Inside OpenAI’s IPO Filing, Former SpaceX Engineer on IPO, Apple’s AI Siri Upgrade

18:28Aaron Tilley:Now, we know that this was Tim Cook's last WWDC, and John Ternus will take the reins in the fall. Do you have any view on whether or not AI or the approach to AI will change at all under John Turnus? I think the approach isn't going to change, but I think the mindset will change. Tim Cook's job was really to take the existing pieces, try to figure out how to come up with the next big innovation, and really grow TAM, grow revenues, and grow work class. And that's what Tim did. I mean, he was the efficiency expert. He was the supply chain expert. He was able to actually drive price increases, adjust pricing as needed.

19:09And that really changed the game for Apple, being able to have the cash for it. Now we need to go back to someone that's focused on product and innovation and engineering and make those decisions. Apple's toughest challenge isn't what to build, it's what not to build. They could build a lot of things. And you can see that from their exercise in building out the EV. I mean, they realized this was a race to the end. I mean, Chinese EVs are at$7 ,000 a pop. Apple's in the high margin, high volume game. and this wasn't going to take them there and so hopefully with john there's going to be that ability to actually find that next big thing after the iphone what what are the what are the options

19:44Aaron Tilley:here we've heard i mean a flip phone i guess was was sort of teased in some way uh with the layouts i know people were really i i don't know it seemed like there was a lot of analysis on what software could work on flip phones i wouldn't really call that the biggest bet ever uh certainly because it's been worked on under Tim Cook's tenure. But when you talk about big bets, you know, what are the menu of big bets that you think Ternus could take in the next few years? Is the technology going to advance quickly enough that a vision pro gets down to where metaglasses are? Is it going to be another device that sits at health that's going to give you the ability to quantify health in a way that we hadn't seen before?

20:26Is there maybe an implant or device that's used to augment our ability to do things? Is it a personal robot that pumps up? There's so many choices that are out there. And of course, it's Apple's way of launching a market, launching a user experience that makes it unique. Right.

20:43Aaron Tilley:I want to ask you about Apple's reliance on Google and on NVIDIA. That was a theme that also came out yesterday. What's your reaction to them having to rely on outside partners at all? You know, I think it was an important step to distinguish two things. One, they're using the most advanced models, whether it's Gemini, you could swap it out for Anthropic in the future, you could swap it out for someone else. But Google for the enterprise is a good choice for them. And the second piece is that how they're handling privacy and trust, right? They've got their own layer. And then when they need to go out to world models or other types of advanced models, they'll go out, they'll protect the context, they'll protect the privacy, and then bring back the information and insights.

21:26I think that was the important piece. They're not giving up on privacy and trust. And it's also why it took them this long. Great.

21:33Aaron Tilley:Well, Ray, I want to thank you for coming on. That is Ray Wong, CEO of Constellation Research here on TIATV. We spoke yesterday on the show about the SpaceX Mafia or the former SpaceX employees who have gone on to start their own companies. Many of them stand to gain big from the shares they earn during their time at the company. One of those former employees is Scott Martin. He is the founder and CEO of Revel, a company that makes industrial software, which was last valued at$1.25 billion. I want to bring on Scott to reflect on his time at the company. Scott, welcome to the show. It's great to have you here.

22:10Aaron Tilley:Yeah, great to be here. Okay, big week. How are you feeling? I'm feeling awesome. Yeah, this is, you know, incredible time. The group chats are firing up over there? Yes, we've got internal chat here. Rebel went to former SpaceX engineers. Super excited. And do I have this right that most of your company, I mean, a lot of your company are former SpaceX engineers, right? Yeah, that's correct. We're, yeah, about 70 % former SpaceX software engineers. Wow. And tell me, like, culture at SpaceX, you know, what were the things from SpaceX that you have really tried to emulate in your own company insofar as culture or even routines, habits, patterns?

22:59Yeah, I mean, I think it's a combination of high agency but high accountability. So we definitely have kind of the SpaceX strong execution culture here. But also, I think the mission-oriented approach. which our mission here is to accelerate all the companies out there, building extraordinarily difficult things and really enabling them to move much faster. I don't know if you know about Revel, what exactly we do, but it's a software platform for controlling and testing hardware systems. So think like rocket engine test sites, nuclear reactors, even how the water actually gets to your house is a series of pumps and valves that have a lot of software involved.

