Bill Gates foresees massive AI job loss: these VCs disagree | E2330

28:52And then I think if people talk about the energy usage or water usage, I don't think is real, but people talk about energy usage, which is real. And I think if it's consuming a scarce resource, then we have the right to charge for that scarce resource. um so i think you're right about the water usage there's more water usage by pistachio and almond farmers than there are totally it's all bullshit but people still people i don't understand but the power usage is real power usage is going to raise bills for people unless we subsidize and take care of power which anybody building a data center has the brains to know that they should just go to the community and say not only are we not going to increase your electricity how does free sound?

29:41Free for five years. Sound good? But that's basically like we're doing redistribution on a piecemeal basis. And I think it's probably just better to get ahead of that and say, look, let's take 10 % of Anthropic and OpenAI and solve our national debt problem. Well, I mean, if you took a third, it's worth$30 trillion. So you're proposing just the government takes 10 % of the companies? Is that what you're proposing? Or you're proposing? I know that sounds anti-capitalist, but I actually think it's a reasonably good solution. I mean, Trump is doing that all over the place. We have positions. Not in a very normalized way either.

30:15He's putting it in his own pocket. He's doing it with threats is what you're saying, Dave. Family's pocket. Literally, he just threatens people and gives them the carrot. They give their shares. I mean, look, we want to be the Norway. Let me ask you a question though, Dave. How is it different the way Trump uses his carrot stick method to extract shares for the American people because he likes doing it versus the socialists saying, hey, you got to give us 20 % of your open AI and clawed to pay down the debt. How is it different? Just an open, honest question. Let me give you two extreme examples of how that can go right and how that can go wrong.

30:48So Venezuela and Norway both have extreme oil reserves. One country has done an extremely good job of providing for their citizens and their wealth and preparing for the future. And one nation has not. Rule of law? I don't know what the implementation details were that went different directions. Rule of law. It happens to every business at some point. You're nearing the end of the month or maybe it's the quarter and your sales team is at risk of missing their quota. You could waste days pulling together data from across the entire organization or you could just ask Rippling AI. Rippling's already built on your real-time people and business data, obviously.

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32:07There's some really interesting historical reasons why Norway went that way that actually had to do with the shape of the country and how the timber industry developed. Actually, they developed hydropower in Norway before oil was discovered. And that was an actual resource. Norway is a country of like four or five million people that became a timber and shipbuilding powerhouse across Europe. And I think the things that they did early to develop timber and hydropower actually went very well once they discovered oil. Fascinating. What do you think, Sheol, about this? If the government owns, let's say, 10 or 20 % of Anthropoc and OpenAI, first of all, how do you decide which companies they own a part of?

32:49And then is there a regulatory challenge? Like, is the government going to then be easier on the regulations? And I think that's probably what Sam Altman, why Sam Altman is proposing it in part. The government would have a financial incentive to protect their valuations and go easy on them. So I'm not sure that that makes sense to me. All right, let's pivot to another technology that caused a lot of social harm and a lot of hand-wringing finally coming to what it seems to be closure for parents and Americans. Meta is agreeing to a$17.1 billion settlement with 29 states over claims. It hooked kids on Instagram and Facebook.

33:40the remedies are well beyond just writing a check. This is the most intense settlement I have ever seen for a technology company. And I think the previous record was set by our friends at Meta. So you get this huge settlement of$17.1 billion. But in addition to this, they are going to put hard limits similar to what China has done and other countries are considering. Productive pauses interrupt scrolling after 15 minutes of continuous use, then again at 60 and 90. This is a self-imposed feature that Instagram will give to kids. They will also have a nighttime block. No access from midnight to 6 a.m.

34:23to make sure kids get sleep. And then no push notifications during the school day, 8 a.m. to 3 p.m. They're adding age verification. They're redesigning the features that they believe or that studies have shown will cause harm to kids, like beauty filters. Oh, my God, the fact that they even added those visible light counts. And then add stronger safeguards against bullying. And they'll obviously be, as they typically are with these, independent auditors. It would have been nice, Hussein, if Mark Zuckerberg and who's our guy running Instagram? Adam Masseri. As I believe both parents looked at this data five or 10 years ago and said, we'll do this without 29 attorney generals bringing us to court and embarrassing us and shaming us.

35:22But here we are. It's getting done. Hussein, what do you think of this unprecedented settlement? Long time coming. I mean, I think the harms are pretty clear in the academic literature. And your parents definitely notice this thing if you have kids and you're starting to see other governments actually crack down. Australia was a big one. The real question is, are all of these changes really enough? Like I'm in the view, like you might actually not want like prepubescent teens and maybe teens to be using some of these things. You might really want to gate these things like this might. And this is a reason and there's a big number in terms of a fine.

36:01There's a small, small, small portion of Meta's market cap. Like this is this is a drug. It's a small portion of like Meta's free cash flow. Like it's not that big of a fine. Probably 10 percent of free cash flow. I'm guessing they have 200 billion. Meta stock is up. And MetaStock's up probably larger than$17 billion, if I'm going to guess. It went up more than 1 % on settlement, so it paid for itself. And you've handled the problem. Jason, first of all, so my wife works at Instagram as a lawyer. Disclosure. You're wrong, actually. Instagram instituted this stuff two years ago. Okay. So they actually have teens have sleep mode from 10 p.m.

36:37to 7 a.m. There's an automatic notification if you spend 60 minutes on the app. They did a lot of this stuff. The difference in the settlement is it's now across apps. So it's Facebook and Instagram and I believe WhatsApp. But they actually self-instituted this policy a couple of years ago. Got it. So we can give them a little bit of credit. Give them some credit. I think that they have, and like the AI world, I think social media has totally bungled the PR. I actually think there's so many benefits from social media that are never talked about. During COVID, I was depressed. I'm an extrovert.

37:15I love talking to people. You are. Social media cured me, I think, like from depression. There's so many outlets for creativity that teens have that they did not have before. So I think there's a huge positive that we never talk about. The studies show some negatives, which I think are real. I'm curious. Do you have kids? I don't. Got it. Okay. Dave, you have kids. I have kids. Our kids grew up on this. What's your take as somebody with kids and watching up close and personal what that generation experienced with these tools? I have a really funny story about this because one time I was in Palo Alto having brunch with some friends and my kids were there.

