Weekly Recap | Elon's Starship Explodes, OpenAI's Defense Contract, Nvidia's Robots, We Test Cluely

34:13And it's so funny because the Wall Street Journal is framing this as like, this is the biggest deal ever. No one's ever done a deal like this. and we're like wait so you're talking about like a series a for like a foundation model company like as a tech person i'm just like yeah like 10 billion dollars like billion dollars i mean we should ring the gong but it's not exactly like the first time it's not even the first time this show we've heard a a deck of corn

34:46congratulations to uh to the lakers mark walter and the whole team it's it's uh it's fantastic uh major premium to the boston celtics who sold for 6.1 billion um and now the lakers is the most valuable sports franchise um but they just don't do enough volume there's only a couple games you know they're not 24 7 like instagram does that ever go offline no no there's always entertainment lakers they're still doing seasons they need to have 24 hour basketball they want to really get there around the clock it's like endurance endurance basketball it's just a week-long game you know gotta always have five players on the court just constantly running up it's the only option uh jeannie bus and her family who have owned the los angeles lakers since jerry bus bought the team in 1979.

35:34Wow. On Wednesday, agreed to sell majority control of the story team to Mark Walter, the sports investor. And I looked at the return on investment of owning the Lakers for that 40 years, slightly under S &P 500. Like it was a really, really good deal. And it was a really great company that grew a lot, but it didn't outperform the stock market. Just diversification bros dca bros undefeated again well if you're trying to dca well the do it on public.com investing for those who take it seriously multi-asset investing industry leading yields they're trusted by millions folks um anyway uh walter who is part of the ownership group that owns the dodgers has been part of the lakers since 2021 when he purchased a 27 minority stake in the franchise he's also a co-owner of chelsea in the english premier league the wnba's Los Angeles Sparks and the newly formed Cadillac Formula One team.

36:31Let's hear it for Cadillac. Let's go. Let's hear it for Cadillac. Guys, congratulations.

36:40John front-run the Cadillac F1 team. He's got a Cadillac for himself over there. You can see the black wing. It's great to have an American F1 team in the business now. Yeah. Yeah, we've fallen off, but we're coming back. You're not going to be able to get one of these in the whole country. I don't think so. They're going to be too popular. the f1 team you know gets out on uh the sale marks the end of nearly a century of lakers control by a family that has become synonymous with los angeles sports and the glitz of professional basketball the deal also comes at a time of skyrocketing valuations in professional basketball which haven't come back to earth since the league announced a media rights deal last year with worth 77 billion when the celtics sold in march the 6.1 billion dollar valuation exceeded the previous record valuation set for a sports team by the 6.05 billion sale of the nfl's washington commanders in 2023 he purchased the lakers for 67 million in 79 1979 the team transformed from franchise uprooted from minnesota into one of the winningest and most valuable i had no idea that they were founded that's where the lake the lake name comes from in minnesota is the land of a thousand lakes They were the Lakers because there's a lot of lakes in Minnesota and then they just put them to They just brought them to LA and kept the name, but that's what Lakers means.

38:01Yeah Wow bus the bus family oversaw the creation of Showtime and Presided over the NBA's last three Pete a listers like Jack Nicholson and Leonardo DiCaprio have become fixtures at the games And when they sell merch they need to pay sales tax They should get on numeral calm humoral hq.com sales tax on autopilot spend less than five minutes per month on sales tax compliance you know they have won 11 championships since 1980 their rosters have boasted many of basketball's brightest stars magic johnson kareem abdul jabbar kobe bryant shaquille o 'neal and lebron james and lebron james's son have all worn the lakers purple and gold i love it it's such a cool yeah the father-son duo i mean i feel like that should have been a bigger like national news story it's such a cool thing i think it's like not like if they were like winning championships together immediately that might be a different story but it's just so insane yeah that you could be playing well professional just because you could have earned a better return by dca into the into the stock market that's not why people own these assets though owning the lakers for a number of decades i imagine was absolutely priceless so um great investment get the owner's box great run yeah all the perks you have to add those in what do you get perks from dca into the i like how uh lakers legend magic johnson hit the timeline said just like i thought when the celtics sold for 6b i knew the lakers were worth 10 let's go the confidence of magic johnson great investor too he's got a bunch of a bunch of good stuff in the portfolio more news on the scale ai uh transaction So it's closed.

39:45I believe that Alex Wong has a badge at Meta and shows up to work in Palo Alto and clocks in at Meta HQ now. Scale AI is still an ongoing concern, is still a company, but every competitor is out for blood and they want to take as much of the business as they can. since obviously the perception is that ScaleAI will primarily be working with Meta and that other foundation model labs might not want to do business with ScaleAI anymore. Unclear if they can separate out the businesses, if they can separate them out fully over time and sell the position to other investors, create like a diversified, I mean, they could even take the company public, at which point I imagine that it would be a lot less of a conflict of interest or like a fear.

40:33But there's been news that OpenAI said, hey, we're not using ScaleAI for data anymore because it's too aligned with our competitor, Lama maybe. But everyone's trying to. Yeah, a lot of this was very predictable. Yeah. Right. I don't think Meta and Scale's teams looked at and said, hey, if we sell right now to Meta, which is competing in open source AI, we're totally going to retain all of our customers. Right. Like people aren't just going to immediately turn off and now they were smart enough to know what would happen. And there was an article I think yesterday about open AI, you know, ending their relationship with scale.

41:12But from what we knew, like they hadn't been doing much for a while as part of the reason why Mercore had been. And they also brought a big function in house because for some of the more complex tasks, it makes sense to generate the reinforcement learning data yourself. And there's just so many others. There's so many other services having like a single point of failure never makes sense for a business of that size But yeah, we'll see so the the information has an article here about a little-known startup that has surged Intent past scale AI without any investors. This is interesting after meta platform scale I ideal data labeling is looking like Silicon Valley's hottest new interest.

41:49That's enormous opportunity for Edwin Chen's surge AI For years, data labeling existed in a tucked away corner of Silicon Valley, a critical but unglamorous area of AI where companies like Google and OpenAI hire outside firms to improve their models by laboriously grading the quality of what they produce. Now, a spotlight has unexpectedly fallen onto the field in the wake of Meta Platform's decision to pay$14.3 billion for 49 % of ScaleAI, the best known data labeling firm. but it's not the largest such firm, nor perhaps the most impressive. That title belongs to Surge AI founded by Edwin Chen.

42:28This is fascinating. I didn't know this. One billion in sales last year, bigger than scale. Yeah. So Chen's startup has won customers like Google, OpenAI, and Anthropic. It's such a testament to the idea that like, sure, you can bootstrap, but it's so incredibly hard to have any hype around your business if you're bootstrapped because you're not having your investors aren't hitting the timeline for you on a daily basis. And also you have, if you're not trying to raise capital, you have less need to go and be loud and go on podcasts and talk to the press and all this stuff because you're just making a lot of money.

43:07And, and, you know, sometimes it can be beneficial for, to, for people to not know about you. So this is, I mean, this is crazy, crazy stats. So Chen is 37. He has no investors and has bootstrapped the five-year-old startup entirely by himself, which has 110 employees in offices in New York and San Francisco. The company generated more than$1 billion in revenue last year. Surge has told employees, a previously reported figure that exceeds the$870 million scale generated in revenue during the same time period. And unlike scale, Surge was profitable and has been from the beginning, Chen said. Moreover, Surge could see its sales get even larger if other companies copy open ai's decision to stop hiring scale a choice made over concerns about scale's relationship with meta to shift business to surge other key financial metrics couldn't be learned like how much revenue surge keeps after paying its workforce of mostly contractors so there is a question about like the margin since this is somewhat of a marketplace business this could be a situation where you know a thousand dollar contract comes in and eight hundred dollars of that contract goes to the actual contractor who's doing the work of the data labeling but at the same time even if it's 200 million in like you know like net revenue that's still a huge business i it's hard to imagine surge not being a fantastic business if they haven't had to raise money they have 110 employees and they're used by google and all these major foundation model labs so uh seems like a fantastic business uh but if surge could earn a valuation from investors similar to the one scale received for meta.

44:38Such a price would make Chen a billionaire many times over, at least on paper, and quietly one of the wealthiest people in tech. Interesting. I'm very interested to see what he did before this company. Edwin Chen. I feel like I've heard that name before, but I don't know. As AI models transform from toys into real business tools, data labeling is becoming more and more essential. Contractors hired by companies like Surge grade the responses from AI models and write thousands of questions and answers in fields like programming, math, and law to feed those AI models. And so, you know, if you're, I wonder if this is going to go the route of, you know, you are Deloitte or McKinsey and you're going to have your team, but then also a company like Surge create a ton of training data around a specific workflow that is costing your business, you know, 20 or 50 or a hundred million dollars every year.

45:30And then, so it's like instead of like the the AI BDR that's like kind of generically writing emails based on like the average of the entire internet it's like no this is a fine-tuned for your business perfectly trained perfectly and it really it really distills what you do excellently. Yeah. I don't know. I don't know if it'll go that way. I'm interested to talk to people about it as AI models. So Surge's subsidiary data annotation tax says workers get paid to train AI on your own schedule with wages starting at$20 an hour. Chen has distinguished Surge by making it the high-end shop, charging premium rates often two to five times what scale might bill.

46:12Surge justifies the prices with its reputation for industry-leading work. Indeed, one former scale employee said Surge often performed better than scale in customer audits of labeling quality. And competitor Garrett Lord, who's coming on the show today, who runs Kleiner Perkins-backed Handshake, readily acknowledge that Chen is the number one player. So I'm excited to talk to Garrett Lord today about this exact topic. It should be very interesting. You wouldn't know that from the coverage of Meta's blockbuster deal to quasi-acquire scale AI, its CEO, Alexander Wong, who is now joining Meta in a senior AI role, was widely regarded as the leader of the data labeling field and had become a Silicon Valley celebrity, blanketing podcasts and conferences with his presence and posting heavily on X.

46:53It also raised 1.5 billion in venture capital, putting scale on a very short list of companies that have raised that much and he hired upwards of a thousand people wong had made a time to his exit perfectly given the traction of surge which had grown larger than scale without outside capital and with a tiny fraction of scales workforce scale also missed the goal to hit a billion dollars in revenue last year but scale scale spokesperson said the scale wasn't profitable i was not profitable which but wasn't burning a ton of money like i think they had like efficient they raised 1.5 billion and they still had like almost a billion in cash So they weren't in like trouble or anything, but at the same time it was like not a wildly profitable, not a wildly lean business, but I don't know.