23:49and you kind of have these companies that are building extraordinarily complex things and cutting-ish systems like hypersonic jets and they're using software that dates back to the 1980s. So this is like pre-Windows 98 era software. And so Rebel is here to fix that.

24:06Aaron Tilley:Right, right. What about things from SpaceX that you are deciding to leave at SpaceX or things that you don't want to continue emulating at your company? Yeah, I had a great, great time at SpaceX. I think it would, you know, we achieved incredible things. You know, I originally joined because I just wanted to work on this incredible mission, you know, making rockets reusable and ultimately getting to Mars. And, you know, I, yeah, I don't, I think SpaceX is a great place to work. No, look, I'm not looking for anything here. I just, you know, I sort of wonder, you know, you have all these SpaceX employees that have now branched out and started their own companies.

24:52And I know, you know, we've heard so much about the tremendous work ethic, the ability to believe in a moonshot mission.

24:59Aaron Tilley:And, you know, I also think that there are probably some nuances in the way that, you know, maybe we don't want to, you know, create a company that won't burn money for, you know, X amount of years. Maybe we want to go a little bit narrower in terms of our financial profile. I don't know. Yeah, I mean, I think, yeah, I think it's a, you know, I think it's not for everyone, SpaceX. Like, you know, people work extremely hard there. the timelines are pretty tough um but i think that is kind of what it takes to be successful right what if you look back on your time that you you were there for a long time and you can take a second here i wonder what the most defining memory you have there what day you remember at spacex among all the years you you spent there what day or what memory really sticks out for you yeah i mean i think so i started working on uh in launch operations i actually wrote the propellant load sequence for falcon 9 which is what you know takes propellant from the launch pad puts it on the rocket and you know i think that first launch that i was a part of i was actually in the control room and i remember i walked in the morning and i looked around and it was like it was such a young squad it was like i think the only person over 30 was the launch director and i was like are we are we really about to go to go launch this rocket uh and yeah it was extremely successful i just think you know spacex bets big on its people uh and but i mean paint paint a picture for this was what what year was this this was 2018 uh the falcon 9 launch out of vandenberg air force base okay and and so you walk so i mean you know not all of us have the opportunity to be part of a launch operation like that like what you know paint a picture for us what is the control room like uh what were you doing what was the buzz i mean it's um yeah i mean there's you know there's always consoles set up and uh you know there's it's kind of you Honestly, it's all your friends.

27:13These are people you've worked with extremely hard the last, you know, in that case, campaign was like six months. And, you know, you kind of T minus five hours is when you arrive. You go sit down at your console. There's definitely kind of a nervousness going on. You're like, you know, this is about this kind of like could be a really great outcome. There could be, you know, it's a very high stakes situation. And, you know, and then you start working through it. You kind of get to work. And then you and it's a big team of people and you're all just problem solving all the way through to T0. And there's all these phases that kind of build slowly up to like T0.

27:52Things kind of start to start kind of slow. You start to prepare the pad. Then you start to prepare the rocket. And then you start to do the integrated operations. And it is kind of a cool like, you know, build up until finally when a lot of things happen very quickly all at T0. and then you see it launch. And the coolest thing about Vandenberg Air Force Base is that you actually can see out the window as the rocket leaves the launch pad. So it's a really nice kind of, yeah, it's a great kind of control room, at least for the operators.

28:25Aaron Tilley:And what about when the launches don't go well? This is the reality of space. That's hard. You know, when the launches don't go as planned, what's the atmosphere then? you know it's extremely tough i've you know i have been involved in uh a few of these um i've actually kind of gone out to the launch site after uh we had uh you know an off nominal event and helped kind of pick up the the pieces um literally like the pieces on the launch pad uh back in early starship um what was that like i mean it's it's really tough like it's but it's also when you learn the most. I mean, I will, it's like you spend the next few months just thinking about exactly what went wrong and what, you know, why did that happen?

29:15What could I have done? There's a series of meetings that comes after that where, you know, you have to present on exactly what has happened, you know, all the way to Elon potentially. And it's really just a time of reflection of how do we do better? How do we integrate these, not only for yourself, How do you integrate these experiences into next time, but also for the entire company? You know, it's a very like introspective period where you want everyone to learn as much as possible.

