Liquidity Summit Talks: Antonio Gracias and Gavin Baker | E1990

27:31In addition to that, they thought it was easy to write checks in early stage companies because they all seem to win. Well, I got news for you, they don't. And I mean, look, I remember having a conversation with one of our friends in the Middle East, and they'd asked me about one of these funds. And I said, look, I wish I was smart enough to hire Bain to do my work. That'd be great. I mean, I've got, you know, 30 guys in operations 30 public investments i mean i just feel like a fool because i've got to manage people and take care of them and pay them and make sure they have good careers yeah um boy it'd be better for ourselves to bain it's great uh turns out it doesn't work so well yeah so management consultants can't do the bespoke work of entrepreneurs and venture capitalists yeah go figure go figure yeah i think it's still got no offense to the guys at bain and mckinsey they're very smart but They're not doing what we're doing.

28:18And they're not at risk the way we are. So outsourcing your fiduciary decision and most of your research to somebody who doesn't have the same capital risk, that's just an agency problem. You're trying to drive capital through at high speed because of this weird dynamic of what I call volatility washing. Let's talk about the state of, I don't want to get into politics, but the state of the balance sheet in America. We have really, over the last two, and this makes it super not partisan, the last two administrations just really went buck wild spending on whatever their pet projects were, COVID, whatever, tax breaks, student loans.

28:55But the country feels like it is reckless in how it is managing its finances. And that seems to me to be something that is really going to be harmful in, I don't know, it's the near future, but certainly in our kids' future. How do you think about the debt we've been running up, the interest rates, and what seems like a bit of chaos in how we're running the enterprise that is the United States, and then let alone putting on top of that recklessness, this anti-entrepreneurship kind of vibes in certain pockets of the culture? It feels like a very dangerous combination to me. I think this is correct.

29:41Let me give you a few additional data points. So the federal debt numbers are through the roof. I've noticed those numbers and they are, it's okay to have debt if you're investing in productive capacity. Problem is here, we're investing in just giving money away to people, right? And what happens? In about, call it the mid seventies, when women enter the workforce, the employment population ratio, which is the total number of people that can work that are working was about 63.8%. If you look at the curve, it went up, peaked somewhere in like the 2000s. Yeah, 69%. Yeah, just under 70. Exactly. And then it came back down during COVID.

30:18It went to about 62 and change. And now it's back at 63.8%. What does that mean? That means that about half the population came into the workforce, but the number of people working is actually the same as it was before they came in. This means that there's a lot fewer people that could be working that aren't working. And so I think that, look, the debt is a real problem, okay? But it can be solved. And we're not at a place where debt to GDP ratio is like 110%, I think, something like that. We're not like at 140, 150. We're not like Latin American numbers. So the dollar can definitely be at risk at some point if we keep going.

30:52But the real problem is we don't have enough productivity. GDP is very, very fundamentally a function of number of people working, time for productivity, productivity of capital and productivity of those humans, right? Which is driven by capital. If that doesn't go up and we don't have more people working, then we will have a real problem because the dollar will be devalued by function of our low productivity levels relative to our competitive trade partners. That's the real problem in my mind. And this is where the culture of, I'd say, anti-entrepreneurism you're talking about and anti-work is a problem.

31:28And we have to work. What area around the world excites you? If you think about entrepreneurship, we had Ibrahim from Mubadali here. We're talking about UAE. Very exciting. What regions make you excited in terms of capital, capitalism, entrepreneurship, and people who want to change the world for the better? So look, I would say I'm still a huge fan of America. I mean, I would not move anywhere. I would not go anywhere. I love this country. I'm raising my children in this country. They're going to work in this country. So I would say still number one is America. You still believe in American exceptionalism?

32:00Yeah. I believe in, well, let me actually go double click on that. I believe that we were in a bipolar world. We're now in a multipolar world. And we'll have to come accustomed to the idea that somewhere around Gulf War I, we started exporting American values as opposed to American interest. We need to return to a policy of exporting American interests. Are we exceptional? We're not exceptional? I don't really care. What matters to me is we have the ability to live well, live freely, and respect other people's cultures. I think that's what matters, which is where we were prior to Gulf War I. I believe we will return to that over time.

