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23:31So an answer to question Harry, in that case, those investors will record on the immediate market. I had a 1x at 25 billion. Now I have a 0 .5x at 12 billion. I've taken a loss. And it all boils down to one little term deep in the bowels of the lick preference order convert terms, which is what hinge didn't have what those guys did. It's, are they going to crystallize the loss? They're going to crystallize the loss. Exactly. In the case of hinge, the preferred investors are just going to sit there with a 1x in an illiquid instrument in a liquid common stock. In the case of chime, they're going to get auto converted, provided it clears 6 billion.

24:06And if you were still carrying that at 25 billion, you're going to record a significant loss. If you've written it down already, you're fine. So this is not the great game that we thought it was, which is you get your money back and then when it pops, you get the premium on top. Absolutely. No, no, it does a whole, but I mean, this is my, and I mean, as I said, if you zoom out a million miles, this is all about what happens to those 600 unicorns, right? The interesting fact is in Jason circulated the SVB work, these are the best unicorns. These are the unicorns that can go public. And what you're seeing is some of the late stage money has protection, keeps it one X and has a miserable IOR.

24:41Some of the late stage money cuts a deal and says I'll roll the dice on converting to common as part of the IPO And then some of the late stage money has no damn choice and just gets converted to common and takes a loss There's a lot going on here. Oh god. No, no, I'm not loving the seed is for suckers anymore. This late stage It is hard. Oh god. That's not nice. If you're in chime you're gonna crystallize those losses is you're going to lose 50%. Well, maybe not maybe trades at 12 or 15, but I don't know where it trades to be clear. And I think it could trade much closer to that. All I can say for sure is they don't have a, there's a mandatory conversion where the later stage rounds don't have a block.

25:21And if that conversion is exercised, they will be converted to common at whatever the prevailing prices. Why don't you take away from this is I want to be Jim Andlman with mountain. And now you're just circling back and forth. What would, as I said, we hadn't seen a week ago. Now we're like, oh my god, no bullshit. I just want to be at seed in 2013 or 2010 turns out vintage is the single most important and underrated part of venture capital just being there for the good years. Listen, you mentioned the brilliant report that Jason shared. I thought one really interesting element was accelerators and incubators at 24 % of all VC deals.

26:0024 % accelerators and databases. Does that mean YC's just won this game? How did you guys read that? For the first time recently, there is more competition, right? At the accelerator incubator phase, there's more, right? But YC is four batches and bigger than ever. I do think they've won. And they also did one of the greatest, not only they did two tilts. It's not the same YC as it used to be. First of all, bringing in Gary was a massive change. Obviously, an uplift, right? For sure, a level up, but also just massive change and all levels. And two, I mean, I mean, it's obvious, but massively tilting into AI when they weren't ahead of the curve and being a center for it to track the best talent, it's very fluid.

26:39But man, you know, right or wrong, and I'm not into the brands, but people want to go to Harvard, Stanford and MIT and the kids want to go to YC, right? And they're doing this massive event for hundreds of the best kids in college, right? This, this, very soon with the best. And, you know, it seems new. But when I look back, you know, all of my first investments were in some sort of accelerator, 5 out of 5, right? So it's not brand new, it's just, it's bigger than ever. I think your absolute assumption has to be why C has won. It's the, look, it's the greatest, one of the greatest equity businesses ever, and I deliberately use the word business as a sting from just fund.

27:14Think about being a fund and invest it like any of us is, you only as good, as I said it a many times, you only as good as your last game every day, you got to get up, make good new picks. And if you're blank and if you get the picks wrong, you're done. You're out. The world doesn't need you, right? There's 600, 700 people funds like you. The beauty of YC is they've got a business and the definition of business, if the owner of that business, Paul Graham can be sitting back in England, walking around the cute little bookstores and the machine keeps humming. That's a damn great business. Why is it so great?

27:44Because the world needs one, the valley needs at least one big accelerator like that. Where provided they have the smarts and the nals and they can convert those two people from London, those one person from Sweden, those two people from the Midwest, and in the space of three short months convert them into highly marketable properties in return for a mere 7%. The world needs that product and it needs it on an industrial basis. And give them credit, give Paul Graham credit, the original stated intent was make it easier for startups. That was the mission and they've succeeded. And because they've succeeded, they've built, as I say, a compelling business.

28:21You can And say, sometimes it's better one than others. Some CEOs of that business are better than others. The current CEO seems to be doing a pretty amazing job. It's just a great business. And I did the math once and trying to figure out, seed is not what we do. But how much better is the YC locked in return than a seed fund at the same stage? They basically have roughly a 2X advantage. If you say to yourself, if a look at the deals they do, if you, and then if you extrapolate based on the published hit rate and success rates. If a seed fund investing at that stage with decent picking gets a 3x, they get a 6x.

28:55It's a structural economic advantage that's very compelling. It's a great business. And it should be a great business because at the risk of sounding like a defender of free market capitalism, it met a market need at scale. It met it brilliantly. And therefore they deserve the return. Go team. Wish I thought of it. But for second time, third time founders, it's still a niche product. I think in my ecosystem, folks that have been around for every park or conrad that wants to do it again at a much better deal, other founders don't get it, right? But for man, for the first time founders, it's just that in front of Europe are the beacons.

29:32Absolutely. I mean, I have to, it is a stone. I mean, this is what gives me hope for Europe, honestly. You know, we have 8 ,000 applicants approach at Europe, three, four hundred of them are pretty fucking awesome. It's amazing. I mean, it's that kind of thing that just wasn't there. Again, going back to the mission, I give Paul Graham is just one of the clearest things. I've never met the man read a lot of this. He's just such a clear thinker. And it's the objective was make it easier for founders to start companies. And that's the kind of thing you're a mead. If you make it easier for founders to start companies, more companies will be founded.

