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25:13Well, I was speaking of financing, obviously, there's going public, there's also later stage rounds and great, great companies raising later stage rounds. We've discussed before the value of capital concentration, going very, very long in your best companies. I didn't realize, but specifically with regards to Andrews raising two and a half billion series G, I don't know if you guys knew this. They got a billion from Founders Fund in this later round, a billion again, making it their largest ever check and the founders fund's prior largest ever check was also to Andrew. I didn't be I mean Sam Lesson said it was the only really important company you could think of more than an opening eye so I found it far from honestly I mean in all seriousness when I after Sam's insights I thought the Hayes right dude's right he said that and all birds were the ones so it's probably sort of joking but honestly my learning from that comedy made it it's probably an even better company than I realize.

26:09It's the old world just because you think someone's being a jerk doesn't mean they're not right. You ask Harry, am I surprised? No, I'm not surprised because all credit to Founder's Fund, they told you did do this back in when they started the firm. They said we're going to have highly concentrated bets in our best industries, the best companies, TIC. And they've also had, again, to be extraordinary, you're all credit to them, that the theme of kind of national security investing, I mean, the ill -co founded, Palantir in, I think 2003, 2004, it's not like they can Johnny come lately to this space and started doing it recently and are rushing in to kind of catch up late stage, they've had this thesis for 20 years, they founded the company and they've said very clearly we're going to double down and treble down on their biggest bets.

26:53Overlay on top of that, there's clearly not just a purpose in terms of capital, but there's clearly a felt purpose in terms of national security that animates the principles in that fund and I respect that. I really do. When you put all that together and you also, let's be honest, at the Maslow hierarchy where minimizing risk for your investors is not your one, two, three, or four priority. You probably sit there and say, what do I want to do with my life? I want to give as much money as I can to the company I love the most that's doing the cause I believe in the most, which is defending the Western world.

27:26I mean, right back to, you know, and then you cite your lords the ring and you're done. I mean, they're putting a billion in, right? That's much more ambitious than throwing a growth fund, throwing 50 million into the last round of Anthropic, right? or throwing 20 million into loveable. I love it big, but. I mean, yeah. Roy, what percentage capital concentration would be the peak of what you would be comfortable with in a fund? We have a capital concentration limit of 10%. We typically aim to, you know, our typical expectations, 20 deals on an average of five, fairly lower standard deviation, so either guess seven.

28:00Do you think that's an option? And I think... And I think... And I'm asking him when it's said to me before they've done the first. And I've got answers out here that question. I think we typically haven't done a whole ton of later stage follow on even in our best investments our focus has been early dollars at work maximizing multiple. Ironically this is really weird comment just like the bigger the fund you raise the more late stage you're going by definition and oddly enough the more concentrated you have to make the bets which is counter intuitive because there's lots of things that value at a hundred million that might go to a billion.

28:28There's very few things that I thought ten billion that might go to thirty so when you find when you got to put a lot in. At the stage we play at, it hasn't been necessary to have the level of concentration. Our limits have been more than fine. We've been in that five to 10 % range. I think to do what, again, to be fair to them, Founders Fund said 20 years ago they're going to do and have done, you have to have a much higher ability to concentrate to put that one, two billion to work in the stage. It's not been our business, but I think the people who are doing it are doing it right. I mean, if they put a billion dollars into Andrew and they really believe it can be worth 100 billion.

29:04The partners themselves just make a billion dollars off that one bet. This is an incremental check, but that extra billion, if that goes from 13 to 100 and they keep 20, the partners clear a billion dollars personally off a one -day decision. Honestly, I think the most interesting question to ask managers today is, what could you, what would you do if your LPs would let you do anything? I fundamentally think, you know, if you have a 400 million fund, you put an open AI, my anthropic cursor and Andrew. And I totally agree with you that. Lockheed Martyr is $150 billion market cap. Doing this at 40, you can see a three and a half acts in this being the next generation of Lockheed.

29:42I think the truth, it's an interesting question. What would you do if you could do anything? I think the probable answer would be, just like you told your teenage kids, they could do anything. Someone would do amazing, but a lot of them will go off the rails. The question as a parent is, would you want to sign up for that, right? You're such a smart strategist, adventure. What would you do? You are. You are. I interview so many. What would you do if your LPs would let you do anything? I found this job hard when I started, and it's hard to be good at one thing. And I would say I probably have a conservative bias to keep doing what we're doing and doing it well versus trying to do lots of different things.

30:18And I think the more you spread, you widen your aperture, yes, the more upside you have with the more risk you take on. Probably. I absolutely am. Probably more risk averse at the margin and be willing to sign up for trying to do everything versus sticking to a strategy that you know works. It's the buffer thing is you know know what's in the box that you can do and understand the limit of the box. We do a really nice job on every dimension of seeing these early and revenue enterprise software companies looking to scale investing in the A's B's and sometimes C's. I think trying to go for that especially as a firm and trying to do, and now I'm going to put a hundred and 200 million into something else.

30:53It's just harder to do. It's not a constraint from the LP as much as it's harder to do. That said, I do believe, as I reflect back, I do believe a little more standard deviation in your bet sizing, probably, for the market where it now might be appropriate. I'm wrestling with that and thinking about that is, you don't want to go hog wild, you don't want to lose your discipline, you don't want to deliver the product and the consistency you are, but at the same time if the market has moved, if staying private for longer has consequences, you got to think about what does that mean for your bet concentration.

