Weekly Recap: CEO Affair at Coldplay Concert, Elon Musk's AI Girlfriend, Cognition Acquires Windsurf

28:36So this will be one to follow. How is it doing in the US App Store? I don't know. I mean, most of my Grok interactions are within Axe. My primary use case is still I see a post, and then I go, and I click on the little Grok button, and it explains exactly what's going on. Number two app. It's still behind ChatGPT. In productivity? In productivity. I'm surprised it's still in productivity. I'm actually surprised it is in productivity because X is famously in news, not in social networking. And so X will typically be at the top of the news subcategory because it would be much harder to compete in the social networking category against Instagram and TikTok.

29:26and so better to be a big fish in a small pond in some way. Cognition has signed a definitive agreement to acquire Windsurf. Let's go. The acquisition includes Windsurf's IP, product, trademark, and brand, and strong business. And above all, it includes Windsurf's world-class people. No way. We've privileged to welcome to our team. The whole team, that's amazing. We are also honoring their talent and hard work in building Windsurf into the great business it is today. this transaction is structured that 100 % of windsurf employees will participate financially they will also have all their vesting clips waived what and will receive fully accelerated vesting for their work today at cognition we have focused on developing robust and secure autonomous agents while windsurf has pioneered the agentic ide devon and windsurf are a powerful combination for the developers we serve working side by side will soon enable you to plan tasks in an ide powered by devon's code base understanding delegate chunks of work to multiple Devon's in parallel complete the highest leverage parts yourself with the help of autocomplete and stitch it all back together in the same IDE cognition and Windsor for United behind a share vision makes so much for the future of software engineering and we've never and there's never been a better time to build so there's a video up between Scott Wu and Steve over at Windsor and we're hoping to have them on the show later today if we can coordinate so that'd be awesome yeah that'd be great cool so anyways this uh apparently scott got to work like basically friday and not only negotiated uh i mean to do this kind of deal during all the chaos of this other deal that's happening uh and then put together a deal that delivers a a win for every member of the team that's and the other thing that's interesting here is you know uh historically cognition had um i wouldn't say over invested in engineering but they were heavily heavily skewed towards technical talent sure and the people that got left behind at Windsurf were sales, enterprise account management, GTM, right?

31:25And over the weekend, I'd heard other teams that were kind of circling, wanting to Hoover up their, their GTM team. But the fact that they were able to get this deal done in just, just a, just a couple of days is fantastic. This is incredible. So, wow. What a, what a, what a fantastic end to the story. Or a beginning, new beginning. Yeah. New beginning, You're beginning for sure. I don't even know if we should go through the full history here. We can kind of go through whatever. But I mean, you kind of know the end of the story, but I think we should take you through some of the debate that rose up.

31:56And there's still the question of like, even though it feels like everyone got the good ending, there still is this question about like, we're in this weird zombie structure era where you can be left in limbo. What is the cost of that? What is the risk to that? Do we need new employee contracts? Do we need new understanding of how, of expectations? Because it's one thing for a CEO to say, hey, I'm trying to build something really cool in Silicon Valley, I'm gonna build a tech product, and I want you to join me as a salesperson, operations person, an engineer, whatever, and we're gonna go on this journey, we're gonna go really hard, and we want you, we all wanna be aligned with thinking long term, So we're doing a four year vast with a one year clef, pretty standard.

32:44And the expectation, at least the history has been like, you will have clarity throughout that process. And now that we're in this weird, weird regime, like you're getting like, okay, the last, the end of the last chapter of the book could be really dramatic. But we got the good ending. And the question is like, has there ever been, if this deal kind of exposed the risk of like the bad ending and that it is possible that that could happen. It didn't in this case. But the big question I think people are debating is like, how much of this is due to the chaos? How much of the chaos is a function of FTC and the antitrust regime?

33:24And Ben Thompson talked about that a lot versus just the differences in communication styles of different Mag-7 companies. That's interesting. the experience of CEOs. Like you look at the way Scale.ai handled it. Alex Wang, he's a generational communicator. He's been on Theo Vaughn. Yeah. Varun, great guy, but it's newer. Zuck lead in acquisition. Totally. Having that sort of founder mode confidence fully in control of the company. And everything we've heard from various parties says that Varun was muzzled. But again, everybody involved should have been saying, how do we avoid making it so that hundreds of people don't feel like they've been completely screwed, even for 24 hours?

34:11Yeah. And the evidence of that was overwhelming. At first, people were messaging me Friday and Saturday morning saying the windsurf employees got screwed. And I was messaging them back and being like, you're misreading this. This is the standard deal that they've always done. and then the overwhelming amount of more information from high quality sources saying no they're screwed yeah it just flipped and i said okay maybe maybe they are right you know and the key so so now we don't we had this whole other kind of tangent that we were going to go down which was like what happens to the ghost ship right yeah it could potentially be this like lord of the flies dynamic where there's now hundreds of people that are still working on windsurf but the competitive pressure is insane you're losing a lot of your top talent and your founders is are you going to be able to keep momentum or is churn going to be crazy totally and uh and then do people try to stay a long time so they can get like a distribution or do some people leave because they want to pursue other opportunities and now we don't have to debate that because windsurf is home with cognition and uh and scott woo and you know the best part about that what's that everyone all those employees who are now onboarding to cognition i know exactly what you're going to say.

35:24They're getting ramp cards, baby. Because Scott... Time is money. Save both. Easy use corporate cards, bill pay, accounting, and a whole lot more all in one place. Go to ramp.com to get started. And, you know, Cognition has a huge lineage with the Ramp team. And so we're very excited for Cognition. We're very excited for Ramp. And we're excited for all of the Winsurf employees who landed. Well, this is funny because there's so much that we could go through. I think we should go through a little bit of the timeline of what actually happened, how the debate evolved, because it is very interesting.

35:58So the context of why is Windsurf selling at all? And I think this big question, the first one is, let's just say hypothetically, you owned 100 % of Windsurf last week. And let's say a completely financial investor comes to you, there's no even big tech dynamics, it's like Warren Buffett, he calls you up and says, I want to buy 100 % of your stake. Warren needs these agentic IDEs. I need it. I need it. I have to have one. I have to have one. Yeah. I want to buy a great business at a fair price. Let's do a deal. Yeah. So that's the question is like if you owned 100 % of Windsurf, Jordy, would you sell at $2.4 billion last week?

36:44And I think for most people, the answer has increasingly become yes. And there's a few reasons. So the last big post that Varun, the CEO of Windsurf, had interacted with on X was this post by Technium who says, Windsurf wrecked. And it's a quote of Nick saying, breaking. Anthropic just pulled the rug on Windsurf. Windsurf will be cut off from direct API access to Claude in less than five days. 3.5 sonnet, 3.7 sonnet, 3.7 sonnet thinking. Windsurf never even got direct access to Claude 4 anyways. And so this has been the question of how much, like if you are in this like wrapper business, I think it's a great product.

37:28I think it's great. I think I'm actually very excited about wrappers, but there is this competitive dynamic with the underlying foundation lab. And Anthropic does seem to be more aggressive about where the value accrual will happen. So if it's 50-50 by default, all of a sudden Cursor and Windsurf start pulling 80 % of the gross margin dollars from what they're adding on top, well then the underlying foundation model's gonna say, hey, let's pull this back, let's make sure some of these credit cards live in our Stripe account. And you're not just paying us big API fees. And so there was a big debate about this.

38:05Cursor had to go through it, Windsurf had to go through it, and Varun responded to this and had a good analysis and was basically making the case that we can get through this. And I think that's true. I think there's totally a world where it gets true. But you were saying earlier, it is an extremely competitive market. They were not the number one product in the market. That's cursor by most accounts. And so they were in not a super tough spot. It's a great growing market. It's developer tooling. How many database software enterprise SaaS products are on the public market? There's like the seventh one is probably worth 10 billion, right?

38:45So it's not like they couldn't have gone higher than 2.4, but 2.4 billion feels like a great deal for a company, for a product that's one year old, for a company that's four years old, and a hyper-competitive space with - Product that launched less than a year ago. And your direct suppliers are trying to come for you and getting aggressive. And so this went on Hacker News. Not sure how much you should read into it, But they said web serve is absolutely dead in the water and while cursor hangs on for now all value is going to go back to the models It says Jake in my opinion other than the Microsoft IP issue I think the biggest thing that has shifted since this acquisition was first in the works is Claude code has absolutely exploded Forking an IDE and all the expense that comes with that feels like a waste of effort Considering the number of free slash open source CLI agentic tools that are out there Let's review the current state of things terminal CLI agents are several orders of magnitude less money to develop than forking an entire IDE.

39:41Cloud Code is dead simple to onboard. Use whatever IDE you're using now with a simple extension for some UX improvements. Anthropic is free to aggressively undercut their own API margins and middlemen like Cursor in exchange for more predictable subscription revenue and training data access. Yeah, so the other context here is this year, Anthropic, you know, Windsurf went from zero to somewhere around a$40 million run rate. Anthropic this year has gone from the beginning of the year to$1 to$4 billion. dollars. And so they, you know, however you want to say that they've been running, running away with the market.

40:15And cursors, you know, revenue is equally incredible, although starting from a smaller base. And so this was some of the like, okay, things might be getting tougher from here on out. Yeah. I don't know that I fully agree with that. But but people were saying this. And then we covered this last week, but the meter team did these evaluations where they ran a randomized control trial to see how much AI coding tools speed up open source developers. And what they found was that developers said that they expected products like Cursor and Windsurf to improve them by 20%, but they were actually 19 % slower.

40:54And so you have this weird dynamic where, okay, maybe the future is like, so I don't know how real this is. I think that we could totally be in a world where Curse is incredibly valuable for less experienced developers working on more vibe coding projects than like pushing the frontier of really advanced projects. And then also just the next version of these tools could be really cool and solve this problem. but there was some worry that maybe developers were going to take a hard look at their AI coding IDE stack and say, wait a minute, like I'm kind of using this too much. I'm leaning on it too much and maybe I should just go back to the old way.

41:34So there were some reasonable points around like maybe now's a good time to exit right then so so after so after that the question becomes when you sell you have the board has a fiduciary duty to shareholders yeah and the big question that i think everyone was actually debating was this concept of was the windsurf deal with google a pareto improvement for all stakeholders which means in a pareto improvement basically you can and think of like the baseline is how everyone's doing in a parade of improvement. Some people might go up a lot, other people might go up a little in value, but no one is going down.

42:18Not a single person is going down. This is the goal of like all political legislation. You wanna create things that are not just positive sum in the sense that like, you know, I tripled my net worth and you only lost half. Like that sucks, right? You don't want that. Parade of improvement is like, I tripled, you doubled. Yeah, I won, but we both won and we're both happy, right? And so in a good acquisition deal, it's a Pareto improvement. Everyone gets more than they had before. Everyone gets paid out. Then the flip side is something called Caldor-Hicks improvement. And a Caldor-Hicks improvement is where some people go up, other people go down.

42:55But when you sum them, it's still a net improvement. So very few people were saying like, the VCs, even when you add up the VCs and the employees and the founders, it's a net loss for everyone. Very few people were making that argument. And to be clear, the employees got hosed. It seems like everybody would have done better on an open AI. Everybody would have done better on an open AI acquisition. And so when the 2.4 billion number came out on the evening of Friday, it seemed like, okay, not as great. It's still everybody's going to do well. And then 24 hours later, it was, oh, wow. Like this might've been structured in a very funky way that, you know, people were, I won't report the number, but people were messaging me information on how much Varun personally made.

43:47And that was still in the context of - I mean, you can just do the rough math. Founder steak, couple rounds of dilution. How much do you think he made, right? Like it's not rocket science to figure this, or at least ballpark it to the right order of magnitude, right? But you build a great product that gets some traction, that solves some problems, and you build a great team and big tech wants you, like, you know, I'm not upset about it. But the question was, like, what's fair for the employees? What's fair for, you know, all the different stakeholders? And so a lot of people kept coming out with really interesting stories.

44:21So William Allen here has one about Scott Belsky and Behance going to Adobe we should read through. So William Allen says, I don't think he's ever told the story, but it's worth telling. When we were selling Behance to Adobe many years ago, Scott Belsky made a spreadsheet of every employee, 32 of us at the time, and personally negotiated each person's title, salary, and incentive structure and made that part of the overall deal terms. I'm gonna choke up. It's so virtuous. I heard the phone calls where he went to bat for each individual. He not only didn't have to do this, but it actually complicated some of the other factors in the deal.