47:36It's absolutely fascinating to come up with these two businesses. It's a wild industry. Something that like, yeah, I mean, just it feels like there's such an edge just to even identifying this opportunity years and years ago. I mean, I guess search started four or five years ago, but it was certainly like pre-chat GPT that all these companies got started. And then they realized like some of them got started in self-driving car annotation, all sorts of stuff like that. But Chen studied linguistics and math at MIT, came to the idea for his startup after leaving college and witnessing firsthand how big companies struggle with data.

48:06Before starting Surge, Chen worked as a machine learning engineer at Facebook, Dropbox, Google, and Twitter. He worked in four different tech companies. Just like going from one to the next. That's insane. he was developing recommendation and search algorithms and helping gather the data needed to train them despite the hefty resources of those companies chen encountered a lot of problems at facebook for instance chen was tasked with helping build a yelp competitor his team needed to train a model that correct could correctly classify businesses telling the difference between restaurants and grocery stores for instance to do so they needed a data set containing 50 000 accurately labeled businesses which he found out would take six months for an outside firm to assemble.

48:48We had no solution other than waiting. We simply waited. When the data came back, Chen blanched. In some instances, it had labeled restaurants as coffee shops and coffee shops as hospitals. The data was complete junk, he wouldn't say, which vendors Facebook had used. In 2020, he left Twitter to found Surge and picked up some of his first customers, executives from Airbnbs and Neva, a once promising AI search engine startup, as only a founder in San Francisco might, bumping into them at rock climbing gyms in the city's dog patch neighborhood and the Mission District, talking up his startup. To get Surge going, Chen recruited data labeling contractors he knew from his previous roles and funded the startup using his savings.

49:28He wouldn't say how much he put in. Fortuitously, Chen focused on language modeling. Scale, by contrast, started out using more visual data for autonomous vehicles, which we talked about. Wow. Just as those types of models began to grow in importance. less than a year later open ai had hired surge to fine-tune its models by teaching them how to avoid producing harmful responses like a racially biased language biased uh based on research paper the company published together in uh by 2022 anthropic had become a surge customer they're putting out research papers yep with open ai and still managed to stay this under the radar wow yeah so look at this uh the label largesse data labeling has proved to be a lucrative niche in ai uh surge founded in 2020 has over a billion in revenue zero funding uh scale founded in 2016 has 100 870 million in 2024 raised oh the this is this says funding raised but this is clearly valuation or something because it says 17.4 billion which is not what they raised um touring has 300 million annualized raised 225 million invisible it's interesting touring too initially was like a marketplace to just hire developers and I think they pivoted into data labeling.

50:41Interesting. It's the same thing when I work with a cloud provider. The enterprise tech customer said, I don't know the internal expectations for why their services work so well. I push a button and I'm glad for the internal work to make that happen. Data labeling companies typically use various techniques to make sure contractors aren't just dialing it in or phoning it in, I guess, when answering questions. For instance, companies randomly insert questions that have no correct answers or make sure labelers agree on the right answer to a question so obviously you scaffold up these these these these like responses so that everything's like double-checked and then you can kind of see if people are messing around but wow what what a beast of a business no idea how big this thing is amazing over in defense tech world and roll has partnered with Ryan Mattel the German the German defense tech company, the prime really, uh, to manufacture barracuda, barracuda and fury over there.

51:36That's very exciting. And then we also touched on a Spotify founder, Daniel AK, uh, leading, uh, guess when Ryan Mattel was founded. The way you're saying that makes me think it's like 1650. I'm putting you on the, I'm putting you on the spot. Like Tucker put, uh, what's his name? How can you possibly report on the news? If you don't know when it was founded, This is the best bit earlier. I have to read it out. Yeah, read the Muffin Man. Tucker, do you know the Muffin Man? Ted goes, the Muffin Man? The Muffin Man? The Muffin Man. No, I don't know him personally. How can you know anything about Drury Lane if you've never met the Muffin Man, John?

52:15This is a post from Zach Stewart. This is a real gotcha. Really, really good. Anyways, you can still, I give you permission to comment on Ryan Mattel, even though you don't know. 1889. I was not, I knew it was really old. 1889? Dosseldorf. Okay. I was pretty far off with 1650, but over a hundred years. I mean, yeah, that's the same. It's General Atomic is part of like this roll up and it came out of like, I think General Dynamics at some point. And the founder of the company that competes with Fury for the for that autonomous program that they're competing for right now was like the designer of a submarine in the civil war or something like that.

53:09Like I'm pretty sure that he's he died more than a hundred years before Palmer Luckey was born. Yeah, that's the that's the cultural difference between the two companies that are competing for this like one contract. It's like a fascinating dynamic about like how legacy they are. Like it's not just like you're in the game for a while, you know, decades after after you start the company, your your greatest enemy will be born and they'll have to grow up a little bit. Yeah, I'll have to learn the game. Yep. And then they're going to come for you wild. So yeah, Spotify founder Daniel Eck is leading a 600 million dollar funding round into the German defense startup Helsing.

53:46This is kind of more of an Anderle equivalent over in Europe, valuing that four-year-old company at$12 billion. The business makes Battlefield AI drone submarines and robo-fighter pilots. It's now one of Europe's most valuable startups. And they're using some renders here, John. Renders? Look at this image. They're render maxing. They're render maxing. Are you sure? It is a cool render. Yeah, look at the water there. It's definitely a render. Who knows? it's hard to tell these days it's so it's be we're beyond the uncanny valley um and so uh helsing is is expanding from its origins in artificial intelligence to produce its own drones aircraft and submarines as part of a bigger push for uh locally made and and owned uh defense products for uh european countries and really companies all over the world crazy it was founded in 2021 Wow.

54:43By Torsten Ryle, a video game entrepreneur. Gunbert Scherf, a former German defense ministry official, and Nicholas Kohler, an AI researcher. And they have partnerships with Saab already, as well as Mistral. Yeah, and tons of American venture capitalists in the deal. You got Lightspeed, Excel, and General Catalyst. Conor's cooking. They've raised over$1.37 billion. The Daniel X said the world is being tested in more ways than ever before that has sped up the timeline for Helsing's financing. X said pointing in particular to the conflict between Russia and Ukraine, where drones and other AI powered systems have been deployed at scale for the first time.

55:28There's an enormous realization that it is now really AI mass and autonomy that is driving the new battlefield. And so yeah, exciting. exciting deal up next we have katherine han from han ventures coming in the studio to talk about the stable coin bill the genius bill is slated to pass on the front of the wall street journal today and is the guiding and establishing national innovation for u.s stable coins we had her on the show and uh yeah we're excited to talk to her so welcome to the show how you doing katherine what's going on hi how are you guys we are great uh big 24 hours congratulations i think are in order but please get us up to speed on what's actually happening and where uh where things are in washington and i love that you called me catherine that was my washington name i haven't been called that i used to appear in court um but uh katie let's update the let's update the chiron katie hon so uh thanks for having me on guys actually i literally just walked off a plane i I was down at the CO2 conference where I was talking to a lot of founders, Crypto and Don, and everyone loves your show.

56:36So I'm happy to be here. Well, thanks for making the time. Yeah, thanks. I think congratulations are in order. I don't know if I would say that yet. I mean, first of all, the bill passed through the Senate. Great, great news, obviously. It's another signal, I think, kind of like I feel like I did when ETFs were approved. Which, by the way, not really by the SEC, although that was the body that formally approved it. But as I said last time I was on your show, guys, make no mistake, the D.C. Circuit, that Article III, that other branch of our government, left the SEC no choice. The courts don't always get it right, but sometimes they do.

57:14And the courts unanimously in that case said that the SEC had acted arbitrarily and capriciously. So to my mind, the court system is the reason we have ETFs in this country today for Bitcoin and for ETH. And I think of this as a bit a similar thing. Now, here we have another branch of government stepping in. In this case, you have the Senate passing this, introducing this legislation, passing this legislation. Now, of course, the House has to vote on it. And then the president has to sign it into law. So if those two things happen, you can say congratulations are in order for the industry. But I think one thing that is not really being discussed, and I hope we can discuss today, is there's another very important bill.

57:58And I'm not going to slap a percentage on and say which bill is more important, but that's the market structure bill. And to me, that's really the transformational bill for the crypto industry. Okay, so break that down for us. Yeah. So there's one bill, stable coin bill, as you just mentioned, that the Senate passed. And one of the things that I loved to see about that is the bipartisan support for that bill, because I think we used to be as an industry pre-political. Ryan Armstrong always talked about the industry being pre-political and I think I don't want it to be the case that this industry is too political on one side or the other so I really love to see these moments like we saw yesterday in the Senate where you have a number of Senate Democrats voting in favor of sensible rules of the road and I think this is a classic example of that so I'm delighted and I hope the house passes it but I don't see why we have to choose between a just a stable coin bill and the market structure bill.

58:56And the stablecoin bill obviously paves the way for a regulatory framework for stablecoins in this country. So that's that. Then there's another bill, the market structure bill. And that kind of will answer or attempt to answer the question of what's a security, what's a commodity. And I know you guys have been covering crypto for long enough. You know, this is kind of an age old debate. And, you know, where can there be an enforcement action. Well, the big question is, well, what's the security and what's not? And I think the market structure really goes a long way in answering that question.

59:27And that's why I think it's so fundamental. And we've seen courts across the country weigh in on that question. And that's because we don't have legislation. And Gary Schindler said it was also clear. And of course, it wasn't also clear. Yeah. So what's the timeline there? What are the different players? What do people want out of it? What is the core, you know, kind of, uh, crypto industry and both on the investor side and, and company side want out of it? And, and what are, what, uh, who, who would, who would not want it to go through at least how the, the crypto side has it in mind? Look, I think, I think everyone in the crypto industry wants the stable coin bill to go through and become law.

1:00:11I don't think there's really any question about that. The question is, do you go for both? Someone just described it to me as in a sports analogy, and I'll probably fumble that one. But it was like, do you go for the field goal or do you go for the touchdown? And the thing about after a field goal, the other side gets the ball back. And I think Congress really operates in kind of six to 10 year windows. And it's on their mind, reform, regulatory clarity for crypto right now. And I think the transformational bill for crypto right now is very much that market structure bill. We also want that stable coin bill.

