazy. but I have a question about like position against like American made products like the narrative is there's always the narrative that like China's cheaper but then there's also and they respond faster the responding faster thing there was this viral YouTube video I'm sure you saw it of like I tried to make something in America versus China and like the Americans couldn't get it to me and blah blah and so when I've heard the initial narrative a lot of it's been like look we're going to be a little bit more expensive, but we're going to be higher quality, more reliable, more compliant with DOD rules and government rules.

2:44:19But how do you see the landscape of comping your business to international competitors evolving? What's at the top of the stack in terms of benefits of going with you over international competitors and how is that evolving? Well, I think no matter how fast we are and how much better the service, people always will shop with their wallet. They vote with their wallet, right? So our goal is we have to be equal, if not better than offshore options. And we are. So especially on the CNC side, because of everything we've learned, we've been able to leverage our software and our efficiencies. And so we can compete.

2:44:58We have a lot of customers that are coming to us now and going, Hey, you guys are maybe a dollar more or a dollar less, but you're faster. So I'm using it's, it's a hundred percent possible there's a lot of people that are coming back on shore i get i think the climate right now with tariffs and then the no de minimis shipping and everything it's there's a wave right now of stuff coming back on shore yeah so if you're equipped so that you can respond or you can do instant quoting you know a lot of these shops uh they were set up in the 80s and 90s and it was based on facts and it was based on like hey let me look at my your blueprints for two weeks and then and then we'll send you a letter in the mail or something.

2:45:40And they still operate that way. That's why I'm encouraging people to go start manufacturing now because you're going to start with a totally different tech stack than anyone ever has. There's email first, chat first, texting first. That's really where the business is. China does a good job of it, but all the new startups that I've interacted with are doing it even better. Yeah, so speaking of those new startups, Like, I'm interested to hear from you since you're so far upstream of like the next tech shift. You know, we've heard about like drones, like there's been a boom in drones. There's been a few industries.

2:46:14What are you seeing on like the next breakout interesting industry of like things or objects or physical products that's being made in America that you have an early insight into where you're like, Oh, I didn't actually know that we'd have that as a customer. And now they're here making cool stuff. and I see their products and that actually could be big. I'd be interested to see what your take on like the hard tech world is broadly, even outside of like defense and B2B. I'm actually really excited about the basics. It's not necessarily a category like drones or automotive or aerospace or whatever.

2:46:49It's people are making nuts and bolts here again. They're making washers. They're making just simple brackets. Stuff like that has been offshored for way too long. And a lot of people don't want to make it. because offshore could always outcompete. And so you'd lean on something like ITAR in order to do your aerospace work that couldn't be done offshore. But what we're seeing now is just dead simple stuff that is going into OEM components. And I was like, OK, once we get that base, then you can add complexity as we go. So I don't know what the next thing is. I think drones is a great one. we're seeing a lot of movement in in automotive just with with oems that were producing stuff in the u.s they have factories in the u.s but the castings maybe came from offshore some of those castings are coming from here in the u.s now so it's really exciting at the basic level yeah automotive is interesting it feels like you know tesla's obviously vertically integrated very heavily but it's kind of caused like a rethink of all the oems they all need to rethink their strategies.

2:47:55Anyway, well, anything else? I'd like to see you guys acquire Intel and that would be great. I'm on the right track because I think your system of dumb, dumb finance or whatever you called it, plus just hardcore engineering. It's clearly working. Yeah, this is working. Anyway, thank you so much for having me. We're going to be your next customer. We're going to go to the website. I got the gong. Yeah, I'm ready for the gong. You're the man. Thanks so much for joining. Bye. We should end with this story of an OEM about the Cadillac, an electric caddy with Rolls-Royce aspirations. It's in the Wall Street Journal today.

2:48:34GM is betting that the Cadillac Celestique, with its ultra-luxurious, customizable design and striking silhouette, will become a coveted electric limousine in the new gilded age of the hyper-wealthy. What do you think, Jordy, about the Celestique? It's deep in the stack, but the boys are going to pull it up. There it is. It's blue. It's got a little wagon vibe to it, a little hatchback. So this job requires an open mind. Obviously, our car test this week, says the Wall Street Journal, the Cadillac Celestique, a sultonic, custom-crafted electric limousine priced in the mid-six figures, has some explaining to do.

2:49:11But it's so gorgeous, I'm prepared to listen. This isn't a concept. This is a real car. They're shipping this. They're making it. For starters, what the hell makes GM think it can compete against ultra-luxury legends like Rolls-Royce, Bentley, Aston Martin, and Maybach when it struggles to even build full-size pickups properly? GM has one of the highest warranty costs and recall rates of any manufacturer. As for the Cadillac brand, most sales come from glowed-up versions of mass-market products such as the Escalade SUV and XT5 crossover. What does the Celestique, a visionary four-seat, six-figure electro yacht built to ply the oceans of global privilege, have to do with that riffraff?

2:49:53Almost nothing. That's the point. The contradictions are largely a matter of optics. Unlike Jaguar, now on a production hiatus while ownership figures out how to retool and rebrand the classic British marquee. So is this a four-seater? This is a four-seater. Cadillac is reimagining itself in plain sight. While the division's profits currently depend on internal combustion-powered people movers in the North America, the Celestique maps the brand's ambitions beyond the U.S. in a gilded age of hyper-wealth. And you'll have to be hyper-wealthy because I imagine the depreciation on this thing is going to be insane.