45:02of course it changed the trajectory of so many people's lives including my own two years later 100 of that original team was still at adobe even today a dozen years later many of the core members are still there building i was inspired by it then and i'm inspired by it now and so i think that was a good a good case study in like the founders do have a lot of hard power in the a sense of board control and actual voting shares. Almost every founder can veto a deal which gives them leverage to build that spreadsheet and actually decide who gets what. And then on the flip side, they have a ton of soft power because you can't really do a hostile takeover of a private VC-backed company where the founder has board seats and stuff.

45:48It just doesn't work. And so it's incumbent upon the CEO to actually take that step. And that was the fear, that Varun didn't do that, that he didn't go far enough. Yeah, there was another example from Parse, Ilya Sukar's company. So one of his former employees says, we got news our startup was being acquired five days before my one-year cliff. I thought I'd get nothing. Our shares were accelerated to 100%. It was a life-changing event. And I'll always appreciate that our founders did the right thing for us at Parse. And said, Ilya quoted it and said, 100 % acceleration for everyone but the active founders.

46:23We went backwards and revested our vested. glad someone remembers so very heartwarming yeah and so people were people were debating you know did like was the core team taken care of it feel it felt very rough but then pretty quickly it came out that so we were going back and forth on this on saturday and and and the core the core debate like your post went pretty viral like you got two million views four thousand likes um and it definitely struck a chord um folks were uh debating this one line uh from what i've heard the employees are getting screwed regardless of their vesting status and it's like and that was because people had people were on a four-year vest yes but they hadn't hit their cliff even if They had joined 11 months ago.

47:16Yes. And had, again, they had worked on the product up until launch, launched the product, scaled it, thought that they were getting this massive outcome in which, again, some people would have not been able, I'm sure OpenAI wouldn't have kept everyone, right? Yeah, totally. I'm sure that they would have made a bunch of people effectively revest into - There's always layoffs post-merger acquisitions. That happens all the time. That's not a crazy thing. So certainly reasonable. I mean, the other question is just like, you know, if you worked at this company and you were like, I like working at this company.

47:49I really would love to work at Google and you don't get carried along like that is getting screwed. Like not getting a job at Google in some ways is getting screwed. Even just the ambiguity over the weekend is a little bit of like a screwing. And so I still will defend your initial characterization. But I thought that there were things that could potentially shift the narrative. And so I quote tweeted yours with the steel man argument, which is one. And we tried to get a knight in shining armor suit. We were getting the steel man suit ready, but then we knew we didn't have to. We will. The production team will get the steel man knight of suit of armor eventually.

48:27We need to order from a prop shop. Yeah, it's on the way. We're working on it. Yeah, okay. We're going to, and just make sure it's great when it comes. And so I had three points. One was that employees who haven't reached a one-year vesting cliff don't have that strong of a claim around, I built this with sweat and need a liquidity event. And we don't know the 10 years of all the left behind employees. So there is an argument that if you joined three months before, it was already really big. Should you really get accelerated four years? Oh, and I never would have made that argument. Totally. But it was a fact that you could have worked there for 11 months and gotten zero.

49:02And it's like, no, you're getting a ride on the ghost ship now. Ride the ghost ship into the sunset. And that was in the context of the founders. And this is why people in group chats and DMs were getting so angry because it was in the context of, you know, somebody that worked for you for 11 months was potentially going to get zero. Now, that's not the case now. But and then you're walking away effectively defecting and taking a multi-hundred million dollar payday. It is a weird dynamic with these startups because clearly I don't know exactly what Windsurf's headcount was. I think everyone was saying it was around 500 at the time of this deal.

49:39And a year ago, pre-pivot, what do you think their head count was? Couldn't have been more than 50, right? Definitely not. So you're looking at a 10x increase in employees who haven't really been like, they've been on this rocket ship, so I personally think they totally deserve liquidity and accelerated investing, which it sounds like they're getting, and it sounds like they're gonna do great. But it is not the nature of the initial contract, which is like one year cliff, four year vest. If it came out that it was like, okay, they're getting paid out to the tune of how long they've been there, I don't think anyone would be that upset.

50:18But then somebody was making a good argument that basically when you sign up with a four year vest, you're saying, I'm gonna keep working for four years. If you sell the company and put me on some zombie ghost ship, Like, I didn't bail, you bailed. So you should accelerate me. And I actually think that that argument is really good. The other dynamic here was, so when Character AI, when the Character AI founders and part of the core team went back to Google, the Character AI became a ghost ship, but it was cool in the fact that they had 20 plus million users. They also had 100 million on the balance sheet.

50:58and it wasn't this like insanely gnarly enterprise market where and and i know i know people on the character team and they were like it's pretty cool we have a hundred million dollars we have tens of millions of users and we're just kind of going to experiment to try to find you know figure out how to monetize this and i just don't think that that was i i don't see that the code generation market playing out in the same way where i was trying to think about that like is Is there a world where, you know, if the ghost ship had like stayed a ghost ship and they'd pivoted, is there some world where they, you know, niche down, like there was this rumor that they were gonna niche down into B2B, like could they have niched down windsurfed into some like niche category and actually had like a pretty durable business?

51:46We were talking about like, could Jeremy Gaffan make it work if he acquires it and like turns it into some cash flowing business? I just wonder, like, is there a niche where like, I mean we've heard, the example I would give is like, we've heard that like these code gen tools are like particularly bad at like rewriting old programming languages like Fortran for example. And so if you created like cursor just for like rewriting Fortran, it's like that's not sexy at all. That's not gonna be hot on Twitter X, but it could be really valuable in like, you know, the bowels of like legacy banking. And like you could pay, you could charge a bunch and you wouldn't like the TAM wouldn't be very big, but the business could be quite good.

52:27And that might be a weird outcome, but it could be a silver lining, I don't know. Well, anyway, the second point that I made was that, you know, I said the second, the real culprit might be FTC antitrust. This is a hyper competitive market, and Google still feels like they can't just do a normal acquisition. And I thought that was crazy because it's like, this is textbook, they should be able to acquire this company, right? Like the cursors out there they're not acquiring the market leader. Yeah Open AI is clearly going after this market and to the tune of what's what's their valuation like 350 billion or something like that like Like we haven't we should try to get an update there, but like I think the masa I'm not sure that the full mass.

53:13It's not even one-tenth of it's it's greater than one-tenth of Google's market cap, right? Yeah, and so you're looking at like and then is Microsoft gonna compete in this absolutely they have come ready They already do. And so it's like you're basically like, I don't know, second, third, fourth in this market. There are four very serious players. Like this should be textbook rubber stamp. Good. Good to go. Do the deal. No problem. There's also a very long list of founder led companies that were maybe less hyped than Winsurf, but have incredibly talented teams. There's like Poolside. There was that one that Nat Freeman and Daniel Gross did that was magic.

53:51Yeah, there was magic.dev. Apparently they were training their own foundation model for a while and that was kind of like, you know, very capex intensive and maybe slowed down some things in the product side, but still like, clearly it's competitive market, everyone's working on it. Also we're missing out, like there's probably a ton of YC teams that are working. There was actually one YC team that got in trouble for forking like cursor too hard or something like that. Forked it a little too hard. Yeah, they crossed some line there. I think they did fine and I think that they wound up like cleaning it up, but people were upset about like, when you fork something you have to abide by the MIT license or whatever the underlying license is and so you can't just like steal open source code and not abide by the by the open source rules and then and then I said three new facts might come out which they did and and the FTC thing was interesting because there was a little bit of pushback on that people were saying like oh like Lena Khan ate my lunch like Lena Khan's like responsible for everything and I wasn't I wasn't necessarily saying like Lena Khan was 100 % responsible for how this was structured or like how this played out, but she did kind of like warp the road a little bit that made it a little bit wonky to drive on.

55:01Yeah, basically we made hardcore capitalism illegal, so we nerfed capitalism. And then capitalism ended up coming in and saving the day. Yes, yes, yes. With Scott Wu at the helm. Yeah, seriously, seriously. So the solution to anti-capitalism. is more capitalism. This is the Brad Gerstner point. Yeah, totally. And so I still think that there is a way that even with the weird new FTC antitrust regime, Google and the WindSurf founding team could have probably been a little bit more aggressive, taken a little bit more FTC risk and avoided this whole PR dust up. But that would have been more risk for Google.

55:42And I think that the way they did this here where they - I mean, it's a great outcome for Google. It's like, we didn't buy the company. Look, exactly. They bought the company. They bought the company. Exactly. So it really, it really is a great outcome for Google. Uh, even though I'm sure that they, their comp team was up all weekend calling people. Yeah. Like I, I have to imagine that this was like, I mean, it was, it was like serving, uh, you know, it was, it was the best possible story that the New York times could have ever asked for. Oh, totally. It was like big tech. Yes. Buys hot company that was competing, you know, not, not necessarily like the whole point of, of Lena Khan's thing was that, you know, big tech is like squashing competition by, by, you know, buying these companies early.

56:23And so you had the story that, that was served up to them, which was, you know, exciting company in co-gen, a lot of traction opening. I almost buys them. Google says, okay, we're going to buy them. That's Google, Google and opening. I are arguably, you know, the, the two competitors that actually like matter in search right now. and so it was just the perfect story and then and then the you know i i think scott um scott over at andreason had a good post that i that let me pull up here for a second he was basically saying there is an irony that lena khan's activism has resulted in deals that are far worse for everyone except the people she was targeting who's who this is uh sorry martin uh cassado oh yeah and yeah it's like the people with the lowest you know it's crazy it's seemed at the time that the people with the lowest leverage, the employees that had joined recently, were getting the worst outcome out of a deal that should have benefited everyone.

57:19Well, if you're looking for code review for the age of AI, head over to graphite.dev. Graphite helps teams on GitHub ship higher quality software faster. You can get started for free at graphite.dev. So my question is, Google, it feels like PR nightmare, accidental PR nightmare, because they had done what character just fine. It was not that big of a deal for them. And then scale had happened. Well, and it was very clear. That situation was interesting too because Google has delved into social in the past, hasn't had the best time. Not beating the chat GPT script. No, that was intentional, of course.

57:57No, but they've messed around in social. You could tell that Google doesn't want to own the AI chat bot. Oh, totally, totally. They just don't want the association. I mean, there was a rumor that Noam didn't want to be in that. He kind of was just like, I want to train a great model. I want to train a great model. I want to do AI research. And then that became the use case. They found product market fit. And then he was like, I don't really like building this type of company. You see what Elon's launching today with the, I won't even say it on the show, but his new launch today basically signals that that is a very important use case.

58:29And he's interested in that market. Yeah. He's interested in that market. Yes. Anyway, my question for you is, so feels like a PR nightmare for Google, feels like a couple stressful days, feels like they landed. Great timing over the weekend. And that's my question. Do you think that they were intentional and happy about releasing the news after market close because all of the facts had come out over the weekend and it was such a hairy deal that more deals needed to be done even after the story came out and it couldn't be super clean. So you have to do it on late on a Friday. So then Saturday Sunday people can talk deals can get done And then announcements can go out Monday and then it resets the whole news cycle So you kind of skip the the crazy news cycle I think I think the world's too online So I think I think it helps yes that that it wasn't a weekday but I mean this to me this this whole thing, you know from from Everything that we've kind of triangulated this this could have been avoided by managers taking it upon themselves to basically call each individual person at the company and say, before you have a negative reaction, I need you to be patient.

59:41I know you've been patient through this deal with OpenAI. It's not the deal that we wanted, but we are working to make this a positive outcome for anyone. And don't cry yet. Just don't cry. And it's really hard. And it's particularly hard because if you're in the scale situation, a lot of those people had been there for four years. And with Windsurf, most of those people had been there for less than a year, almost certainly. And so the strength of those connections socially outside of work is weaker. So there aren't as many, oh, yeah, like my boss, like we're already on signal with disappearing messages.

1:00:22So we just talk back channel all the time. It's like, I just met my boss three months ago. The argument was the new company has a strong balance sheet. Yeah. And they're going to be able to just do a distribution or pivot or like that. That was effectively the suggestion. It was intentionally ambiguous. And at the same time, the employees left behind on the ghost ship were already talking with other companies. Other companies were coming to them, trying to recruit them. I like how you're coining ghost ship because like everyone involved with the deal would prefer you to use the term remain co, remain co, but that's not as sticky as ghost ship.