1:00:46And we have this unique moment in time where we have bipartisan support for both bills. So personally, I say go for both of them. And worst case, you end up getting the stable coin bill only. But I do think that's not the most desirable outcome for the crypto industry. I think the crypto industry deserves, especially after years of uncertainty, both a clear message from Congress. I think Congress ought to do its job and pass both bills. And I especially think that because after the Supreme Court last summer, in a case I said that this was the most important case for technology policy, not for just crypto, but for tech policy in decades, was the overturning of the Chevron doctrine.

1:01:26And that takes power kind of away at a high level, away from regulatory agencies, and puts it back more in the hands of the courts. And do we want to have another 10 years of litigation percolating up from the district to the appellate court to the Supreme Court on what's the security or what's a commodity in a patchwork of different answers throughout the country? Or do we want Congress to answer that question for us now? And I think it's incumbent for Congress to answer that question now. You asked who, what does the industry want? I think people, this is a big industry. We say crypto is not a monolith.

1:02:01It's a broad new asset class. And stable coins are a very big, important piece of that asset class and a growing piece. As you guys saw, I shared with you the stats, you know, almost a quarter of a trillion dollars. I think you banged the gong for that stat. Locked in supply, growing enterprises across the world, integrating stable coins. You probably saw those announcements from some of the big tech companies in the last few weeks. And I think one thing that everyone's wondering is those ones that haven't yet dived in for stable coins is, well, what are the rules? So this bill that was passed yesterday on the Senate, the Genius Act is so important for that.

1:02:40It's like, here you go. And so what kind of institutional interest will be unleashed once that bill becomes law? I think that's really exciting. What's your, how would you, how do you think about big companies getting excited about stable coins and thinking or institutions and being like, there's a lot of potential here, we should create our own stable coin versus we should just figure out how to leverage this technology? Where do you see the kind of line and opportunities? Well, look, we already have two very dominant stable coins, right, already today. Tether, USDT, and then we have USDC. So clearly, it's not winner take all.

1:03:19I mean, those two are both growing and they both have market share. So we think there will be stable coins like those that will have network effects. But we also think at the same time, there are some businesses that are just so big and just so important. And if they launch their own stable coin, we could also see that too. I don't think we see a world where everyone, I think we get asked this question all the time, is there going to be a world where every company has their own stable coins? Yeah. We don't think so. We could be wrong, but that's not the view of how we see this evolving. We had Aaron Frank from Lightspeed on earlier, and he was comparing certain companies would launch a stable coin and it maybe would feel like Kohl's Cash where it's like, I don't have any of that nor do I and that's the thing if I did Would you want to use it on other platforms?

1:04:10I mean, every bank could launch a Visa network competitor theoretically, but that doesn't necessarily make sense. Yeah. So in your mind, is the broader market structure bill the kind of thing that could catalyze a massive amount of new activity? And from my view, you know, stable coins have been getting adoption. There are a bunch of exciting use cases. We have a public American stable coin, you know, issuer in circle now. It feels like, yes, regulatory clarity is important there, but having broader clarity around how tokens are treated by, you know, how the government actually views tokens feels like it could catalyze, you know, much more of an explosion in investment activity and new company formation and new use cases for tokens.

1:04:54Is that the right framework? I think that is the right framework, because like I said, stable coins, a big, important piece of the pie and very low hanging fruit, by the way, to my mind. But crypto as an asset class is much broader. So when you say where do the industry players, where are the crypto investors, where do we want to see it? I don't think it's a monolith. I think crypto as it grows to a multi trillion dollar asset class, like any multi trillion dollar asset class, you have different factions. And I think some fairly and some really smart people think just take this, take this win and move on and don't worry about the rest.

1:05:29And I think that's a little I see why they might think that if they think that it's this or nothing. But I don't I think that's a false choice. I think that we can have both. And this is a really opportune moment to have both. And I think the question that has beleaguered the industry really has been the question over securities, commodities, which agencies are going to have jurisdiction. I think that's a bigger question. And I think it would be a real shame if we let this moment go to waste. You know, the irony, too. So you have some stable coins or only stable coin companies who are like, yep, genius act and move on.

1:06:03They don't want to get dragged into this broader, kind of a more omnibus package. Right. With the market structure legislation. But I think that's a missed opportunity. And I think we'll be sorry as an industry if we don't go for both now. Again, go for the touchdown. And, you know, I think all of the like I told you, all of the fundamentals are kind of working all at once together now when I last talked to you guys. And this is very much part of it. So why would we not go for that? So I think some folks who don't maybe have an appreciation for how sometimes, sorry to say, it's slow Congress operates.

1:06:37They've been trying to update the money laundering laws for two decades. And it's like out of sight, out of mind sometimes. And I think we have a really unique moment to press for both here. And the irony is some Democrats who are opposed to market structure, you know, because of potential abuses, who are opposed to the crypto industry. They cite abuses. They cite fraud. They cite speculation. They cite Trump coin. And I get all of those criticisms. But I'll tell you what, had the market structure bill been passed, that would have answered a lot of those questions. The irony is if you would have had the market structure bill, you wouldn't have had a lot of the blowups that you've had in the past several years in this industry.

1:07:19Is crypto truly coming home to America? We went through a period where crypto is being pushed offshore. We've heard over the last year that some crypto founders feel like they can come back to the States now, maybe actually have an office stateside. Are you seeing more and more momentum there with some of this positive regulatory movement? Or are you still seeing momentum around places offshore, Singapore, etc.? I think, look, everywhere that you're going to want to develop is going to have some rules that you're going to have to follow. When I hear founders who say there is no regulatory, it's often that there is no regulatory regime whatsoever.

1:07:59Sorry, Balaji, if you're watching. But I am seeing that onshoring a bit. We were kind of seeing the offshoring in an unfortunate way. But it's not only regulation that matters. It's hiring top talent. and certainly there's top talent right here in Silicon Valley and other places in the world. I mean, you mentioned Singapore. Singapore has top talent to be sure, but, you know, there's a lot going for the U.S., so we're still very optimistic. And I don't think it, but we were getting to a very dangerous point with the crypto industry had the likes of Gensler and others like him been left kind of to just do this.

1:08:36Now, fortunately, the courts were pushing back. So it wasn't a partisan issue. It was just the courts were starting to say, no, you've gone too far. I mean, I lost track now. I literally lost track of how many federal courts of all political persuasions and appointments ruled against Gensler's regime and not just Gensler, but others like it, where you had very activist regulators who were really far out of their lane and you saw courts curbing back on that. So I think that was already, we're in a dangerous spot, but the courts were maybe going to save us. But you don't only want to rely on litigation to save you, of course, because then you've already lost.

1:09:13But I think hiring talent is important. I think, you know, access to capital and traditional venture, maybe that's a little different in the crypto asset class. But I think also fundamentally what you have going on right here now with AI, particularly in Silicon Valley. And we've talked a little bit at the early stage about some of the synergies between AI and crypto, because of course, AI creates digital abundance and blockchains are good at enforcing digital scarcity. And I think you're going to see more and more synergies emerge and use cases over time. And I'm not going to say what they are because we've seen that before in crypto.

1:09:47A lot of over-promising, under-delivering on use cases. So let's just stick to right now we see synergies. There's a lot happening in Silicon Valley, obviously, with AI. We think that's going to benefit the crypto industry. And so in addition to regulatory clarity, if you're a founder, You want access to great talent. You want your visa situations sorted out for your employees. You want access to other founders. Depending on what type of company you are, you want access to capital. So I am optimistic about the state of crypto in the U.S., but also elsewhere. And we invest in companies. We invested in squads.

1:10:26We've announced that. And I know Stepin, one of the founders of squads, watches your show. but Stefan's based right now overseas. And I was just having a conversation with him about how do we get you to come and bring squads to the US. Awesome, awesome. I want to talk about the longer tail of regulation because it seems like the stable coin bill is very straightforward, like the least ambiguity there. Then you have the Market Structure Act and there's a lot more to do there, but I'm sure that there's like riders getting pitched and all sorts of long tail things like how much are we actually like where does the line end between what we're actually trying to define versus what we're still in the exploration fear uh phase of because you have nfts crypto gaming there's uh you know uh prediction markets there's so many different crypto applications that trying to kind of do them all at once maybe that's the right approach maybe these need to be handled like after we've done the technological exploration, but what's your view on kind of the long tail?

1:11:34My view on that is no, because we can't have an NFT bill, a bill for event contracts, or we can't have specific bills. And if you saw, if you think back to the advent of internet, that's not what we had. You know, we had section 230, it applied broadly to platforms. And I think we need something similar here. So on the one hand, I would say it can't be so specific that it's like, okay, if you're a, you know, events contract platform. It's this rule. And if you're an NFT player, because again, we don't even know yet what will be created really at the end of the day. We've seen some early use cases with product market fit.

1:12:11Obviously, chief example of that is Bitcoin. But what if we had had this conversation, guys, back in 2010 and you said, OK, we've got Satoshi's white paper and there's this thing called Bitcoin. Let's pass some crypto regulation. It would have just been for Bitcoin. And that would have been a mistake because then a couple of years later on the scene, we have ETH. And a years later, we have Solana. So I think what we need to do, so you don't wait for the end state to have any regulation, right? You don't do regulation by enforcement. I can tell you what we don't do. We don't do regulation by enforcement.

1:12:39You don't wait till the end state of things, but nor do you want to get so with such specificity today and do the current state of regulation by the end state of regulation. That you can't do either. And so I think what you have are some guiding principles, some generic rules of the road. And really, that's all the market structure bill is. And there's enough clarity that you had Democrats vote for it last time it came up. So it's not like it's so specific. It talks about, and I think, look, I think you have people like Hester Peirce, who is SEC commissioner, has written and given speeches on this of what that ought to look like.

1:13:18What is a decentralization test? And those are some guiding principles that you can kind of look at and apply as you think through this legislation. You know, what body ought to regulate it? And sure, you're going to have some outliers and new technologies emerge that you're like, okay, does this fit neatly in the bill? No, but we have laws for everything in this country with technologies that develop that don't fit neatly in a particular bill. And that's why we have, that's why we actually have, we don't do regulation by enforcement. We do notice and comment. We do things like advisory opinions.