37:59I think they were probably like three and five at the time. And one of them was playing with an iPhone. One of them playing with an iPad. and looked over at the table next to us and Steve Jobs was sitting at the fucking table right next to us. And at the time I went over and said, hey, you know, these are actually really fun tools. My kids are learning how to like, you know, draw and read and do some other stuff. Thanks. And he sort of said, you know, you're welcome, whatever. Later I found out he didn't allow his own kids to have access to bones at that age. I would say we've had a mixed experience, I think.

38:30Unpack it, yeah, unpack it. With one of my kids. Well, yeah, sure, sure. Too much privacy. Tell me about average kids, you know, that you, in Silicon Valley. Tell me about average kids. I live in Silicon Valley. I don't know what average means here because it's like completely weird and different. But, you know, I think there are some great things about Silicon Valley. We live in a very diverse community. Like my kids went, you know, to school with people from all over the world. They got to experience a lot of other cultures. But, you know, everybody had technology all over them. Everybody had very high expectations.

39:01One of my kids went to a pretty high-pressure private school where a lot of negative things happened to kids. Some kids actually committed suicide. Many of them had stress related from tests and things. So it's a mixed bag living in Silicon Valley. I kind of agree with S.H.I.E.L. I think there are both pluses and minuses, but there are definitely some minuses. And particularly, I think when kids are, let's say, between 12 and 17, there's a lot of social pressures and challenges. I mean, without technology, kids can be assholes to each other. And, you know, sometimes that's amplified, not because of the technology, but because of the people who are on the technology.

39:42And so bullying and shaming and like - Social pressure, body issues. Yeah. It's all contained in that window. That exists in real life. It's not like the technology is what's causing it. Well, it amplifies it, I think, to a level that is superhuman. So the same way, you know, you could become famous and go viral and help your business, um, or, you know, get people to read your novel, whatever it is, all those positive things. Or if you're feeling melancholy, I can't believe you would be depressed. She'll, I'll just go with melancholy. If she'll hit a level of melancholy and, you know, talking to people online and, you know, having never ending threads, uh, debating social topics, got you to be less melancholy.

40:25I'm for it. You know, I just had a hard rule. You know, the kids were allowed to have a certain number of hours with the controls Apple belt, but no social media until 17. And my oldest daughter is 16. And we're just, you know, she'll be 17 shortly. And we're just doing read only accounts, read only accounts, because she's really given me the full core press. I'm the, she's literally saying, I'm the only one dad. I'm the only one without this now. And I look at, What are her friends posting? Most of her friends are great kids, and they're posting pictures of their outfits and their friends goofing off and nature and food and anything that we would all post.

41:08But it does start you down a how many followers do I have? How many likes do I have? And already kids are coming back to the phones and back to the iPads, and this creates the same addiction you and I have, Sheil, with Twitter. you and I get pulled into it it's not just kids, it's us we have these problems too it doesn't stop at 18 or 21 I bet you median time in the bathroom has doubled or tripled Hussain, go ahead do you have kids Hussain? I have a 40 year old so much younger but these kids are just so much more sensitive to it these development cycles where the number of likes And if someone leaves a mean comment, we're more resilient than they are.

41:57Like we've lived through more and we've had to deal with this stuff. And maybe the argument is kids have to go through this stuff. But I think shielding kids from this stuff is actually a good thing versus a bad thing. I would. Despite the. I would love to see Apple and Google put this into the hardware level of the products in America. So if you're a parent and you buy an Apple or an Android-based phone, you're kind of bought into the same. Both of those ecosystems allow protection of kids at a very root level. And the controls in Apple's products were extremely confusing and complicated. and after hours and hours of managing them, after like a year, and I'm a technologist, I've kind of got a grip on what I want to do.

42:48As an example, I'm into audio books. I like to listen to them. I'm an audio listener. I like to hike around the ranch. I got the girls into Audible. They're addicted to Audible. I put Audible. You can listen to Audible 10 hours a day. Now we were having like the sleeping thing. I let them put a sleep timer on. they can listen to an audio book they put a 30 minute sleep timer on you know of course we'll read them stories but they're kind of getting to the age where that's not cool anymore 10 years old like they're like i don't want you to read me you know a story which is sad but they do want to listen to something when they go to bed and i'm like hey if i can get them addicted to audio books that would be fantastic and so you know i'm i'm starting to have the controls work in my favor And if you want a child to behave well, if they've got a device and you can say, after these chores are done, go to clean the chicken coop, take the dogs for a walk, yada, yada, then you can earn more time on the device.

43:50You'll be amazed, Sheil, when you have your kids, how quickly chores get done when the iPad does not work because you remotely turned it off. oh my god this they just have to come to dad and i'm like okay oh you were arguing with mom oh yeah you're disrespectful to your mother and you didn't oh she asked you three times to empty the dishwasher okay great let me know when the dishwasher is free i'll turn on your iphone again problem solved or let's get into venture capital uh unless anybody wants to add anything there but i think we beat it to death um one one funny thing i saw um taylor lorenz posted a thread of all of the past moral panics.

44:32And there were studies done around novels that said they were bad for teens. There were studies done around jazz music saying they were bad for teens. Radios, bad for teens. Television, of course, bad for teens. And actually - Dungeons and Dragons. All remarkably similar to the stuff that we talk about social media today. D &D is definitely detrimental to your dating life, for sure. Yeah, dating life, but it's also good for your creativity. You're definitely not going to get a lot of dates for that. Yeah, she's got a point, except, you know, I don't think we've ever seen anything in humanity as addicting as social media.