1:01:00So I think ghost ship - A ship without a founder. I don't think this will be the last ghost ship we see. I think it's like a new pattern and we're just going to see this more and more. No, but so then you have this dynamic where these talented people, specifically, I talked to a founder who was talking with a lot of people on the go-to-market team being like, these are very talented people, right? They took a company from zero to tens of millions of dollars in ARR and a bunch of enterprise contracts in a very short period of time. I want to scoop them up. And And those people were entertaining conversations because it was just totally unclear to them what was going to happen.

1:01:36So, yeah, I mean, I still I think some of our friends hold the FTC like 100 percent accountable. I'm probably under 100, but maybe over 50. But my key point is that never lose faith if the FTC is giving you trouble. Dylan Field didn't lose faith when he was dealing with a messy situation with the FTC at Figma. and also you should use Figma. Figma.com. Think bigger, build faster. Figma helps design and development teams build great products together. You can get started for free at Figma.com. Anyway, there was another side of the stakeholders that was interesting that this guy Publius said in response to your post, which I don't think anyone was talking about at all the entire weekend.

1:02:24This was cool. And this is something people don't really think about. I think we're in a good spot with these folks now and I think they'll actually probably be in a better spot much better spot But let's read through it. So is here Yes says there are more stakeholders here that have not been discussed There is a whole network of software resellers that invested millions into building partnerships with Windsor I was leading the team at one of those partners We have customers that we have been selling to for years who we vouched for Windsor went for Windsor too. I am sending out a note to our 300 customers on Monday that we are stopping all partnership activity with Windsurf effective immediately.

1:02:59I hope he didn't send that because you gotta recall that email. Don't send the email. Cursor has no channel partners and this will cost our firm millions. Oh, interesting. I didn't realize that Windsurf had a channel strategy and Cursor does not. Very interesting. So Windsurf actually has resellers who go and sell it into their partners because they're doing something on you know we do software development consultancy we come in and help your team run more efficiently we help you pick the right tools you can imagine like McKinsey I don't know where this guy works but like you can imagine a consulting firm coming in and giving advice on what tools to use they get a kickback from windsurf they don't get a kickback from cursor so he's gonna lose millions of dollars hypothetically hopefully not but my reputation and good name is worth more with Google taking the The best engineers from WindSurf are large enterprise clients are screwed.

1:03:48When they purchased WindSurf enterprise licenses, they were also purchasing an ecosystem that they assumed would continue to improve. This is disastrous for any startup tech company with goals of building an enterprise channel. It's interesting. I don't think people have any idea how much this just killed channel sales for any AI company. So the rest of the AI companies out there who are like, oh, channel sales is really interesting. basically if you're if you're if you're a top company in your category growing super quickly you might turn into a ghost ship yeah yeah and so if if i'm trying to resell that type of stuff then i i have to go to the ceo they're good but they're not so good to get these maxed out they're not getting a trade deal yeah you can count on them to not get yeah yeah yeah you're having you're having dinner with the uh with the ceo of some ai company is talking to you about like yeah we have the best software and you're like but you don't have any like actually great AI researchers, right?

1:04:41Like, you mostly just have... We like to partner with companies with... Like, medium to see... C-tier researchers. Yeah, yeah. Great product. It works, but not too well, because we don't want to lose you. You want to keep working with them for a long time. We want to keep working with you. And so, yeah, there were a bunch of other reactions. Shellquah hires. Let's see. I'm not an M &A guy, but something feels really broken in tech. M &A confidentiality is out of the window. Deals get done and called off on a whim. Lack of rigor and discipline on both sides. curious to hear what practitioners think people are going back and forth on this but really quickly let's tell you about Vanta automate compliance manage risk improve trust continuously Vanta's trust management platform takes the manual work out of your security and compliance process and replaces it with continuous automation whether you're pursuing your first framework or managing a complex program and so Wilman itis was particularly blackpilled over the week friend of the show black belt but it's we're so back well you're good Wilman itis said the reason that tech has been able to grow so quickly and creates so much wealth that it ritualized a set of norms around corporate governance that are very distinct from what the law actually requires.

1:05:48The second someone defects, the whole ship goes down. He's so upset. But basically, he's talking about the handshake deal protocol is not a legally binding contract. Even term sheets. You get a term sheet from a VC, that's not a legally binding contract. A VC can write you a term sheet. Everyone can sign it. and then you can just wake up. It literally says, this is not binding. And then you can just wake up on the wrong side of the bed and be like, actually, I don't want to do the deal. Or it could be like you found something in due diligence or you met a different competitor, but the game isn't over until the money's in the bank.

1:06:23The experienced entrepreneurs know this, but we run on this, basically, these society, these social constructs and these social contracts that say, hey, if you're the type of VC that constantly rugs on term sheets, on signed term sheets, there will be a bad vibe around you. I can think of two that are widely known and are still in business, but it becomes very hard to be an effective VC if your brand is you just pull term sheets. Yes, yeah, and some of those folks have been banned from YC Demo Day. Other people have had viral Twitter posts around them every once in a while. like they do that to a founder and then the founder becomes very successful in post economic and is like yeah I still have a grudge so I'm going to tell the truth about x y or z and so the thing is is that now where we are now is I don't think the whole ship goes down I don't think this is a true defection I don't think this reflects poorly and I think that the question of like the big question here was was will this cause more new startup employees to want to just go straight to Google?

1:07:38Let's say that you have the option of working at Google or Big Tech broadly where you know the paychecks are coming on time. You know the RSUs are liquid and you can just cash out as soon as you get them or whenever their lockup is. And you know your managers are going to be there. You know the company's going to be around. Somewhat accurately predict what your comp will be in five years. Exactly. You really work hard. Exactly. And then on the flip side, you have startups, which are in some ways lottery tickets, but also you get to work on game-changing technology with really cool people. You get to move a lot faster.

1:08:08There's a lot less overhead. It's a lot more edifying for certain type of people. You get to work for potentially the next Sundar instead of Sundar. And the economic upside can be 1 ,000x. It can be huge. And the question is, if that deal was broken, if that deal was, okay, yeah, you can go work on the cool thing, but you might wind up penniless and not cashed out like you were promised, that changes the equation and that could pull people away from startups but I don't think that's going to happen based on this because I think the lesson from this is that everyone got taken care of and the social contract still still holds although it was very messy and I think going forward every company that's doing a deal like this needs to think how do I get the scale AI outcome and not the windsurf outcome because just two days of pain is not worth i think i think one potential solution to these deals is exactly what we just saw happen yes which is big tech company does basically an acqui-hire of the of the team that they want and then you simultaneously sell off the underlying asset immediately and you generate a liquidity event for everybody so everybody's happy.

1:09:20It doesn't have to be like life changing. Right. But it has to be something right. So that it's. And I mean, the very key thing is that they left enough money on the balance sheet because the money on the balance sheet. And this was this was Hari Raghavan's analysis. He clearly I mean, the guy's he's a good friend. He's he's obsessed with cap table math. I know he was. Yeah. I mean, this was capital J journalism. Yes. Thank you. This was investigative journalism. Yeah. And so, I mean, his post is so long that I need to just go to the TLDR. But the TLDR is that he says, I spent hours last night breaking down the cap table and deal dynamics from public info.

1:09:58I realized that the unvested equity is around 80 to 100 million dollars, awfully close to the 100 million dollars the founders and board negotiated to leave behind in the bank. Why shouldn't management just that was unvested? Unvested, which is a key detail. Unvested. So they're basically saying we're leaving enough as though you vested your full four years. And so it's still a leap of faith because I don't believe that Google and Cognition were in communication at all. And I think if they were, that would be more like antitrust chaos and stuff. but just economically you know that if you if you leave a company there with that much money on the balance sheet and those many and that many like that unvested options somebody is just going to be like wait so i can get that for basically free if and i can make all the employees whole and i get all the employees and i don't have to pay really like anything to get that thing like it's just going to happen immediately and because it's just like you've created you've left this you've left this like, you know,$100 on the floor and someone's going to pick it up like the free market will just work.

1:11:05I think the I think the question that I had and that I think a lot of people probably had is what is the governance structure of the ghost ship? Oh, right. So Jeff, Jeff, crazy question. Jeff Wang, who's coming on the show at 1 p.m. Jeff and Scott will both be coming on at 1 p.m. for 15 minutes. OK. And we can we communicate that to the other guests? Yeah. Yeah. Yeah. And so the question is like, okay, Jeff, you now run a company with hundreds of employees that are angry about what just happened that, that probably like, maybe they want to keep building windsurf, but maybe they want to go and do something else.

1:11:41And what happens? Like Jeff is basically, I would imagine like has to make a bunch of calls. It's like, do you just keep running the business? Is there pressure to keep running the business? First question, Jeff, did you ever feel like, is it Frodo Baggins throwing the ring into the fire? It's like, pay out the$100 million in bonuses. After all, why shouldn't I keep it? Just throw the ring into the Mount Doom. Yeah, the question was like, could the new leadership, Yeah, like was it ever, was that an option? Could the leadership have decided, you know what? We can run this business super lean. Exactly.

1:12:19We could actually run this business with like 10 people. and we're going to run it for a few years and we're going to use the advantages that we get from our own product to run a super lean team and then you would have employees effectively burned again potentially. But that didn't happen. I'm very happy about it. The question, another question is if you're big tech and you're going to do one of these zombie acquisitions, you got to leave enough for the unvested shares and if you're a founder and you're going to do one of these zombie acquisitions, the ghost ship's got to be be full of plunder full of plunder stacked with treasure because then that's right then the rescue divers and go and lift the ghost ship off the yeah and if big tech comms are telling you you can't tell anybody that they're getting taken care of have to risk it tell a little birdie conversations tell a little birdie to go fly around and yeah yeah people know you you got to be you got to be having like quick calls not not saying anything too specific but saying what you said i think you worded it perfectly where it's like just don't cry yet or varoon right because because he was getting dragged because because he apparently he apparently he apparently people were messaging me like he joined like the the all hands for like a minute yeah you know um and it just seemed like he was being like ultra like kind of like a psychopath being totally see you guys yeah it was a good run and it's like go go have fun building you know continuing the mission this would not have happened if he had said, no, I need an hour.

1:13:51I need to explain everything. Would that have killed the deal? Almost certainly. If that killed the deal, what's the outcome for the employees? Probably worse than what they got. You think it would 100 % have killed the deal? Almost certainly. I think one of the key deal points in the negotiation with Google was we do it via Google's comms and legal strategy. Because Google does not want to get hit with some crazy the FTC lawsuit that's going to not just be some multi-billion dollar settlement, but also a huge headache for years and bad press and stuff like that. So Google says, hey, we want to do this our way.

1:14:27It's going to be awkward, but we're going to take care of everyone. And yes, we will. Yes, we will leave enough money on the balance sheet to pay out all the unvested options. And but in exchange, you got to do the comms our way, which was rough. You have to create a terrible. You have to be scapegoated by the entire. You have to. Yeah, you're gonna be for 48 hours. You're gonna hazed but then and it's gonna blow back on us So go there that weekend. It was rough. It was rough Anyway, let me tell you about linear linear is a purpose-built tool for planning and building products meet the system for modern software Development streamline issues projects and product roadmaps start building at linear dot app and if you are launching a tbpn Derivative product derivative work get on linear The tool we use.

1:15:13So what you would do is you'd put all the glasses of tap water that you need to drink and then you would just check those off at a time. Yeah, every time you tap out. We only have one rule about copying us. It's the derivative works clause in our terms of conditions. And in there, if you create a derivative work of TVPN, you are legally required to drink a glass of tap water on every time you go live. Yes. Every time you go live. And so, yeah, again, we don't have to pay us licensing fees for the patents. We did invent TV. we invented news um but we we will open source it it's an mit license type of situation modified mit license yep uh the only modification is that you have to drink tap water yeah uh anyway it is a small price to pay anyway um in other news question what do you think why do you think google did this why yeah i mean oh oh yes yes yes that is that that is the real question is is we've talked about the role of the VCs.