30:04Most of them will be mediocre. That's life. But some of them can be freaking amazing and cover a multitude of sins. That's the way it's meant to work. So, you know, go project your year. I think the thing that's so amazing about it is you know, I always say the future of ventures won by Walmart and it's won by Chanel. Chanel, the incredible brand with a very specific customer base, Walmart, whatever product you want, they've got it. And what I think is so special about YC is it's Walmart and Chanel. They have scale and they retain brand. That's very good. It's still an aspirational brand that has managed to do scale.

30:35One of the, let me repeat, I believe it to be one of the great, enduring equity businesses in the sense of businesses. There's lots of funds, there's very few enduring brands that occupy a clear niche. And the test you run is, if they went away, would someone else rise to fill the gap? Absolutely, because the world needs that product. If the 600 venture firm went away, we might just stop at 599 and say, we're good, thank you. And that's the difference. If we move slightly down the funding spectrum from seed to A, you know I like to start with some comment that is completely unsubstantiated with data.

31:10But I feel like Sirius A is the hardest place to be investing today. When you hear me say that, do you agree with me and what's your take? I guess my question then is if Ced is so easy that that's really troubling the combination isn't it? I mean it means we're underestimating the failure rate to Sirius A right? Ced is easy because it's Walt Disney versus Jerry McGuire. Walt Disney is tell me the story. There's lots of people that tell a good story and come from great companies. and then Jeremy Guyer has shown me the money. And there's actually very few people who are showing the money in a way that's actually true quality, sustainable.

31:47And I think attractive for a Series A investor. And so I think that's why Series A is good. That's right, seed is good and Series A is hard. Weirdly enough, I agree with you, despite the data. On the one hand, the conversion rate from C to A per the card of data's gone way down. On the other hand, I think what you're saying in its correct is for the stuff that's working and in the chosen hot markets, there is mass competition because everyone wants to get the early traction in those AI companies that are just starting to explode. So you are correct if you are in the chosen sweet spots, almost every venture person is looking at those deals.

32:24And yes, those are the very few, widely competitive. Look, we competed in a couple of deals and I kind of broadly recognized emerging AI space, brutally competitive, didn't win. I think got out priced and won. I'll beauty contest it on the other. So that's pretty tough. So you say to yourself, first of all, what about the other 75 %? The odd thing is what we're saying effectively is it's hard to invest in series A companies while 75 % of the companies you could be investing in are dying on struggling for capital. So there's a little part of me that says maybe I need to figure out the non -obvious C .A .A.

32:58and make the money that way. So yeah, it's only tough when you're competing for the best because again back to the it turns out to be hard to make money. It is hard. It is funny going to a ruralie's point of whatever you look at looks harder. I was thinking the other day, Revenue Cat or Hair and I both are investors announced it raised its last round at 500 million, which actually was low -ish. They just did a deal in one hour, 500 million. Valuation, I invested. I was the first investor in 2018 at seven pre. Okay, at seven. That was right before YC. And I thought about a deal I did in the last batch.

33:27That was probably the same risk profile at 30. Okay. Now obviously deals are done higher lower at YC. But I'm saying there's some similarities between these two companies. Revenue cap, this new one. So seven versus 30. How does that math work? If the fun size is the, do I need four times bigger a fund? Am I taking four times higher risk? Help me think about this. Like because I'm roughly thinking, now granted, upside has gone up, right? That's the meta point, right? But they're still, I would say they're the same, but at four times the price versus 2018. So do you adjust chisers or adjust ownership to pull an entry.

34:00I feel like I have no choice. If the round is bigger, you write a bigger check. If the round is smaller because it's like a YC deal and they don't need as much money, you write a smaller check. I honestly feel like I have no choice. That's not new. That's not when I invested in revenue cap, the first investor, I wanted to put twice as much money and I just wasn't allowed to, right? I could only buy 10%. But that is a question, right? Either way, but like it's four, where do I get the 4x? Four times the fund or four times the risk? In mild consolation, Jason, I'd probably say it's only around probably 2 .5x worse off.

34:31In a sense of, you do have to give some credence for the fact that I've mentioned earlier. We just had a huge GDP inflation over the last five or seven years. So a buck ten years ago is probably 60, 50 cents now today on a GDP basis, not just inflation, but inflation plus growth, which is what you got to look at. So it probably not four times worse, but you are correct. It is probably at least two times and maybe two and a half times as risky per dollar as it was. That's the first thing. And then the second thing is you're exactly right. You do have to expand the check size because the truth is you have to play the game on the field.

35:06And we've seen that at our stage, which I think it was typically at least a stage later than you, right? We had roughly the same ownership targets for 15 plus years, same typical court deal but the check size has gone up to get welfare the same ownership. And that's just the nature of the beast. And when I have a slide in our deck, when we point it out to the LPs and just say, look, this is the dynamic of the marketplace we're in now. And this is the scary part of the game. Do you guys want to see get 15 %? We typically get around 10, 11 % ownership, and that's been pretty consistent across five, six funds.

35:41So all the way back to 2009. It's a pretty typical median. We don't navigate off ownership targets, because as I tell people, I would happily go later and take less ownership if I could get our target return. But in the pricing environment for the last frankly decade, it's been almost impossible to have clarity on average that a later stage run would give you kind of your target return. Now, obviously, some later stage runs are given an amazing return and we can come back to that discussion some other time. But on average, probably not. So it's typically been those early revenue, $23 million going hyper quick, where you know, you're glad to get 10 and 20 is not on the table.

36:23For sure, everyone gets less owner than the ownership and they claim on Twitter, right? Every stream manager is like, we've raised new $30 million fund. Our target ownership is 15. We're going to do 25 of those in the fund and the math just doesn't make sense in planet Earth, right? But for me, the bigger learning, Rory, you figured this out. I mean, this you'll laugh I say this, but this snuck up on me is now that companies hold for these investments. You hold them for so long. I did not fully understand the compounding nature of delusion. Totally. If you model 6 % delusion per year for a portfolio company for hiring and you hold this, help me compound it and you hold that investment for 15 years, what is 6 % compounding to 15 is 9 % ownership, isn't it?