31:26So I mean, the bizarre thing about funders funders, they appear to be willing to do everything and I give them all credit. I just have to say I'm not sure I could be that brilliant. I mean, you have to go back to wow, they've demonstrated a range of investment acumen across a range of different challenges that's just very impressive. Back to your hypothetical LP question, if everyone was set free to do whatever they want, I think for the median firm it would be value destructive. I'll tell you what my answer is for what it's worth just think when I thought about it. If I could do what I wanted and offset the risk right into other vehicles and to SBVs into the ether, then I get that the Andral Open AI thing is the smart display, but what I personally would do would be to do every dollar up to a billion.

32:08That would be my version of it in every winner. So if you do a seed investment and it turns out to be a winner, top 5 % deal, you do every round, on ABCDE until a billion and then you stop. You maximize the ownership and you maximize the capital in until a billion. If I could offset the risk in those later checks, that the returns might be mediocre if the world didn't go perfectly, that's what I would do. And I'm watching that in currently in my little portfolio of the two hottest companies and I put hot and quotes, that's what investors on the cap table with access to unlimited capital are based like wildly over subscribed because they're trying to just put every single dollar into every single round because they have access to, For all intents and purposes, unlimited capital relative to the startup's ability to consume it.

32:49Right. Why not instead of putting 5 million or 7 million in, why not put 100 in on the way to a million or 150, but still have the benefits of starting with the seed fund. Maybe you have three funds, right? And you stack them. I mean, here you have two. But that's what I would find a way to do that if I didn't have to worry about some of the risk of doing it. The interesting thing about the hypothesis, oh, I'd double down and my winner's all the way, is it sounds plausible, but it's interesting actually when you run the math. There's not as big an opportunity to stuff money in even most late stage corner quote winners as you think, right?

33:22Because if you think about, I mean, as I said, going back to our likely distribution, we do 20 deals, 30 % of them fail. You don't want to put a dime in those. 50 % of them are a one to five X on the money you put in, which means by definition, the next round, the two X that is a two and a half X are less, not a compelling. Only 20 % of a deals in any fund, if you're doing A's and B's, are going to be amazing. So now you're down to only four deals out of the 20 where you can quote stuff money into. And remember, amazing is 10x. But still four, four is not zero. It's four is a four, that could be 400 million dollars right there.

33:56It's still four, but yes, it could be, but what was amazing to you with the A and the B might be amazing on that last round. So probably of that four, let's say the four of them are 10x plus type returns from the A and B prices by definition from the C and D prices, they're going to be three and four extra turns. It's only if you have the one or two amazing compounding winners that you can stuff big money. When you raise that quote late stage opportunity fund, one of a couple of things happen. Either A, you write size it such as a relatively small percentage of your core fund because there's actually not that many opportunities.

34:30The second thing that happened, but people don't do that. The second thing you do is I don't have enough money in my portfolio. I'm just now going to do general growth investing. I'm just going to find other deals that do it. Or the third is, and I think people who are doing a doing a well, you just ratchet up the end count, the number of deals at the series A and B, because you're basically saying, to make my math and my overall thing work, I need to have not just a really good one to five billion dollar outcome, but a freaking amazing five plus billion dollar outcome. And the only way to do that, you can say you can deal with great picking, but we've discussed that over and over again, you can, but it's maybe at most one per fund.

35:06But if you treble the number of at -bats, then you probably roughly two and a half x the chance of being able to move big money at the late stage. The point I'm making is this, there's a whole series of things you're driven to do. Once you adopt this, oh, I'm going to quote stuff a load of money into my late stage deals. It's not as simple. The sound bite always looked good in retrospect. Look, if I knew Doc your site was going to compound to where it did, I would have done the round at 19 bucks a share, too. I didn't. We did the round at a buck and two bucks. But those outcomes are few and far between.

35:34And the amount of distortion you get to try and it's really hard to pull that strategy off in the quote unquote typical portfolio. When you reflect Royal, not could you have known is there a lesson that you take from that? I did it at a buck. I did it at two bucks. And it's now at 19. It's now at 80. And I passed I didn't do a lot of the round at 90. Is there a lesson you could know? It's always the lesson on the good outcomes that you could have done more. And the only way you can be intellectually honest as saying, what are the deals that I have that looked equally promising that in retrospect you shouldn't have done around at 19?

36:07Everyone does this. In retrospect, I wish I'd put more money in my winners. Door, right? It's not an inside. It's an obvious. The question is, can you put enough money in your winners to move the needle without putting enough money in your so -so's to drag down your return? And that's a challenge. The five or seven amazing companies in the last decade. We know the names, right? If you ended up with one of those, you probably can stuff to your heart's content. Chiming a good example. It looked like something you could stuff to your heart content, but it turned out that the price wasn't 25, it was 12, 15 -ish, and stuff didn't work.

36:39The docuSign and even the EchoSign Adobe Sign lesson, looking back, having been there, right? I think the venture lesson be visionary, but relentlessly honest about Tam. Because it's a Tam story at the end of the day. If you have a number one or number two player in the space and you see a Tam explosion happening, That's where you get a big lift, right? It's hard to know which ones are going to be your best and how much they're going to run. I also think there's probably been a little bit of a fake signal in 21 because even your OK ones got highly valued. Late stage looked a lot easier in 21, then it probably will look across a decade.