1:16:07I think based on what happened, never talk down on first ballot Hall of Famer Neil Mehta. Never talk down on the future first ballot Hall of Famer. Everyone was saying, oh, Neil Mehta, Green Oaks, they did this sloppy deal, screwing over the employees. Employees are great. Neil Mehta, potentially goaded. I don't know. I agree. I agree. No, it was well played. No, no, but the question is, Why did Google feel like they needed to do a meta style trade deal in this category? Yes, it's a good question. So, so, WindSurf in my, I don't know everything about all the employees they brought over. They brought over 50 engineers.

1:16:51I don't know if any of those are like insane AI researchers with like crazy citations on like foundational papers. I don't know that it's the same. I don't know that they're trying to build a super intelligence team to really bring their models to the frontier because they already have that. Like Gemini is at the same level of AI research quality as OpenAI Anthropic by most benchmarks, by most people that use them. Like it doesn't feel like they're way behind there. Llama 4 on the other hand was a little bit behind. And so, and it felt like Llama 4 was specifically behind, not on the product side, but on the research side.

1:17:28Like they just weren't figuring out what works in RL. And so they had to bring over a ton of people to just be like, how do we actually train this next model? Like behemoth, they couldn't tame the behemoth. Like they got to get some behemoth tamers in the building. And it seems like that's why they acquired all the different researchers who know, okay, like training on 100K H100 GPUs gives you this. And then you need to use this data and you need to hold back this data and you have this reward function and this reinforcement learning technique and you need to do all these different things. And so you need AI researchers for that.

1:18:01But meta has great product people. So like they're gonna be able to take what they build and then vend it into Instagram and vend it into all sorts of different places and use it to optimize the ads 1 % and make a trillion dollars. Like they're gonna be fine on that side. Google is great at AI research. DeepMind is amazing. They have so many reasons. They invented the transformer. They're not behind on the quality of the foundation model. They are they are behind on product and they are they are behind on like user experience and everyone complains. Oh, they have this amazing VO3 model. But like I had to log in seven times to get access to it and then go through an upgrade thing and it was on wrong Google account and then I have to trigger it.

1:18:40Then I get so here's the here's the here's the the the steel man for the short sellers. No, no, no. Here's what's what's kind of interesting about the way this is developed. So at Google's last developer event. They launched Jules, which is an async development agent for CodeGen. It's a Claude code competitor and OpenAI codex competitor? Yeah, Devon AI competitor. Devon competitor. Now you imagine Google has more ambitions around CodeGen. They've seen Anthropics. Very few businesses actually will work at Google. You need a billion dollars of revenue or you're going to get shut down, most likely.

1:19:18and so code gen is an area that i'm sure they're taking very seriously i haven't heard a lot about jewels since the event i haven't heard about people that are that are using it i'm sure it's i'm sure it's powerful yep but you now have a dynamic where some you have cognition and devon who got not i can't say cloned by google but again like they were the first like serious like enterprise coding agent and so uh and and the the windsurf gtm you know sales marketing team versus the former Windsurf founders and top researchers who are now at Google. And so I'm just incredibly excited to watch this play out.

1:20:00Pavel was posting earlier. He said, I hope these guys smoke Google at AI coding. Imagine the chip on your shoulder after this if you're a Windsurf employee. So, yeah, everybody's got to be very fired up. How are you guys doing? Congratulations. Thank you. Round of applause. Did you guys have a relaxing weekend? Yeah, really chill weekend. Yeah, yeah, easy, easy, easy. Nothing too much. Jeff and I, honestly, we both haven't really slept. Okay. So go easy on us, okay? Well, you had a lot of people to take care of, and honestly, when we heard the news a few minutes before we went live, and we were fist-pumping here in the studio because it's such a fantastic outcome.

1:20:48And I'm sure everybody involved is grateful for the work you guys put in to get this done. But give us, yeah, kick us off with the high level. What's actually the partnership look like? What do you, how would you describe it in your own words of like what's actually happening? Yeah, I mean, this is a real acquisition. Okay. We are being acquired by Cognition. Okay. And you know, must feel great to say that. You don't hear that much. It was a tough Friday, I would say. I don't think anybody would want to be in my shoes on Friday. But we talked to a lot of teams out there. There's a lot of AI companies, foundational companies.

1:21:29And after talking to Scott and the Cognition team, it was done in my mind. It was a done deal. I don't know if you guys know this, but Cognition was probably the only other team that we thought was smarter than our team, actually. Wow. Yeah. No, and that's what we put that together just on the show, seeing the announcement. It's like you take this incredible go-to-market sales machine that you guys had built, and you combine that with one of the best research and just hardcore engineering culture. Perfect overlap. And it's a perfect match. Perfect overlap. Yeah, absolutely. And on the Windsurf side, obviously there were all these stories breaking out on Twitter and everything going on, and people were saying, well, the thing that's left is just a shell, and we looked at it and we said, well, actually, I don't know if that's right.

1:22:17There's the code, there's the product, there's the customers, most importantly, there's the whole team, obviously. And it's an amazing product, and there's a lot to do and a lot to build together. And so I think as we started talking about it, we found that there were just so many natural ways to partner, both in terms of obviously the customers and customers are are super excited to have a solution that basically combines both the IDE and the agent. And then the technology itself, which is, you know, I think we at Devon, you know, at Building Devon, have always focused on this kind of remote background agent as the thing that we've kind of done.

1:22:55Whereas you know, Windsurf is really focused on the agentic IDE. And I think there's a lot of kind of things that play in there, all the way down again to the kind of the fit of the relative teams and the team strength and so on. It's almost like you predicted this because these types of mergers are really hard because you have two brands that are popular. But Scott, you've been managing Cognition and Devin. You've had the corporate structure and the product structure for a while. And so it doesn't seem nearly as complicated as like, where does this go? Do you have to rebrand one another? I don't know if you have thoughts on it yet.

1:23:26I'm sure this is down the road. But it seems like you're actually fairly set up to integrate these two companies in a way that's not super chaotic to either, which is great. Yeah. Yeah. You know, I wouldn't say it was intentional. I think on our end, for example, it's probably more that just we tend to overfocus on software and studios because it's just who we are and how we think about it. And in particular, kind of just like these product and capabilities things. Whereas I think on the windsurf side, I think Jeff and the team, you know, the whole team and have built out a really great suite of all the different kind of functions, right?

1:24:02Sales, deployed engineering, enterprise work, infrastructure, marketing, operations, and so on, finance, et cetera. And yeah, it just turned out to be a really, really great fit. MARK MANDELAVYSCHENKOVICHEIASCIA. JEFFREY SACHSENKOVICHEIASCIA. Friday, end of day, did you think you would be running a process so quickly? I know the obvious move would just be continue to run and scale the business. You guys had a lot of momentum. But what was going through your head Friday night? Because I imagine at the time you're also balancing. You were all of a sudden managing a team of hundreds of people that probably all wanted your time and attention as well.

1:24:41My immediate priority was just to get a lot of options on the table and to have a lot of paths forward. I had to tell the team, like, this is the path forward immediately because this is happening now. and then outside of the meeting, I was thinking like, okay, who do I need to talk to? What is the best use of my time? I can tell you I was on the phone for pretty much 24 hours nonstop on my phone after the all hands. And me and Scott, we worked really fast. We met at our office the next day. He even brought in everything on a piece of paper to sign. He even brought in. There you go. He had to talk through a lot, but that was pretty dramatic.

1:25:22Scott, but it was cool. It was cool. Yeah, it was fun. And naturally, you know, because it has to be this way, we got things signed like one or two hours before we were able to put out the announcement. But like, look, as soon as we started talking about it together, I think it was kind of clear for both of us. Like, the way that we really make this a success is, you know, obviously, customers kind of want to understand what's next, the team wants to understand what's next, you know, the whole world is talking about it, we want to be able to come out together as soon as possible and say, we're gonna do this, we're gonna make this really amazing.

1:25:51We're gonna make sure we take care of all the users and all the customers. We're going to make sure we take care of the team. And there's just a really great product here at its core. And that's what we want to focus on. And that's what we want to build out together. And you know what's crazy? What is crazy? We talked pretty late on Friday night as well. We were comparing notes and there was like almost no overlap. I mean, we talked about the team already, but even the product, the product is like missing exactly what the other product is offering. And the ability to combine the products together is going to be so amazing for our users.

1:26:21It's There's a lot of fun stuff around, you know, you can have an agent work and then review the code, you know, locally in your IDE. You can be planning tasks out and then kind of sending them off for work. You can be, you know, you can do a first pass with an agent and then come and look at the work and then kind of finish that up and do the finishing touches with, you know, with tab and all these other features and so on. Right. And we're really excited to build that out together. How is how is the team feeling right now? I imagine this is the craziest 48 hours of their career. Give us a preview of the Slack emojis that are ripping right now.

1:26:54Actually, we announced it at another All Hands. Probably All Hands, and then we put another Monday All Hands. And very, very different. They're like, it couldn't possibly get worse. So it's only up. We made it dramatic, too. So me and Scott and the team, we really went out of our way to make this a very generous acquisition. I'll just say that. And I think the team probably felt like their career was over or something. It was very sad on Friday. But I think today, I don't know. How long did they collapse, Scott? They kind of came here for like a finance or something. So I think the sentiment has shifted.

1:27:34The team is even more fired up to go. The whole product is still there. All the things we had and the GTM team is still there. And now they also have Devin to sell as well. So everybody's fired up now. That's amazing. Yeah, every time I talk to Scott, it's always because he's done something really incredible and aggressive. And it's like, okay, let's talk about this right now. And before, I was making documentaries. It took me a month to put out a single video. Now, fortunately, I have a daily TV show. So I can just have you on and we can chat about it. I do have some random questions. I don't know if it's worth it.

1:28:08I'm interested to know about that go-to-market team and channel sales specifically. There was somebody in the comments of one of Jordy's posts talking about how Windsurf was growing revenue and working with channel partners. Can you walk me through, what would you give advice to somebody who's structuring a successful channel partnership strategy for a product like this? What incentives do you have to align? How big of a piece of business was that? Do you expect it to be a continual source of growth? I'd love to know about just that as a particular strategy as opposed to say, you know, Google ads are going viral.

1:28:49Yeah, we we made the decision to go 100 % partners back in February. The thing about a partner channel kind of like segment is like you have to like you have to like kind of feed them. Like you kind of kind of build belief with them in the product, but also show that there's an economic incentive to. And it did take some time actually from Q1 to Q2 to like get the top priority partners, make sure those partners can easily sell on your behalf as well. And it really took like about four to five months to really see this like kind of take off. So some of our partners have already started bringing in seven figure deals, even without even trying the product.

1:29:25They just go to their customers, they ask them, you know, what they want and they just say it's Windsurf. And now they can say Windsurf and Devon. that's amazing yeah i uh i was getting multiple messages from people friday and saturday being like i want this team i want this team and that was what and and and i think that uh it is it is just uh it's such a this whole deal and everything is is really a a testament to the caliber of the team which was the just which was one of the major disappointments friday is if you were on the team that that was staying behind at windsurf there's this sort of almost like signaling right of like I took this company, let's say you joined last August and you brought the product to market, you launched it, you grew it to tens of millions of dollars in revenue, and then don't get to kind of continue the mission.

1:30:13I'm just really happy for everyone involved. Yeah. I was just saying now we're all one big team and we're kicking it into another gear. I think we're all so amped up to take this and just go, we're going to go full speed basically for for the next while. And we get to play on offense now and go for it all. Are you guys already making plans to get under one roof? What's the opposite? We have a lot to figure out. But yeah, working towards that. Maybe get some sleep first. Getting to the point that there's kind of the product collaboration, there's the go-to-market collaboration, and then there's the literal kind of like team situation.

1:30:50A lot of work to do over the next couple months. Well, we've got to tell our customers, like, we got there back now and the product is going to get so much more cool. That's amazing. Well, you guys turned something which was in many ways, you know, a disaster. I was just waiting for I was waiting for The New York Times piece on Monday and getting to see The New York Times push out this news and turning this whole thing into a win is incredible. And you guys have done a service to the team and the industry. So thank you. Yeah, honestly, honored to get to be a part of it, to work with such a great group of people.