37:06Totally. I mean, it's obviously not 9 % but you're exactly right because it's a descending scale. But no, look, the impact of delusion over time is huge. On the other hand, you can't avoid it. Because you don't want to hire this big. No, it's an interesting discussion. Because honestly, the least, I would say, enjoyable, least rewarded, but most necessary part of my job as a board member is often on Com Committees. Well, you're trying to set up policies for companies not in their first four years of life, but in year 7, 8, 10. Well, you got to grant new shares. you got to re -upfounders and sometimes I think that's very legitimate thing to do because you want them insented, but at the same time you got to manage overall delusion.

37:47And you know, trying to keep it down probably not to the 6 -5%, but the 3 -4 % level and managed that over time is just really important because you're exactly right. 6 % a year for six or seven years or even 10 years is just a huge impact on everyone, including the founders, including the initial equity investors. So yeah, spending a lot of time on refresh policies for mid -stage tech companies is as I say, the combination of low value, low joy, high impact work. It's so funny. You say that. I mean, I was with an investor this morning who said actually the challenge with LLM investments and we have one of the best is that actually the employee stock is 9 % a year.

38:27It's not the six, it's 9 to 10. And so actually the level of valuation on the employee stock grants is so much higher than traditional that it may even even hard to venture category to invest in, which I thought was interesting. I think it's gone up. When I just look, I wish I had all the data, but Harry's point, when I just look my kind of insight, the exits I had in 2021, when everyone had a lot of exits, right? I haven't had a billion dollar exits since 2021. It may be quite a while until I have one. The delusion, I made up a term delusion profile, which probably makes no sense, but that was the term I made up on Sassaro a while ago.

38:57It was much lower than today in 2021. I look at those exits and I'm like, man, I owned it. That was pretty good. If I looked at the companies today, I'm like, I'm not going to own that much at those exits, right? And so they better be much bigger exits because otherwise, man, I'm going to own so much less. So when I go into a deal, I assume 40 % dilution from my entry. Is that a reasonable heuristic? What do you think I'm overrunger? It's too low for seed. For A, it might be okay. Or I would know it's way too low. I think you've got to assume now, two -thirds dilution from seed. If you don't do pro -rata to IPO two -thirds.

39:30Well, I think there's two types of delusion, obviously. There's the following round delusion, and then just purely the option delusion, and I'm not sure which you guys are talking about. I'm combining them all to two -thirds. I think it used to be half if you didn't do it. It was just approaching some thirds. Absolutely. I mean, look, there's a very pure test of this, which is with lots of data associated with it. You just look at the Y -combinator, because they have a fixed ownership every time. They have 5 ,000 data points. So if you felt strongly about calculating the answer here, you just look at their ownership on IPO, and you have a statistically valid sample and go to the work.

40:05Right. And that's why they've dramatically increased their ownership. There are no dummies there at the Y -comma here. I think we should ask. We're moving to post money instead of pre -money as so -called for the benefit of the founders. And not raising their ownership and then having any delusion and then investing more. It's the only ones that have caught up, I think, is why I see delusion in more power too. I want to go back to the foundation model comment, because I think it's something that we should internalize and get humble about, which is this. We, the capital providers, are not the most important people in the equation, and you better just internalize that's the way it is.

40:40The important people in the equation are the people with the IQ and the STEM knowledge and the ability to generate these models, and anyone running those companies is going to pay those people what it takes to keep them. Franchi Toshet on the delusion for the capital provider side. You know, that's the nature of competing in a huge talent war for small numbers of people who can do amazing things. So yes, you can betcha about it and say, oh my god, that's awful, but it's a cost to do in business, right? And I think it segues, I mean, look, we just had the largest single instance of dilution in a foundation model in terms of the acquisition in this week, which is obviously at some level in aquahire.

41:18So what you can see is it turns out it takes 2 % dilution or 6 billion dollars to hire one really great VP of hardware engineering and a solid team under him. The capital providers are long for the ride, you better like the terms of trade and at least internalize them, you don't have to like them, but you have to accept them if you want to play. The terms of trade are being set by the leaders of these companies and their need to attract that amazing talent in a very competitive world. It was funny. I was looking how do you how do you say does an MNT end at IPO? How is it? I'm gonna call it mountain by the way I was looking you know found it I think in 2009 and immediately Jim Andalman who's at bonfire Who I'm using OG sass investor?

41:59I immediately flipped the perspective and said how much does he own after all these years? Right because I think it was probably in bonfire one It was probably a very small fund that we could look it up 20 30 million and he's still a nine point something percent at IPO And I'm like, that's old school. This is going to be a good deal for him, right? So even the market cap is only, and I'm putting this in quotes, only $2 billion, right? But if he owns $180 million on a $20 or $30 million fund, that's a great outcome, right? Today it would be, today, in a company just like Mountain Today, you don't have that at IPO or less, right?

42:31And the fund size might be five times bigger for seed. So instead of a 6x, 5 or 6x performer, it might be a 1x, right? right? Sign of the times. You actually had this with Michael Kim at Sandana who said that Eric 12x DPI the fund with honey for mucka. Yeah. We turned 280 million dollars to them. I thought I was incredible. But would that happen with honey today? Right? Probably not. Right? The thing is when you look at these old deals, they're great because they were all modeled on much smaller exits, right? And much less competition. So you could get the ownership. And these old school founders often they don't, you don't see the same delusion.

43:06Like I didn't, I read through the perspective and say, but I bet the mountain guys were very conservative, right? There's no way Jim could own 10 % over all those years if the founders were given away 10, 12 % of the company either. But I also think, you know, it's, as they say, horses for courses. It's, it was, they were playing a different game and even today, those different versions of the game. I think mountain was trying to build a profitable company in a pretty, I won't say well understood, but a defined space. Well, you know, you're not competing against the gazillion companies, even at the time you weren't competing against you know the largest value market cap companies on the planet.