37:13With my first fund after 18 months, I predicted my top five fund return as you had your hop -ins, you had your B -reels, you had your clubhouse, and none of the five out performers and ended up being the out performers. And the five out performers, I always had in the middle bucket, actually. They were always in the mid -tier. And actually it was Roger Aaron Boggit, I .A., who said, that is exactly the same as me. And I see exactly that in Apple Photos. It's an interesting fact, because actually, we have a different experience because we're just slightly... I think it's seeded that's totally true.

37:44I'd seed you almost no nothing. At the A and B stage, what we've observed is this. The going in probability of a 5x plus winner, on mental margin, remember I said, is 20 % chance of that outcome. If after two years, the company has done what we said it would do roughly in terms of performance. In other words, it's ramped. The probability of it being a 5x plus outcome goes up to around 60 or 70%. And it's just because we're slightly as they're paying for companies after they have product market fit and are looking to scale. And if in fact they scale, you're probably a strong outcome goes up a lot.

38:16And if they don't scale, it's obviously a lot harder. So our data comes back quicker than yours because it's a little further along. But it's still what we remain uncertain of. At CEDU, like, doesn't even work. At the stage we're at, isn't a decent business that can grow fast? And then the late stage question is, how big can this be, which is a time question, as Jason pointed out, and how will it be ultimately valued by the public markets? That's the thing that, you know, two or three years in, we don't know. And if you're looking for everyone, as we're all on the same journey at different stages, you can be good at the thing you have, but then you internalize at the auto edges, those the things that just aren't knowable as easily, even when you're in the deal.

38:55I think an important point that you've pushed back on me before on Rory, you said, oh, I'd still take these companies, but the how fast can you grow and the financing providers to find that rate still attractive? You've said before the double, double, treble, treble, but you know, I met a company in verticalsast the other day, I was just going to Jason about it. They'll scale to from one million to seven million over the next three years. It's not attractive. No one's going to touch that. I would change that word because you begin into sound like our recent friend. It is attractive for them. And that's the most important thing.

39:27It's a great entrepreneurial opportunity. It's just not compelling for our business model. And I think it's an important thing. I was actually reflecting on the conversation last week. You never want to dis -down the entrepreneur. Most businesses aren't venture -fundable. To the conversation last week, most venture -fundable deals don't turn out to be the most important company of the last decade. because by definition only one company can be the most important company in the last decade. That doesn't mean you're pissed on the entrepreneur on the journey. I love the fact that this company that's going from one to seven over three years, great for him, he probably has a great business.

39:59It's just not our business. That's all. I would respect for you, push bangs. I'm not pissing on the entrepreneur. I'm saying, if you take money with that growth rate, I think there will be an impatience from your venture investment. They will make your life hard. I'm not saying that. I want to save you a great pain. And that's why I would say, I'm just gonna push you and then let you ask me, I think if you said that's not attractive for us, that would have been a fine statement, right? I think not, again, it's back to this, that's no good, isn't a helpful thing. It's like, that's a really good business for you, but it would not be a good business for us as venture people.

40:33That way you're not downing their journey, but at the same time you're saying, it doesn't suit our model. It's not, you know, it's not you, it's me. Agreed. But I might do that deal, Harry, for what it's worth. If I thought the founders were incredible, I thought the true tam was large, and I thought there was upside at growth scale at beyond 10 million, and I hate over -discussing price, but in this case, if the price was commensurate with that bet, which was much easier to do a few years ago, I would take that bet. Like in the older days, I did that bet in pipe drive, okay? And that was, and I did it at 16 million, right?

41:10And it's not that it's the same, but it's basically the similar metrics at the time, I would do that bet at 16 pre or 20 posts. Like, if I love the founders and believe the market was large enough, I might take that risk at 20 posts. It's just they don't want to do it. That world doesn't exist today, but I might take that, honestly, I might take that risk. How has got his skeptical face on? I share his skepticism. I'm just saying, literally, I would say it. So you could be skeptical. I'm saying, honestly, based on what I know that, you know, we talked about it, right? It's interesting to me if this is a multi -billion dollar opportunity and it's just gonna take a little longer and it's still gonna double at that rate.

41:43And I love the founders, founders matter. And I might take that bet. If the valuation gave me time, I'm patient. If it gave me time. That's fair, but implicit in that statement is, what you're saying, it's quite an interesting thing in the context of what you're saying is the new interaction to seven over three years, you're saying may not be predictive of the ultimate potential. Because you just did a game report on it. I wrote it up. They just did one other day that velocity to 100 is not a, it's why it's not the perfect predictor to success at scale You just need to grow fast didn't that with the open view report said it said you just have to grow fast enough to 100 to get there But the super fast historically pre AI hasn't fully correlated to success We've looked at every deal we've done.

42:27This is a really interesting one And you know, we've ranked it based on the quartile of growth rate relative to the peers at the time of investment So, first, second, third or fourth quartile. Now, as you'd expect, literally at the time of investment, we've done almost no deals below the second quartile. Because obviously, we'd be incredibly stupid to do deals that were slow growing out of the gate. But the interesting fact is this, very little correlation between great outcomes, top being top quartile or second quartile. In other words, they're almost as likely the growing quickly, but not astonishingly quickly, I was just about the same probability of giving you a great outcome as the hyper -growth from day one, which is, I think, validation what you're saying, Jason.