45:11I'm trying to think of, like, cigarettes and social media seem to be the two. And I guess sugar and fatty foods, right? And so if you were to think of those three that just came off the top of my head, the damage they've done, the damage that processed foods have done to Americans. Tobacco, alcohol, and carbs. Tobacco, alcohol, and carbs. And then you add to it the mental health issues with screen addiction. That's a pretty big—those are the four horses of the apocalypse for humanity. Hey, question for you guys. is there anything left to fund outside of AI right now for us? Has anybody, looking through your last couple of investments, was the company, because there's two things, a company that uses AI to build a company, you would be foolish not to, that would be a sure sign that your company's going to fail, but then a company based on AI providing services that are AI-related and or powered by AI, Is there anything outside of AI that anybody is funding?

46:16I think that's an extreme statement, but it is probably at least half of the VC brain, if not two thirds. But, you know, let's say there's all these new sexy categories, space tech, defense tech, robotics, AI are probably like the hot and sexy categories. I still think fintech is like a big category and it's not, you know, overfunded, particularly if you get outside the US and a lot of emerging markets, I would say fintech and e-commerce are still big categories and are still growing. They're not sexy in the venture world, at least not in the US. I was an investor in a fund and I got a distribution for this new bank and new bank.

46:59And I'm like, what's a new bank? And it was like this tiny little amount of stock. And I'm like, well, if this legendary venture firm found this company and I'll just hold on to the stock and see what happens. And then all of a sudden it became a very large amount of stock over a period of time. Yeah, for sure. Still much room to grow. What do we think, Hussein, of Stripe buying open router? Those are two different things, tokens and web hosting. It's more than web hosting. It's like the it's the information layer. You kind of know exactly how the token spends kind of going through the economy.

47:39And I mean, I think these are these it's an interesting strategic purchase. We all kind of scratched our heads with YouTube. Well, we all scratched our heads when YouTube got bought. We all scratched our head when WhatsApp got bought, like maybe a little bit less so for Instagram. I think if you're if you're leaning into AI and you're the plumbing system for the payments, being leaning into AI and knowing where the spend is actually happening, how these like it's actually strategic. The why I think we're going to figure out probably five years from now, we're going to kick our, like, look at it and be like, there's such an obvious big purchase.

48:10Like, I think you give a lot of credit to founder led businesses who can kind of think one or two steps ahead of the rest of the market. I like how you're framing is like Stripe's infrastructure, open routers infrastructure, infrastructure respects infrastructure. That could be the beginning. I never thought of that. That makes sense to me. What do you think, Shiel, when you saw that purchase? I mean, yes, Stripe routes money, payment methods, banks, et cetera, open router routes inference, basically. And I think broadly it makes sense. I think the price is wild. What did it go for? $12 billion?

48:46Seven. Oh,$7 billion. Seven to eight. And it was making$100 or$200 million at the time? I think. That was rumored. I don't know. I don't know. I don't think it was more than that. I thought it was a little bit more. It was still 50 times revenue, 100 times revenue. Something crazy, yeah. Because they had just raised at$1.3 billion earlier in the year. Got it. 70 times revenue. 70 times revenue? 70 times revenue. There it is. Okay. Well, sorry, that was based on the$10 billion number, so I guess less than that. Something in that range. Okay, so between 50 and 100 times. It's unbelievable. It's clearly a bet that neutrality ends up, like that you need to route, which I think I see no evidence that that isn't true, but people are building their own.

49:28Ramp launched their own router.com the same day that the deal was announced. It's crazy. Yeah. I mean, hey, it's been a fucking great week for Martin Casado at Andreessen, man. Between Casado and Cursor. Well, I mean, a$60 billion Cursor deal. I mean, explain how unprecedented that is, Dave, in terms of the last 20 years you've been a venture capital and 12 I've been one. I think Cursor was the biggest M &A ever,$60 billion. Andreessen and Thrive, I think both invested roughly$60 million,$50 million. they both made Andreessen got 6.6 billion back on 44 million in 150x return in a couple years and a big cash on cash number so 150 times multiple might be small compared to some angel deals but it's on a big number some of the angel investors even better like I think Neo Ali Partovi I think put in a million and a half and is getting I don't know billions back something like Yeah, nobody could ever challenge Y Combinator, could ever compete with them.

50:42And the Y Combinator people attacked him savagely. And I wondered why they did that. Because he was a legit threat, probably. He was good at what he does? But notably, Cursor didn't go through the accelerator. It was an investment outside. Right. But I agree with your point, though. I mean, what did you think when you saw that, Sheil? There were also investors at Replit. I think they did go through the accelerator. What did you think, Sheil, about that? Like the Y Combinator trying to put him out of business? I thought that whole thing was weird. Why come out with this personal stuff and you make claims that like, oh, he's a bad person.

51:15We know the story, but we're not going to tell you. I don't like all that stuff. That's the YC playbook. They did it to me too at one point. I can tell you from experience, it's a very different thing when you are not competing with YC and are competing with YC. They did it to you too, Dave. They went after you, yeah. I was pretty close with a lot of people before I started 500. I even emailed PG and Jessica before I started 500. And then as soon as I left 500, things got very warm again. It was an interesting experience. Yeah, they're circled away. It's so lame, though, to be swinging your elbow like that and trying to, you know.

51:51It's like there's plenty of, if you accept less than 1 % of startups, then you should be happy that the other, let's say, 9 % in the top 10 % have a place to go. because I can tell you, Dave, you and I both know the business pretty well. Do we know the difference between top 1 % or 2 % or 3 % and does YC? Obviously not. Not until seven years later? Correct. So what are we talking about here? You can be kind to each other and supportive. I'm super happy for him. I think entrepreneurs of all kinds are competitive and you're probably very familiar with how Elon looks at people. How about before a year ago, how Elon thought about Dario and this year, now that Dario is a big customer.

52:34I think he re-underwrote his position on them after talking to him. Chamath re-underwrote his position on Trump. It's a lot of re-underwriting that occurs in our industry. All right, let me just take a pause for the cause right now. I love using AI. I, obviously, we all do. And then I found out about this great product called Harmonic. What is Harmonic? It's a database of every transaction, every investment in venture capital, every profile of every company. And I've been getting into robotics, because when I was in Japan, I started seeing these robots fighting each other. And I was like, tell me about these.