43:43It's very different than if you're building an LLM today and you have you know you're competing against Microsoft, you're competing against Google, you're competing against OpenAI. It's the wars that you choose to engage in dictate what it has to take to win. So I think that and the big a half on this Jason on your right is that you can create meaningful economic value for yourself for your investors, for your fund, for you as a founder in markets that are significant, but by no means the, yeah, the hugeness of the AI foundation model bet. And Mountain is a great example of that as it's hinged the other IPO last, in the last week.

44:19It's a two really solid companies, 200 million plus in revenue growing 30 to 50 percent, depending on the two deals, solid outcomes, multi -billion dollar outcomes, everyone involves made money, but we'll come back to some nuances on that. Great classic venture outcomes, just a very different game. When you're trying to compete with someone who was publicly stated that's going to take another approximately half, 50 billion dollars to get the capital break even. It's just a different game. I do just want to take this a bit in turn because there's so many elements that I know. Too much. You know, we mentioned Johnny Ive.

44:51Obviously, we saw the acquisition for six and a half billion dollars of his design studio slash company by OpenAI. Is it a simple aquahire? And when I say simple, I don't mean cheap, but is it a simple aquaheim bringing Johnny into a hardware play for OpenAI? How did you guys read it? Well, look, first of all, it was really interesting that he's not joining full time. He's still managing his design firm, which was an important point that I don't know. I'm sure it's been worked out, but super interesting. It was clear he's not joining full time. He's still managing his design firm. They're just buying the startup that he's a founder of.

45:21For the six billion, is it six billion? Is that what it was? They're not even getting him full time. They might be getting, I bet they're getting most of his time. Like, I'm sure he's their top client. I thought of all things that was a sign of the time that you had to pay six billion But you could get away with not getting the guy full time as part of the deal Sam's so smart right and he was clear in that video He's like I want the third device right the laptop the phone and the third device and at first I laughed a mic of course that's whatever he tech guy and severance tech dude and San Francisco wants But then they said listen with chat GBT is cross 20 minutes per day for the average user So going from 20 to 200 with a device for a small percent of your market cap so you could have 10x the coverage, 20x the coverage of a life.

46:04That if this is the right guy in the right team, that might be the best investment they can make to go from 20 minutes to 200 minutes to 20 minutes to 200. I think we're going to live in a world where our AI is listening to us 24 hours a day one way or the other whether it's on our watch or this device or on our screen or in the background like granola or notion. Like it's always going to be listening. And I think it might be a war he has to win to always be listening. Mike is, of course, the word here. It's like, it might work. My perspective is every single significant software platform company develops at some point in their life, hardware paranoia.

46:39The feeling that somehow the hardware guys are going to screw them and the only way they can stop themselves is by spending a whole ton of money attempting to build a hardware platform. They almost invariably fail, making sure that doesn't happen to you and kind of scratching that terrified itch is just a part of doing business. I mean, if you look, if you step back Microsoft, oh my God, Nokia is gonna, we should buy Nokia, oh my God, we should build a surface. If you look at Facebook, it's like, oh my God, we should build these VR devices because otherwise we're gonna lose in the multiverse. If you look at Google, we need to quote on the phone so they crank out pixels at absolutely no margin.

47:15Everyone does it. So, you know, who is Sam to break this time -honored tradition and of spending a lot of money on a hardware device. And then my guess is statistically, the likely outcome just based on the priors of the other companies in the space is, three, five years later, it turns into a fizzle, it didn't pan out, but it's okay to try. No way, it's gonna be huge. It will be, it will launch in a year, it will launch in a year, it will be massively subsidized. So it'll be 20 bucks for this device, okay? They will figure out the form factor. I don't know what the right combination is, whether it's embedded in your ear, like the barista, the cool coffee guys wear, or it's at LIDG, you were backwards.

47:51And within a year, we will be living all day long at AI, and the timing will be perfect. This is great, because we now actually have something that we can track and disagree. What you say, I'm saying, I don't think it'll produce anything meaningful as significant revenue driver, but it's okay to do. I'm not saying it's dumb, I'm simply saying, it's an itch that every platform vendor has to scratch. What you're saying is you believe that we will look back two or three years later and go, wow, they shipped a meaningful device with meaningful hardware revenues as part of the overall open AI business model.

48:22I think you said it's going to ship 200 million and I don't think that was a throwaway comment. Here's the difference between us. One difference though is I spent almost two hours a day in AI already. Yes. Four months ago I didn't. I spent two hours a day in AI between RAAI, AI tools, everything. Okay, I don't do anything without AI anymore. And so I could already see it. Listen, I'm scared about it. I'm scared that that chat GPT will now rewrite itself to not shut down. I don't think that's a joke. I don't think it's a joke that enthrop it. Opus Force Threatening researchers, right, with blackmail for affairs.

48:52I don't think it's a joke, but I'm already in two hours a day for AI all day long. I mean, literally at a sastrangle this year, one of the one of the folks that helped put us on, he rewrote the best summary of the day that day of his day. He let an entire day. He hosted our chief customer officer summit, John Gleason. And then that day, he wrote the best summary of the entire day. How did he do it? He just said granola running on his phone 24 seven granola weekend. I could have granola I don't I'm not running granola now, but I might next week so that I don't have to do anything granola Just run granola and the new feature from notion are pretty cool and pretty creepy.

49:24They run at the hardware level You don't know it's a note taker. You can't see anything. It's recording every minute of the day Agreed with all that Jason, but actually the key sentence for 200 million consumers is it ran in the phone How many people are going to be willing to spend two, three, four hundred dollars for another device and then make it part of their daily lives? It'll be 20 bucks. It'll be 50 bucks and it'll be cool. The thing is Johnny, I will make it cool. If it's cool, it's the elusive next device and then all, I think all Sam needs is for it to be cool and to work, right? Just think about the Ray Bands, like the connected Ray Bands that everybody has.

50:00It's wildly successful. But going back, my first comment is, I think it's okay to try that. Because when you're at the stage, those open AI's, you should make those bets. And it gets right back to the comment on dilution event, right? Just think about two people got 2 % of open AI in the last three months. One of them wrote a six billion dollar check. Have any of us ever seen six billion dollars? Have any of us ever had it in our account? No. And then the other one signed a part -time working deal and sold his 55 -person design studio in and got the same amount of money. If that doesn't show where the capital providers stand in the hierarchy in the great AI race, nothing does.