43:07Bill .com, it compounded to a huge network, and obviously it was an amazing outcome for us. But the growth rate was always, I think, second quarter time, right? There were companies always growing. It was slower than me back in the day with Renee. It was slower growing than it was, whenever I would see him, it was always growing a little slower than I was. When we did that work, I was really actually happy because what it shows is, it's not just a metrics business. And I think because I tend intellectually to be quantified, it was really good pushback for my own brain to say, worry, it's not about ranked the more than do the highest growth thing based on the growth rate of time of investment.

43:38It turns out that that would be a very bad rule because it would exclude some amazing deals. My heart is you want to be a top half growth rate, but then after that you have to take into account things other than just the absolute, you can't, as I say, you can't just rank them and buy. It turns out there's nuance within that capital efficiency matters, tan market, entrepreneur, growth persistence, all the other things. A friend of mine used to go ahead and say, it's wonderful saying about venture when you'd complain about how hard it is to figure all this shit out. And he would say to me, if it was factory work, they'd pay you factory wages.

44:12In other words, if it was simple, they'd pay you 20 bucks an hour and they don't. It's not as simple as rank on growth rate and buy from top down. No, we did the work. It was pleasing. I think HubSpot actually was for a couple of quarters, right as we invested only second quartile, and it's been an amazing outcome. Absolutely. It has. Speaking of kind of growth rate, so I do want to get some important topic, I think, actually, which is a piece of work done by Jammin Bull that we've seen this real slowdown actually in SaaS spending for H125. The question being, is this an ongoing more permanent trend?

44:44Is this a h at a time and we will progress through it? How did we think about this in context of where we are today in terms of this sass slowdown in spend. But yeah, this was tough news to see that the rate of growth has actually declined more this year. There can be different reasons I look, I wonder why Octa has slowed, it's still two products, why Salesforce is still in the single digits, it's so big. But I do worry that the pressure of AI sucking up all the spend. Another person pointed out on Twitter, I've added to my summary of it, like if cursor did almost half a million, half a billion dollars in revenue in the same time, it sucked up an enormous amount of that dollar that would have gone to Okta and Salesforce, right?

45:27500 million. That's a lot in that period of time, right? So AI is sucking up budget. Here's a real example of it happening and consolidation is still coming. It's still coming. So I just think this pressure, it's just this pressure is not even if the the 2024 days are behind us, It doesn't appear to be any easier. Big picture. I do think the slowdown continues, even though we don't talk about it as much. If you zoom out and we had said this literally four or five years ago, this is not surprising, the industry's mature. And if you think about it, by five or six years there was narrative of, oh my gosh, it's been 20 years, a SaaS and cloud, and we're only 40 % of workloads have moved to the cloud.

46:06And people would articulate that as if it was good news. And I remember a time thinking and saying, you idiot, it's horrific news. You know why? Because you've compounded from one percent market share to 40 percent market share It took 20 years and an average growth rate of 30 percent do the math that gets you roughly there The problem is three more years of 30 percent growth and you go from 40 to about 80 the SaaS slowdown Was inevitable once you got to 40 50 percent market share these are mature served markets the best example of that is Let's take it zoom a company. I love and so wish I'd done who the hell do you think is left in in 2023 who doesn't have a free consumer count.

46:45You're done. Like, I mean, if you didn't buy one in 21, there's, you know, you've hit time, you've hit complete time. Right? And that's an extreme example, but I think DocuSign wrestled with some of the similar things, right? Salesforce, most companies have a CRM. You know, I know they'll show you some survey that says on a tan basis, there's other companies, but the truth is you've had 20 years to buy the damn thing and it hasn't changed. If you haven't bought it now, you are a trailing edge adopter. independent of AI, the SaaS industry was going to hit the mature stage. And you write JSON, it's all the things that happen at that stage, bundling, consolidation, grinding out the weak.

47:20Fortunately for us as technology investors, right at the same time, you got this new new thing which is sucking up all the attention and the dollars, and it's taking a lot of the attention and definitely contributing to the slowdown. Now, the good news is it's not quite zero or some. This is the key hope statement. If you were just replacing CRM with let's call it AI CRM, then there's no time expansion, then it really is a knife fight for limited resources. If in fact the AI is taking over some of the work and taking over some of the labor dollars, then to some extent it's additive, which is obviously what we believe it is, but that's the crucial statement.

47:55You know, I don't think it's a fight for table scraps. I think AI is the new new thing and to some extent from an economic perspective, the cursor dollars in software development or any other of these things aren't directly taking away from the SaaS dollars. I think it's time expansion, but at the just practical level of getting shit done, my guess is a CIO. People cannot even take on so many projects. There's no brownie points for taking on a SaaS conversion in 2025. There's a lot of brownie points for doing something in AI. The attention has shifted. The SaaS business is definitely in the consolidation stage and the AI business is exploding.

48:32Almost too much of that, I kind of overloaded it. No, it's good. You can't argue. The 40 % math is a good one. You can't argue with that, right? I mean, if you don't, if you don't dramatically expand the dollars going into, into court, traditional business offer, you just can't compound it. The rate the markets want. It's just not possible. Yeah. I agree. I think that part was clear. I think on the AI stuff, it's a question of unlocking new dollars and expressing that clearly. There's so much group think on social media. I think I want to believe, I want to believe, but I think the evidence that AI will a mock massive budget from the human side of replacing humans from the services budget.