32:35So I wouldn't say it's exceptionalism necessarily, but it's the American ingenuity that we can have partners that are equals to us. That's okay. No problem. We just don't have to fight with them. vehicles. The second place I would go in the world, the biggest delta between what is happening on the ground and what's being reported in the U.S. I think is actually the Middle East. You and I have both gone there and spent time there. It's extraordinary to me how much these countries are sort of running the Singapore playbook, except they have resources and they have land. So if you think about if Lee Kuan Yew had lots of capital and lots of land and a very, very young population that was well-educated, which is what you have in these countries in the Middle East.

33:22Culturally, they are different than us. However, I think we should respect these cultural differences and find the commonality we have to work together. The second area, which I think is obvious to people, more obvious than the Middle East, is India. Again, demographics are destiny. Look at the Middle East and India. They have very high population growth.

34:08today and in the future how if you were president uh how would you architect our immigration policy for the next for this century i mean i would run it exactly a company i'd say okay we want the very smartest people let's figure out how to find them a lot just open open up the top of funnel for the very smartest people in the areas we need them and give them h1b visas to come in and um turn off the nonsense at the at the other end right so we do need a i do believe we need a guest worker program for labor that is$15,$20 an hour. And I think that's probably a smart thing to do in a controlled way, was where we were 20 years ago.

34:47The H1B program is totally broken. We need reformation there. And I think it's become political football between the left and the right, which is not good for America. And I hope it gets resolved soon. But for sure, we would never have a company that just brought people in and hired them without any qualifications, which is what's happening right now. You just walk in and start working. I think we need to reframe it from immigration to recruitment because companies do recruitment. Yes. And recruiting what we need and the highest quality people would give us a distinct advantage because if you were to recruit the best of India, the best of Japan, the best of China, the best of Russia, they lose that person.

35:25You get a great player on your team. Yeah. The other team loses the player. You win twice. Yes. The advantage doubles. I agree. And people want to come in, but we've created this bizarre architecture where you can come to the border. And 80 % of it, this is not a political issue. 80 % of the country is in agreement. We should have some control down there. No, look, I just wanted to share my parents. My father actually volunteered for the Vietnam Direct. To get to this country. To get this country. Yeah. To get a visa. To get a green card. And I'm sure your grandparents, your parents, someone did something similar.

35:56It's hard. Yeah. And I still believe that if we allow, create a system where the best people could come, they would come. We'd never recruit them. We'd just open up and have, you know, however you want to qualify, then they'd come. Yeah. I mean, Canada, New Zealand, Australia, all point-based systems. Like, it's very obvious that this needs to shift to a recruitment-based one. What gets you excited these days, just generally speaking? I mean, I flew here to talk to you. That was pretty exciting. That's been pretty exciting. Super exciting for me. Yeah. I even wore my collar boots, so I'm pretty excited about that.

36:28Look, this is the most exciting time in my career. It really is a moment where I feel like there is, you know, we have this investment thesis which is called Pro and Tropic, right? Lots of chaos going through the world. And we want to invest in companies that make the world better. These two things are more important than ever. It's investing companies that make the world better that are good at helping us manage through the chaos that's going to come. And the chaos is getting worse, not better. So it's very exciting. And the number of young people I'm dealing with daily, both inside the firm, outside at the firm, the systems we're building, scale which we're operating, all this really does excite me.

37:02And it excites me partially because it is scary. Like it's not just exciting because it's all benign. You know, it might be benign if we make it benign, but it could also be dystopian if we don't really work to make it a great outcome. And I think we, the people in this room, we had the opportunity to do this, right? We live in a system in America, and I'll moralize for a moment, which is in many ways, it's ethical, but we drifted toward being amoral. We think about what the legal thing to do is, not always the right thing to do. And I think this is changing. I think people are actually thinking more about not just, hey, is it legal, but is it right?

37:42And if I can leave with one thought, it's just think about that as you analyze managers, analyze people you work with. I know Jason Duke, the world that way is not just managers, it's like inside the law, but should I actually do this? is the right place to put my energy, my life's energy, and that and my team on this company to see it succeed. Yeah. And we make mistakes and we change the world and everything in between. And it's just such great work. It's great to work with you as a partner. Everybody give it up for Antonio Gracias. Thank you. Okay. Most of us in the startup game have heard of Brex.