50:38And sitting there as soft bank or someone like that, I just wired you six billion dollars and you effectively took that six billion dollars and gave exactly the same ownership to a 55 person startup. I think we will need to remember that Sam will need to go out and raise more money. He says he needs to spend 50 billion dollars. What this enables him in terms of storytelling narrative is unbelievable. Now he's got a hardware play done by the guy who did fucking Apple. The Saudis will give him more money than he needs with this new chapter, this new challenge that needs funding. It's a great story.

51:10Absolutely. Absolutely. 20 minutes, 20 minutes to 24 hours is a great stabby my side. We're going from 20 minutes a day to 24 hours a day. If Chapchipi could be monetized per minute and then per human, that's a lot more revenue. 20 minutes to 24 hours. That's a lot of that's meant to be the strongest, like PowerPoint argument that chat TBT is underrated, right? But I think without this to get another 20 billion for another next model, that's hard. It's a good insight. It's a good insight. I probably missed. Totally, totally agree. In terms of storytelling, this is the kind of thing you do. And that's the thing at these in these hyper growth markets where almost nothing is certain, you would far prefer to take the dilution and cover the base, then be wrong and get sideswept.

51:54But right now, making that kind of bet, totally makes sense. It's also 2 % of market cap. It's not a hail, Mary. And Harry, I can say this, you know, I'm a farmer. You're going back there in England, and you must look at Johnny Ive and go, oh my God, if every stem and design graduate from every high quality London college isn't figuring out how to get on a plane and go to San Francisco, I don't know what they're thinking. $60 billion. Well done, thinking, Roy. I'm thinking half Americans still have to buy Europeans to get some taste. No, that's not the other thing I did. You're exactly right, Harry.

52:32That's why Europe has one very rich entrepreneur who does taste, Bernie or no, and we have the other nine who does tech and have all the money. So knock yourself out with your taste, taste you can buy, cold hard tech lasts forever. So you can feel good about that. You know what I love? I love the American banking sector. years of China, you guys create fuck -o -lands prize value. We have a Russian in London who creates $100 billion behemoth that makes China and everyone else that like kids play. I want to go back on that. I didn't realize you're going off on that tangent. That partly, I'll tell you very directly, that's partly because you have a mediocre incumbent banking sector there and that's a huge amount of surplus value to be extracted.

53:16It's just like what's the guys in Brazil, I'm sorry, new bank, right? The crappier the existing banks, the bigger the opportunity for Fintech, and broadly speaking, in the United States, with a few exceptions, some of these existing guys are pretty efficient. So you're right, there wasn't the same idiocy to kind of attack there. So the market cap, so the opportunity for Fintech, it was a tougher business to get to scale. Now, you had the countervailing fact that you have kind of the visa and interchange revenues which are pretty exciting in the US. So that's been an advantage to the US over Europe where they're more capped.

53:51But yeah, I don't think attributing success in Fintech and London to the greater entrepreneurial qualities of Russians living in the UK is perhaps the most logical analysis, Harry. I agree we should instead look at a suite who creates Spotify and changes in music industry and creates a hundred billion dollar company. You're right, yes. Look, I'm delighted to see you guys have some wins. genuine comment. It's wonderful to see Europe have some wins, but unfortunately the data just shows the vast majority of market cap in technology has been created first of all in the United States, second of all in China, and then Europe is a farer this and third.

54:29You'd love to change that because broadly speaking, despite recent events, Europe is broadly quote on our side. It would be good for the United States if Europe would get us together I don't have amazing technology companies, but for some reason you just don't seem to be capable of doing it. Sorry, that was harsh. This wasn't even on the agenda, how are you? This wasn't even on the agenda. So we're missing it. I don't disagree with you. Actually, here, let me ask you a question about it. I've checked because I'm curious, right? I mean, I've been coming to London for years and done a lot of Euro to you.

55:00But the pull of SF for AI is so powerful, right? We can argue over France, but it is powerful to founders. You don't you know, is it powerful in the entrepreneurs that you made in project Europe? I mean EF EF is hybrid now, isn't it? I mean EF is basically I'm gonna get in trouble for this EF sold itself out while going to San Francisco. It's a complete sellout It's your question of like actually, you know One we have a huge amount of people who say you can only build companies in Silicon Valley and so people And I'm not one of them It's very very aware within the founder communities that is incredibly hard to retain great talent in in SF.

55:37It's incredibly expensive and you're competing against open air and drop pick. And so yes, it has the allure of Hollywood for our industry. But I think when you dig beneath the surface, the smart ones are going actually, I can get better people for cheaper in London, where deep mind is, where unbelievable AI talent is. Absolutely. It's just the reason I asked about the vibe. I absolutely, the, you can't afford anybody in the Bay Area, right? is a start -up. Like it's the inflation so high to our point. But the SF Bay Area is not what it was pre -2020. Okay. In some ways it's smaller. Okay. In some ways it is smaller.

56:13But if you're a solo founder, if you don't know anybody, if you're an outsider, but the sense of community in AI that you get in the Bay Area, the sense of community is so powerful. In 2019, I would tell founders to come to the Bay Area because if you're in B2B, you walk down the street, you're going to see everybody because we're all working in an office. But it's more this community. I underestimated the power of sitting in dog patch, seeing every YC founder, seeing Sam Altman on the street, seeing everybody, the density is actually higher than 2019 for AI, for found only for founders, not for SDRs, not for marketing managers, not for everybody else, but for founders, it's not so the density.

56:51It's a small community for sure, but I actually make my life easier because we have three companies which are crushing and have created a ecosystem just in themselves, which is 11 labs and Thesia and Grenola. And all three of them have created a mentality that you can build amazing AI businesses in London. And so it's actually easier for me because it's a much more concentrated supply of great AI talent that's not as distributed as the Bay. And so as long as you're in the hackathons and as long as you're hanging around 11 labs and hanging with Masi, you're kind of a near greatness. It's easy. But do you feel as a founder and this is going to sound but it's not.