1:13:51Certain bodies, by the way, do do advisory opinions, not judges. And then if all else fails, you do go and sometimes seek Article 3, seek a judicial interpretation. But I think that's, like I said, that's kind of the failure state if you're having to go to the courts. But indeed, that's what was happening because we were getting no rules of the road and we were only getting unfair regulation by enforcement and i say unfair because gary gensler basically picked what should have been the best companies in crypto the poster children for compliance and brought enforcement actions against them and then the complete spectacular disasters didn't bring anything so uh until after the fact and um so i think regulation by we gotta have you we gotta have you and gary on the show to hash it out i'm sure you guys have had some funny conversations thank you so much for having me we'll talk to you uh have a good rest of your day cheers up next we have justine moore from indrescent horowitz incredible map knowledge dropped a fantastic new market map all around ai image ai video models we're gonna have her take us through it welcome to the show how are you doing can you hear us can you hear us hello oh i can hear you guys now sorry there we go Hey, I was saying to John, when you dropped your new market map, I was saying, you know, it's a great sign of respect in our culture to drop a new market map and come on the show.

1:15:21So we're on credit. Bullish on market maps. I find them extremely interesting. And I think they got a bad rep a couple of years ago, but I'm glad you've stayed the course. And you're pro strongly pro market map. Yes. The people love market maps. It's like you can guarantee a popular tweet if it has a market map in it. Absolutely. And I think people got kind of sick of like, oh, like we know the playbook, we've seen it, but there's a playbook for a reason. It works. So, yeah, take us through the latest market map. What are you tracking? How did you decide what to divide it up into and what kind of inspired this moment specifically?

1:15:55Yes. So I mostly do AI creative tools here at A16Z. So I spend like all my time testing all of the image, video, audio, et cetera. And obviously the past few months in particular, video has been like the thing. Um, there's been like VO three obviously, which was a massive moment with adding the audio for the generations, um, Hydra around the talking characters, um, the new mini max model, the new bite dance model, seed dance, which is in the arena already outperforming VO three. So it just felt like a good time to refresh sort of what's going on in the video space. Um, and I kind of formatted this market map, just thinking about, um, more from the perspective of a creator, like less in terms of the go-to-market of the company, more just like if you're a person trying to create a video with AI, where would you go for these different use cases?

1:16:46So there's first sort of the model, like the foundation model companies where it's either text to video or image to video. Most places do both, where they actually take your input, generate, have their own proprietary model that generates the video for you. So that's the VOs, the clings, the runways, the picas. And then there's also now this emergence of what I call like multi-model apps, places like CREA and Flora and Visual Electric that enable you to run a bunch of models in one place. So like if you want to take a single prompt or a single image and see what it looks like in five different models super easily, you can do it somewhere like that.

1:17:30And then the other side of this market map is sort of like what happens when you add speech and talking characters. And so some folks do that by like generating a talking avatar from an image where you can eventually have the person move. And other folks do that by taking like a video of a person and then applying lip sync over it and then syncing the audio. So that's sort of the distinction between talking avatars and lip sync. It's interesting that you're in the consumer group because I can imagine that a lot of the talking avatar companies wind up selling to corporations that want to vend in talking avatars, for example, are you seeing a lot of that?

1:18:08Or like, I guess how, how, how, uh, rigorous or, uh, stringent are founders about like, Hey, we are trying to build a consumer app or we're just building a cool technology and it might land as a consumer product, but it also might land as a B2B play. Um, most people are not at all rigorous and often don't even know at the beginning. So what we actually saw with the first generation of AI video was it was only researchers making these like magical models and they had no idea what the use cases were going to be. They all just put like a text prompt box in front of the model and then you got an output and like a big company and an individual were using the exact same interface.

1:18:44Now I think we're starting to see more at like what we call the app layer, which is essentially like, how do you productize this? How do you create workflow? And therefore, how do you go into specific verticals? Maybe an example of that is all of the like standalone video ad creation products. So things like Creatify or captions where, or Hey Jen has a product for this too, where you can literally just like paste in a link to your Amazon or Shopify store. It will pull all of the info about your product, your logo, your brand, and it will generate a talking head avatar, like holding your product and describing it.

1:19:19And that's something that like a VO3 or cling, the general video model companies won't do today. Yeah. Um, where are you seeing the strongest, like low churn adoption of these tools? Because just personally, like VO three was the thing that got me to subscribe to Google pro max 25, which we can go into the names and how difficult it is to access these. Um, but, but other than that, uh, there, there haven't, I haven't seen that many where like we've seen the asmr stormtroopers or something but but it hasn't been clear to me that someone's building like the next pixar and they're actually thinking about it like mr beast and they're like i'm building a studio this is a business i have ad integrations and i have a content schedule it's very much in like the testing phase we see the studio ghibli moments go viral so where where is like the true long-term value playing out right now okay on the content creation side where we are at right now is actually there's a bunch of content agencies.

1:20:19Like, you know, there's a bunch, Wonder Studios, Dream Studios. There's probably like 20 of them now. One called Paracosm. That's really cool. And these are people who are just early adopters of the tools and they're getting hired by brands and ad agencies and entertainment companies to use the tools for them and make content. I think the problem now and what you're describing is like the people at Pixar would have to know how to use the AI video tools and how to set up the workflow in order to create their next movie using AI. And we're not yet at like the tools aren't mature enough. And we don't have enough people who are working at those entertainment companies who know how to use the tools that it's primarily being done with these external AI native agencies or contractors today.

1:21:03I think like one of the first AI IP we've seen is the Italian brain rot characters. I don't know if you guys. No, I don't know this. I haven't seen this. The Italian brain rot characters are huge. So I can't even say the names here because they will sound ridiculous, but, um, it's people basically making images of like an animated talking baseball bat and like a ballerina whose head is like a cup of cappuccino and a shark who wears sneakers. Okay. But they're starting to build like a cinematic universe. Oh, it's massive. Yeah. Accounts have like millions of followers. The world isn't ready for Italian brain rock.

1:21:37So is it, is it, uh, is it like decentralized in the sense that like I could just go and participate in this like broader trend? So yes and no. I would say there were a couple accounts that originated the first few characters and then other people started participating using the hashtags remixing. And then the good, the characters that were good that came out of that sort of bubbled up to become part of the cinematic universe. They have Bombadiery, Bombadero, crocody crocadillo which is a he's a crocodile plane that shoots bombs this sounds like yeah yeah super super viral yes the kids probably love it uh it's wild um before we go into more of the consumer side talk to me about some of the uh the more like uh niche like b2b use cases because i remember when like gpt 3.5 and we got four four uh gpt4 dropped there was still like a lot of hallucinations, but you saw companies that were just like, yeah, like sure.

1:22:40It's not incredible at writing poetry, but it's amazing. It just like converting this messy text to JSON. And they were all of a sudden just running tons and tons of queries. And so I would imagine that in a, in a, in a, in a video workflow, things like what runway was doing in the old days of just like green screening or the stuff that like artists aren't going to really get upset about because it just feels like a better, more advanced tool. Are a lot of these companies building tools like that? Or is all the focus just on like, let's one shot the next Oscar film? Yeah, it's a great question.

1:23:13There's a decent amount of vertical focus. I think also like it's very hard for this for startups, like if you're not a Google or an open AI or whoever to play in the game of like, let's train the largest one shot best video model. So a lot of them are focusing on verticals like Luma, which is a company we've invested in, did this really cool tool where you can upload like a nine by 16, like iPhone style video. And you can just say extend and it just basically like out paints around the existing video and makes it look like, so you can just change the dimensions of your video really fast. Or there's companies like just like a practical tool, but super useful for a bunch of creators that are filming vertical content probably.

1:23:54And they want to distribute in a horizontal format. So they just do that. Yes, exactly. That makes a ton of sense. Or something like Higgs field that has all these really special effects, like motion Laura's essentially. So you can take like an image of a car and just say like, this is like, here's a template of what a car explosion looks like. Make this specific car explode. And then on the B2B side, we've seen a lot around like, how do you scale marketing or L &D or like executive presence type content? So like, you know, tools like Descript now allow you to take a video of someone talking and then change the word that they're saying by changing, like cloning their voice, having the voice say the new word and then doing a new lip dub.

1:24:36New lip sync, yeah. So you could have your CEO sending what looks like a personalized holiday message to like every single customer or something like that. Yep, or maybe something worse with a phishing scam, but I'm sure we'll get into Casey at some point. What do you think the long-term ambitions of companies like Google with VO and ByteDance with their model. What do you think they want out of this category? They obviously have a massive edge. I saw Anish was posting about Google's edge or YouTube's edge around IP with Veo. You can generate... Yeah, what was going on there? It's crazy. The Disney thing.

1:25:14Is that like a real deal or is that just a beneficiary of like some sort of relationship? Yeah, I want to get a sense of do Google and ByteDance do they want to be developer tools that just vend into a bunch of these platforms do they actually want to own the end customer what is this market is there a generalized market in the long run of just generating funny videos for the average consumer or is it going to all be verticalized out where i want to generate ads i maybe want to generate you know customized messages but yeah i i want to understand like this is a good overview of all the of the ways you can generate content but like how does the market structure evolve yes um okay on the ip question i have not talked to google's ip lawyers and i'm not an ip lawyer but my understanding is google but this is legal advice right yeah exactly this is financial our compliance team is gonna love this um sarcasm uh you can uh i i think my sense is basically you know when youtube came about it was suddenly like all this ip content is on the internet and Google cut deals with a bunch of the IP owners about essentially what can be posted on various Google properties and if that content gets monetized, how it ends up going to the end rights holder.

1:26:27And so that's sort of the working theory right now about like why VO3 can generate IP content and not get sued when a lot of other people are struggling with that. In terms of the market dynamics, it's so fascinating the question around like Google and ByteDance and eventually I think Facebook, I hear, is going to do more in video soon as well, like why they're doing it and what their strategy is. I think first of all, like, if I'm one of those huge consumer giants, AI is such a massive shift in consumer behavior that, like, you want, if you want to own the interface to consumers, you probably want to own text, image, and video generation as well.

1:27:04And they have the resources in terms of data, like YouTube, for example, is a perfect example of this. They have a ton of compute, they have a ton of money, and they can hire the best researchers to build the best models. I think the question, as you sort of alluded to, is like, do they sell those models via API and let other people build the consumer experience on top of them? Or do they own the end-to-end consumer experience? My honest take on it so far has been like, it takes so long in the big company product teams to get stuff done and get new products out that like the model teams are just shipping the models and like pretty basic interfaces like Google flow.