53:14And very quickly, as you can see on my screen here, told me which ones are the ones being used at all these different fighting competitions. But then I was like, you know what? I want to have this type of search going on like an associate or a researcher at my firm might do. And so I've empowered my team to create scouts, just like the Sequoia Scouts program. I was the first Sequoia Scouts. And they named it Scouts. So I said, hey, find me any robotics companies that are pre-series A. And if they went to Carnegie Mellon, MIT, Harvard, Stanford, get me that list as well. And now it runs it every Monday for me.

53:51That's the power of harmonic AI. If you are in our business and you don't have harmonic AI, you might miss the next Uber, the next Micro One, the next cursor. Give it a shot, folks. Harmonic.ai. Lots more to get to here. But let's talk about physical AI, robotics, defense industry. Hussein, have you jumped into it yet? Are you monitoring it? Because it feels like frontier models, obviously, that investment opportunity seems to have manifested itself fully. There might be less opportunities in backing a frontier model. But it feels like we're in that moment for robotics. And still, for military tech, still seems pretty nascent to me, especially on the implementation side.

54:38These things aren't in our homes yet. They aren't really in the factories. And if they are, they're kind of kludgy. So your thoughts on physical AI and just physical real world stuff being the moat now. That's what we're hearing from a lot of investors. Hey, there's no moat, but hardware used to be hard. So we didn't do it. Now hardware is still hard. So we do it. So we have some kind of defensibility. It's amazing how this industry has transformed from being anti-hardware five years ago to very, very, very pro hardware across the board. you know i am convinced that the future is like like it's the everything language related is done like and every derivative of the language stuff it's the frontier models that we all kind of know open ai anthropic and then you know people building on top of the stuff i think it is still up for grabs who's going to win transformers ai for physical and transformers ai for biology and it's no surprise that do two spaces have kind of gotten hot um and there's a bunch of that stuff in Europe, which is kind of good news for us, because that's where we kind of invest.

55:38And we've done one stealth one that came out of Imperial College. And a bunch of people are citing their papers. I can't talk about it yet, because they're going to launch in about like two or three months. But it's super exciting. It's like a new frontier model for robotics that kind of upends the figures and the generalists, etc. of the world with a different technique that requires a lot less training and makes it much more efficient. So big believers in this stuff. them. Shil, any investments in the area so far? Are you double clicking on it? What are your thoughts? I mean, you're early stage, so it's a little bit scary to put, I'm assuming your average check size, 250 to a million.

56:18Am I correct? Or do I have all the information? We're probably like 2 million average to two and a half. Okay. So that would burn through like the prototype in nine months. Yeah. In a hardware company. It is hard. In general, these AI companies take so much money. We have not invested in anything in physical AI. I am super excited about what I've seen. I don't know if you saw the demo yesterday from skilled AI. They announced something. They have a robot that like you show it flipping a pancake and it'll just flip.

56:51It'll really cool thing where the demo had or the they cut off a dog's leg and Like a robot, a robot dog's leg. Oh, sorry. And this is a robotic dog. No dogs have been harmed in the creation of this. We're clear. They cut off a robot dog's leg and show that it just learns how to walk on fewer legs. Or they cut off part of its leg and it shows learning how to walk. The demos are amazing. And I can't freaking wait to have a robot in my house doing my chores. And this is from Skilled AI. Skilled AI, yeah. Here is the - Cardigan melon spin-off. Yeah, I mean, that's why I put that into my search. Here it is, folks.

57:43Let's take a look. skilled AI person has some gloves or a harness, I guess a physical harness. Here's the pancake being made. Here's a plant being planted. And you can see here, the human has devices, cameras on each wrist, and it's studying the human doing planting, moving things from pots and flipping pancakes and lo and behold uh this is like the scene from planet of the apes dave you remember that famous scene where it was like do and they were like putting the forks and the knives into the into the proper trays and uh it does look like this is going to be the end of chores and human or your daughter is never always is always going to have her ipad i mean basically she's going to be like, she's going to be doing to the optimist or the skilled robot what I do to her.

58:42She's going to be like, I'm turning off your internet access until that dishwasher is empty. And the robot's going to be like, okay, I'll empty the dishwasher. But this feels like it's getting close. Yeah. It's getting close. Yeah. It's compounding at a rate, which is like exponential. And like, I think this is, I mean, I think if you're, you can take the long view and be like, it's 10 years away, but I think it's a lot sooner. I mean, watching this, I think the training data is happening at such a fast rate. So, Sheila, your thoughts on the compounding nature of what we're seeing right now and when that hits reality.

59:14As these things get better and better, I just can't wait to have a robot in my house. And I would easily pay way more than it costs to make one of these things. Like, is a robot worth$100 ,000 to me? Easily. Like, if it's cleaning and cooking, it's worth$100 ,000. And what are these things going to cost to make? not that much 30 000 is uh i think what the first yeah what do they say build of materials or um bomb bill of material bill bill of materials i always say build bill of materials bomb the bomb i think's like probably 15 20 you put in some extra pricing i think they got to be 20 to 30 so i think they're the cost of a toyota prius so think about what that unlocks for humans and it's just incredible.

1:00:00At that price point, it's incredible. It's going to be like everyone, unfortunately not everyone's going to be able to have one immediately, but even for the average person at$20 ,000,$30 ,000, it actually pays for itself pretty quickly. We have Rosie, the robot. Unbelievable. Unbelievable. All right, listen, while we wrap up here, Sheila is a beast on Twitter and we're going to play a new segment. It's a new segment, we're saying. It's called Shields Hottest Takes. Take number one. Let's see. You disagreed with Chamath's all-in that Silicon Valley has lost the idealism that made it great and that people only care about money now.

1:00:44You suggest, quote, most likely a function of who Chamath surrounds him with. Am I supposed to take this personal? What do you think of this take, Dave? and then we'll end it with you, Shielg, defending your take. All right. That is below my line. It's below your line, okay. Just saying your take on the... I mean, is it too much about money right now and a little less Steve Jobs and, you know, idealistic, we're going to index the web, Larry Page, you know, it did feel... You know, Silicon Valley is always about the money, but it's also always about the innovation. Jason, you were probably around...