57:28Do you feel in London with granola and 11 labs and Synthesia, right? I'm fans of all of them, right? Do you feel like you're failing everyday as a founder? Because that's the special part of being an SF. You feel like you're failing everyday compared to everybody around. If there's only three, I might feel like I'm doing pretty well. It took me a while to internalize what you're actually saying. It wasn't, I thought you were saying are you failing in London? What you're basically saying is the core San Francisco value prop is a feeling of, is a feeling that no matter how well you're doing, someone else is doing better and you just got to compete more.

58:00Is that what you're saying, Jason? I, listen, right now, I mean, I'm still okay. I feel like a failure. The instant I get off a plane in the Bay Area, I'm not joking, even in me. I feel like a failure every day in the Bay Area and sitting here in the beach where I am for one week. I'm feeling like I'm a success story right here right now. I'm not kidding. I feel like, you know, I haven't been full time in the Bay Area other than this last year and I felt like a failure every day. The YC company doesn't announce you that I did, right? The one I compared it to, right? The founder's pretty good AI guy.

58:28He's like, I'm 26. I feel like a failure. I had one small exit. I'm falling behind everybody, right? Literally work seven and a half days a week. He's at me and it's just that failure feeling. I think it's bigger than ever. And I just think it drives founders. You know, I yell at some of my founders to feel like you're failing sometimes. I yell at them. I'm like, you, you, you should feel that way. This is my mother would argue that I have too high an opinion of myself, but I have a high opinion of myself. I'm a fucking machine and I am not motivated by an external person. I'm motivated by the internal of me and the greatest founders that I know are motivated by the internal fire.

59:04And being in London, I push myself every day to be better. Yeah, everyone around me is relatively mediocre in terms of London, generally speaking, generally population wise. I don't need them to feel for failure. I will push myself and the best versus San Francisco thing, is a function of that, to be honest. I think anyone who's built a successful company liked it, three, you mentioned Harry. The truth is, the drive that it takes to do that in a country where it's not the norm, in my view speaks to something even more powerful than entrepreneurial and those entrepreneurs, right? Because over here, it's almost like you go to Stanford, you drop out, you go to White Combinator, it's almost like it's the preset path, whereas for someone having been an entrepreneur and frankly failed in London in the UK and gun bust.

59:54It's incredibly hard in Europe to be entrepreneurial. And therefore, the people who do it have something really determined and awesome about them. So I do believe that at the human level, those guys, I'm not worried that those guys aren't competitive enough. I don't think that's the issue. I think the real issue is not, yeah, because I generally find people are roughly the same the world over. I think what is true is the systems to become successful are way more powerful in the Bay Area than in Europe. And you'd like those systems in Europe to be better, but just as an objective statement of fact, you're ability to bounce back from failure, you're ability to get capital a second up.

1:00:30It's all the other things that make it a lot easier in the US to be successful. In fact, to make this very concrete, I always used to say that people talk about Europe, exceptional people rise to the top anywhere in the world. The strength of the United States economic system is we can take mediocre people and make them dance successful. That is the secret superpower of the US free market economy. The truth is, the mediocre people in Europe can often drift off, government jobs, whatever safe scenicures in the United States, the free market system keeps the whip on everybody's back and as such, a lot more people have to strive and become successful.

1:01:08I don't think there's any lack of genius in the UK, in Europe, just as there isn't here. I don't think there's any lack of drive in the scene of people. It's just the systems to transform that individual talent and drive into a successful ecosystem. I just so much stronger here. We mentioned Juelingo then. We kind of go forth on this Jason. You're always precluding that you know, AI is going to replace all of our jobs, all of our jobs. And then we've had a plan, we've had a plan a back track on it. And now Juelingo backtracking on the AI stance. So the question is like, all leaders getting wear out of their skis and then walking back.

1:01:40And is this going to be a continuing trend? You know, I thought when I read that it sounded to me like every backstage conversation I had at Sastor annual this year with public company CEOs, which is they're trying to guide folks to a truth Not everyone can say what five are said, right? And so he got there really fast. Listen, we don't we we're gonna go AI first and and we're not gonna hire anybody we don't need to we're gonna We I can do better than our contractors and we're really gonna hire people when we have to and I think CEOs for Public companies are trying to prepare their teams for it but the backlash was too strong.

1:02:11So I just think he had to walk a back to 70 % of the truth. We still need the same number of employees. In fact, they all say we're, in fact, we're hiring. That's what the public companies always, whatever they say. In fact, we're hiring because that seems to take the edge off. But I think they're just walking back the fact that everybody knows they don't need 30, 40 % of the team they have today. Everybody says this. Not just everyone past, you know, not if you're 50 people like Rinala, But everyone with 500 employees enough that I talked to off the record, including public companies says, I don't know what I don't need 30 to 40 % of my team.

1:02:42I think we're going to see mass layoffs in the next 24 months. I think the net head count is going to stay flat, right? But I think he just walked it back because it's too hard for people to hear. It's too hard and there's only so much honesty you can get from a CEO. Just for some stats. In 10 years, they made 140 courses with humans. And in the year, they made 140 courses. So 10 years of work took them one year with AI. I think actually on this one, I think Jason's 100 % right. I think you see every one of the CEO's kind of oscillating between two extremes on AI. One extreme is, oh my God, it's gonna make us wildly efficient because I'm sucking up to Wall Street.

1:03:18And I probably over -promise on that side. And you saw Clowne do that and have to walk that back. And then on the other side, when you kind of do the AI is gonna change everything, I'm gonna say a whole bunch of people, then you other constituents, you internal constituents, which are your employees, kind of lose their shit and you have to walk that back to. So what I think people are going to evolve to, as Jason said, is the very bland statement, which is, you know, we're going to adopt AI. It's going to make everything better. I'm not going to threaten mass, court mass lay. I'll not come back to that in a second.