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38:49So here's your call to action. Brex is used by one in every three US startups. Amazing. Get the financial stack founders trust at brex.com slash twist 24 at brex.com slash twist 24. I hope you enjoy that as much as I did. I always love hearing what Antonio has to say. Now, next up, we have Gavin Baker. He's the chief investment officer over at Atreides Management. Spent nearly two decades at Fidelity running their OTC portfolio, and also helping lead their venture capital activity. He talks to Jason about investing, humility, and which big tech companies are moving the fast and doing the best work in AI.

39:27Enjoy. I try not to do many fireside chats here. I like to make everybody sing for their supper and really put a deck together. But last year, Gavin Baker, come on up, Gavin, from Atreides, sang for his supper. And most people said, when I ask people, who's your favorite speaker? Good to see you. appreciate you coming out for me. And Gavin and I have become colleagues and then friends over the last couple years. And I said, hey, I have this event, probably not worth your time, but I would love to introduce you to people in my orbit. And he came last year and he gave a talk. And almost universally people said that was the best talk of the event, but there were a lot of good talks last year and even this year as well.

40:09And I said, this year, just come back for the fire so you don't have to do any work if you would be willing to come back. And he said, JGal, for you, I support everything you do because I see how relentlessly supportive you are of Antonio and our friends. So thank you for coming back. And we'll do a fireside chat here where we just get to wrap out and you didn't have to do any prep. By the way, I didn't prep last year. I didn't have any slides. You did have two slides. I don't. If so, that's news to me. You didn't? I had no slides. You just spoke extemporaneously. Yeah, I have a strict no preparation ever for anything rule.

40:42Okay. I did just want to reflect on some of the things Megan said. I thought that was one of the best conversations I've ever heard. That was amazing. I don't know if she's still there. The lights are quite bright. She's one of my favorite Twitter followers. I learned from her weekly email. And I am rarely starstruck when I am introduced to someone. And Brad is a good friend. Yeah. But Brad introduced me to Megan in Miami maybe, I don't know, three months ago. And I was actually starstruck. so Megan that was great to meet you they were very busy they had to run off it was great to meet Megan also love Brad and I loved her talk and I would just say a few other things because it feels like maybe there's some people in the audience who are trying to raise funds like just really quick riffs and reflections on what she said the first thing is is it all feels so personal like I know I'm sure it feels personal to you and it still feels so personal to me but it's just not personal for the people on the other side of the table you know it just may be like they love you they don't have an opportunity they really like you they don't do just they've got a lot of other things going on um and just recognize it's not personal and that really helped me because um i still find it takes a big emotional toll uh because the rate of rejection you know is incredibly high um you know i would say like 99 probably everybody in this room you succeed at most things you do um and probably a lot of people were good students and it's like there's like a one percent success rate raising money and so the 99 of the times you get rejected they take a big toll on you and just understanding that it's not personal um was really helpful to me uh i would also say just not that into you yeah maybe they're just not that into me no i mean to your point i think the other side of the table has their own multitudes of issues they are dealing with and i had some people pull me aside this is when i actually took this to heart because to be totally honest i am really not used to any kind of rejection it never happens like i get it it's a very strange thing i particularly understand it after seeing how good you looked in white last night, Jason.

43:04Thank you, sir. No, I'm not even talking about romantically or anything like that. I'm a happily married man, but I'm talking about just in generally speaking, I am so used to making friends or get in a seat space. There's always room for me in a deal. I have people who reopen rounds. I've had people reopen their rounds six months every day to then go meet with the LP community. And then this is when I realized it took two or three of these for me to realize, oh, this is not about you jaco when two or three different lps said to me after the call they did a follow-up and they said hey um i really enjoyed our call i just wanted to talk to you real quick and i said yeah i don't know how long i'm going to be here exactly so uh what's it i mean venture like what's it like on that side of the table and i was like you're looking for a job it's like well i'm considering some options i was like oh i'm meeting with people who their situation is so acute that they're expecting to be fired or laid off 100 on their side so that changed my whole dynamic like oh my god they're taking the meetings because they have to take meetings that's the job they have to take 200 meetings to make one investment yeah just like we take 200 meetings to get one to get one investment oh this is just what founders go through every day and once i had that empathy and i was talking to a friend who was raising his fund and he was catatonic that he couldn't get any yeses.

44:29And I said to him, now I guess we know what it's like to be founders. A hundred percent. And it's actually, I was always surprised before I did this, you know, I generally show up to meetings with company CEOs or founders, you know, knowing their name, knowing the name of the company, you know, having done some work on them, having thought about some questions. Prepared mind. Yeah, prepared mind to quote our friend Brad, who loves to say that. And I was just always shocked by how much it seemed to mean to the, to the founders. But it's like, sometimes you'll go to a meeting, you know, with a, let me not speak ill, but just, um, it is, you know, it's not every once in a while, every once in a while you get a, who are you and why am I meeting with you?