1:01:22Well, you may not have been. Were you here in the Valley in the late 90s? No, I was in New York still. But I mean, it would come out two or three times a year. But I mean, it did get - I knew there were a lot of people who thought in the late 90s, it was just people here for the money. And a lot of them were just here for the money. And then it blew up in 2001, and a lot of them left town. And then again, that happened probably two or three times. So I don't know that it's wrong. It's just not the whole story. um the true believers versus the get rich quick people is i think a trend you are correctly identifying dave and we are i think tipping into the get rich quick kind of like hey can i get in here go ahead and i was gonna say i mean like in the 90s there were a bunch of tourists who came in they were definitely there to make a buck and they left but like we did not see seed rounds and series a rounds of secondaries where founders were taking a ton of money off the table pretty like life altering, like not life altering money by today's like trillion dollar company standards, but life altering money and like millions of dollars.

1:02:29I mean, if you break 10, it's life altering. Yes. Five or 10, it starts. It's become much more coin operated than it used to be in the past. Like there, there's a, and I think there's a, there's a bit of a negative halo around some of this stuff because I think that that voice has become much more amplified, even among the most technical of founders and the most innovative of founders. There's like a, it's become a business in a way where it wasn't as much of a business 20 years ago, 30 years ago. It felt more clubby. That's for sure. 10 or 20 years ago. So she'll, um, you defend your take. You still defend your take or were you S posting?

1:03:03Be honest. Were you S posting? No, no, no, no, no, absolutely not. I think, I think that, so Chamath said Silicon Valley lost the idealism that made it great and only cares about money are there people that only care about money absolutely has always been the case and it ebbs and flows on the whole the people doing the great work like my friends at anthropic and open ai could give two shits about the money like they're doing it for the mission i think like this easy to say when you pass a hundred billion valuation you're yeah that's right but but also like their lives haven't changed like they haven't changed the way they They live their lives.

1:03:42And what are they? They could. They could easily just say, hey, I'm done. I'm retiring. But if you look at the number of people that continue to do stuff, it's not strictly money motivated. It's because they're excited about the mission. And I think I've actually I didn't see that idealism five years ago that I do see now. It is a peculiar group of people. I will say Anthropic, because of the leadership, having all self-selected out of the Sam Altman experience, which is the cutthroat experience in their minds and the money people are going to make the decisions, code monkeys, code monkey, but leave it to Sam to take the credit.

1:04:21This is not my interpretation. This is what people say. Sam's taking the credit. Sam's doing the deal. Sam's the front man. That got a little tired, I think, for that group of people. Anthropic is like, oh, we're a bunch of monks. We're a bunch of pious. like we're doing this and we're giving all our money to the Anthropic Foundation and we're going to cure cancer, but you're going to lose your job. They seem like head cases to me a bit on the margins, like really delusionally committed to being the last company on earth. It is a little weird. All right. What about Sam not having any equity in OpenAI?

1:04:55I don't know if it's true. I mean, I think we're missing the point. He's got a lot of money probably in nonprofits and philanthropic entities that he controls. And who's to say whether that's money in his personal pocket versus money in his philanthropic pocket? It's fuzzy. People need liquidity. And obviously, talking my own book here, but I just wanted to share a few interesting charts that might be relevant. I've been doing this presentation for another talk. This is like comparing$100 million private rounds versus$100 million IPOs. That crossed over around 2017 when SoftBank Vision Fund came out.

1:05:35Got a little nuts in 2021. In 2016 is when the flip happened. The blue line is$100 million private rounds. The red line is $100 million IPOs. And we see them bifurcate in 2016, just so people listening understand. And now it's 10 to 1. Last couple of years, the number of private$100 million rounds 400 per year. Looks like we're going to continue on that track. Number of IPOs of$100 million, only like 40 or 50, right? And I think that's what we've seen is the IPO market now is requiring half a billion to a billion dollars to go public. It's not that it's closed. You just have to be a lot bigger.

1:06:14That results in companies being private a lot longer. The other graph I will show is this one, which is the tender offer. And this is corporate tenders or internal secondary offers for their employees. That is a booming business, somewhere between$30 to$40 billion a year now and growing probably north of 50%, at least north of 30, 40, 50 % per year. And here we're seeing 2023, there were 6.5, 2024, 12, major jump from 24 to 25, 12 to $27 billion, so just over 2x, and then$27 billion to$37 billion into the estimated 2026 tender offers, which for people who don't know, that's some investors coming in and buying common shares from employees.

1:07:04It's corporate organized secondaries, primarily for the employees, sometimes also for their investors. Early investors who have been patiently - For a lot of companies like Databricks and Stripe and Canada and others, these are happening on almost an annual basis now. Those numbers are probably distorted a little bit. OpenAhead did their own$7 billion secondary earlier this year. But still, the majority - Who was the buy side on that$7 billion? Was that Kushner? It's secondary firms. It's the primary round VCs who want more equity when they're oversubscribed rounds. It's retail market and family offices, at least for the popular names.

1:07:44But it's kind of interesting because outside the top 50 companies, there's not as much awareness of those companies. And I think this is what's going to start to happen is these companies are staying private for five years longer than they used to. Employees there want to buy a house, want to put their kids to college. They want liquidity. They're sitting on a ton of, you know, unrealized equity, but they can't buy a house in Silicon Valley. They can't pay for schools and everything. Well, and their concentration, Dave, is the real issue, right? Like you're basically 99.99 % of Shields friends at Anthropic.

1:08:20Their wealth is in one stock. Well, OK, one more graph and I'll quit here. Well, we love your graphs. Keep them coming. Here's my segmentation of that market. In that top category, used to be SpaceX, still is Anthropic OpenAI. Now it's like a trillion. Stripe. Well, but as soon as Open AI Anthropic go out, then the remaining ones will be like Stripe, Databricks, maybe Revolut, Anderol, a few others, like ByteDance, if you consider. Right around 100. Yeah, some of them just below, some just above. So that will - Huge amount of dollars there. But like, look at the rhinos and stallions and maybe the donkeys.