1:03:46It'll just make things better, or, by the way, we're hiring. Jason nailed it exactly. We have evolved to standard corporate speak for how you talk about AI. It's going to make a sufficient Wall Street wink, wink. People, no one's going to get fired. We're just going to, you know, you're just going to do more interesting things. That's the current state of the lie. The good news, I think, separate comment is, I think it'll be just fine. There will be efficiencies and there will be jobs that would have existed in the absence of this product that won't exist now. So there will be tension, but I don't think Jason that translates to mass layoffs.

1:04:18And we've had this discussion iteratively. I think it'll take a lot more time to adopt some companies, especially tech companies, kind of at the very forefront of this, will see significantly reduced hiring. And I saw that LinkedIn executive who posted on, you know, graduate hiring is pretty screwed up right now in part because people aren't sure how many graduates are gonna need in computer science and all this thing. So I do definitely think there's gonna be an impact here. I don't think it'll be, quote, mass layoffs. I think it'll be more of a steady grind of two or three percent less hiring per year.

1:04:50Tweet at the margin on the organization. You're gonna keep trying to move it forward. It's just gonna take time. Parno was just what everybody wants to do. They went first. They went to the extreme. But all it is is the future pulled forward a certain amount of months. I think it's 12 to 14 months. You think it's 60? The thing we're in consensus in is Jason's kind of articulation of how to manage the messaging here. The messaging from corporate America will be bland with a slight hint of upside on the stock, but not being so direct that it alienates all your employees. That is going to be corporate speak for the next two years.

1:05:22Totally agree. What we don't agree on, you exactly right, Jason, is a 12 to 15 months in which case it could be a significant change in terms of employment, I was at my theory 60 months, 12, five years, in which case it'll be more gradual. Good to go. Okay. So this is Koushi Quickfight again. Koushi is a prediction marketplace. Our team freaking love it. And they are always doing this on me every morning. And so they've chosen some of their favorites. Okay. When will open AI achieve AGI before 2030 or after 2030? That's easy. It'll achieve open AGI whenever I'm Alpine in his negotiations with Microsoft over the open AGI term in that contract to declare it to be AGI Because it's a meaningless ill -defined term that will be used for economic leverage go team.

1:06:07That's it There's just two separate. I mean just stepping back. It's because maybe you know listeners don't know There's you have the whole big -assed AGI discussion when will it happen? What does it mean? No one can quite define what it is no one can defy quite define what happened and then oddly enough There's a term in the Microsoft opening eye relationship, which now appears to be quite contentious. That says, I think I'm trying to remember, when AGI is achieved, I can't remember which way the leverage moves. I'm willing to predict that that term, that will be exploited by one of the two parties to get direct.

1:06:37Someone now finally has an economic reason to give a shit what OpenAGI, what AGI is, and when it can be activated. So my guess is the determination of what it is will be driven by that contract rather than any theoretical BS kind of fear to the world kind of stuff. Listen, I think Elon Musk calls the ball, but he's just always optimistic about when exactly that it's gonna launch across all those companies, but he always calls the ball, right? I mean, he founded OpenAI, too, right? I mean, guys pretty good. All the trillion dollar -ish ones he founded, right? He said 2026, so what I think, and again, I'm not next to it, what I think is it will feel like AGI in 2026.

1:07:17And the really smart guys will agree we're there around 2028. This is just me. I think he's right. He's so good, right? So I'm betting 2026. It feels like it in 2028. We agree, unfortunately, we're there, right? It is a nice one. It's an over under. So I'm under 2030. I'm with Jason Malone. Okay. Will Trump corporate tax this year? No. Easy bet if you read the docs. Basically, if you look at the one big beautiful bill, I can't believe I said that without laughing. The corporate tax rate was changed permanently in 2017. So there's no need to touch it now. It's 21 percent. It's not going to be changed.

1:07:52And I think the current version of the bill doesn't include another change in the corporate tax rate. There are some minor second order changes to corporate tax around international taxation, guilty, all the stuff that makes your head hurt when you even try and understand it. There's no change to taxation rate. And there's no need to because unlike the personal income tax changes in 2017, the corporate tax was a permanent change. Yeah, certainly my taxes are, we're going to taxes are going up though. VCs taxes are going way up under the Trump bill because we can't deduct California taxes anymore from federal taxes.

1:08:24So our taxes are going way up just like they did under the first Trump under the first Trump they got rid of salt. So our taxes went up, right? Now our taxes are going again because in partnerships we're not going to be able to deduct our California taxes against our federal taxes anymore. So Trump just don't care about California nor probably should he, right? No probably should he, right? How much are they going up just for me to know a lot? Oh, you'll be fine Jason. You'll be fine. No, no, but it's just interesting. It's just others and I'm not into politics, but it is interesting that under both Trump regimes, my taxes have gone way up.

1:08:54Absolutely way up by Trump because he doesn't care about California. Is the is the demographic as wealthy inhabitants of New York and California and you look at their voting propensity. I'm sure there's some guy in the Houseways and Means Committee when they realized, oh, this really sticks to those rich guys on the coast. It was like, this is the only damn tax code we're ever going to support. Let's push it through. So yeah, I hear you, man. But oh, well, but what will the taxes go up? I always better than me. 6 6 % but I don't have a genius. I don't have a sense of personal. Because the past through entity, you no longer get a past through entity tax deduction in California.

1:09:31So I think our taxes go plus California is raising it in another 1 .0%. So I think our taxes are going to go up another seven percent, not that seven percent out of the hundred percent, not seven percent higher I'd be cool with. It's another seven percent we're going to be paying this coming year. Hooray. First of all, no one's going to cry for us in California, still a great place to live. So we'll figure it out. Final cowsie quick file, when will that be a half trillion ass? Is someone worth 500 billion dollars? Will it be before 2026 or after 2026? I'll take after easily. I mean, isn't it just tied to how the stock market essentially performs over the next year?