1:27:40And then the product teams are going to figure out if they can catch up with some kind of cool new consumer app later. Yeah. Yeah. I mean, my question is like how much, what will the market actually look like for the average consumer wanting to generate images and video? Or will it just be something that people default to chat GPT? Because maybe they already have a subscription or they're fine with the free tier. Yeah. And it doesn't end up, there ends up being a bunch of different applications on the enterprise B2B side, but then not so many like, you know, core consumer subscriptions on just like cool videos, pictures, et cetera.

1:28:19I mean, it seems like it's a killer, killer moat for Google cloud platform to have VO3 as an API, even if Google can't figure out how to productize it fully. It's like they do seem to have a real moat. I want to get into that about YouTube is obviously an incredible training data a resource. You mentioned that there was another company that just surpassed them. Was it Tencent, you said? ByteDance. ByteDance, that's right. So I have a question about that because obviously with CodeGen, GitHub has a lot of public repos that people can probably just scrape. It's also just not that much data. You can probably fit it on a couple of hard drives, maybe sneak it out the back and go head a flight and train somewhere in Malaysia or something.

1:29:03you can't do that with YouTube. Like it's just too much data. And so my question is, is how durable, how much should we be thinking about a durable data moat in video generation for YouTube? Because it seems like something that they could really like clamp down on and would give them a durable advantage. But I don't know, there's so many other, there's so many other ways to attack any of these model developments. that there's a lot of different options. So there's a couple of parts of the data question. The first part is like, what do you own versus what do you scrape? I mean, we've seen companies like OpenAI will scrape YouTube as well to train their models.

1:29:40I think ByteDance also like, here we think of YouTube and Facebook and whatever here in the US, I mean, as being the big host of content, but like there's all these massive companies in China, like ByteDance who have their own user-generated content on like their version of TikTok and their version of YouTube. And I'm sure there's reposts of American videos over there. So it's not like even has a unique flavor, probably can generalize pretty well, right? Totally. Though, yeah, like I was one of the very early users of all the Chinese video models when you still had to access them on Chinese apps with Chinese phone numbers.

1:30:14And they were definitely very good at things that were more China oriented than the U.S. models. That makes a ton of sense. Oh, okay. The other thing that's important to mention on data is, in video in particular, it's not just the volume of data, it's also the quality of data and the quality of data labeling. Because essentially, you can't just feed a video into a video model and assume it can understand what's going on and pull out the relevant info. You have to have really sort of dense labels, is what we call them, or super detailed captions about, like, this is this style shot, shot from this sort of camera.

1:30:50The camera is coming from this angle. This is the sort of character. This is how the character is interacting with the background. And that quality data is what drives quality in the video models. And China has really benefited there because there are so many more PhDs than there are here. And it's much cheaper for these companies to hire them to do these dense labels for the video data. Yeah. Well, how does Midjourney fit into all of this now? It's such an interesting company because no venture dollars, this like behemoth kind of quietly hiding in a discord server still. I saw some examples of video.

1:31:27It looks fantastic. Seemed like they hadn't added audio yet, but how do they fit into the whole piece? Because it seemed like early on they developed a really great feedback loop for the data that maybe wasn't happening with some of the other model providers. Yeah. So the MidJourney model came out this morning really conveniently, like 10 minutes after I put out my market map without MidJourney video because it's not yet available. I was just playing around with it too. It's really cool. They do image to video. And so they don't do text to video, which is actually sort of easier. They can start with the super high quality images that they generate on the platform and then animate those.

1:32:04I think they have like a low motion and a high motion setting. from what I've tested so far it's it's better as sort of like a low motion scenery environment light interaction type thing like you have a photo of a person and you can then animate sort of rain and wind and them walking slowly and it's not as good at like what I call physics heavy world model type things like two cars running into each other and exploding that sort of thing requires a very, very large and costly, usually like text to video model that is more difficult to train. Whereas mid journey, I mean, I have no idea how they did it.

1:32:44It's a great model. They could have taken one of the open source image to video models and fine tune it on all their own data. Yeah. Yeah. I've noticed VO3 is really, really good with some of that physics stuff, but it still gets confused. Like if a car is driving away, all of a sudden you'll be looking at the front of the car and then the back of the car and it'll get kind of mixed up um but yeah are you uh as as all these different models have progressed i i always remember uh brud and trevor mcfedries and just how early he was to to what i think will be this like new wave is that little michaela yeah little michaela uh which was like basically cg a cgi influencer so very early i I think we're going to see a lot more of this.

1:33:26And we've seen some of this to date, but do you expect that to be kind of like a new, a new, like how, how bullish are you on, on sort of like entirely AI creators getting, getting real adoption, following, turn followings, turning into real businesses. I'm sure you've, you follow a bunch of them already. Yeah. I'm, I'm personally super excited about it because it kind of separates the content from the character. like now you know before ai if you were on instagram like you were both the character and the person coming out with the content and so you had to like look in a way and present yourself in a way and talk in a way that was like interesting to the instagram algorithm and now it's like anyone with a good idea can create a compelling character um and so i think some of those are human characters i've already seen way too many examples in my reels feed of only fans models who promote themselves with AI avatars of themselves now, which works shockingly well.

1:34:23There's some photorealistic human influencers, but honestly, some of the more interesting ones are things that could never be influencers before AI. So there's one called like Raccoon Stole My iPhone, and it's an AI raccoon influencer. There's like AI capybara influencers. There's like mystical creatures, like all of these things that just come out of people's imagination. Competing for Mindshare with Instagram pet pages, you know, dog pages, things like that. Did you have a reaction to Fountainhead? It was the, or sorry, Mountainhead, not Fountainhead. Oh, yeah. Mountainhead, the movie, the core overarching theme was that basically deep fakes or AI-generated content had gotten so good that it was causing global unrest.

1:35:11did it resonate at all? It does feel like I now have multiple times a day I'm seeing content online and it's like getting, we're both in the community notes program. So it's like you see content getting community notes. One person says, it's not real. Look at this link. It was this image. They redid it. Another person says, it's real. Look at this link. So it's like, I just assume that everything's fake and made up unless I see it with my own eyes. But I'm curious if you if you if it resonated at all with you. So I've not I largely consume AI slop. So I have not seen the movie. I should watch it.

1:35:48You should watch the movie, the motion picture on slop. Yeah. Once they have that, I will watch the full film. But it's so interesting. We talked about this a lot, actually, with audio models with the last like election cycle, because video, I think, wasn't there yet to have convincing deep fakes. But audio, like there were way less cases of, even though you could make really realistic voices cloning candidates and saying things that weren't true, there were way less examples than we thought of that actually impacting any election in any sort of meaningful way. And I think part of it is things like you mentioned, the community notes program, where you have citizen watchdogs on various platforms saying, this is real, this isn't real, running them through various AI detectors.

1:36:32But I also think people are starting to develop more skepticism around everything they see online and whether or not it is real, which is probably not a terrible thing. Yeah. I had this take that After Effects would be more impactful on the election than AI video because you can just show a clip of a burning building from 2020 and it's real video, but you recontextualize it and say, oh, the Capitol's burning or something and it's from years ago or just speed up a video, slow it down, edit it out. They would do this with various politicians. Cut out the ums and us, and they'll sound sharper. Add a bunch of gaps, and all of a sudden they sound like they're slower.

1:37:13Yeah, we're here in L.A., and when all the imagery was coming out of the protests from a couple weeks ago, it was like burning Waymos. Kind of looks like something you'd generate with VO3. Totally. Just because it was so symbolic and just such a crazy image. and then like make an image of a guy with a mexican flag riding it doing burnouts around a car that's on fire and it's like that looks like even and even the just the way that was photographed there was like it looked like all of los angeles was engulfed in flames but it was really like one crazy block with a bunch of different angles yes and then a bunch of different posts and and you drive around and you'd be like oh there's not that much that's the other interesting thing is like even real footage can be manipulated totally like any kind of story can being manipulated in a way like ai are you are you seeing uh i think like you know there's exciting uh companies like world coin you know doing like proof of human are you seeing any infrastructure players trying to like do anything on like content verification side and like trying to create some sort of um mechanism to to prove whether something was like authentic you know actually shot on an iPhone, right?

1:38:24You know, proving through the metadata and some type of like public setting. Is there any pitches from that side? Yeah. So largely, honestly, today that has come in two places. One is the model companies themselves will often watermark the content in some way, like the VO3 generations has a little VO3 11 labs, which is the audio. They actually have a site where you can upload any audio and it will tell you if it was generated with 11 labs or not. That's cool. Which is pretty cool. The other place we've seen development there is for like prominent individuals like, you know, celebrities or someone who is there's like value behind their brands and who potentially even might want to monetize it in the age of AI.

1:39:05Like if you're an actor and you suddenly don't have to, you know, film, go fly back to LA when you're filming a movie in Australia to tape like five ads for some cell phone brand and you can have your AI avatar generated to do it instead. And it looks just as good. Like you might actually want to, you know, have some licensing company that owns your AI licensing rights, whether it's your traditional talent agency or not, who can manage that for you. Yeah, totally. Very cool. Well, thank you so much for stopping by. We can talk for another hour. I have so many more questions in our doc, but we'll have to have you back.

1:39:39So thank you so much for stopping by. Thanks, guys. Thanks, Justine. We'll talk to you soon. Great chatting. Have a good one. More breaking news. NVIDIA to drop humanoid robots that will produce NVIDIA GB300 chips in Q1 of 2026. Nick says, holy based. That is so close. So NVIDIA is Foxconn in talks to deploy humanoid robots at Houston AI server-making plant. Wow, that is extremely close. I don't totally understand this. What does that mean? I guess Foxconn has been training the robots to pick and place objects and insert cables. Yeah. I don't know if this is marketing. It feels like... We've asked a bunch of robotics experts about humanoids.

1:40:20Yeah. And so far, I haven't got a... I don't have the confidence that this is actually a super great use case for them. It's just the definition of like, what is humanoid? Because you go to a, you go to like a Ford F-150 factory and they have like massive robotic arms, like moving windshields around. Right. Like it's like you could anthropomorphize that by like spray painting it pink and putting some hair on the, on the hand and being like, it's a, it's humanoid now. You know, but like you could like retrofit every bicep definition. Totally. I mean, like Amazon has like tons of robots sliding around.