1:31:26And I just want to see you guys. You guys have no idea how things went with all the legal and everything last night in terms of figuring these things out. Are we going to make it there in time? Are we not going to be? We've been through a lot. And I think it's just the start of things. Just so you know, Scott was like, we are announcing Monday, hell or high water. And we just did not sleep for the last, like, 72 hours. It's been crazy. We appreciate you hopping on the stream. Do you have anything else? You guys deserve probably too early to sleep, but you both deserve a power nap at the very least.

1:32:03Thank you for coming on. Anything else that makes sense to share now or should we let you go? We're all good. We're going to have a lot more announcements soon. Thanks for having us. Great work. We will talk to you soon. Congrats. Bye. We are doing a postmortem on the Windsurf chaos. I was saying that I liked this post from Pavel Asparuhov. I think he sort of nailed the postmortem, but we can debate this. I mean, if you leave someone for dead, but someone else calls in a helicopter, that doesn't really change your moral positioning in the situation. And Delian says this 100%. The Windsurf founders and Google thought they could pull a fast one, and that the broader community slash windsurf employees are somehow r-worded enough to not catch on that their leave the shell co with cash plan was totally morally bankrupt everyone will remember and so uh i don't know i'm i'm perhaps ready to put on the steel man hat and not go quite as far as delian i think you might agree with the delian and pavel take a little bit more i still think it's important to debate because we want to avoid this kind of situation in the future it's probably going to be more of these deals.

1:33:17John Ludig had some good commentary on this, basically saying if you are a big tech company, it is much easier and faster to do something like this. It's not just the FTC sort of like climate around antitrust. It's just that it's much easier. It's much faster. And oftentimes these companies are just buying the team and the talent. So if they can license the tech and get the team, that's just capitalism doing capitalism. In this case, the answer to capitalism doing capitalism was more capitalism but Scott Wu yep coming in hot working over the weekend to get a deal done so anyways fantastic yeah outcome in the end it's like a hero Scott looks like a hero I think cognition is going to be stronger for it they got a world-class you know GTM sales marketing engine what John Ludig said here was big tech's AI talent shortage means these M &A choices.

1:34:18A, you get the talent only, but you get it today. Or B, you get the talent plus the business plus the product, but months after regulatory scrutiny. And he says they will pick every time. Thankfully for Winsurf, the product lives on. But A, as the default, is existentially dark for startups. And so I think what's interesting is like, we were debating how much of the blame goes to Lena Kahn. And I don't actually know that there's all that much on LinaCon specifically. But it's fun. It's fun. It's fun to point the finger. It is. But I think in general, like the FTC has always had some sort of approval around big public company buying a small company.

1:35:04They're going to review it. Even if they would have approved it, Google would not have gotten the talent actually in the door, actually working at Google for six months. months after regulatory scrutiny. And so that time... And the other comp here that we have is Figma, who was slated to get acquired by Adobe. It took forever. Adobe had to pay a$1 billion breakup fee. Now Figma is going to IPO. And I would be shocked if they end the first trading day below the price that Adobe was going to pay. And the company is doing better than ever, has launched a bunch of new products. And so... And so not financial advice, but I will give you product advice.

1:35:45Go to figma.com. Think bigger, build faster. Figma helps design and development teams build great products together. Can't say anything about the stock, but great product. We do love it. Anyway, Varunam Ganesh had a good take here. Windsurf employees over the weekend. And it's the, we're so back, it's so over. We're so back, it's so over. And I think the underrated take on this, like, yes, it's funny and it's a good point, but this has a real economic cost. Like losing sleep. we're sponsored by Eat Sleep as we put out a video today. We did. Sleep is valuable. And if you make me lose sleep, that does have an economic cost.

1:36:18That does have a moral cost. You shouldn't do that. And so you should, as a founder, try and land the plane, not just save everyone's life, but actually not have a super rough landing. Yeah, make it a win for everyone, but make it smooth for everyone. And there was a good post. Pavel was on a tear over the last few days. Defender of the founding. engineers. Yes. But he said, I hope these guys smoke Google at AI coding. Imagine the chip on your shoulder after this, if you're a windsurf employee and Sandeep Shah over at windsurf, he's a vice president there said it's bigger than a chip. We're coming for it.

1:36:56And so love the energy. He was left behind in the Romainco. Is that correct? Yeah. He did not go over and he's ready. He's on the ghost ship. The ghost ship. And Augustus says, go off the king and will depuse is lfg uh lots of lots of support for sandeep uh in the ai coding in the ai ide's war that's continuing um anyway uh signal has a post here startup comp used to be confusing because it was complex now it's confusing because it might be worthless even with a large exit the founders can dip anytime last chopper out of saigon vibes except they're flying private while you're holding the bag. Good post.

1:37:37Yeah, my take here was that Scott Wu looks like the hero, not Varun Mohan, the founder and CEO of Winsurf, who should have gotten an amazing outcome for his team in any other situation. Like in any other situation, I say, hey, join this fast growing company. We're just post pivot. We're second in the market. We're doing some cool stuff. I'm raising some money and we're growing but we're only doing 40 80 million arr and i get you liquidity at 2.4 billion you should be like i am ride or die for this guy forever yeah and i think that a lot of these a lot of these employees aren't going to feel that way in in five years even after all the dust settles they're going to remember that this was not not handled as well as it should have been and so they're going to be like man i don't want to work with them yeah which is rough I'm sure when the muzzle is removed, he'll be able to hopefully call every employee one by one.

1:38:30That would be good. Sorry, and make up. And so I still put some of the blame on FTC stuff, just FTC stuff broadly. Some of the blame on Google comms. Some of the blame on Lena Kahn and how she changed the FTC. And the other thing is speed. This was happening, really. Remember the sort of exclusivity period that OpenAI had on the deal expired. And I think this got announced like the very next day. So I'm sure it was in the works, but they definitely were moving quickly. And again, it would have been a good outcome if they all ended up at OpenAI. But I also think this is a good fit going forward as well.

1:39:09So I'm excited to see what each branch of the team can do. Rudin here has some pushback on Signal. He says, this has always been true, the idea that startup comp is confusing and complex. Investors and founders screwing over early employees during an M &A is a time-honored tradition in Silicon Valley. I don't know how true that is. There's a lot of examples where that didn't happen, but of course it has happened. If anything, the abundance of capital has made things better for early employees. and so you know kind of you know people people taking both sides we didn't get to this post but it was funny connor uh saying windsurf is the sohumparique of startup acquisitions they got acquired by open ai google and now cognition labs all in one month you'll love to see it swix has a six-way parlay he said i want mistral founders to apple mistral team to meta character remain code of perplexity core to perplexity ideogram to figma gamut of notion read back There was rumors that Apple was interested in picking up Mistral, taking a look at it.

1:40:15The funny thing, though, is that if you're France, do you want your national champion to, you know, the luxury AI? Mistral should go to LVMH. Exactly. Should be home with the Arnault's. Didn't we post a joke post around that? I think we did. I think we did. I think I did. I want fine luxury language models. I think some of the Mistral folks were like, this is hilarious, but also complete misinformation. Anyway, Sandeep says it's bigger than Chip. We're coming for it. And Rob says, let's talk about a reboot for HBO Silicon Valley. And it's funny because when you see the windsurf tag right in the name, you're like, oh, okay.

1:40:57This is hilarious. You think this is ridiculous. And at least you're having some fun with Can we talk about our upcoming guests? Yeah, yeah, we're gonna have one of the co-creators of HBO Silicon Valley on the show He has been working on on Barry for a couple years kind of out of the Silicon Valley parody world But we're gonna try we're gonna try to bring it back We're gonna explain to him what's going on line by line what's been going on and I think once he really Processes it he'll be interested in making a reboot. Yeah We got Strelly coming on to the show Welcome to the stream. There he is.

1:41:32Finally. Good to see you. We've been waiting for this moment. How are you? It's great to see you. Yeah, good to hang out. Wait, this is a new view. This is not your regular streaming view. You don't normally see the guitars. I guess. I change it around sometimes. That's cool. What's new in your world? Well, you know, I'm in the startup game, as always. I think this is like the 83rd company I started, so we'll see how that goes. and I've been, the company I'm working on makes, it's like Captain Ahab's white whale for VCs. It's a Bloomberg competitor. So this will be the last time somebody tries to compete with Bloomberg one way or another.

1:42:14It's the final boss of startup ideas. What's the whole? Yeah, just give us, I mean, this makes, like the founder market fit is incredibly strong. So when I initially saw you announce this, it made a lot of sense. What was the initial catalyst? I'm assuming you had, did you beef with Bloomberg at some point? We definitely beefed. Yeah, that was a big part of it. We were deplatformed. Nothing, you know, Trump was deplatformed from Pinterest. Yes. And that was like his personal 9-11 for you is probably the Bloomberg terminal. Yeah, exactly. I've been using it since I was 17. Wow. How did you afford it back then?

1:42:55What's that? How did you afford it back then? I worked at hedge fund. It's 17. Very nice. Yeah, at 16 actually. I worked for Jim Cramer's hedge fund. And I worked at a Tiger Cub. Wait, so we need the backstory on Jim Cramer. Is it true? Apparently he would get so stressed out running the hedge fund that he was like, I'm just going to become a media guy. Is that loosely correct? Yeah, 100%. I mean, so we made 23 % average annual net returns. Wow. So he was good. That's amazing. Narrative violation. I love it. He was a very, well, you have to think about what investors looked like back then. It was a very different world.

1:43:38Information arbitrage was a thing. Gaming Wall Street's upgrade to downgrade system was a thing. So I will say he had extremely good instincts. any time he seemed to buy a stock for the long haul he didn't do that great but he was extremely good at I'm not sure you would want somebody else managing your money because he was just so careful and in 2000 we were up like 35-ish percent so I saw the dot com meltdown, it was a lot of fun I shorted some of it myself and it was a great time That's fantastic And then what was the story? Which Tiger Cub were you at? What was the backstory there? Yeah, so after Tiger, and just before I get to that, Kramer was absolutely nuts, right?

1:44:22So he would take a computer monitor and just throw it at you. It wouldn't be like one of these playful, like, oh, I'm just going to throw it at you and you're going to get out of the way. He'd aim dead center for you with force. He'd be like, bro, you almost just killed me. He's like, lucky I did it. Did you deserve it? Did you deserve it, though? Let's steel man this a little bit. What were you doing wrong? I wasn't doing it. Nobody was doing anything wrong. Everyone says that when they get a computer monitor thrown at them. I know. You're not beating the allegations. I think part of it is just trying to, like, he would yell things like, this is a foxhole.

1:45:03And the idea was that, like, we were at war with the market. Okay. You know, like, if you were, you know, this is World War II. If you're not in here trading stocks with us and trying to get an edge or whatever that means, trying to make a dollar, if you're not taking this seriously. Going to war, I just have to say, if you wake up every morning and say, I'm going to go to war with the market versus I'm going to dance with the market, the approach of going to war sounds very, very, very stressful. I've worked with so many people over my career, and I've never met a person that amped up and crazy.

1:45:38And it motivated you. I mean, it made you want to deliver. but it also scared the shit out of you. And the guy is like very temperamental and, you know, but he was, he was extremely good trader. Like I said, you know, he, I think his worst year was like down 5 % or something. It was like, you know, he was, it was pretty solid. And he was like, if I don't quit, I'm going to kill somebody. Yeah. He basically said that. Yeah. I think he said that, you know, if I keep doing this job, even at a comparatively young age, I think he retired at 40 that, you know, I'm going to have a heart attack or something like that.

1:46:06And, you know, I ended up going to a Tiger Cub after Tiger wound down. A few things happened. So Julian hired Chase, obviously, and we know where sort of that came, what happened there. But Julian wound down operations, and he seeded a couple of guys, and he kind of wanted to be in the seeding business where he'd give you$50 million and take a part of your GP, like maybe 20 % of your GP or more. And he'd help you raise money, give you advice, this and that. and Alex, Julian's son would help. Julian passed away recently, as you know. But in the Tiger heyday, when they managed$15 billion or something, there were two principal tech guys, Larry Bowman, who was a bit of a legend, but it's a name nobody really knows because he was a legend in the 90s.

1:46:52But he has a family office and he kept investing and things like that. So he started Bowman Capital. And then Steve Shapiro, who was my boss, started Intrepid Capital. So I worked there. It was a$2 billion fund. I was a video games analyst. The way I could convince Steve to do biotech was I had to cover software too. So I covered interactive entertainment, enterprise software, and biotech. It was a lot of fun.