45:11And it's like, okay, let me, let me set the stage. Who are an LP? I deploy capital. I've done well. But having said that, we have, you know, lots of LPs are amazing and great, but I did just, I do have a lot more empathy, like you say, for founders and, you know, just things happen like, um, before, uh, before my firm Atreides launched, um, I ate people from a very prestigious, you know, university endowment, uh, came to our office. they spent five hours with me and i was just like oh my god this is amazing they all followed by twitter they were asking me all these questions about tweets i was so happy um and then the next day they're like oh we're definitely not gonna invest and then i went to lunch with one of them and i was like oh you know what was that i thought there was great meeting they're like oh yeah we you know we love you but we're just not gonna deploy anything into your sector for many years and we just want to be with you because you're interesting and we thought it'd be a good use of time for us and i was like well did you think about like i'm trying to launch a firm like but anyway it's just some other things to riff on things uh megan said which i thought was great but just it really is a journey it takes a lot of it takes a lot of time you want to invest in those relationships and there are you know truly world-class lps who will who i think will go along with that journey with you um if you kind of follow all of megan's rules um and be really supportive through thick and thin and uh karma is also very very real um that just resonated with me so much like one of my rules is just always be super nice to everyone and if someone is going through a hard time be really nice to them um not only is it the right thing to do but it often yeah i try to bounce the ball to a lot of people the people who consistently bounce it back are the people who I reached out to or tried to be helpful when they were going through a hard time.

47:05I think that's a great rule for life, but also for raising money. And the last thing, and then we can talk about AI or software or whatever you want to talk about, is just also something Megan said is like, you have to ask. Even with people who, it's very rare that somebody is going to say, hey, just here, take my money. You have to ask. People want to be asked. And I I think getting comfortable doing that, uh, it is important. But anyways, those are just some thoughts inspired by Megan's epically awesome talk. So we can, you know, I think this is the talk that matters actually. And by the way, in terms of the rule for life, I, it's very strange where you pick things up, you know, like childhood actually like really is formative.

47:50And you know, one of the things I learned was like when somebody gets their S's kick, like you, you gotta go like stand up for your friends and like, that's, that's like, that's the moment in time of friendship, not the moment of time when like, you know, they win the lottery and you go pop champagne bottles with them and you're like, hey, you won the lottery. This is fucking great. You know, it's like when they actually fall on their face. And so it just very naturally came to me when people got their asses kicked that I should just immediately call them or come to them and say, hey, let's get a dinner or drink or go for a hike or something like that.

48:18And I kind of just expected everybody had that in their DNA. That's not in people's DNA. The reaction is, oh, I just read a horrible news story about this person something terrible happened i probably should give them some space yeah and then that person is sitting at home alone on a friday or saturday night saying i am a fucking loser i have no friends i am falling on my face and nobody has called me and they interpret it as i've just failed that life yeah well i will i will share um i'll share where it came from for me and and i'll admit it was not intuitive to me um but one of my best friends and mentors and i was like 25, 24, 23.

49:02And so we had gotten fired in a terrible way from the firm where we both worked, not for anything unethical, but just probably bad performance. And I said, hey, I really like that person. I want to reach out, but it just doesn't feel like the right thing to do. I should give him some space. And she said, no, you should definitively reach out. And then I'm sure she's very close friend so hopefully it's okay with her and if it's not i'm very confident she will forgive me but she um she told me about how her dad had died when she was very young and she'd been very close to her dad when she was very young when she was 30 her dad they'd been best friends it was really really hard you know even you know 35 years later it's hard for her to talk about but she said you know when my dad died um there were all these people who are good friends of mine and they reached out and I was like, oh, thank you.

49:56I really appreciate that. Then 80 % of people didn't reach out. And it took me a long time to understand why they didn't reach out and to forgive them. And I just, I had to understand they didn't know what to say and they felt awkward. He said, but the one group of people I've never forgotten are people who weren't good friends and reached out and just said, I'm sorry. I don't know what to say, but I'm sorry. I remember their names 35 years later. And so it's just... And they weren't good friends yet. They were good friends yet. And now they are. Yeah, but just kindness. Like I just think in the short term, sharky, aggressive people often get ahead.