1:41:00You could put googly eyes on them and be like they're humanoids now and and you get maybe get like a stock bump But like there's clearly things that are happening in the AI server assembly process that are using robotics Obviously whether it's even just like conveyor belts or or you know the the three axis pick in place You know pick it up put it over here that type of stuff just going to humanoids is just it's like well will it have five fingers or will it have a just a grabber will it have legs or will it have wheels like it could just be sitting there because for a lot of these pick and place jobs you can just have the the humanoid sit there with a single arm mounted to the ground because the stuff comes to it and so then you're just kind of in a okay we're in the arm business now um it feels it feels like it's a little bit wrapped in marketing lingo but still cool that more companies are making humanoids because it does seem like a cool form factor that hopefully people will break through and get there and this seems like you know a step in the right direction in the sense that it's a very defined task i think when people think humanoids they think some like my new touring test is is humanoid robotics will will be here and when they can put up a six minute nurberg ring time in a manual yeah gated manual in a gated manual uh because at that point the they have to not just be a self-driving car but they have to be able to you know negotiate the uh the the wheel and the stick shift so so efficiently and so quickly that they are truly performing yeah and a manual and a manual can be weirdly like probable probabilistic right and that like you're like you know you can move the synthesize a lot of data.

1:42:47Yeah. It's not, it's not like, you know, yeah, perfect system, right. It's not going to, you're not going to put up a sub seven minute Nürburgring time with the Joe Biden walk. That's right. You're going to have to be moving fast. Those actuators are going to have to be that's right. High speed. Um, so yeah, I, I, I don't know where all this goes, but, uh, I mean, exciting to see that they're, that they're at least doing work on it because it seems like an important it's it's clearly an important path in the tech tree we don't know how relevant it is to other to other formats but uh cool to see a lot of money pouring into the sector uh from very big companies so foxconn will be announcing their robots in november and then deploying them shortly after yeah in our year 2026 i mean foxconn seems like the right builder for this uh unitary is is already like feels like it's scaling up to the point where like unitary robots should be usable in certain locations like they're not generalizable yet but they're certainly if you train them on a specific task they could do that task over and over and over again uh the question is just like like you know do you need five fingers ten fingers ten toes is that is that really like the right form factor or or should we be just doing things that are more specified uh because if you're if you're if the whole point of these human robots is just ai server making just assembly just one one spot on the manufacturing line could probably be a much more specialized robot.

1:44:11But it will be cool to see. I'm sure we'll see a lot of viral videos about it. It'll be very cool. I invested in a company making robots for data centers. And they intentionally chose not to make it humanoid form. And I think a lot of the reason behind that decision would also transfer to manufacturing setting, which is like, do you need legs? If you can use wheels? data centers have the most perfectly polished floors with like no dust at all yeah like it's it's the the perfect environment for a wheeled use case at the same time you probably need to have a very specific actuator for like unplugging and plugging the cable back in right yeah and that's actually like it's pretty hard to reach around the back of a computer and unplug an ethernet cable and obviously the server racks are like designed to be worked on more but still even the cabling is like very detailed work and so if that's what they're trying to do um uh you probably need a specific actuator for that we have our next guest in the studio uh george hots how you doing george good to hear from you what's going on welcome can we hear you oh can you hear yes i can hear you gotcha uh well let's kick it off with something uh simple i want to take your temperature on uh agi timelines p doom the the easy and fun stuff i don't know what agi means and I don't know what you mean by deal.

1:45:36No? Are these terms just like entirely irrelevant? I mean, now we've shifted to like super intelligence. They're all buzzwords, but at the same time, there is an idea of like the, I don't know, the conversations may be shifting to like the AI generating more economic value than humans. Is that a relevant metric to track? Machines have been generating more economic value than humans since the Industrial Revolution. is there some is there some other metric that we should be tracking or is it just like irrelevant you're just talking about like hype like i don't know i mean i i like i don't know what you mean like you can talk about concrete things the term like agi means nothing right like computers everything that's a turing machine is a general purpose computer is that what you call intelligence i don't know what you mean it's a linear regression intelligent what if it's big enough the chinese does know chinese knees yeah um what what i mean what about uh uh your your decision to get on a spaceship traveling at 0.9 sea away from the yeah from the earth like how close are we to that are we closer than the last time we talked which was like a couple years ago and it seemed like it was maybe going to happen within your lifetime has it moved at all yeah i don't know i don't know if i'm actually gonna get that spaceship but it's kind of like in an ideal world what i would want to do you know yep just just just back away and chill and don't look back actually you can't look back you can't never look back they're all there you need the you need the blast shield right you need the information shield information what do you mean oh that's how they're gonna get you okay right i mean okay so like here's a way you can think about ai right yeah um imagine there were 10 CIA agents assigned to you.

1:47:29And they're running at 1000x real time. So they're like hyper fast CIA agents that devote their entire lifespan to your day. And they're trying to manipulate it. Maybe to get you to buy things, maybe to get you to vote for a certain guy, whatever. But like, that's what you're going to be up against with AI. What we're currently building what what if you think about the biggest companies in AI, what they do is advertising, What advertising is, is just manipulation of humans. So you're going to have a team of CIA agents thinking about you and trying to manipulate you at all times. And now you see why you want to head away at the speed of light, right?

1:48:05Even CIA agents can't be bad. Is there some world where there's like a capital war and I'm paying for a more powerful ad blocker? Yeah, I mean, that sounds good. And like another question is kind of to say like, okay, if you think that you either think that current like capital accumulation dynamics are going to continue and that the rich are going to continue to get richer. And if you believe that the question is kind of, well, how many people are going to survive in the future? How many people are going to have any modicum of independence? Right? Like you have some far AI people who think that there's going to be a singleton, right?

1:48:43There's going to be literally one, right? You know, some people maybe think it's 10, some people thousand, 10 ,000. Some people think that all the humans will get to continue to exist as independent entities. Are they already independent entities? That's a question, right? I don't know. That's a good question. I mean, if you were trying to put it in like the form of a bet, human population above or below 8 billion in 2030? Above, I think. I would just continue to normal trend. Is that what the trend says? Yeah, just go with what the trend says. I don't think there's going to be any discontinuities to any trends, really.

1:49:18Well, yeah, I mean, I mean, at some point, but the question is, like, how far out do you have to go until you start seeing these effects? What do you mean by human? Right. What about someone who lies in bed all day and watches TikTok? Are they human? Yeah, that is odd. They kind of drop out of society. I think I think a question that that popped up for me is, is this all this debate about AI safety and what should labs be doing? what should labs not be doing it feels like your angle is it should be each individual's responsibility look to look after their own safety in the context of of ai is that at all i just i just like this whole like should shouldn't like what i don't know i'm not a sadistic who wants to manipulate other people like the people in power like i don't know yeah but i mean people still look to you as like an example of like uh someone who might have uh answers No, I don't have any answers.

1:50:13Not necessarily answers. But you can buy my shit coin. Here, can I shell a shit coin? Here you go. Just flick this QR code and you can buy a George Hatz coin. And that will give you answers. You will find satisfaction and fulfillment in your life after purchasing a George Hatz coin. Is that the end state? We all have our own coins? No, no, no. I don't mean it like that. I mean, like, I think that a lot of people are like, they don't really know what they're looking for. And that vacuum is very, you know, it's very dangerous. And it's going to be filled by dumb shit and don't have that vacuum. Right.

1:50:52You got to stand for something, you know, or something. I don't know. Yeah. I mean, do you think that there's a chance that someone is able to take a stand and actually bend the arc of AI progress in the way that, I mean, it happened with nuclear, right? Like nuclear development did stall. There was a stagnation in real-world build-out of nuclear capability on the energy side. Yeah, I mean, there's a few things about nuclear that make it different. So nuclear, even as a weapon, is incredibly hard to deploy tactically, right? So if a country has nuclear weapons, aside from a mutually assured destruction idea, they're not all that useful.

1:51:34It's not like you can use a nuclear weapon to accomplish tactical objectives. You know, if you could, I think Russia would have already done it. Right? Russia has some tactical objectives they might want to accomplish, but nukes aren't really going to do it, right? I mean, from a pure realpolitik perspective, not even from a, like, oh, like a taboo moral perspective. Like, what do you want in a radiated pile of rubble? Like, that's what you're going to get. No, what you want is drones that are hyper specific and can take out exactly who you want and control areas, right? So like as a military technology, nukes are not that good.

1:52:05AI is way better. Yeah, but what about it as an energy technology? It feels like the fear, like the memetic fear of nuclear war and total destruction caused a whole bunch of regulation to pour into a sector and essentially a stalling of nuclear energy build out. And if the AI doom scenario, whether it's real or not, becomes so memetically powerful that someone's able to harness that and actually say, if you try and build a big data center, we will shoot you, then maybe it stagnates. No? I don't really think that's the reason for nuclear. I think it has more to do with why we can't do other big infrastructure projects in this country, right?

1:52:42Like, it doesn't have to do with the new. We also can't build dams, right? And if you look, like, that's the thing. If people think that there's some weird taboo around nuclear, right? But then, OK, look at hydroelectric, right? There's no taboo around hydroelectric. But China leads an installation of both nuclear and hydroelectric and coal and everything. It's almost like they're correlated, right? So the thing is not there's a specific fear around nuclear. It's like, you know, the U.S. decided that they're a developed country. We're not going to develop anymore because we're already developed.

1:53:10You see the D on the end, right? Interesting. So is that just cultural then when you are like the malaise sets in? Would you expect that to happen to China when they catch up? I don't know. I, I, yeah, I mean, maybe it's just like this normal story arc, uh, of like, uh, you know, it's, it's, I don't know. I don't know. I think that like you have a real problem when the kids can't live better than their parents. Yeah. Um, so, but I, I don't have anything more to speculate on that. Did you have more context on, on China and specifically in like the AI context? US electricity looks like this and China electricity looks like this.

1:53:54Is that all that matters? Pretty much, yeah. I mean, that's a pretty good proxy for everything, right? Yeah. Like, there's two things. There's two things. You know, people are like, George, how do you feel about the Trump administration? I'm looking at two things. With any administration, I'm looking at two things. Did you decrease government spending and did you increase total electricity production of America? Those are the only two numbers I care about. Those will capture everything. Why does government spending matter? We were joking that Trump must be extremely AGI-pilled if he's running up a massive budget deficit.