49:07There's some evidence of it, but I don't think it's a slam dunk today when we're doing this today. I don't think it's a slam dunk that the tam will, of overall for B2B will go 5x because we'll, we'll attach from other human budgets and replace it with AI. I don't, I don't know if we've proven that. It makes sense, but I don't think we have as much evidence of it as we claim on social media. You've been more apocalyptic in the past, So I'm glad to hear that because I think the evidence it's classifying is the future is here It's just unevenly distributed in some areas you are seeing the on lock and you are seeing the automation But it one of the reasons I'm pretty relaxed about any kind of you know all these mass unemployment stories I think it's a long secular 20 year trend that we can invest in and I think you will see replacement of labor by a pretty consistent basis, but not an explosive basis.

49:58And it's a great investment team. It is happening very quickly in the contact center at the extreme, right? Agreed. I'm just worried from a, going to your point of the tab, because I have a lot of exposure to the contact center. It's, it, it, half the folks are being displaced to these companies, but you're not getting that much more ACV. That's my worry. You're replacing a $40 ,000, $50 ,000 a year human, $60 ,000 a year fully burdened with benefits and taxes, not with a $20 ,000 a year bill, with a $20 month bill. That's the issue. I don't know that there's enough tam appreciation when you trade in a $50 ,000 human for $240 a year.

50:39If that's what's happening on your right, but I don't just... It is happening. I can just tell you, I just like in my portfolio, when I look at Gorgeous, which dominate Shopify for the context center, right? Their average customer's replaced 40 % to 50 % of their humans with AI and their ACV is only up 50%, it's only up 50 % with half their humans replaced with AI, right? So how much, you could help me think about it, and actually, but how much does that really expand the tam? I give it's only 50 % that's not enough for your compounding map to be exciting, is it? If what you're saying is correct, it wouldn't be, but I wonder on each of the dimensions.

51:15I mean, funny, if I've just been doing some refresh work on the, as you say, the call center, contact center space, And interesting, you come up with roughly the same rules of thumb that I see in robotics are totally different space, which is people tend to replace labor when there's a two -for -one arbitrage. In other words, when we're selling robotics and I see this over and over again, you go and you say you're spending a hundred grand on labor. If on a rise, what about as a service space as we can do it for 50, they'll do the deal. Less than that, it's not worth the brain debt. But you typically can get that, you know, you can have the market and you can get that.

51:48In call center, for example, email and call resolution is a two to four dollar email human resolution based process We are seeing companies getting your plus or minus a dollar So I do think you can get that you get half the labor you save to you So by definition if you're only saving a little bit of labor, you know You're not gonna get enough to uplift but zooming out the contact center software market is 10 to 15 billion a year of annual spend the contract center labor market is at least $150 billion. So now I'm gonna arm wave just for a second and you can give me shit. So you could look at that and go, oh my god, it's $75 billion if you do the two for one rule.

52:28So it expands from a $15 billion to a $75 billion market if you can quote eat the labor. I don't think you can eat all the labor by any means. But I do believe there is going to be at least a 2X time expansion, 3X time expansion and as you take the simple contact center queries and resolve them on a two to one basis, for half the price using AI, and the AI company will be able to take that capital, take that money. So I do think there'll be time expansion. I don't think it will be all, it's not gonna eat the whole contact center marker. There's gonna be humans on phones and answering emails for the foreseeable future, but automation to be done and time expansion to be gained.

53:09If you're pricing it so low that you're giving it just at the margin to your existing stuff, then yeah, that's going to be hard. I think the value is there such that you can command more. I'll give you two other quick thoughts for it, sort of. One, a lot of the folks that are exploding in the AI context and with huge numbers have either acquired or indirectly acquired BPO's, attaching into that 75 billion in a very interesting way. Now all that revenue is necessarily software, SaaS or AI. I'm not saying it's sketchy, but it might be the, some leaders might be the edge of slightly sketchy, but I'll give you an example Like I look at what's like maybe that's gonna happen the one I'm watching.

53:48I'm just curious. I don't have the answers is I'm Huge proponent of AI replacing sales reps, right? I everyone out there in the market selling these products is basically trying to sell a 30 to 50 to 60k price point it up When we get really good at it, it might be 20 bucks a month. It might be 20 bucks a month. It wouldn't surprise me if when the cursor for sales comes out for real, it's not a bunch of traditional sales processes trying to charge 50 grand. It's like, this is just soft art. This is just, this is a really good wrapper and it's 30 bucks a month. I don't just don't know that we're going to be able to, that all these price points that we hope are sustainable in venture and startups.

54:26I don't, I'm not sure when the underlying COGS approach is zero. If it's going to be as sustainable as we help this one for two. I hope it is, but that's my concern for the TAM. On the software side, it's just like SASS. At some level, you go a 1999 DAW. This is it. Everyone was going to do SASS. It was obviously the way of the future. And no one founded another non -SASS client -server company. At the same time, it took 20 years to get everyone across from non -SASS to SASS. And the sequencing became really important. And it wasn't just random. It turns out the things that had the highest value from that shift, like, um, C -O -M, went first, and the things that are lower value like accounting took longer.