2:50:27Can you imagine buying a$400 ,000 electric car? When you could get a Bentley. I mean, the Bentley is going to depreciate by 50K in the first year. What's the Cadillac going to do? 90 is going to look like a SPAC. But they got F1 now. They got Zuck. They got Coogan driving Cadillacs. They do. And so maybe the brand's on an upswing. November 2024, Cadillac announced it would sponsor a team in the biggest, brattiest, most mammon-worshipping of all international motorsports, F1. Brick by brick, Cadillac is building itself an ivory tower. It wouldn't surprise me to see the division relaunched as an independent manufacturer in the next decade with its own IPO and everything.

2:51:11Let's just hope nothing ever happens to disturb the free flow of goods among our global trading partners. This is hilarious. Our Celestique arrived at my hotel in Monterey, California two weeks ago, leaving no head unturned. The sense of occasion is partly owed to the car's luxuriant size. 217 inches. Do you know how long that is? 220 inches is the size of like a full size, like a Escalade, basically. So it It is insanely long. The thing makes a full-size Lexus sedan look like a toy. How long is it? 217 inches. Wow, so it's longer than the Maybach. Yes. Wow, mogged. Maybach is 215. 215. Well, they got you by two inches.

2:51:52It has 130-inch wheelbase. The status-seeking proportions oblige designers to use the largest wheels and tires that could reasonably be fitted. custom 22-inch Michelin Pilot Sport EVs wrapped around forged alloy rims. For extra swagger, you can specify 23s. You know, talking with Jim at Send Cut Send made me think that we should get a Cybertruck, lower it, put it on smaller wheels, and use Send Cut Send to make a Huracan. Yes, yes, yes. I've seen the demos of that. I would 100 % be in. Tyler, next project. Yeah, build a sports car version of the Cybertruck. Just send, cut send. Just send, cut send.

2:52:31The design's signature move is obviously the fantabulous fastback glass and the tapering rear deck lid, the hatchback of the gods. Here I detect top notes of Jensen Interceptor and Maserati Maroc. The brand's boomerang motif is restated in sizzling LED side markers in the sale panels. I chucked my suitcase into the cut pile spaciousness of the cargo compartment and closed the privacy shade on the rear window. What a fantastic idea. The fastback four-door configuration creates a chic, futuristic cabin arranged more like an aircraft than an automobile with two sets of identical sports seats, gorgeous, divided by central consoles with armrests and interactive touchscreen displays, all under the blister-like canopy of tinted glass.

2:53:14I was pleasantly surprised. Over the years, Cadillac has rolled out a series of ravishing, ultra-luxury concept cars, the CN, the 16, the El Mirage. Have you seen those cars? the Cadillac CN. The CN looks insane. We should pull up a picture. That never made it to production for want of a business case. Cadillac's standard of the world model grew increasingly pitiful. Indeed, much of what makes the Celestique compelling might have been nixed by an earlier generation of bean counters. The technically demanding carbon fiber hood, the radio transparent material in the grill form, allowing the LIDAR emitters to be hidden behind the glass surface, the shaved exterior doors with hidden push buttons replacing door handles, the nifty panoramic roof.

2:54:02That's the CN. Yeah, that's the 2002 Cadillac CN. They got to ship that thing. I can see. You're such a Cadillac guy. I can just see you building out the best Cadillac. Well, you can't buy that. It was just a console car. There's always a price. There's always a price. Always a price. I don't know if there's a price for that. I think that's only in automotive museums. I think that never - It has butterfly doors too, right? Yep. That's pretty cool. Yep. They should have shipped it. It would have been - Great option for like - It could have been the Audi R8 of the Cadillac brand. But they're going back into halo cars.

2:54:34How does it drive? It's stupendous. A nuclear attack sub - Are they calling this a halo car? This is definitely a halo car. I don't know that they're calling it, but it clearly is. The Wall Street Journal says it's stupendous to drive. It's a nuclear attack sub with heated massaging seats, Mechagodzilla on little cat feet. Odd. Parts of California Route 17 winding over the mountains between Santa Cruz and Los Gatos. Narrowed down to just four lanes separated by doom-threatening concrete barriers. The traffic is fast, close, and competitive. I dialed in the car's lane-keeping driver assistance and pointed it downhill, overtaking Porsches as I went.

2:55:10I could have driven with one finger. The unsprung mass of large wheel sets can provoke a grainy, noisy, undampened ride response. the Celestique chassis is, says, we'll have none of that. The car hangs on a variable skyhook of gravity-defying interventions, including four-corner adaptive air suspension, active magnetic dampers, active roll control, rear wheel steering, adaptive all-wheel control. If drivers want, they can almost entirely eliminate dynamic body rolls so the car stays absolutely flat in corners, even as the lateral Gs throw personal effects into the footwells. My buck does have some body roll, especially when it's the way that speeder drives it.

2:55:53Well, folks, I think that's our show. It is a three-day weekend. We will not be live on Monday. We'll see you on Tuesday, folks. Our team has been absolutely grinding. They're going to enjoy three full days away from the Ultra Dome. Yes. But Tuesday, we'll be back. We'll see you Tuesday. It'll be a big week next week. we've sensed that apparently people are going to be announcing some fundraisers next week it's going to happen summer's over well I guess summer will be over Tuesday and the fundraising will be good enjoy the weekend we're back on VHS we love you goodnight bye