1:54:27What the hell is AGI? I don't know what this is. Never seen it. In this formulation, it adds numbers. Yes, yes, yes. But it is an extra lever on labor and capital, and it creates more GDP that can be taxed to pay down the increasing amount of debt. Super Excel. Yeah, Super Excel. What is Super Excel that normal Excel doesn't do? Let's give it up for better Excel. Yeah. Yes, we need that. Excel 2.0, right? Yes. The thing is, Excel was the final piece of software. And then but in order to add another, you know, a hundred trillion dollars to global GDP, we needed to like kind of rebrand it. And so now we get AGI.

1:55:13GDP is the complete biggest bullshit thing ever. Right. Like I always joke with my friend and I that we're going to start companies and be billionaires. I'll tell you how we're going to do it. OK. All right. I start a company. He starts a company. We both write contracts to each other. Yep. Right. Like, I'll buy something from him for a million dollars. He'll buy something from me for a million dollars. We'll just do this real fast. We'll keep passing the money back and forth. Whoa, look at our revenue. Wow, that all contributes to GDP. Wow, we're billionaires overnight, right? Like, like, and that's my argument is the economy is just that with a lot of extra steps, right?

1:55:45You can't use services. It's not part of GDP. This is complete nonsense. You can't get services. Like, literally, literally, you take the steel out of the ground, you grow the corn. Okay, that's GDP. But is it I mean, if that GDP is fake, is not the debt is the deficit not fake? Like, is government spending less? No, we really owe that shit to people. It's not fake. But can you just tax the fake for the fake money? Like if you tax your scenario where you're generating a billion dollars in fake money, you can't tax the fake money because we're passing the same dollars back and forth. The minute you tax it, that falls off so fast.

1:56:17Yeah, yeah, yeah. You can only tax productive work.

1:56:24Is AMD doing productive work right now? AMD's doing all right. Yeah, either NVIDIA is really overvalued or AMD is really undervalued. It has to be one or the other. How does it all play out? Like what does AMD actually need to do to get back on track or realize their potential? NVIDIA needs to stumble. I mean, it worked for AMD and Intel, right? Like so AMD ended up beating Intel in the entire, like no one would buy a data center, Intel CPU anymore. Yeah, and it's just because well, you know, they stumbled and now Intel owns that market. Yeah, so you know AMD just sits there in second place Okay, pretty to be in a better second place than they were a few years ago Yeah, and then when Nvidia stumbles AMD is like oh hey, we're here is is dgx lepton like their their cloud offering A potential stumbling block or is it uh, there is it the right move for them?

1:57:13I don't know what that is. What's an Nvidia cloud shit? Yeah, exactly You can break AI down basically into like, there's like five tiers, right? Like at the base level, you have like electricity and data centers and land and like things like that. Tier two or like TSMC, ASML, Samsung, Intel, right? Favs, NVIDIA, AMD, OpenAI, Anthropic. And then on top, you have like completely worthless things like Hunter and Winsurf. You know, these character AI, all these people who think, oh, what do you have? We're going to get the ARR. No, that worked in the web. It won't work for AI. And I can go into why, but it's kind of boring.

1:57:47I want to hear why. Keep going. Keep going. Basically, okay, so like here's the difference between AI and web. When you want to run a service like Gmail, one server can serve 10 ,000 people easily, right? And there's no demand for like better Gmail, right? It's not like I can click and get like, yeah, you can buy Gmail Pro and it'll have a few things, but most people don't really care, right? There's no limit to the ceiling of how good you want your AI to be or how fast you want your AI to be. Maybe there's a limit to the speed, but like when you're at like a thousand tokens per second, I want the biggest model in the world, right?

1:58:19Like, so there's very little limit on that. But suddenly you can't serve 10 ,000 users from one server anymore. Right? And the whole dynamics of the web, the whole reason some of the value aggregated to these end players, and they still didn't aggregate to the cursor and the WinServs. They aggregated to the OpenAI and the Anthropics, right? Nobody who built like an email client survived. They all got eaten up by the tier fours of the web, right? the Google's the Facebook's all of these like app providers right where's a Zynga today you know like this already happened right people just don't know where's Zynga all Zynga's gonna be the next thing man like no it's not Facebook ate all of that value right Google ate all the value from all the people building on top of Google so the tier fours ate all that value yeah so opening eye and drop it will eat all the value from the cursors in the wind surface of the world they'll acquire some of them don't compete with some of them right same as you saw on the web but I argue that the tier fours aren't even gonna have value because the tier fours are this ain't the web this ain't where you can have one server serve lots and lots and lots of people you know i'm running oh three i'm running i you know how much i cost open ai every month i pay the 200 a month and i cost them a lot more than that you can now click on codex yes spin up four nodes yeah why would i not click four it's not my

1:59:37you gave me the button hey i'm just using it george hots single-handedly bankrupts is there no value in just being the the front end to ai applications to be like the the the front door just the the the default button because we see these we see these these these uh these models kind of go back and forth in terms of benchmarks or what's hot And there isn't as much customer churn as you would expect because people are just kind of like defaulted into the app that they installed whenever. And so even if Gemini gets better in terms of the actual performance metrics, people don't switch from OpenAI to Google.

2:00:17It's so negligible. You got to make something 10x better. You got to make something 10x better. So like this whole game is OpenAI's unless they stumble. Sure. I'm not switching to Gemini because it's 20 % better. It downloads a new app and think about a whole new thing, right? No one's going to switch. Is there a chance for a company to kind of come out with something that's 10x better with an algorithmic improvement? Or is it just a race for scale? Like, what could actually be that next? It felt like GPT 3.5 when they really broke through with DaVinci and then 4.0. and then four, like it felt like this kind of like binary moment when a lot of people realized that this was usable for their daily life, even if it's just a Google search replacement or whatever, write a poem or whatever, like a 10x, what you're describing, like a 10x improvement feels like that kind of like qualitative binary shift.

2:01:09Is that possible with just scale? Or is this something that we need a different model for? I don't know. I don't know. I would bet majority still on. These big labs are also attracting the talent. But it is also like, it's pretty commoditized a lot more so than like Google search. You can look at people track how far open source is behind. It's not that far behind. So no, I don't know. I think this game is mostly going to be chat GPTs. I think Elon's aware of this too. That's why he's trying to go 10x bigger with the data center. We'll see. Maybe it'll work. You know, there's someone to bet on.

2:01:51Anthropic, I'm not that bullish on, but maybe. You kind of predicted the pre-training wall, but that's not a refutation of the bitter lesson, and we're going to see similar scale play out in reinforcement learning, or is there going to be something else that we're building the big data centers for? There's something that we don't understand. uh in terms of data efficiency um so like when you think of how long it takes a gpt to learn to talk like how much data it takes it takes like terabytes of data in order to make a gpt talk like a normal person it takes terabytes of data okay whereas a human trains on megabytes yeah right how is it that if you take all the text that you've ever heard in your life and you you put it to whisper and you you uh you transcribe it it's going to be a couple megabytes 10 megabytes maybe 100 megabytes yeah so humans have this thousand x data efficiency uh advantage and we're gonna have to fix that if we want like reinforcement learning to work especially like reinforcement learning that you want to do in the real world humans could do humans can learn from very few samples yep um and yeah i think that like it might be okay if these foundation models train unsupervised on lots and lots of stuff.

2:03:02But yeah. Is that something that somebody's working on just like a new more data efficient algorithm to drop into the pipeline? Or do we have any like leads there? Because it feels like right now we're going down the path of like reinforcement learning with verifiable rewards. And we're going after like individual business use cases that are increasingly long tail and that could be kind of like valuable, but it doesn't feel like the breakthrough that you're talking about. like has there ever been a breakthrough right like people think gpdpd is a breakthrough Ready? AI scaling laws. You can put in exponentially more money to get linear returns.

2:04:00Yes, exactly. Do you believe that the real value is investing in humanoid robotics then? Have you heard this theory? So, I mean, if you put exponential more money into humanoid robotics, Assuming that they work and assuming you can you can sometimes as many robots Ten times as much output anyone anyone who wants a humanoid robot has never worked in a factory in their life Okay, right break it down. What's a human? Oh, yeah, you're gonna walk around

2:04:41Yeah, we got a laugh track. Can you show me a robot arm that's capable of putting a screw in something? probably yeah the screw in the thing yeah no no not like you carefully jigged up the screw like the way a normal human does it with a screw sitting there and a little bucket on the thing and it picks up one screw and it puts it in it takes a screwdriver no we're no we're we're not close but also it feels like we're not far it feels like that's what i feel like i feel like humanoids are this interesting sort of like space because a lot of smart people just say like here's the 20 reasons why they won't work and and like why we shouldn't build them but then so much capital and so many different teams are trying to make them work that they they very well might work for some things and like they just humanity might brute force it because we saw it in a sci-fi movie no you know 30 years ago why why why are we cooked on this is dumbest self-driving cars was right and nobody learns their lesson and people like kyle boat should be ashamed of themselves like they really should these people who go and raise large amounts of money for another thing that like they should know they should know better right here's basically like remember in 2012 and google said that you know my my 12 year old daughter would never have to get her driver's license yeah come on that's nonsense right and like now okay they shipped waymo it's in a few cities they're teleopt right how how tele-operated are they in your opinion is it is it effectively one-to-one it's more than one-to-one there's probably about i would say there's 1.2 operators per car um but it's not they don't have a steering wheel and pedals yeah it is it is an autonomous system that they're probably doing some higher level inputs on they're definitely like say when you can be aggressive when you should slow down uh you know whether you can turn on the stop sign or not But, you know, again, like here's the simple reason to know that it's like that, right?

2:06:39There's definitely some teleop of the Waymos, right? Yeah. Have you ever seen a picture of that room? No. Yeah, why not? I've always thought it was like an ace up their sleeve because like if there's a lot of pressure on them to say these Waymos aren't safe, they can pull the sheet off of the ghost and say, there's actually a human in the loop. Don't worry. It's safer than you thought. Yeah. Yeah. Yeah, like the fact that you've never seen that room tells you that it's way worse than you think it is, right? Okay. Tells you that there's way more tele-op than you think it is. If it was really one person supervising 10 cars, Google would post those pictures all over the place.