55:08And I think it'll be exactly the same here. It's not going to be a cataclysmic change in one day. I think you have to pick the spots where it works now, and avoid the spots where it's going to take five more years. My mental model is there's a two -step process. Step one is, does the AI work and allow automation? You over that hurdle. And you write, the second question is, can you get paid for that enough? And I can't speak to the specifics of your company. I do believe I actually think it's interesting comment. It's harder to command huge value on top of software on the SMB side, because typically the amount of labor you're saving is not a lot.

55:42The wonderful thing about automation for large corporate America is when you have 2 ,000 people in a contact center and you're paying the meat 50 grand a year, the quantum of money gets big enough that the quantum of savings from automation becomes compelling. I do think that for those things, for those kind of higher end implementations, you will be able to command value from what you're delivering with AI. AI, next generation AI for B2B, as you approach true SMB, it's more and more going to be base and included with a limited upsell opportunity. And the enterprise we're going to try to do agent force and charge massive amounts of money, and we'll see where this all leads.

56:20But when the AI, when an S tier AI is included for free in an SMB product and when it's extra, when it's charged to a $20 ,000 a year to replace one human in the enterprise, we'll see how that works out over the coming years. Instead of looking at the SMB products that are kind of like crummy compared to the enterprise ones, we may again be looking at them in AI and say, wow, they're better. Look what I get for free, included with my SMB CRM. It's included for free. Final one, guys, before we do a quick fry, I was in Sweden at this dinner. Elon's tweet came out and we're not going to politics so it's not a political question.

56:53But Elon's tweet came out and I think half the people around the table had over $100 million in SpaceX and probably another $100 million in other Elon companies. Purely from the business perspective, again I'm not going to politics, I'm not going to health or drug use nothing. How do we evaluate Elon companies from here? Is it business as usual? How do we think about that? It was never going to work, so you probably just got through that pain point. It's pretty clear from a company -building perspective, most investors would have preferred to skip the whole thing. If you'd stayed on the sidelines, making nice, kind, supportive noises, but without putting your head up the power part, you would have probably got all the benefits that the market was a trip.

57:38Remind of, as late as December, January, there was the, oh my god, it's going to be amazing for Tesla trade going on in the market and the stock went way up. If you'd stayed less involved than doing what he did as visibly as he did, you probably could have got the benefits without the pain. Always worth noting, again, you go back to the shrewdness of Peter Thiel, that found his fund, got some of the benefits of perceived support for the current administration, probably get some of the halo effect from that without putting himself on the line of fire. Elon just because he is that entrepreneur who leads with his heart did the other and the process of doing it and then withdrawing from it has been painful.

58:17Given that it was always going to fail, thank God that's over, it's probably their feeling, but it would have been so much better had none of whatever happened. From a pure company perspective. Is there a company that is more materially impacted than others do you think, Rory? Tesla, only because the truth is electronic vehicles have a whole bunch of specific subsidies both around purchase and around the ability to resell emissions credits to people like GM, right? And all those things can be withdrawn by Congress. There's no obvious direct political cost. There's a much better statement of doing that.

58:54And there's no obvious impact on the government. I think the wonderful thing about Stalin and why it's an amazing business is you kind to go through the, oh my God, I hate, I mean, I can see the government sitting in a room going, we love you, we love God, we'll give you a lot of business. Then, oh my God, we hate you, we love you. But there's nothing we can do because we don't have any other rockets. It's the definition of a great, I mean, definition of a great business is when your customers can hate you and still do business with you. And I think, you know, the truth is, SpaceX, it's just such an amazing achievement that even if what was your largest customer, interesting, is now no longer your largest customer or installing such a big business.

59:27Even if one of your biggest customers doesn't much like you, they still gotta do business with you. That's not quite as true for Tesla. So yeah, I think the impact is slightly worse there. I think let's just give it a year. As you point out here, the new cycles are so fast, right? Clearly, Elon's alienated himself. I mean, Tesla's the closest to a consumer product of those until the, and so he's alienated a certain segment of his population, which has impacted, you saw it in Europe most, most extremely, right? Some of the sales. But let's give it a year. I think we'll never forget this episode, you know, stock prices go up and down.

1:00:00This may sound crazy, but I think in a year we will not have forgotten about it, but maybe no one cares. I don't even know if Trump cares anymore, so I don't know if the rest of the world will care. He may not even care. Yeah, and I'm just glad he's back to doing them. I mean, because we mentioned Neuralink and the fundraiser, you just got to go back to putting that episode behind one of the amazing entrepreneur. We monitor to the haters, Tesla, wow, SpaceX, wow, And then we forget it, but well, he won't forget it by God. Open AI founding. Wow. And now Nureling. Wow. I mean, you just got to step back and say, please, I mean, another one that everyone forgets, the boring company.

1:00:36I really, really reinventing city. Have you done it? Have you done it? I know. It's pretty cool. It just works. It's pretty cool. At least in Vegas, it doesn't do much, but what it does do is pretty cool. And I, you know, I think that, you know, I was just thinking about this this morning. It's such a shame. And that's just such an unparalleled record of entrepreneurial success. And it's kind of like a management failure of massive proportions if you think about it to hire the guy who did that for something that's not like that. It's something that's political, something that involves making cuts, something involved making political decisions.

1:01:12It's so good that he's back to doing the thing. He's best at it. Everyone should play the position where they can score and win. Regardless, so that gets back to what I said, It's not that it's better, but it's just everyone's back now in their right place. Eilin is back building amazing companies. Yay, everyone. Oh my God, that was a painful six months. Is I'm sure the mental model. Skills are not wholly transferable. One of the beauties to X is we can see how what every billionaire thinks. Right? There's so many billionaires on X in Texas. We can see what they think. The meta question I wonder is, you know, should you invest once a billionaire becomes unhappy, the Chimouth seems unhappy.