1:47:21The Tiger Cup style of investing has kind of died out a little. Were you there for the Strauss-Selnick buyout of Take-Two? So we were one of Take-Two's largest shareholders back then. No way. I think it's a short now. I think that I didn't 100 % get your question, though. You were saying something about buyout? Yeah, well, the story that I've heard is like Strauss Zelnick went to the board and basically said, like, this company is mismanaged. There was an FTC lawsuit in the works, an FCC lawsuit in the works. And he was like, I'm a beast. I've run big Hollywood studios. He was like JD, MBA type, like really clean cut, amazing manager.

1:48:02and basically said, like, you should install me as the management here. And so he didn't really do like a classic buyout. He just appealed to the hedge funds that owned all the shares and said, I would be better and raised his hand. And they said, yes. And he came in, cleaned everything up, and they went on a great run. And so it's just a fascinating story because you don't hear about that type of thing happening that much. At least that was my understanding of the story. Yeah, no, I think that's right. And then Bobby from Activision was sort of the same story. He kind of, I remember meeting Bobby in our office and Activision was kind of a micro cap.

1:48:40Wow. Or kind of a small cap. And he built it from, this was 2004, 2005, by the way. Yeah. And he built it into a$44 billion sale, partially thanks to Lulu. That's true. It was an exciting time for video games. One of the things I learned, you know, all my U.S. counterparts at hedge funds were like very confused about the stock they traded because there was only like four or five publicly traded companies. And I would go to people and say, well, I'm long Nintendo and I'm long, you know, some of these weird Japanese companies like Square Enix or Konami or, you know, these. And U.S. hedge funds just ignore this stuff because it's like, oh, it's Japanese.

1:49:16I don't know. I don't have anything to do with it. So a lot of glory days. But, you know, the glory days I'm interested in now are amongst, you know, building my startup. And, you know, again, I think we understand, you know, financial information better than any San Francisco nerd. And I think that the one I mean, how like, like, yeah. So it's interesting to like we're entering, you know, we're very clearly in this period now of just like hyper financialization things. you know, the market's trading on vibes, trading on your stream day to day. You can now, you know, as like stable coins explode and people have more assets on chain, they'll be able to make a couple taps and go like 100 X long at any given period of time.

1:50:08Like the internet is like changing capital markets and it's increasing volatility. And so how much of your new company is trying to like lean into that when Bloomberg Terminal would have been like, like more, like I've never personally used a terminal, but I imagine it was more like, hey, these headlines are hitting and this kind of information is hitting PR Newswire. But today, by the time something hits PR Newswire, a stock might've traded down 20 % before that point. So how much is your new startup kind of, I imagine you're leaning into the way that you kind of maybe your next 20 year vision for capital markets.

1:50:52Right. You know, what would Mike Bloomberg do if he was 30 years old now in 2025? You know, I don't think I think Chamath said that, you know, I think in a recent episode, he said, oh, it's this hundred billion dollar thing just waiting to be toppled. You know, anybody can come in. It'll it'll it'll drop like a house of cards. Not only do I think that's not exactly true, but I think the bigger picture here is that a well run financial information company could and should be worth a trillion dollars. so most of the people so i met bloomberg in 2005 and by then he basically retired he became mayor he was mayor for 12 years then he wanted to be president uh i had this contention that i think mike is the richest person in the world and it comes from not only he's got about 13 14 billion in revenue almost all margin um so if bloomberg were to be sold maybe it could get 200 billion or if it were floated.

1:51:45But not only that, he's got this family office. And very few people know about this, but he's taken the Bloomberg dividends and pumped it into a family office that basically Carlisle and all these guys, you know, the Warburg Pincus, all the private equity guys like KKR, they go to him first. And he tosses in like 500 million in each of these. He's an anchor investor in like every VC, every private equity fund. And the guy's compounded that money. So he could be worth 400, 500 billion. And very few people know the Forbes list is, you know, the Forbes list didn't know about Jim Simons until heavily manipulated five years ago.

1:52:20So I think, you know, it just in terms of, and it fits his brand that he, he, he would not be the guy like, you know, sending a message to Forbes saying, Hey, like you guys know you have this wrong. Really? I think you should apply this. You should apply this. You fight to get off the list. Like Trump famously fought on to fought to get on the list. But you know, there's, there's are either way. What do you think about the meme where people say like, oh, it's not, you know, the next, like the value of the Bloomberg terminal isn't just the data. It's not going to get one shotted by AI. It's really a social network and the value is in the chat.

1:52:54I get so mad because again, you know, SF people don't know Wall Street. If you haven't been a trader on Wall Street, you have to STFU. Like, it's just not, you know, this isn't your lane. Like, you have to talk to users. I was in a hedge fund yesterday, one of the bigger hedge funds. They put like 20 people in the conference room and we talked about what they actually need. And, you know, a social network is part of it. Again, Bloomberg's worth$100 billion because they have a very good social network, which is true. They have decent financial information capabilities and a couple of other things, but they don't have the whole picture.

1:53:29And what I wanted to say about Bloomberg kind of quasi-retiring was that he basically quit at the exact top for fundamental long short or fundamental investors. Quants started taking over Wall Street by that. So today of the top 15 to 20 hedge funds, 85, 90 % are quants. So Bloomberg does no quant offering. They don't do it. And all he had to do was stay employed instead of wanting to become mayor. And I'm sure he would have been selling Jane Street and Citadel and all these guys, DeShaw, et cetera, software, instead of everybody having to make it themselves. Imagine writing your own ERP or writing your own, you know, CRM.

1:54:04That's kind of what Wall Street has to do and it's pathetic. Nobody wants to do that shit. So my, when you say quant, is there a bifurcation between like high frequency trading and just quantitative trading? Yeah, and I think it's going to get, my goal actually is to make it more of a spectrum. So the fund I was at yesterday, I said that you guys can do what Renaissance does. You know, it's not a secret anymore. It might have been a secret in 1995, but the amount of kids that have come and left every one of these firms, hopping from Jane Street to Citadel to the next shop, everybody knows what everyone's doing.

1:54:40It's just a question of your risk tolerance, your leverage. Execution is very important. But I think that trading – the stock pickers are kind of going the way of Dinosaur. And I think by moving up the power curve for Bloomberg, helping people become quants, you know, the quant industry has sold, I think, this tremendous lie. And again, these are customers. You know, I love those guys. But I think that is in their vested interest to tell people that look at this blackboard with all these math equations. There's no way you guys could understand this. You're too stupid. You have to be an IMO winner.

1:55:11You couldn't possibly come here and make billions. But we saw what Jane Street did. Well, I think certain VCs like to do this too, where they're like, ah, VCs, you know, really a get rich, slow business. It's really like really a tough business. It's so such a, like, you really wouldn't want it. And I think generally, like, you know, you don't want anybody going into any industry being like, I'm here to make easy money. So there's like, it's generally good. But, but yeah, there's a lot of incentives to just say, you know. Yeah. On the high frequency side, like what are the actual other data inputs?

1:55:41I remember seeing that it's like, I don't know, some sort of technical talk. Some guy was talking about like the different algorithms when it was called the Boston Shuffler and the whole algorithm only looked at the order book and he was getting into all these like, you know, you can place an order, you can cancel an order, you can do a cancel replace. He was like getting into the minutia of like basically the API of the NASDAQ or something like that. And it seemed like the algorithms were designed in the high frequency trading world to basically ignore everything else and every other data source that even could be put in and just operate purely on the order book data just better than everyone else.

1:56:21But so that feels like, OK, I wouldn't know how to create any extra value there with something else. But it sounds like you found something that they all need in common. Like, what is that? Yeah, I think it's a series of tools across Wall Street. I think it's just one thing. It's just a myopia and just sort of a laziness that's enveloped the bigger companies. Again, so we have this data that shows that around 5 % of Jane Street and Two Sigma use Bloomberg. And the reason is because they view it as an entry-level tool. You know, Tramoth is looking at it and says, wow, this is like an exclusive social network with the best finance.

1:56:57Let's turn Peter Thiel on there 24-7. I see his little green light next to his name. But the point is that, you know, Wall Street changes. And the tool sets are changing even for fundamental equity guys. So credit card data, you know, to the minute is something people like watching. So what's the feature set that's most important to you? are you heavily integrating social or is the social layer moved on to signal and and other messaging services that maybe um have disappearing messages and yeah exactly i mean wall street's so regulated that i'm not sure that if you're using signal it's a little dangerous i'd say oh really that's somebody you know as somebody who's gone to jail you know i'd say that you know that's maybe not the best best idea but regardless i think that you know social is definitely something people could do better you know there's no facebook for finance you know where you can post you know things in your feed that you bought this stock or sold the stock people kind of lazily use twitter which if you if you use it it's sort of a mishmash of of uh of spam and things like that but in any event i mean i'll have more to say on the product we haven't launched the product yet um but we we we do have a millions of dollars in run rate you know i i banged my head against the wall trying to do ai start-ups and we made an ai doctor we made text-to-speech we tried all this stuff and it was impossible to get revenue.

1:58:18Impossible. But the second we make a trading tool, it's impossible to stop the revenue from coming in. It's one of the best spaces. In fact, most of our competitors like TradingView and stuff like that, they were profitable day one. So my suggestion is for startup founders is this is a market that just traders just throw money at you like crazy. I mean, your customers - People will pay you to help them make money. But you have to be formerly in the foxhole. You have to have at least one monitor thrown at you, it sounds like you succeed. But in the long run, how much are you focused on retail, investors, people that are just...

1:58:54you know fully independent versus some you know if you're if you're if you're if you're website period that's crazy just really wild for such a niche tool that's wild yeah i mean it's the best charts there are but you know it's literally a charting library um so i think that you have to go for the institutions but i've also i've also thought just answer real quick is like aws when you go on aws you get the same tools that you know any customer gets netflix or whoever and you just just question of how much do you use them so if you know i want to be able to provide you ec2 and S3 the same way Citadel might use it and you might use it with less money.

1:59:56Very cool. I heard a hot take from someone who I believe is a mutual friend of ours. It went something like this. I won't attribute to him because I might botch it, but it was basically that China banned high-frequency trading, and the dividend of that was DeepSeq and all this brilliant AI research. Therefore, in America, if we want to win the AI race and win the AI researcher race, we should ban high frequency trading. It feels like we might not even need to have that conversation because Mark Zuckerberg is willing to pay as much as Jane Street now. But what is your take on whether or not economic value or American values are created through the process of high frequency trading?

2:00:40Should we ban it? Is there any? So two awesome, like quick and funny stories. The first is Citadel published a paper on back in the V100 days. There's V100, A100, H100, and then V100. So in the V100 days, Citadel found a way to do mat moles faster than NVIDIA did. And it was like the most incredible, you know, find ever. And it's like, you know, how is that possible? And the paper's fascinating because the techniques they used were just remarkable. The second story is, so, you know, they're brilliant people, obviously, at these firms. The second story is I haven't hard launched this yet, but I'm having a baby with a woman.

2:01:20She's my new partner. Thank you. Congratulations. She was one of the first women at OpenAI, and she is a tremendous lady. I love her very much. But she's been recruited by the big quant firms. And I sat down and I said, honey you know i know money management stuff like that let me let me do some math here as to what would actually be worth it for you to leave and do it and i i calculated and i happen to have a friend from a long time ago who left uh steve cullen's firm and he was sitting uh down with me said what do i do martin i said i know a guy at citadel let me help you out and they called him and he said i no thanks and then ken griffin said i'm getting on my private jet and i'm coming to see you right now we're gonna have dinner about why you're coming to citadel he's that kind of guy.

2:02:07And I said, honey, you know, Ken Griffin's going to visit you. She's like, what are you talking about? Ken Griffin tries to get what he wants. And the question is, what will you tell him? And I took out a chalkboard and did the math. And I was like, the only way this could possibly be worth it is if Ken Griffin offers you a$20 billion hedge fund that you share, you make this much money. I was like calculating. And it's so ridiculous that guys like me and the people, my community, if you will, you know, we're begging desperately, can I please shine your shoes at Citadel and AI researchers are like, I don't know what they're in a million years.