50:35But in over any long-term timeframe, being kind, being loyal, being ethical, doing the right thing, standing by people when no one else will, even if it's really important. they just matter so much. And if you superimpose this on what we do for a living, we make investments. Not bets. We make investments. Yes. By the way, I have that problem too. We do. What are you betting on now? What can we double down on? Exactly. Fuck it. Let's ship these chips all in. Yes. And the LPs are like, why are these people so crazy? And why are we giving them money? Yes. Yes. I mean, I had one time, one LP had just decided they were like double clicking and they were like, tell me about this company that, you know, like failed.

51:25And I was like, wow, that's interesting you bring that one up. The founder absconded with the money, never talked to us again. And they just literally took the 150K that we gave them and like just burned it. And they never responded to our emails. And we're still chasing them to try to dissolve this company so we can get attacked right off. Yes. They're in a non-extradition country. Basically. And I was like, they're like, what was the diligence process like? I was like, what do you mean? Like due diligence. And this is back in the day when like, when you gave a hundred K check, you would just take a flyer and like, you know, like diligence.

52:00It was just an idea. That's not what you do now, Jason. No, that is not what you do now. We do a lot. There's a very careful process. Oh my God. The diligence we do, we have founders complain, like you're putting in 250 K and the person who's leading the round didn't do as much diligence as you. I was like, what does that tell you? And they're like, ah, oh, you've made stupid bets before. yes but if you superimpose this discussion we're having about friendship about loyalty um and karma and then stuff tell it with megan's incredible presentation legendary presentation what we do is place a series of bets and we humbly place those investments and hope for the best it's gonna take time do that on purpose did you do that on purpose kind of i go for the cheap last sometimes okay okay that was just like a soft yes it's like wow it's just hanging up there for me to smash it but you have to be humble because the truth is we don't know if they're gonna pay off to what extent they're gonna pay off and most importantly when so somebody who is just getting smashed by wave after wave and getting sucked under could hit it you've had this happen you've gotten your ass kicked and you've hit huge waves.

53:12So I want to talk about maybe that experience for you because when you were at Fidelity, man, you beat 99 % of your contemporaries, then you made your own fund and there have been bumps in the road. There are always bumps in the road in public equity investing. I was actually just reflecting. If you're a public equity investor, you have no issue staying humble because I would say the world's best investors are actually wrong 60 % of the time. And then I would say your average good professional investor is probably only right low 50s percent of the time. I've seen batting averages on a lot of investors.

53:49So you're wrong a lot. And even when you're having a great year, all you're consumed with is what you could have done differently. And then when you have a bad year, yeah, public equities are very, very humbling. and I do think particularly for public equity investing but in venture, going back to the comments about being a journey resilience and grit and tenacity are the most important characteristics if you want to have a career because no matter how good you are, you're going to go through really hard times and I've had many hard times in my career as a public equity investor What was the worst?

54:34life um that one the worst was probably that one i see it in your worst was probably 2011 or 2012 um and um i made two of the biggest mistakes uh simultaneously um and you know there's good bets bad bets winning decisions bad decisions um but i had been a uh i'd run a telecom fund at earlier in my career and for a long time a really easy way to make money in telecom is whenever in almost any market or particularly but particularly an emerging market where cell phone penetration was still growing you bet on the company within us network you always want and the reason for that is the newest network is the best product and ultimately the best product wins the reason it's the best product it has the latest and greatest technology and also it's empty like no one can get a cell phone signal you know at grand central or pin station you know even you know at the at airports, cell phones, and that's just because they're crowded.

55:32The networks are crowded. A lot of people are there. And so if you have an empty network, it's an amazing experience. And then, you know, word of mouth is the best way to sell anything, whether it's a firm or a cell phone network. There's a company called Nextel International. They launched, if anybody knows it went bankrupt, just to cut to the end of the story, they had launched a brand new, amazing network all over South America and Mexico. It was by far the best. They were coming into the market. They were a little levered, three times levered. Then things just started to go wrong that were out of their control.

56:11A price war broke out between two of their biggest competitors. The exchange rate went the wrong way. You have to pay for telecom equipment in dollars. The revenue comes in and other things. All these things went wrong. At each point, you think, hey, maybe I should reduce the position. But it felt like, hey, there's been an overreaction to this. And I'd so consistently made money on this. And I'm embarrassed to say, I think when the stock was maybe$8 or$10, I wrote a letter to the board of directors demanding they buy back, not demanding. I was not an activist, walking through the merits of buying stock back.