1:01:46I don't know him. You'll one doesn't seem happy. Can folks still be as innovative and groundbreaking when they reach the unhappy billionaire phase? I don't know. The one thing I will say on Schamaff is the public persona and the private persona are drastically different. He's actually very humble and kind privately. The public is very different display. The only matter question just is, are your best days behind if you become, let's leave Schamaff out of it, I don't really know, but my very limited interactions are consistent with that Harry for sure. But I would say at least 50 % of the tech billionaires on X are unhappy.

1:02:20Can they still innovate at that stage? Do they still have the same level of driver passion? Or is there, is there crouchingness? An inhibitor to be an innovator? No, and I think that's the sentence here. And I love what Harry said is that you don't know if someone's happy till you know them personally. The truth is social media and politics just tend to drive a person. It takes a certain persona to be perceived as winning. You know, we all understand the kind of the heightening effect in social media of the most extreme situation. So I think it's one of those environments where like Gresham's law for money, bad money drives out good.

1:02:54Well, the equivalent of that in social media is bad -aponinated people drive out good -boring people. So when you're in the political arena, when you're in the social media arena, it just forces a persona that comes across at least a very angry and unhappy, and I'm like, whatever. I'm willing to suffer the risks of getting a billion dollars and seeing how I do And that's what's gonna happen, but I'm willing to run that risk. I Want to do a quick fire. This is cow she's quick fire again. This is like the performance marketplace where people bat on different outcomes So let's start with number one Sundar pit joy leaves Google this year.

1:03:30Yes or no? The only thing I thought about when I saw this when I was a VP of Adobe and shot new was the CEO not a founder, but on the rise there, I didn't directly interact with the Adobe board or others, but when I saw the vibe, they would not gonna let that guy leave. And this was a company that was no longer found or run, and he had figured out the transition to cloud, and you could debate decisions, but his ability to steer that ship in the right direction. Everyone at Senior Doobie know, it was even riskier to have anybody else, right? So I suspect it's similar at Google. None of the large stakeholders want him to go no matter what, and they will do almost anything to keep him despite all the, on the search side, which is still the majority of wherever, despite all the threats today.

1:04:13That was my sense, because a shot new was just, I mean, it's a great CO, but I'm sure the board and others would just grab him by the jacket and not have left him ever leave Adobe when I was there, even, you know, for many, many years? The question is really, you know, abstracting from personal stuff. Random events could cause it. There's some probability that anyone can leave at any point in time. It's called death. What is really a proxy for saying is, is he doing an amazing job at Google? I think we've definitely gone from the, oh my God, the world is ending at Google too. You know, they're doing good stuff.

1:04:39They're getting good models out there. It's not obvious it's all gone to hell in the hand basket. They have the classic innovators, the Lama of the Google model. The search model is awesome. It's a cash -spewing machine. But let's be honest, when I get the lineup for the Howie's Stepping podcast, I start on chat GPT to do my research, not Google anymore, right? So they have that long term dilemma. It's not clear that putting someone else in the chair will solve that. My guess is by far the most likely outcome is not leave, just continue to manage what you've got reasonably well without ever solving the existential problem.

1:05:14I agree with you both. The only thing that I do think is just interesting is Sergei is back. And he's back back. And he's speaking publicly about being back and how it's the most exciting time ever and how they have to win more than ever, having had a hiatus. And I'm just intrigued to see what not into play. I mean, if it were to happen, that's been the default. I mean, if you look at the founder comes back narrative is definitely there are precedents, including obviously the most amazing one. And then the Starbucks guy who keeps coming back every three years like it or not. Yeah. And it would be the narrative that would easy to sell.

1:05:46My guess is if the founder decided he wanted to do that, it would be on the table. But it's a can. Can she way agrees with us? They say absolutely he will stay. So if we go to the next one, New York Times wins Open AI lawsuit. This one's pretty evenly split. Yes or no to New York Times wins Open AI lawsuit. If you include Win or Settle, then I'd give it 80%. In other words, I can't believe that Open AI is just going to want to let it run forever. So if you lump settlement into the equation, do I think New York Times is going to come away with quote unquote a win of sorts out of this? Yes. More likely to be a settlement just because always in the end close to the trial, people settle, then a, oh my God, it goes all the way to, I don't know if it's a jury or a bench trial, and then they win.

1:06:33But I think they've got enough of a case to be in the room, and it's one of those issues where money ultimately can help solve it. So yes, I think they win something from suing. I think they win more from suing and then settling than the other companies who did smaller media deals with open AI. In other words, to make it harder for myself, their strategy of sewing will be validated versus just cutting a 20 or 30 million dollar deal with open AI two years ago. I think they will get something from their effort. If they've already determined that they're gonna pay in the end, then that has to settle.

1:07:03And in that sense, they'll win, but they may not win the lawsuit because they get settled. I mean, at some level, if they don't, it's gonna go to the Supreme Court. It has to go to the Supreme Court, and the folks in the Supreme Court will decide what fair use means in the age of the internet. And that's a big, that's probably a 48 % gamble because it's easy to see them coming down on the side of the content providers and maybe Saster gets a check. I think I deserve a check. Chat GBT scrapes a lot of our content. I get a lot of traffic from it already. Seriously, why does New York Times get a check and not me?