1:08:58These are like where the majority of the number of tenders are. They're not like huge numbers. These are like 10 to$50 million tenders. amount of market cap that's being sold here is probably somewhere between two to five percent for most of these companies got it so they're trimming very little of their cap table for very large numbers right and you know let's assume these companies are probably growing you know north of 20 30 40 percent per year it it's not at all unreasonable to say you would you know do five percent every year in sort of secondaries yeah back to employees this is really the new IPO market.

1:09:31This is like where liquidity is coming from for employees. It's why real estate agents in San Francisco make a ton of money and car dealerships and private schools. But the challenge here is it's still a pretty concentrated story. And I think we're just going to see more and more of these corporate tenders happening on a regular basis. If nothing else, just to be competitive, if you have the choice to go work for a company that has an annual tender offer and one that doesn't, which one you're going to choose? Yeah. And who's the loser here, Hussein? Who loses in this new private market tender offer in your mind?

1:10:06And retail. Retail investors, right? Retail investors have to wait until these things are super expensive. And in the old days, Dave, in the 90s, you take these companies out really, really early, at market caps of 100, and employees would have liquidity immediately after the lockup. And retail could buy those shares. More importantly, a civilian could own Microsoft at$100,$200,$300 million. Well, they can still do that. But the difference is now it's a fuzzy story. Because when those companies go public, they report their numbers, there's quarterly transparency of what's going on. You have a$2,$3,$4 trillion middle ground market where these companies exist before they go public, but their financials are not disclosed to anybody that's not an insider or a primary investor.

1:10:52And so all of this secondary trades that are happening on markets, you know, Hive, Forge, Equizen, Augment, all these other brokers, there's no underlying corporate financial data on most of them. Everybody's flying blind and buying that on Vibes. Yeah. It's Vibes. Yeah. Totally Vibes. And the buyers who are buying it are hearing people talk about these names. And when something gets a certain amount of PR, then... It looks great while SpaceX and Anthropic are going through the roof. But I guarantee you, as soon as that market turns around - It could be like the SaaSpocalypse, right? Like late stage VCs, they suspended disbelief.

1:11:29They bought Airtable, no dig to Airtable at 10 billion and it didn't get there. They got their money back. We could have a lot of those. We could have a lot of those. I don't know how many unicorns there were back in 21, like 600 plus. How many of them are real, right? We were just talking about Headspace just got bought for 200, 300 million dollars, but the last private mark was$3 billion. Headspace got bought. Down 90%. Who bought them? I'm still a large shareholder in comm. I did take advantage of secondary twice during that opportunity on the way up for my LPs, but who bought Sword Health, Plans Require, Headspace and Cash Transaction?

1:12:06Wow. And by the way, this same issue exists for a lot of seed funds. I think this is the big challenge for a whole bunch of fund managers is they're sitting on unrealized marks. They may have a fund that's at 3, 4, 5X, you know, TVPI. but DPI is zero or barely 0.5. These funds are getting to 10 years and there hasn't been 1x return back to investors yet. And I think we need to start figuring out how we're going to get liquidity for these funds. If I wasn't doing what I'm doing right now and so busy, I would do a roll-up vehicle. I would raise$500 million and then just go straight down like Bending Spoons is doing.

1:12:45Bending spoons. But I would do a private bending spoons and then just hire a bunch of AI kids, developers, give them like really crazy bonuses for hitting crazy profitability and just buy every Headspace slash whatever is out there with maybe Headspace has 50 million in revenue and they get sold for 100 or 200 million and then you can get rid of 80 % of the staff. You can do what Elon did at Twitter, you know, get rid of 80, 90 % of the cost and now you've got a wonderful business. I remember meetup.com. My friends got high for me. I started that company, Kevin Ryan, wound up buying it. And then it went to Bending Spoons.

1:13:22And I had heard a whisper that it was making$15 million a year. And then it got bought for$20 million. And I was like, wait, how's that possible? It doesn't make any sense to me. And I don't know if that's true or not. That was just a whisper I heard. But I think if it's not growing, VCs just don't want to waste their time. But what an incredible opportunity. Well, there's some stuff that's growing, just not fast enough for venture returns. Yeah. That was Airtable, right? Airtable still growing 20 % and people are like well this is a waste of my time it's like really but okay uh I guess we'll see it all depends on it all depends on price right and at the end of the day well it's price and but I think more importantly see this is what I thought that too Hussein then I realized it's not price it's it's opportunity plus price you have a certain number of things mentally you can keep in your brain as an investor probably 10 uh you know like as in board seats and you're like, well, if I have...

1:14:14I would say three. Okay, but I'm being generous here. Let's say it's eight. Let's say it's seven. So you got seven and you're like, hey, these three are filling my space with a 20 % growth company and it's hard and every conversation is hard and a bummer and we can't get out of the mud for four years and I could give those three seats to, I don't know, this robotic company making pancakes. You know, it's just, you only have so many spots on your dance card. I think that's... Shiel, you're nodding, I think. Yeah. No, I agree. I think there's a question of like, are these companies ever going to go public?

1:14:50Like, why would Stripe go public ever? Like, they have unlimited capital. If they're capital, and they can sell their capital, you know, why not? They don't have to. They have liquidity. If they want to acquire PayPal, it seems like they can because somebody else will give them money to do it. So why would they ever go public? Mike Bloomberg never took Bloomberg public. Different. He owned it almost entirely. Sure. 80, 90%. Because he didn't have to solve for, like Stripe gets this tender thing that Dave's talking about, solves for the liquidity question. And the private markets have grown so much that they don't need to go public to grow.

1:15:26Bloomberg was a technology company. You know what he did in New York? He was famous for just paying 50 % more than everybody else. If you worked at the New York Times, you made 100, you were making 200 working for him. And if you worked at the Washington Post and you went to Bloomberg, you got a 50K, 75K raise. And you didn't get any equity, but right now. I think there's an arbitrage opportunity here where these companies have been priced on sort of venture scale projections. And now some of them are profitable, but not growing that fast. And they're going to be priced on free cash flow projections, not just multiples of revenue or growth.