29:47Aaron Tilley:What's your most vivid memory of working with Elon? Did you meet him? Yeah, I did. So early Starship, he was quite evolved. uh i think that the one of them was definitely when uh i mean it's like orbital flight one of starship was absolutely incredible i mean it was like years of work at that point so much coming together but i think another was when i realized that he was serious about trying to catch the booster on the launch tower and like i think that was uh and then kind of when the the designs actually came together and being able to see that this actually looks like it will work and at first when i heard kind of you know the idea of these chopsticks i was like what are we like we're just trying to get this to work what are we doing here but then actually seeing it and being in the room and like and him being very serious we were actually doing this we were catching the rocket with the launch tower and and then uh i think that was like a moment where i was like this is you know this is a very different situation a very different kind of leader uh what what was it what was it about him that convinced you like what what did he say in that moment that that convinced it was his conviction that this is the right path and you know it was like we're basically not going to build legs on this booster it's just not we're just like fundamentally we're making this massive bet and we're just you because it's like so fundamental to the rocket is having legs on it it influences the structure the entire aft and the vehicle and we're just going down this course and We're going to make it work.

31:22And the betting on the team, betting that we could do it, I think was just another realization of how extraordinarily leadership works. Right. Yeah.

31:36Aaron Tilley:I want to ask you, so look, the ambition is tall and Elon is a tremendous leader. The valuation is also extraordinary. And I say this knowing that you're a former SpaceX employee. You obviously want your own shares to go as high as they can. But help us think about the valuation. I mean, there's really not a lot of fundamentals to it. How do you, what do you say to people that say that it's too high? I guess overall, I'm not spending too much time personally thinking about this. I bet we've got a lot going on at Rebel, a lot of customers to worry about. But what I will say is, I think I've just seen along the way, a lot of people doubted, could you land a rocket that sends something to orbit?

32:32Then could you rapidly reuse that? Or then could you reuse that? And then could you do it reliably? And then, of course, there's Starship. but it's just kind of this kind of pattern goes on and on through the life of SpaceX. And, you know, I think the valuation is probably heavily associated with, you know, orbital data centers. And, you know, I think it's tough to bet against Elon is kind of my, yeah, my general thought there. Yeah, I honestly haven't spent too much time thinking about it. I'm super busy at Revel. We've got a lot to do.

33:11Aaron Tilley:Well, I'll tell you what, I'm excited about what you guys are doing at Revel, and I'm keen to have you back on to tell us more about that because I think the prospects of your own company are also really interesting. But I really do want to thank you for coming on and helping us understand your time at SpaceX, Scott. That is Scott Morton, the CEO of Revel and a former longtime SpaceX engineer here on TI TV. Thank you for having me. the staggering demand for gpu and the rapid infrastructure build out has some trading firms looking for an opportunity to create derivative products tied to the scarce resource that is compute my colleagues yuechi yang and dakin campbell published a scoop on that this week i want to bring on dakin to share with us what he knows dakin welcome to the show it's great to have you here yeah thanks so much okay so i mean the first line of the story i'll just read it the first line is Goldman Sachs and JP Morgan are exploring ways to trade on the cost of computing power.

34:14Aaron Tilley:How would that tactically work? Yes. Good question. So this is a new market. Really what they're looking at first is futures contracts. And a futures contract is basically a contract to buy or sell something at a future date at a certain price. So there are lots of futures out there now on corn and oil and the S &P 500. So it's definitely a well-known and well-established contract. The idea here, the price here would be the price to rent a GPU for a single hour. So maybe you've seen on various NeoCloud websites or things like that, you can see they have a dashboard where you can go to that and see what their GPU rental prices are.

35:13And so the idea here would be to write a futures contract on some sort of a generic price to rent a GPU for an hour.

35:23Aaron Tilley:And so Goldman Sachs and J.P. Morgan, So they're basically looking at creating this type of derivatives product. Well, we don't know how far they are in the process yet. Is that right? They are looking at trading this derivatives product and helping clients buy and sell it. So already the exchanges ICE and CME and a startup called Architect have said that they are working to create this futures product, this futures contract. contract, sorry. And the idea would be once they create it, they need to then create a market around it. And that's where firms like Goldman Sachs and JP Morgan would come in.

36:08They would offer to make markets in that futures contract. So a client could come to them and say, hey, I want to buy the futures on GPU. I want to somehow hedge my exposure to GPU prices. and Goldman or JP Morgan would say, okay, we can do that for you. And then they would go into the market, buy it or sell it and perform that service for clients.