1:07:31I don't think it's right or fair under fair use. They're directly taking my content, which is very unique and specific to me. So in theory, there's arguments and take it all the way to spring court and win and not have to pay anybody because OpenA has slurped up the entire internet. So they should settle because it's pretty confusing. We've basically, in the age of AI, we've decided to surrender a lot of copyrights and surrender a lot of privacy. Now, OpenAI can record all of our conversations 24 -7 in their Mac OS app already. So we're giving up copyrights, we're giving up privacy, and we're gonna learn where these new lines are, but they're not gonna be the same as they were two years ago.

1:08:06But the Supreme Court's conservative, it's a bunch of Harvard grads. I think the most fun thing about that answer is Jason, without blinking or laughing, described Harvard as court conservative. I think they would be so glad. I think they're gonna put that on their Harvard website. Look, Harvard grads are conservative. Leave us alone, please, Danette. I don't know whether it's right to take on the Trump administration. I know there's a lot of principled reasons, but I do think there's not politically, but with a small C, gotta be the most conservative organization that I have any affiliation with, very conservative.

1:08:34I think one nuance on this that gets to it, we picked up in a very interesting reference we did on another deal, which is really interesting. Obviously, open AI and all the models need access to quote unquote modern news to be able to answer So the real -time questions, the way publicity initially did, and now everyone has copied. You have LLM plus web search. So they clearly need that. So that's a given. They need access to modern news sources. I really think the question, Father, is this. If I have as open AI, say Washington Post and Wall Street Journal, do I need New York Times? In other words, is a third national news source additive or not?

1:09:12It's a very interesting question. I hadn't thought about it until I talked to this person who made the point. Yes, you need news to give the full LLM experience, but do you need the third or fourth marginal news source? Maybe not. And that's the thing that would maybe make my hedge my bet. It may be separate issue from what are the legal rights on this. You could imagine an LLM saying, I need to get modern news from AP and one national newspaper, but I sure as hell don't need six. Because if you think about it, you reflect even on your experience on a Sunday morning when you'd read three or four newspapers back when they were papers, by the time you got to the third, you're like, I know already, 90 % of the content is repetitive.

1:09:53The argument for OpenAI, gutting it out, is they're saying, hey, I already have it from two or three people. Yeah, maybe I should have paid you for the past and maybe I'll lose that part of the case, but I don't need to license your content on an ongoing basis to be able to deliver the full search plus LLM experience provided I have one provider. And if that's the case, There'll be an interesting game theory process going on on media content pricing and that's why Jason was sashtow will get paid So handsome because it's not the unique I'm kidding but Harry how much do you get paid by I get like three or four grand from Twitter a month?

1:10:28How much do you get? I get a lot cool. I'm so pissed off about this. I see everyone post I don't know how to do do you know maybe not but if I'm making 50 grand a year for I know It's not the same because Twitter is opting to pay its credit I'm getting paid 50 grand a year for my tweets. I want $500 ,000 a year from opening I for its saster content. It's more valuable. I want I just want I just want like 40 grand a month. You have 50 grand a year for tweets. I would get like 200 grand a year for tweeting. You might. Yeah, you might. I think the fun thing about this is it will drive very interesting conversations about what content is in fact valuable.

1:11:02Speaking of that final one for you, Lindy Akarino, will she leave Twitter this year? You know, it's a fun question. We get glimpses of Twitter's financials, X's financials, we don't see all of them, right? I mean, her job was to bring in the advertisers while and create a buffer there. That doesn't seem to have been wildly successful. So I know this is mean to say, I'm only judging the public persona. I don't see how the team is managed internally. I mean, objectively, it seems like one you could upgrade on the team. It seems like on his sea level team and his company, this seems like the VP that maybe I'll upgrade this year.

1:11:37That may be true, but thinking probably, if I was, and I never thought I'd say this poor Mr. Elon coming back from a bruising six months, you know, in government work and having five or six amazing companies to work with plus Twitter, I'd probably say to myself, I'm just not going to take on the heart. And can I just focus on building cool engineering shit? Twitter whatever. I mean, the person who changes the CEO is the board or in this case, Elon himself, do you just want the heartache, dude? just let it run. Don't be a hero. I hear it. But you know, we forget, like Elon recruited Iliad to open AI.

1:12:12The guy's a good recruiter, but it seems like she's the week link on the team. When he has the moment in time, I think he will bring in the best media executive in the world that he can get because for all the folks that he has alienated the last few months, there are others who probably are bigger fans. Go find the best one of yours. Like lean into your super fans. If you have them, that's where the magic is. Guys, thank Thank you so much for doing this with me as always. My favourite is always the comments. The comments obviously are always my favourite. And I so appreciate you both. This has been wonderful.

1:12:42Brori 6am. I mean, dude, credit. Credit and love. Hey. I mean, credit and love. Only time I got. Jason, you the man. I mean, always the most fun shows to do. If you want to check them out on YouTube, you can find them on YouTube by searching for 20VC. That's 2 .0VC on YouTube. 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. In case you didn't know, Kajabi is the leading creator commerce platform with an all -in -one suite of tools, including websites, email marketing, marketing, digital products, payment processing and analytics for as low as $69 per month.

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