1:16:01And that's going to be a different number, very different. I mean, if you have a currency like Elon did, I think Cursor might wind up being, you know, this generation's YouTube acquisition. You've got it. That's a great buy. That was a fantastic buy. $2 trillion. And they brought in$3 billion. And what was their runway? $3 billion? $4 billion at the time? It's at$4 billion now. And it's on its way to$10 by the end of the year. But, like, that's not even, like, the total value. It's, like, you know, to be kind, I would say XAI was a shell of a company that was mostly valuable because of, you know.

1:16:34The infrastructure and CapEx that Elon bought, it wasn't because of the tech or even the people who largely walked out the door after that acquisition. But, you know, turns out that all that infrastructure was very useful to rent out to, you know, Anthropic and Google. And then Cursor was really the value that came in. And I think that combination, like you got to give Elon credit, the massive pivot that he's done in the last six, nine months with that company. incredible he's gonna have a line of business that is the majority of their revenue that did not exist you on web services yes that is just mind all right let's end on agents uh i have been obsessed with grok bot just does what you tell it to do she'll you have been obsessed with another agent which has a landing page that looks like it was built in seven minutes by a python developer and I signed up for it and people are losing their minds over it and the terms of service.

1:17:34Tell us about this new open claw abstracted into just iMessage that people are losing their minds over. Tell us everything. Yeah, so I've been using GrokBot too. This company is called Instinct. It was funded at Seed by Conviction and A, I believe by Kleiner Perkins. Not announced, but that's what I've heard. um also i've also heard crazy valuation numbers like seed at 100 uh a at 500 and i heard they have offers uh at the billion plus range um what it does is it's basically like your assistant you can that's the website yeah this is worth a billion dollars folks here's your yeah i mean Could we even just put it in a no background?

1:18:22No. OK, sounds good. You can text it and it just does stuff for you. What's cool and I think valuable about it is it actually like goes the next step beyond what you would think to do, you would think a bot would do. So if you ask chat GPT work to book a flight for you, it will take you to the landing page. Google Flights. Here's the flight to take. instinct will actually go through and book it for you. And they're able to do that because they have a vault where they store your credit card information. And they're probably violating all sorts of terms of service. But hey, the thing works. I signed up for it.

1:19:06I saw the terms of service debate. I paused. I was like, I'm not sending anything until I find out what's going on here. GrokBot has been amazing for me. A bunch of the things I wanted to do with OpenClaw and Hermes, I call it Hermes because I think it's funny, that it's a harness and they make bags. But anyway, a lot of those agents in Claw Code, they had too many restrictions on what they would do and not do. I took a clip of a YouTube file and I said, analyze this into the five most important clips and make me five clips. And it took this Mearsheimer, John Mearsheimer video about tactical nukes, whatever.

1:19:45he's been on the all-in pod it made me five clips i was like whoa and it's like would you like one of these vertical with captions and i said sure and then i shared it on my twitter and i was like well that's a 50 an hour video editor you know freelancer that i would have done that back and forth with instead of taking three hours it took three minutes and was essentially close to free and then I asked it to do some things on LinkedIn and it just did it because it has a computer window that abstracts into cursor and it kind of works all the time. I think that product, if it goes multiplayer mode, will go parabolic.

1:20:26And by multiplayer mode, I mean, can I just add three team members to it as comment only? Can I add five team members to it as read only? You know, like the Google Doc Suite. If they add multiplayer mode to that, I would have taken the Docket creator for today and shared it with you guys. And we would have all been there talking with the Docket. Really interesting product. Anybody use GrokBot yet? Any impressions? I'm using it too. I use them all. Which one is sticking most? Which one do you go to first? OpenClaw is the least durable. like like i switched over to hermies uh and then then grokbot became the next one then instinct i just got i was it has a sign up list and i'm not cool enough like you guys to get i put my name and it was instantly it was like okay you're on the list but you're in i was like okay okay so i'm not working on that one but it's also amazing like a year ago none of these things existed like like open close like a year ago there's like a notorious like yeah yeah like the pace is like super fast again these things are compounding i gotta say what sam altman i mean listen i don't want to beat up on sam here but what he did to open claw was so sinister and cynical in my mind he he like buys the guy brings him internal and then you know dave morin like is trying to keep this foundation going.

1:21:55And literally the second, his name is Peter, I believe. I've never met him. The second Peter went to OpenAI, OpenClaw just lost its voice, lost its momentum. Everybody was like, well, this is over, whether it's true or not. I've never seen a project go from everybody embracing it, talking about it, to completely toxic and people being like, yeah, you know, I gotta go find something else. I gotta find something else. And I don't know if that's because they thought it was part of open AI and they didn't want to, you know, they were open source people or better options came out. I don't know. What do you think, Sheil?

1:22:33Yeah. I'm not sure what happened there. I think to your point about GrokBot being like, we talked about this, having a hundred million users. I think that relies on the other guys not catching up and they actually already have. Like ChatGPT work already yesterday announced new stuff that's doing a closer version of this. I'll show you guys one more graph. By the way, Shield, is OpenAI work basically what Peter's probably working on there, and it's basically OpenClaw inside of OpenAI. Totally. Yeah. I mean, what did he get? You think he got$300 million, Shield? Yeah, I think it was. What is he worth?

1:23:09You heard that? I don't know. I thought it was somewhere between$200 to$300. That sounds right. Oh, man. Maybe we had$300 million valuation or$400 million. That might be triple. It might be a billion dollars right now. What do you think, Kusan? Just one guy. Just one guy. It was never disclosed. I mean, the rumors were like a crazy number. Sorry, you know what? That wasn't... That was the other company that was acquired. The podcasting bros was two... Oh, there was a social media experiment that they bought? Oh, yeah. What was that? No, no, but I think Peter got... The whisper number on Peter was $200 or$300 million in equity.