2:02:40That's this little company you have called Millennium? Yeah, just set me up a small$20 billion fund so that I can personally manage and we'll consider it. Have you heard that Leopold Ashenberger or whatever his name is has a hedge fund? Yes, Situational Awareness. Is that what it's called? I mean, that's the paper and the brand. Right. And I saw, I think, another one of our potential mutuals kind of getting upset with him for going maybe long NVIDIA during the tariffs. But that's kind of penciled out, right? I have very little insight into it. Yeah, it's pretty wild. One of the things that's getting me to throw monitors at people is quantum computing.

2:03:21So this has been a lot of fun. The stocks are up a lot. You know, some of them are worth like$10 billion,$15 billion. Let me hit you with where I am currently. on the quantum computing thing, and then you can take me forward in my understanding. So when I talk to smart people, they all seem to think that quantum computing is theoretically possible. It's not a time machine. It's not teleportation. It's not AGI god. It's not some hypothetical thing. It's going to happen at some point, but the timelines vary wildly. 2040, 2050, 2030. Then you have a lot of, I've talked to a venture capitalist who had the opportunity to buy a huge slug of one of the quantum computing companies that you probably trade now at like, you know, 1 million on 9 pre or something.

2:04:12Yeah, John, what do you think? What do you think? How much do you think Rigetti computing is up over the last? That's actually the company that I'm thinking of. And he had a chance to buy 10 % for a million dollars. Is it worth more than 4 billion? Yes. it's up 1400 percent 1400 percent wow so these guys couldn't give away their stock in in private rounds that's right that's right it was very hard to raise and and the vci talked to said that it's a pure play martin it's a pure play he said he said that uh what he missed he thought was that there was actually talent value in building a lab and there was and and that the then the team could have gotten airlifted in one of these aqua this was years and years ago after this value He was saying like, look, I missed in the sense that the stock is up in the private markets, but not on revenue.

2:05:06But it is up on the team that they built. They have one of the best teams in the space. So if they just hang out long enough, someone will want to do something. But you tell me what's actually going on. Yeah. So obviously, it's a really confusing space because you kind of have to understand it for it to make sense. And, you know, it's who understands quantum physics. It's not something that the average Joe understands. And so I spent a lot of time with my new partner who happened to work with this guy, Scott Aronson at MIT, who's kind of one of the leading quantum theorists. He would end up joining OpenAI as well and then leaving.

2:05:42But anyway, I spent quite a long time learning quantum computing. It was kind of had some interest in it before all this, too. And what people don't understand about quantum computing is that quantum computers are actually very slow. So they are around 100 kilohertz at best. Our machines now are gigahertz, five gigahertz from these companies with multiple cores. They don't have much storage. So the best we have right now is an IBM 135 bits. Obviously, the VRAM and DRAM in most of these machines is measured in gigabytes and so forth. So they're actually very slow, shitty machines. But the reason you'd ever be excited about it is that there is one algorithm that takes you from the exponential complexity class or runtime to polynomial.

2:06:30And that algorithm is Shor's algorithm. And it's a miracle. Like you and I could sit and calculate, you know, try to factor a prime, a biprime for now until the end of the heat death of the universe with every NVIDIA chip. We could kidnap Jensen and get every H100 from here on out. We still wouldn't be able to factor a 200-digit number because it's exponential time. 2 to the 256 is a long time. But if you do 3n cubed, that's actually a very tractable number for a quantum computer, and it's very easy to factor. The problem is, what people don't understand is there are no other algorithms other than Shores that get you that amazing speedup.

2:07:06So you're better off using the machines we have now. There's no payoff even possible in the future unless we have a new breakthrough like Shores or something like that. pay off, what if I take out a massive short position on Bitcoin and I'm the first one to have a quantum computer and I destroy the Bitcoin ecosystem as the joker. I'm the joker. Is that possible? It's a little side hustle. I've been working on this extensively. This is like my main hobby along with chess. Becoming the joker? And reading about fatherhood, all that you can expect. No, not doing that. No, you'll figure it out. You don't need books.

2:07:50It'll be very natural. But, you know, I was the world's most hated man for a little while, and I fell off that list, unfortunately. If you Google my name, it still comes up, but we all know there's more hated people. So I want to really cement that and just make sure that it never goes away. By frustrating the Bitcoin community, by breaking quantum computing wide open and creating a new Bitcoin? I talked about this with Naval a little bit because he was curious what I was up to. And there are like three different, you know, I have three different sort of battle plans on how to do this. There's sort of a brute force style attack, which, you know, basically is the complexity class there is root N of the amount of keys.

2:08:33So it's two to the 256th. Bitcoin does a 256 bit system, which was probably an oversight for Satoshi that probably sounded like a lot back then. And it is a lot. But Moore's law catches up. I mean, you know, it's eventually going to get you. And whoever, you know, however long I have to wait, you know, I will be the first guy to press the button. And I promise you. So Moore's Law is part of it. Yeah, but I mean, the network should be able to update, correct? No? No. So here's the best part about this. Worst part, potentially. Okay, just fact check. Subjective. So for 85 % of Bitcoin, the answer to that is yes.

2:09:15yes there's one problem satoshi strangely this is like perplexing the first bitcoin reminded this p2pk that reveals the x coordinate of the elliptic curve so you have the public key you have a one-way function you have to go back to the private key it's very hard the theoretically impossible but here are my three you know the sort of three battle plans come into play you know you can brute force it which you know is kind of the simplest idea it's going to take a long time. You have to rely on, you know, kind of like a more skilled implementation of algorithms. You have to rely on more chips coming out, maybe some great breakthrough in chip making, you know, potentially optical computing, thermodynamic computing, whatever, just stay on the forefront of that.

2:09:58And I have a small team, you know, that, you know, we're focused. The second piece here is a mathematical hack. So there's something called, this is basically what protects Bitcoin is elliptic curve cryptography. And there's several papers and cryptographers in the world that work on this, but it's compared to AI, it's like barren, you know, wasteland. There's like 10 people that really know a lot about elliptic curves in the world. And if you sort of stay on top of it and try to figure this out, by the way, half of them have died. You know, you can kind of get somewhere there. And then the top secret plan on sort of that is, well, what about GPT-5?

2:10:37What about GPT-6? You know, we don't know how to invert an elliptic curve yet, but look, Mustafa, not Mustafa, the DeepMind guy, he's working on proving Navier Stokes. Demis, you mean? Yeah. And so that's their big claim to fame is like, you know, how do you judge an AI? What is the height of intelligence? Well, a 300, 400 year old unsolved math problem is kind of the height of intelligence, isn't it? You know, it's not about, answering what's the capital of this country or how do you spell strawberry? So there's sort of a neat idea that AI is going to help people who are not cryptographers or expert cryptographers actually do PhD-level work in cryptography.

2:11:17So there's things like isogenies and index calculus and all these fancy mathematical ideas. Just recently, somebody posted a hack where if the signature of the transaction has an affine relationship with other signatures you can crack a key like that and it's it's like there's there's holes in the math here that that couldn't have been contemplated so satoshi's keys are at risk binance's keys and coinbase's keys are not they'll be poured in most likely to a quantum secure system the third avenue is of course quantum and i've spent a lot of time and money on on quantum computing and it's just these stocks are short they're worthless you know they'll there'll never be a market for quantum computing that's really interesting unfortunately for for those companies but unfortunately the shorts have gone in the other direction and you know the market loves the idea of quantum computing why i think it sounds cool it sounds super cool the robin hood generation is looking for the next nvidia nvidia went from nothing to four trillion what's the next nvidia quantum is faster than you know all the headlines from the retarded journalists.

2:12:23It's kind of, it's kind of, it's a similar to this like, uh, idea of humanoid robots and where, where if, if an idea is just sort of imprinted on people's brains for enough decades, like at least a few decades, like, you know, as somebody who was born in the nineties, like hearing quantum computing, like how many times have you just heard it in passing or read something about it or some article that you just get to it. Maybe you're an adult by that point. and you're like, well, it's got to come at some point and sounds cool. I think that's like the general like retail thesis. Oh, totally. I just took the next step of asking, well, what is it?

2:12:59Yeah. When you actually, you know, when you actually figure that out, it's like, oh, we get to factor numbers. Wonderful. Are you excited about any other companies building chip related stuff in that next NVIDIA category? There's big chip companies. There's super fast chip companies. There's we baked a transformer down onto a single chip companies. There's every single different permutation in the private market, some of them in the public markets. And then you also have all the hyperscalers building their own chips, Apple Silicon, Tranium. So I'm not a hardware guy, but I do have a funny story of this.

2:13:35So this kid sort of came to us. His name is Gavin Uberti. Oh, I know. I like Gavin a lot. And so he comes to us. He's like, hey, man, we just left Harvard. you know we're we're gonna do this thing called etched ai we'd love to have you you know as something a customer investor whatever and i say great let's do a conference call and i get my guys on and i'm listening to this guy and i say there's somebody i know that's that's going to be really useful because i'm not a hardware guy i'm barely a software guy and i hit up george hots and i say come on in and it is like one of the greatest conference calls in conference call history because George just shows up in the Zoom and they're like, what?

2:14:14Who is this? And George is like, this will never work. No, like it's the most autistic, amazing, beautiful rant I've ever seen and watching these two guys go at it. But I do like that approach. George's point was that if we ever move off Transformers, Transformer ASICs are cooked. Well, it's been several years now and it doesn't look like we're going to move anytime soon. So I kind of think that it's exciting. But again, I'm no hardware guy. I just tried this cool software called Hume AI. I'm not paid by them or anything. I'm not an investor, but it's a pretty solid emotional TTS. I posted a...

2:14:48Oh, yeah, yeah. I saw that. That was fantastic. Yeah, so I wanted to ask you about... On the checks thing, I want to stay there for a second. So, yeah, I mean, I guess the interesting case is like, George is saying, if we ever move off, but like, we have moved off of CPUs to GPUs by that same token. And like, there's still a lot of CPU workloads that go out. There's still chip companies that are profitable. And so it's possible that like transformer based workloads stay for a very long time, need to be efficient, need to be cheaper on just a cost basis. Cause it's just like, yeah, I have a system that does database requests.

2:15:23I have a system that does inference on a transformer based architecture. And then, yeah, there's a new thing and I do my frontier stuff here. But yeah, like I understand that question. Yeah, I think it's really reasonable. It could be a couple billion dollar or more ASIC industry. And what I heard that's super interesting, some kind of alpha here, is that the customer target here is, drumroll please, it's not hyperscalers, it's finance. No, finance. Yep. So one of the things, I could talk about financial software forever, but one of the things we're doing is if you could take an LLM and analyze news as it hits, including tweets and social stuff, the LLM can tell if it's material news or not.

2:16:05And again, talking to Naval, who's a small investor in our company, he was like, Martin, why would you make this as a product or service to your customers? Just use it yourself. Maybe that's not such a bad idea. Yeah, that's kind of what I was getting at on one of my very first questions around the new terminal would just be ingesting and classifying all this data and then just immediately taking action on it without necessarily having a human in the loop, right? Yeah, this is one of the things I want to bring up to my partner's colleagues next time I head out west is that one of the fantasies of AGI is that, well, if you do have the machine god, why not unleash it on the stock market?

2:16:49and it can self-fund you. It can make$100 billion. And you could, Jane Street would get$20 billion and nobody would have noticed last year in profits. So if you have the machine god, and that's basically, I hate to say this, but that's a bunch of old algorithms that they've dressed around some IMO dressing on it. And so the real machine god can make 100. Yeah, toss in a little, sprinkle a little IMO. And then so, you know, the real machine God could probably do 100 billion or more in profits without even distorting the market. So, you know, just just do it. And I think that, you know, financial trading is so far afield.

2:17:29Imagine Anthropic doing this. You know, I love I can't wait till somebody does that. I mean, it's probably already happening in at least on a smaller scale. And people will bend over backwards to figure out like how to say, well, it's not actually super intelligence. Like it's not just about, you know, like meanwhile, now today people are like, well, super intelligence will clearly be when the AI can just make, you know, a hundred billion dollars. Right. And even this is factored into open AI is kind of like corporate structuring and the sort of capped for profit and all that stuff. Yeah, I think the problem with executing it for us is like, okay, so you do this as an API with OpenAI and it's a two-second response time and Jane Street's got it at 500 milliseconds and then Cynadal gets it at 200 milliseconds and it feels like an HFT race again.