56:49I think the company's bankrupt 15 months later. so that was a pretty bad mistake but then I actually think the next year I had my I had the best year of my career a lot of things came through and just kind of have to have the tenacity and the belief that hey I've been doing this I have a process I have a framework I have a philosophy that works that has not changed and I mean I will and just you know you have a lot of people People are not shy about sharing their opinions after you have a really bad year. And you're human and that impacts you. And you just have to have the resilience to continue making high quality decisions.

57:33But yeah, that was the hardest year. It was a really hard year. I went from, I had two moments in my prior career. When I was very young, I was the highest rated out of 200 analysts. Just, you know, I was 24 years old. Ah, this is amazing. the next year they told me they're assigning me a new group and if i don't get the stocks right quickly i will be fired and that terrible year that i had the year before it was you know we think you're amazing we believe absolutely in your you know process and everything you know you're off to an incredible start and then one year later hey if you have another bad year you might be fired.

58:19I mean, and there are some great lessons in this, which is, you know, there are highs and there are lows, and then there is your process. You kept referring to the process. And I think that's critical because the outcomes are in some cases out of your control. In public equities, they're almost, they generally are. You just have to have a discipline. Right. And then that discipline and process, you can actually improve every day. Absolutely. You can get better every day at the process. Even if you're missing the ball, and I will say, quote another great mentor of mine, Steve Weimer, has a Warren Buffett-like track record on$150 billion.

58:54Steve has two things that always stuck with me in investing. There's only two things, numbers and excuses. And if you don't have the first, generally nobody wants to hear the second. Wait, wait, wait. It's what and excuses? There are only two things in investing, numbers and excuses. Numbers and excuses. You don't have the first, nobody cares about the second. Love it. But the other thing he would say is the reason to never have a really bad year is that people either try to help you or they put pressure on you. And both of those are the enemy of excellence. And just, you know, you do have to, as a professional investor, manage the downside.

59:29You know, it is, what is it? The disposition effect, or I can't remember, but people value losses between two and five times more than gains. Fascinating. Yeah. I do want to talk about last year, you talked about, hey, if you don't get your AI strategy correct, you're going to be roadkill, essentially. The gap between the people who get it right and the people who don't is going to be the spread rate, the dispersion. It's going to be brutal. So here we are exactly one year later. AI has had quite a year in terms of the velocity of product releases and it being incorporated at least what I see on the ground inside of startups who are the first to adopt these kind of technologies because they're resource constrained and they always look for an advantage and an edge.

1:00:16And what I'm seeing is 100 % adoption of anything that can make their firm, their three or four person or 30 or 40 person firm, more competitive, eliminate jobs, make the people who are working there more efficient. It is a ruthless, unbelievable sort of process. Now, what are you seeing in the big enterprises and with the companies that we were talking about last year, whether it's Google, Apple, Amazon, let's just go through the top 10 companies or so. And did they, did they embrace it? Yeah. Who embraced it the most? Who did the worst job embracing it? And who kind of kicked the can down the road?

1:00:54Let's put them into three buckets. Yeah. Crushed it, fucked it up, or like a sleep at the wheel. Well, this is not a commentary on stock performance. just specifically about execution on AI. To me, if you think about Google, a year ago, it was at dawn we slept, December 7th, 1941. They were this company with a country club culture, which I'm sure they still have, who hadn't really shipped anything maybe in a long time. They have this search as probably the world's single best business. You could probably run that and generate all of the revenue with no human beings. It could be a 10-person company.

1:01:37It could be a 10-person company, literally. And OpenAI comes out, and it was a question, will the sleeping giant awaken? Yamamoto, after Pearl Harbor, wrote a letter where he said, hey, I've given Japan and the Imperial Navy an incredible victory, and I'll continue to do so for a year. I will drive America across the Pacific and it will be an unbridled string of victories. And he said, but if America doesn't give up going back to grit and resilience, then eventually the steel mills of Detroit and the oil wells of Texas will overwhelm me and Japan. And after this first year, it will be continuous defeat.