2:07:14Yes, yes, yes. You don't see any pictures. So Cruise had actually came out in the lawsuit. I think it was like 1.5 or 1.7 humans per car, right? Or vice versa, like 1.5 cars per person, right? No, no. Wait, more people than cars? Yeah, that's what he's saying. That's insane. It's still that way. Because an Uber only requires one person. Yes, I know. So maybe the real innovation is just allowing somebody to get in a car and not have to talk about the weather. Exactly. I'll pay more for that. I'll pay more for that. Yeah, but is there any hope that we drive this down and we get to two cars per person and four cars per person and it starts doubling exponentially and eventually we are there?

2:07:54I mean, yeah. It's obviously going to happen, right? It's obviously eventually going to happen. If you want to see where the real state of the art of unsupervised self-driving is today, right? There's no person with FSD. When you get your Tesla, that's not teleop. You can go press FSD and that's real AI. And, well, you can see how good it is, right? Would I take a nap in there, even for five minutes? Oh, A &L. You'd be super tech. How are things going on the comma side? Give us the update there. Pretty good. You know, we're on track to. um we're on track to be two years behind tesla so there you go so cheers behind tesla uh but you know here's why we win right like because like it's cheap uh okay so when you think about self-driving cars uh it doesn't look anything like the rollout of uber right or airbnb when you roll out something like that you're trying to roll out a two-sided marketplace you got to spend tons of money on customer acquisition costs you've got to make sure that you've perfectly matched that marketplace right away because if drivers aren't getting rides they're gonna leave the platform if riders have to wait too long for drivers they're gonna leave the platform so it's this careful balancing act but once you get this marketplace you got you got a moat right switching costs are real high try to get everybody to switch at the same time it's a challenge point never doing self-driving cars don't look anything like that self-driving cars look like scooters the only thing that it's going to take to roll out big fleets of self-driving cars is capital, right?

2:09:21It's just strictly a capital market. You could just, I could, if I look at a city, I can calculate how many Waymos there are. If I want to build my own network and deploy that network and run at a lower cost, it's straight up capital. Easiest thing for investors to calculate, very little risk. So self-driving cars are going to be this awesome race to the bottom, right? It's going to be like scooters, where there's going to be like 10 providers of these things for a while, and then they're going to consolidate, like one's going to do it but um yeah people are really going to win what is what's most valuable in terms of developing the next like the next better version of full self-driving is it having a lot of data building a big data center having a great team to actually design the system what's most important are they all equal yeah all those things matter right i think the main thing that matters more than anything else.

2:10:10It's just time. Like we're figuring things out with research, infrastructure is getting better. I think a lot of it's just infrastructure. We have a new company's AI infrastructure, right? Like, the infrastructure gets better. My coworker has a saying is like, what we do is that we make the hard things easy, and the impossible things hard. And that's like the goal of infrastructure, right? So you build infrastructure, your infrastructure gets better and then what was what you couldn't even dream of doing 10 years ago is now one command today and today you know what what you you you uh yeah what's the current use case for most people with tiny boxes yeah that's my design right you're not supposed to know but i mean like i sell a computer it has specs right like so many people want to tell you and i hate this i hate this they're telling you like how the product is going to impact your life what you use the product for.

2:11:07Oh my God, who cares? Here's what it is. I'm going to tell you what it is. That's your job, right? I'm not an advertiser. But I mean, our intern wants to build something with a tiny box. I want to give him some ideas. Go buy one. I don't know. Why do you want to build something with a tiny box? I mean, it's a bunch of GPUs in a box. It's a nice little box. gpus in a box what um what robotic form factors are you most bullish on we've touched humanoids you gave a great review there we've touched autonomous vehicles sounds like generally bullish but capital wars race to the bottom uh all that stuff are there any other kind of form factors that you're thinking about that you are generally optimistic or excited arm arm the arm two arm right just two arm right because i look look i run a factory i run a factory in san diego we make all the commas right here and i can't wait to get a whole lot of robots in there but uh i don't need humanoids i'm just gonna two arms to the table and then it's gonna grab a comma it's gonna put the screen on the front it's gonna flip it over it's gonna put the four screws in it then it's gonna pass it on yep right show me anything that's anywhere near that level today yeah what what uh what would you do if you were trying to build like a truly multi-purpose robotic arm the arms are already good enough it's the off-the-shelf arms are fine it's all software again it's always all software autonomous vehicles are all software robotics is all software but everybody loves to bite shit yeah like what color are we gonna paint the human yeah like let's have a great conversation about that well you know we don't want to paint them red because that might scare people in a moment.

2:12:49This is actually the level of stupidity that I see in those discussions about humanoid robots. Yeah. Would you, uh, would you trade in your legs for wheels if you could? I got that. My legs for wheels. Yeah. This is a question from Aaron Frank, friend of the show. It's asking us in real time. You're a wheel guy then like people would ask me if the wheels are like making a statement. I just don't have to have this conversation. What, what, what about the sim to real gap in robotics? Like how, how is, how is simulated data you know you build a bunch of data in unreal engine then you try and transfer learn it back uh obviously there's been a bunch of experiments of that with self-driving cars is that a path that we should be going down for the for the robotic arm development yeah so i think with a lot of sim to real stuff the reason people are excited about it is because of that data efficiency gap we spoke about right like current machine learning algorithms like a thousand x less data efficient than humans.

2:13:46So yeah, you're going to need a thousand X more data, right? If a human can learn something in one example or 10 examples, the computer is going to need a thousand or 10 ,000. Now, do you really want to reset the stupid state of the physical world 10 ,000 times? You might do it at 10, but you're not going to do it at 10 ,000, right? So that's where you want a simulator where you can just click reset and everything's back to exactly how it was. So I think this stuff's going to play a role, but I think more fundamentally that data efficiency gap has to be understood. Uh, we talked a little bit about coding agents.

2:14:17We talked about how you're bankrupting OpenAI by spinning up a lot of different, uh, codex agents. Um, what, uh, what other, uh, uh, sort of agentic software are you excited about? Do you expect to, uh, you know, what's agentic mean? Yeah, basically bots. It's, it's like what we're calling bots now. Um, What's a bot? But anyways, I just, you know, I don't know. You mean like Daniel from Star Trek? Yeah, yeah, maybe. No, but I think about a world in the future, you know, do you expect to be, I don't know if you're a Slack guy, an iMessage guy, Discord, maybe no messaging at all, just, you know, telepathy.

2:14:56but but do you expect a world in the future where you're just you know a perfect interaction between you know human employees and agents or is it you know going to be more like you know you'll do the odd deep research or maybe you send some automated outbound emails or have some codex bots running i don't even like follow this when do you think you'll be able to book a flight just by saying i'm trying to get to new york tomorrow oh see the worst part about this is like hey like And that's going to come pretty soon, actually. We're going to pretty soon have computer use models that are actually capable of going to Delta.com and booking a flight.

2:15:32But then what's actually going to happen is Delta is going to partner with whatever company does that. And they're going to put it behind the stupid thing. And like, yeah, so that's going to be here in a few years. Not with agentic shit, but just with normal hooking the APIs together, right? Wait, so what is the... It's bullish on APIs. What is the mistake about the agentic buzzword? What are people even describing? Again, it's another thing that I really have no idea what it means. You know, I was hanging out with some friends last night and like my friends in this VR company and the, you know, the CEO is really interested in things being open source.

2:16:07But he's also really interested in making sure that things are protecting our intellectual property and proprietary. And the truth is, he has no idea what the word open source means. He has no idea what it means that they can copy his shit. like that someone else could use it he just he just heard the word open source in some like buzzword thing and he's like do we have the open source do we have the open source in the thing okay so check the box check the open source box okay last question about the agent last question about the agentic buzzword i think that there is something that people are picking up on which is that these models seem to be very smart for a short amount of time but if you run them for a long time, they start hallucinating and kind of going off the rails.

2:16:48And so you have like 10 minute AGI. It feels incredible. But as you let it run and do more work, you can't just say, hey, go do a week's worth of work. Come back to me when you're, but it's superhuman in one minute. And so is that kind of trade-off curve real? And then is it just a matter of like better harnessing to actually get to two hours of work, which is kind of what the agentic people are like advocating for? No, so I don't think it's better, but this is definitely a real phenomenon. This is definitely a real phenomenon. You can experience this. There's papers exploring it, which show that in 10 seconds, there's absolutely no way I'll come even close to a modern LLM.

2:17:27Totally. Because the first shot from the LLM is great. Yeah. And then it kind of degrades, and it degrades pretty quickly, whereas humans look a lot more like this. Humans can stay coherent internally for much longer. um so yeah i think that that's a real thing i think that that's mostly going to be fixed by like long context just more energy long context rl okay yeah just like you just got to do it we'll figure out new ways to make the context better we'll combine diffusion and uh and auto regression in some clever ways yeah i think that this is just going to be uh like there's not going to be a breakthrough here.

2:18:12There's not like one magical thing that we're missing. I think it will be a continued plod. The same thing with data efficiency. I think people will start to care about it. Some new tricks will come out. Some of them will work. Some of them won't work. We'll continue to do graduate student dissent until we find that. Anything? Last question for me. Anything that you're particularly optimistic about? Anything you check the timeline and you think, this is awesome. I love this. I love this. I want to see more of this. Maybe a little white pill to kind of cap it off. Yeah. So here's something I'm optimistic about.

2:18:45That fact that the one server can't run 10 ,000 users, that is most of the reason that the modern internet, that's one of the reasons that the modern internet sucks. That's so much of the stuff is in non-recurring expense. And then it becomes really, really hard to compete with these people. Right? Like, you could run Twitter on one computer. Yeah. Right? it and 20 people could do it too but like they don't because again these companies have moats and they invest in making sure that their moats can't be broken um with ai i think there's going to be a much less of a vote especially when you look at the move from autoregression to diffusion so autoregression can run in large batch sizes when you run chat gpt you're running with a whole bunch of other people on that same computer yeah it's only 100 it's not 10 000 but still it's 100 Diffusion is running the cloud at batch size one.

2:19:37And once you're in batch size one land, running it locally starts to make sense. Actually running the models locally, or at least having your own computer in the cloud. Not being some shared resource that's really controlled by somebody else. So yeah, this was never a thing because you can't put lots of people on a GPU. They tried some weird stuff with the licensing, Yeah. Fantastic. Well, thank you so much for stopping by. This is a great conversation. Yeah, I wish we had a full hour. This was great. We'll talk to you soon, George. Cool. Bye. Cheers. Bye.