1:23:42And that was when it was a$300 or$400 million company. If it goes out at$2 trillion, that could be 5X, 6X. anyway i just want to point this out how crazy it was the open claw hype the open claw hype was so crazy that there was a there was this moltbook a face that was the one that i was talking about got acquired i think that got acquired for like 200 million by meta by meta right yeah and there was like the open claw religion like if someone planted that seed like it was like there was a euphoria around this thing and then it just like died like it was about one month the whole thing start to finish.

1:24:15Well, I think the hype was maybe overplayed, but the story was sort of for real. I think that was like original agentic sort of adoption. Wow, look at this chart. This is kind of like crazy. Explain the chart. You got to explain the chart, Dave, because people listen. So there's a little story here that CFO Sarah Fryer at OpenAI, four months ago, she was like, Sam's like, we're going to IPO. And she's like, we're not ready to IPO. And then just recently, this was leaked from their internal conversation She's like, we're definitely going to IPO in 2027 and maybe sooner if our growth keeps inflecting.

1:24:50And I was like, what's she talking about inflecting? And I was like, this graph is what she was talking about. Look at those numbers sort of like go through the goddamn roof. Yeah. And what we're seeing here is OpenAI active agent users back in January, 200 ,000 breaks a million. Just a month ago. Like that growth went through. But it hits$5 million in May, and then$6 million in July,$10 million later in July, $15 million in the beginning of August,$20 million towards the end of August. So you're talking about 4X-ing in two months. Right. Unbelievable. And I don't have the grass in front of me, but I know that it was reported that OpenAI revenue was growing faster than Anthropic this month.

1:25:31This is after they had quarter over quarter slowdown. Hmm. Interesting. All right, listen. Another amazing episode. this week in venture capital, a special edition of this week in startups and offshoot, whatever. Hey guys, best investment. What's your biggest portfolio win these days, Shiel? Tell us. When'd you get in? What is it? Which one is just gonna sprinkle all that beautiful DPI on your LPs? Tell us everything, Shiel. Tell us where hope, where is your hope tied to? It's a hard job being interviewed. A real DPI or hope? Those are two different things. Selling hope, baby. Hopium. Tell us about your hopium.

1:26:14I would say recently one is called Basis. It's an AI for accounting. Really automates the work of a junior accountant. If you think about Harvey or Legora for law, and you've seen the growth in those companies, this is that for accounting. We led a seed. Keith at Kostla led the A and Excel led a B recently. And the growth that I've seen is amazing. And companies, these accounting firms are really using the product. And it's been amazing. Fantastic. And you got in at Seed. I think we are investors in the Uber to your Lyft or your DoorDash, whatever the analogy is, tax GPT that we incubated. So yeah, I agree.

1:26:59This is going to be a fantastic space for both companies. What do you got, Dave? What's making you? We're talking about what we're going to get DPI and what we hope to get DPI. Yes. Which one do you, when you talk about it, put an eggplant emoji at the end of the sentence? Which one? Well, I guess because I worked at Founders Fund 16 years ago, I have Kerry in Founders Fund too. And when we started our secondary fund, I rolled in about a million dollars in GP commit in that fund thinking, oh, this will perform pretty well. Oh, yum, yum. Turns out that was all SpaceX. Fantastic, well done. It was our best investment.

1:27:35So that went really well. But the things I'm actually excited about probably are not generally on people's radar. We spend about 10 % of our capital in Latin America. And one of our best performing investments, I may have mentioned this on the show before, was a company called Motu. And they are a motorcycle manufacturing and small business lending company for delivery drivers in Sao Paulo, Brazil. And that business is on fire. It's doing over$300 million in revenue, profitable, growing 60%, 70 % per year. And it's very, very reasonably priced. A lot of LATAM is actually on sale. Like Tamina. And as Shiel knows, we used to do a lot of investments all over the world in 500 startups.

1:28:18Now that I'm doing secondaries, most of it's in the US, but at least some of it we're doing emerging markets. A different deal that's not a typical secondary for us is in a company called Equity B. And we recently put money into that because they are a platform sort of similar to secondary marketplaces like Forge Equity's done, but they do employee stock option forward contracts. And so again, getting back to those employees who are sort of locked up and want or need liquidity before the shares are actually available to them, they can finance and exercise and hold those shares and get some liquidity.

1:28:54And really helpful for people who are leaving companies who might otherwise lose those options. Equitybee.com, B-E-E. Amazing. Well done. Hussain, who do you got? Who's making you feel optimistic these days? This year, this month, we did one in the AI space for material science called Cusp AI. We were the inception check. We wrote him a$10 million check. What at the time felt like a crazy number. It's not a crazy number in hindsight. We're 2.6 billion. Kleiner just marked it up. Two years in, almost a fun returner for our fun three in two years. Feels pretty good. Congratulations. Not our most interesting thing, though.

1:29:31Our sister company to that in many ways is the same type of thing, but a drug discovery company. AI for biology called peptone.com, which this stuff really works. We have a drug against prostate cancer that might actually stop prostate cancer almost entirely generated by the computer. And like we're going into clinical trials. So like that, that to me is like the one that's where I can generate the ton of DPI for us. But both are great. Absolutely fantastic. Congratulations. I'll just give you two quick ones myself. We love all of our startups equally, but you know, sometimes we see things get marked up and this is this week in VC.

1:30:07So just on the markup trail on prem and sovereign AI became like a big deal, but we had incubated this company, Apicus, 18 months ago. And so for banking and healthcare, et cetera, they take this GoOne server, put it into your facility, and they help you build your own large language models, harnesses, et cetera, and keep you from having to give all that data to a frontier or risk leaking it. And they have a wait list for their product. And that is always a great sign. Second one, MicroOne. And I met this crazy founder, just high energy, reminded me a bit of Travis. And he was using AI to figure out who the top developer was, top developers were.

1:30:54It's a pretty interesting product. I think we invested when it was$10 or$15 million. And then he pivoted into AI training. This week, he announced he had$500 million in training revenue, everything from legal, et cetera, and that they also hit a$4 billion valuation. So that is a fund returner times four, three or four, I guess. But of course, long way to go. Still more work to be done. Dave, Sheil, Hussain, great job on the show. And we'll see you all next time. Bye-bye.