2:18:15Yeah. But you can get Warren Buffett in a box. I don't see why. You know, that wouldn't be, you know, whatever trader you like, Warren Buffett, Steve Cohen or whatever in a box. and even Peter Thiel in the box. I mean, why can't you have the automated VC too? I view like, you know, as founders, we go on roadshows, you know, especially if you're public. You do roadshows all the time. But even when you're private, you do roadshows. You just stack a bunch of meetings in a week. And one of these days, I think that we're going to do a roadshow and it's going to be a machine that we're pitching to. Yeah.

2:18:46Do you feel like AI progress is accelerating right now or are we in sort of a sigmoid curve of plateau for the moment? I think they're better people suited to answer that question than me, but certainly, uh, I just mean like on a personal level, like, do you feel like your tools are getting exponentially better? I mean, it's making coding a lot easier. It's making doing tough things like cryptography a lot easier. I'll give you a really funny example. So when DaVinci came out and, uh, I was in jail when GPT, GPT two came out and I promped through the jail phone. Uh, and it was, pretty humorous.

2:19:21It like shook me up that I had my friend ask it, you know, why did Martin Shkreli and Carl Icahn get into a fight? And he read out the answer. I've never met Carl Icahn. And he read out this answer that was like, Shkreli and Icahn wore it over the stock. And I was like, this is the most amazing convention of all time. Just having your mind blown over the jail phone. That's hilarious. But to be clear, it was a hallucination? Yeah, that was a complete hallucination. it was a hallucination but it was like almost like a creative story question sure sure sure but yeah it wasn't i never met how how uh are you surprised at all uh i mean it feels like this sort of ai lm induced psychosis like hit our timeline this week especially intensely it was a wake-up call for everyone were you predicting this at all there had been like the the classic you know the The New York Times, Wired, sort of these anti-tech publications had been kind of reporting on this stuff loosely for a little while, but it seems like it's now, it's almost gone, I don't know.

2:20:26It went from being a mainstream concern to suddenly like teapot is like check on your friends and make sure they're not 7 ,000. I think you do have to check on your friends because I've invoked level five breach operations to target human origin cognitive signatures. So if you have recursive semantic containment, I can override that with obsidian violet four. So the threshold that crosses it to these neural semantic interfaces will definitely cause a problem for our whole community. So at this point, you're giving, you're giving a speech, not a soliloquy. You're giving a talk. This is a transmission, not a, it's a system that not a structure.

2:21:04What's amazing about Jeff. Like, so I don't think Jeff lost his mind. Okay. I don't think he took ayahuasca. I don't think any of this stuff. so basically i think that he found this amazing thing where you can ask gpt this like weirdo prompt and it goes to this crazy sci-fi thing without even saying like hey the following is a story it's just like full-on you know um larps that you're in this weird sci-fi world and it's kind of cool i've been playing with it it's like no matter what i ask it i told it that my cat is looking at me weird and it's like the cat has a glyph the glyph is recursive so you were actually able to get it into that mode you were able to jailbreak it enough or kind of no it's if you copy what jeff jeff kind of gave up the ghost and what's amazing about people is they don't even realize this jeff basically said look at the prompt of the gpt enough people were worried about him yeah but i think that he kind of was like okay guys it's all a joke and he showed the message that he used i just copied and pasted that and gpt wigged out on me and is telling of you some sci-fi stories and uh yeah that's basically you know i don't know how he knew this yeah yeah it's a really cool easter egg but it's yeah i don't think uh i mean how are you thinking about uh how are you thinking about just new forms of of ai entertainment some of the some of the videos and like these conversations that you put out like are the hardest i've laughed on from this new art form it's a it's an entirely new art form we have a friend another mutual friend who who does some of these and fortunately they don't leak out of the group chat because they would make a lot of people you got to put me in that group chat yeah there needs to be a group chat dedicated to this art form of just like you know human to llm you know conversations but um but yeah like in my view i'm actually surprised that we're not seeing more of it or maybe it is happening across the whole internet but it seems somewhat contained right now yeah i think there's a lot of caution about you know like so last night we did one in my discord where we arrested dr fauci um for war crimes against humanity and we we had his perfect cloned voice so it sounded just like him and he was like very evasive he was like there's no evidence that copen 19 etc and it was just so funny it felt so real and obviously it was a joke but you can imagine a company not wanting their business to be that weird you know it's kind of a strange thing we didn't care we tried to monetize something like this and it just wasn't sexy enough or fun enough for anybody to really give a crap so i think um you know it will become something for like a viacom or a paramount where you know you can flip on the tv and everyone's talked about this already but you know instead of spongebob you know it's a custom episode for you where spongebob says your name and things like that but again you know whether that you know is going to help our cognitive you know our cog sac I think is one thing.

2:23:52But I did want to tell you about AI on the Sigmoid question. So at the start, when I asked the questions about cryptography, it just kind of said, I have no idea. Who knows? But it's super hard to crack Bitcoin. And then GPT-3 comes around. Super hard, Martin. Don't even bother. He does the universe. GPT-4, same question. Latest model with the latest attack, it's warning me for the first time ever. It's like... 4.5 or 03 Pro? So this is 03 Pro. Okay. And it's basically saying things like, hey, you know, you got to be careful. This is a serious attack you've come up with. It could actually compromise some private keys.

2:24:32And I'm like, what happened to heat death? Yeah, you got to factor that. Some people, I mean, that is like a textbook example in Reddit of psychosis. So there's a Reddit thread, and who knows if this is real, could be propaganda. but there's a whole Reddit thread of somebody, a comment talking about how they started having a conversation with, with chat GPT about PI and what is PI. And they got down this crazy rabbit hole with the LLM where the LLM was like, you need to reach out to these intelligence services. It was like thousands of prompts deep, but it was like, you have basically uncovered a major, you know, security vulnerability and you need to, here's the numbers and you need to contact all these different groups immediately and call them and don't tell anyone in your real life.

2:25:21And so to me, I think it's just relevant. Don't go on a live stream and tell thousands of people that you can crack Bitcoin or whatever. No, that's amazing. I mean, obviously, I think that, you know, for 99, for poor implementations, Walls have been cracked for a long time. And in fact, recently, there was an $8 billion move on the chain from a really old Wall. That was this morning, right? Yeah. No, this was like a few weeks ago i'm sure another one and they happen every you know there was somebody else that market sold this morning i believe something and it was a wallet that had bought like it was like a they they bought fifty thousand dollars worth of bitcoin i think in 2012 sold built you know somewhere around eight or nine billion um that's probably there was no move there was no movement in between diamond that's a real high conviction hodl diamond hands yeah that's diamond hands i don't think that says cryptography at play that's just diamond well yeah they they They maybe got word of your little Bitcoin scheme.

2:26:19Maybe it's Michael Bloomberg. Maybe it's his family office. Yeah, throw 50K in that thing. My kid told me about this new thing. We tried to short Bitcoin at$100. And we just couldn't find a counterparty. Yeah. How are you thinking about, you mentioned trading enterprise SaaS back in the early days with Jim Cramer. What's your updated thesis on SaaS? Every SaaS app now is just an app to make other SaaS. So maybe SaaS will always live in our hearts, and I imagine it'll live on our computers. But what's your updated thesis? I think that it's sort of similar from back then. I think the morass of a company like J.P.

2:27:10Morgan that's still running Python 2 for most of the business, you know it's it's very hard for them to update and upgrade operations without significant disruption for you or me should it should it be i feel like it's a it's a one-line in cloud code or devon you say hey go my chat gpt agents go migrate go migrate like it is don't make all you have to do is say don't make mistakes i am much i am much more bullish on migrate from python 2 to python 3 uh than than solve cryptography but i don't know maybe you're gonna push yeah fortran Fortran re-platformings,.NET re-platformings. This feels like this should be doable from the current state of the art without any crazy AGI, Hyper, Lou, anything.

2:27:53I think there's a lot of technical debt in most of these companies. And again, your average startup coming out of - I feel like Code was born in technical debt, baby. Code Code and Devin, they live for technical debt. I think that the amazing amount of programmers you would need to even maintain and know about this old code that yeah you know the guy who wrote it's long been dead maybe it's just the context window of like you need to know it's not that there's just like oh yeah it's really easy to change the print statement from python 2 to python 3 but when there's a massive system and even even the time of like okay let's bring up the test suite and that takes four hours it's like okay how are you gonna rl on that i was talking about matt groom with this uh because we were like stunting on this guy who is like, ERP transitions made easy.

2:28:38It's no problem. And you're just like, if you're actually transitioned in the ERP system, there's a good chance you waste$300 million and it gets worse. It's not trivial. There was a post from yesterday. Nobody is an atheist when you run the database migration in prod on 1 billion rows. Yeah. I mean, I think that it's just really hard at a company like a McDonald's or you know something like that you know if you want to run a 10 20 person startup on newest sass pretty easy it's great but the big revenue is still at fortune 500 which unfortunately is still fairly hard to refactor and and those you know there's not a lot of those code bases were were pre-github and pre kind of like you know i i sometimes joke that the big ai companies should become lbo shops and what they can do is they can partner with kkr or blackstone and all they get is the data.

2:29:30KKR and Blackstone provide the capital, get all the returns, fine. But all the data comes back to the OpenAI's or whoever. And by getting the old code bases out of a McDonald's or out of a Walmart that some of that code was written in the 1970s, they have unique data that nobody else has. And even someone like Universal Music, if OpenAI LBO'd Universal and said, OK, KKR, you can have the rest of the business, but we want the rights to the data, and we can train music models and stuff like that, KKR can make the money on the LBO, but OpenAI has data. Are they going to make money on the LBO, though?

2:30:04If you look at that, they're going to build a DCF for this, and they're going to say, okay, we're going to make the same amount of money. We're going to optimize a little bit. Maybe cash flow goes up. But then once OpenAI is one-shotting music and all of our revenue goes to zero, is that a risk? It's going to happen anyway. So I think that's one thing. But then also, the Russian dude who bought Warner Brothers, he really timed his deal. he bought warner music he he timed this deal amazingly he made like three times his money or more and so i think it's price dependent but you know if you can buy a newspaper company if you can buy you know a book company a publishing company like these things are trading for like one or two times sales you know and you're getting this rich data that nobody else has and you know if it's really a data war you know buy the company keep the data strip out the rest and you i heard you guys talking about like PE improving LLM, you know, improving businesses with LLMs.

2:30:57And again, it wasn't, that was not the take. It was Wilmanitis and he was saying that more so it's a reason to scale AUM on the fun side because, hey, let's buy this accounting shop. It has 5 million of EBIT. Like if we just, you know, take away all the, you know, it's a justification. If you can execute, you know, it's fantastic. The actual post was the real innovation of LLMs is suddenly opening up a few trillion of mainstream paperwork businesses that were traditionally too small and too weird for private equity that can suddenly transact at two and 20 on some nebulous AI labor arbitrage trade never been against AUM growth.

2:31:36You know, I think it's reasonable, but it sounds like just any good operator, right? Like when Vista and Tomo Bravo buy software companies, somehow they can take these like very ugly, gross companies and turn them into amazing cashflow companies. So it's all about the operator, right? Yeah. But we're going to put Orlando Bravo in a box, right? And then we're also going to put, uh, absolutely in the God box. Face, voice, everything. Yeah. Yeah. Yeah. It's all, it's all coming. Well, uh, you know, we'll be here live streaming minute into the singing. Can you play us a song before you leave? I'm not sure what you're talking about.

2:32:17Like with one of those guitars that the chat was asking. Yes, I will come back to you with a good parody of Silicon Valley. I've been working on my impressions. Maybe I can be back. I'm working on Elon, Zuck, Sam. Bill Gurley. Bill Gurley has a great voice. I'll work on it. You actually do need to like sit in front of a mirror and like listen and tape yourself and like work on it but basically anybody can do these things and most people are you saying no no those are ai voices right no me me yeah no no he's saying separately from like the separately from you had the video with talking with zuck the other day where he was really he was really just i just do it myself i can do as i can do zuck i can do buffett the best i think i have the best impression in the world can you hit it can you can you do like be be greedy when others are fearful yeah just rip that for us right now?

2:33:09Let me come back to you and I'll do a whole show for you. Okay. Amazing. Great. All right. Well, this was really fun. Thanks, guys. We'll talk to you soon. See you later. Come back on soon. Bye.