1:10:08Right? If you think the stock market, if you're really bullish on the market, then there's a chance that it happens next year. Well, we need to see double digit growth in, well, in several stocks, but overall, in the next couple of years. Right? We need to see a return to that double digit growth rate, right? I think this, I think this poll is actually pretty good, the 38%. That's my gut. What are the odds that we return to the great growth rates overall in NASDAQ that we saw before this instability? 38 % sounds about right, right? That's what my gut, right? But I'm making a bet. I'm actually making the bet it's higher.

1:10:42I'm all in on the market. I'm betting your 2026 number, even though it's not really consistent with reversion to the mean for gains of public activities, right? We can't have this growth rate forever, can we? Wow. With one caveat, I thought this was bullshit when we started a little week ago, but now I'm thinking to make it a bet on CalShi, which just shows how easily it works. My bet is it's well after 2027. For exactly the reasons you articulated Jason, I just think it's hard to assume, look, from 2010 to this year, it's been an amazing stock market for 15 years. Now, when you look, it's just hard to extrapolate, you know, medium term continued, same level of growth.

1:11:20Right, and I think one of the things you learn and the data is it's almost impossible to predict stock market over one month, six months, 12 months, but over five or 10 years, the correlation between entry valuation and ultimate return is pretty high. Entry valuations are high. So statistically, I mean, then God published great work on this over the next 10 years, your default assumption on the equity return from the United States stocks should be much lower than it's been for the last decade. If you take that into account, then you're then you write, none of these guys, those are going to be a half a trillionaire by 2027.

1:11:51And then they're stopped. The only caveat to that entire sentence is the only person who can sprint their way through a half a trillionaire in the next couple of years is obviously Elon, because he has private stocks and our ability is the ability of the private market to mark up investments is as yet untrammeled by any form of reality. So when you own a sluggish space X and you own a slug of X and you own a slug of Twitter, it is entirely plausible that someone gives you such a big step up that you have a paper network of north of a half a trillion dollars in the next two or three years. I don't think Microsoft or any of the public stocks are going to compound your way to the same level.

1:12:34Final, final one, 646 US tech unicorns. How much That was again from Jason's paper, from let's give him credit from the Silicon Valley bank work on unicorns. I think the data there says 20 to 30 % max. In other words, which of the meat, if you say you have to be roughly a hundred million bucks, roughly growing more than 20 % and vaguely add on your profitability, what they were saying is that percentage is mid -high 20s, early 30%. So yeah, I think that's exactly correct. And what it means is 70 % goes back to the same discussion, 70 % of those unicorns aren't worth a billion dollars plus. They're worth something, but they're sub -100 million subscale, scub growth, sub -profitability.

1:13:17So they're probably not worth a billion. And the overall return from the entire 2 .7 trillion of equity will be driven by five or six, not just deck of coins, but I can't remember what 100 coins is, whatever it is. Because if they don't compound the way out, the average unicorn ain't going to get you there. I always certainly agree. What's the exact question here is going to happen? It's 46 how many are actually unicorns? And it's worth a billion dollars in hard cash today. Here's what I'm worried. And so 20 % was kind of what the SVB data said, right, which sounds about right to us, right? It's an unfortunate number.

1:13:49It's smaller than we'd hope. It's smaller than the markdowns that GPs have taken, right? The only thing I would say is I'm just and I know we've talked about this. I hope we do one of these and it changes. I'm just worried there aren't as many exits for these folks. There should be. And so I'm worried the numbers have whatever the number is. whatever we calculated to, I'm worried in practice, it's half of that. When in 2021, it was twice that, right? Because there's so much liquidity for P and others, right? James, you're exactly right, which is why kind of it's this quantity, 646, and you circle back to two good IPOs.

1:14:22Let's say we had two good IPOs a week for the next year, that's a hundred good exits, right? That's if they were all going to make it, that would take six years to clear the total balance of unicorns. It just brings up home. You're exactly there will be some value from this there are come but the bar on exits that's now noble and achievable is 2 300 million plus 30 percent growth. It's a relatively small number of the 646 on the herd that's gonna make that the only I would say in 2021 at the peak we had an IPO a day. Yep. So if the rev it like clearly the markets can absorb it Right, so if these companies all reflated to growth we've already done this right?

1:14:582021 was, it sounds crazy today. It was an IPO day in 2021 was an IPO day. You couldn't even keep up. It's a great point. TechCrunch said in 2021, we won't even cover companies at a billion. It has to be two billion and up to write a post, right? It was so crazy, right? That's actually an excellent point. I shouldn't have throttled other two a week. Two a week would be great. Yeah. If the appetite comes, which is why it's really good that both of these companies are performing, if the appetite comes back, more than can go public, it isn't a question of is the liquidity there. It isn't the question of the, is the ability of bankers to get transactions done there to your point Jason.

1:15:31The real question is how many of that 646 meet the new profile of 200 million plus 30 % growth and profitable. And that's where the calling of the herd will take place. Boris, I always love this. You have been fantastic. Thank you so much for joining me. It's slightly earlier. Also, God, I love you, Californians doing early mornings. Is it okay to get back to Jason's point we work over here, dude. Sorry. That was means you were a traitor You're a traitor your Irish. How could you do this? You mean me England? Let me explain I could give you 800 years of history and explain why but well, let's not we don't have time for that.

1:16:07How I I can do it Just fine. Oh, we miss you in the UK. Oh, that's a number subject. I know you don't Boys, you're amazing. Thank you so much. Take care. All right rock on I've said it once, I'll say it again. Those are my favourite shows to record. Rory is a master, Jason is a friend, we just have such a good time doing it. If you want to see the episode you can find on YouTube by searching for 20VC, that's 20VC. But before we leave you today, here are two fun facts about our newest brand sponsor, Kajabi. First, their customers just crossed a collective $8 billion in total revenue. Wow, second, Kajabi's users keep 100 % of their earnings with the average Kajabi creator bringing in over $30 ,000 per year.

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1:19:29Bank banking services provided by Choice Financial Group, Column NA and Evolved Bank and Trust members of FDIC. As always, I so appreciate all your support and stay tuned for an incredible episode coming on Monday with the founder of Windsurf.