36:36Aaron Tilley:Got it. And silly questions here, but I haven't studied the build out of derivatives markets as closely as you have, certainly. So Goldman and JP Morgan, would they be acting as the brokers here in this relationship representing clients, or would they be the client themselves? Yeah, great. That's a great question. It's not a silly one. We don't know the answer yet. It's sort of so early in this build-out and so early in their exploration that we don't know. I think, you know, my assumption would be far enough down the line they'd be doing both. You know, certainly J.P. Morgan is a big lender to NeoClouds and to others.

37:24So they have exposure to GPU prices. So it would make sense for them to, on their own behalf, go into the market and buy futures or sell futures to hedge that exposure. But then they've also got big trading clients that would come to them and want them to do it for them as well.

37:43Aaron Tilley:So, Dakin, when you first came across this bit of information in your reporting. I mean, you've been following the AI story from a financial perspective for a long time here. Did this surprise you? Was this inevitable? What was your reaction to it overall? I think this is inevitable. You know, we've seen, we saw something like this develop for crypto markets, you know, 10, 15 years ago. They were very early. And the way that a lot of these markets develop is there is a financialization of them. You will have firms that come in and they can see similarities to derivative products or other securities that exist already.

38:32And so they've got a mental model for how to develop them again. And so it felt sort of inevitable to me that when we got into artificial intelligence and we're spending, you know, trillions of dollars on compute that you would have firms coming into this market to create derivatives and to create other ways to trade and hedge against that exposure.

39:01Aaron Tilley:So it's inevitable. Is it a good thing? Is it a bad thing? Does it add risk to the equation here? I mean, I can't help but think here that the more that a market becomes real and financialized, I don't even know what the right terminology here is, but counterparty risk then becomes more prevalent throughout the ecosystem. So you have the circular financing happening in one way. You have the data center buildout happening in another part. And then you have trading firms that are basically spreading the risk out to a broader series of parties. Yeah, I think that's right. I mean, you know, if you go to an individual actor and say, we're going to create a product that's going to let you edge your exposure, they would say to you, this is a good development.

39:52This is a way for me to reduce some risk. You know, I don't want to be long GPUs all day long. I want a way to reduce my exposure. So in that sense, you know, derivatives can be a good thing. We've seen a lot in history and other financial cycles where derivatives just become too big and you can't really accurately predict who is holding the risk on each side of the derivative. You can't predict whether the counterparty, as you said, is going to be able to pay at the end of that contract. And so this is definitely something we're going to be watching, even though it's inevitable. I think it's a big next step in sort of the AI build out.

40:42And, you know, down the road, there could be real challenges.

40:49Aaron Tilley:And last question for you. Are there any regulatory hurdles here to creating a derivatives market for a GPU compute? Yeah, so the Commodity Futures Trading Commission, the CFTC, oversees all futures contracts, so they will need to weigh in on this one. I assume, you know, for this story, we did put a call into the CFTC. We did not hear back. But I assume that the three exchanges that are exploring the – creating the futures contracts are in touch with them and have some expectation that they'll get approval from the CFTC eventually. I don't think they would have gone public with their announcements if they didn't think that they could find a way through.

41:38So I don't – you won't see anything trading here in the U.S. until the CFTC gives a final approval. but I think that'll probably happen by the end of the year certainly.

41:51Aaron Tilley:Right and just to go back to what you were saying at the very start so there are exchanges you know intercontinental exchange for example they are the ones that are developing the infrastructure that would ultimately decide on the price right and by that I mean they're not setting the price but they are sort of facilitating the intersection of all these different players. So that is currently the build-up that is happening underneath the surface. That's right. That's right. And once they create the product, then you have a market that develops around that product. And that's what J.P. Morgan and Goldman and other market-making firms, you know, we quoted DRW in our story.

42:33There are others also that sort of grow up around that product and facilitate trading of that product. Great.

42:42Aaron Tilley:Well, it is a fascinating story, and I suspect we are just at the start of it, Dakin, so I look forward to having you on more to help us explain the developments. That is Dakin Campbell, our AI finance reporter here at The Information. That does it for today's show. A reminder, we are on this stream Monday through Friday at 10 a.m. Pacific, 1 p.m. Eastern. If you can't make it then, episodes are available at theinformation.com, on our YouTube channel, or wherever you get your podcasts. Make sure to follow us on social media on X, on Instagram, on TikTok, and on LinkedIn. I am already excited for our next show tomorrow.

43:16Aaron Tilley:Have a great rest of your Tuesday. Bye-bye for now.