1:02:24And that's eventually what happened because America had resolve, which is awesome. Yeah, America. Yes. By the way, I'm super paid. We also immigrated all the great scientists around the world. 100%. To have us win the most important race that ended that, you know, tragically, you know, ended that. Bringing all the world's smartest Jewish people to America in World War II. Many of them from Russia and Eastern Europe was an enormous win for the country. Perhaps a lesson we need to meditate on. Of course. Yes. Recruitment of, we talked, I had Antonio Grasso's here. I think you've met him. He was here yesterday and we talked about immigration and just why are we not recruiting the smartest people we can find?

1:03:05No, it's the biggest advantage America has. I mean, outside of, you know, we have two oceans, incredible natural resources, but all the world's smartest people want to come here and we should take them all. Not only does it help us, but in many cases, it weakens our enemies. But I'm very pro-American. I didn't say ye American lightly. I'm super pro-American, very pro-national defense and investing. I'm very grateful to be a citizen. I think America is Yeah, you can be patriotic. You won't get canceled. Yes. We've moved past that insanity. Now you can fly an American flag. Yeah. Yeah, right side up.

1:03:37Yes. Fly an American flag right side up. And by the way, you could always do that. Just, you know. And you can do it upside down. It's your right. It's your right. Certain people, which is one of the great things about America. But anyways, coming back to Google, which is also rich in resources, well defended with two oceans. You know, those oceans. Put a sleep at the wheel. Put a sleep at those wheels. And they're, you know, America, we have the Pacific and the Atlantic Ocean. They have Android and Chrome, which are really dominant distribution systems, but they woke up. They put Demis Hassabis in charge of AI.

1:04:07They've started to really lever, leverage the fact that they do have their own computer infrastructure that is really unique and really differentiated. To this day, large language models have only been trained on three kinds of chips, NVIDIA, Cerebris, and Google's TPUs. And this guy, Demis, is ruthless, effective, started DeepMind, which was the original OpenAI. And he is a wartime general, and he is in charge. I think, from my perspective, Gemini was the first time that OpenAI was ever passed. And it does have a really important advantage. It can do context caching in a way that no other LLM can.

1:04:54I think it's going to take maybe people time to appreciate how powerful this is. What that basically means is it remembers questions that it has been asked. And if it has in a given use case, and if it's given a good answer, it just goes back to that answer. so for all of these enterprises that you're seeing these startups that are trying to save money the ai has to think again every time it's asked a question because of google's tpu architecture they can do context caching and we will see whether that is in the next generation of gpus from nvidia or um amd um you know jensen has seen around so many technical corners is an exceptional CEO.

1:05:39So Google's back. Google's back. Okay, so they got it right this year. NVIDIA obviously is crushing it. NVIDIA has continued to crush it. Then we look at Apple asleep at the wheel or somewhere in between. I think Apple is about to wake up. Okay, so that could be a parallel to what we saw with Google. Yeah, and I do think Apple's strategy is generally not to be the first, but almost to be the last and the best. you know um the palm the palm pilot came out in 2001 and i think at one point palm had a bigger market cap than like apple dell hewlett-packard compact all these companies combined and you know now where's where's where's where's palm nowhere um it's an operating system for lgtvs that's that is literally where it is um so being first isn't always uh most important but if you're going to be last you need to be best and apple makes more money off search than anyone but google because they own iOS, which is another toll booth on the internet, just like Android and Chrome.

1:06:40And I think what you will see them do, this is what I would do if I were them. I would have a small on-device LLM that is privacy safe and can access all of your information and you trust it because Apple has built a brand around privacy. And then whenever that LLM doesn't know what to do, it asks open AI permission to go to the cloud yeah permission to go to the cloud yeah I think you're right because I I noticed in my iPhoto library or which is just Apple photos now there's a little AI wizard button and when you press it it's like that's a bulldog and you know uh whatever a Tesla behind it and there and you can see the power of exactly what you're saying on your phone every 10th photo has it and they're just subtly going to make it so when you go into photos and say, hey, I need pictures of my bulldo when it was a puppy.

1:07:32And it'll be like, which one? Taurus or Fondue or Toro or Max? Well, even more important, instead of doing searches, you'll say, instead of doing searches for best vacation in Italy, you'll just say, hey, book me a vacation you know I will like. Give me three choices in Italy. And then why don't you pick another country that you think I'd like that I didn't suggest? Then we'll say, here are four options, press one, boom. And this is agents and actions and transactions for placing search. And I think this will happen. I think agents are going to be massive. Before I leave that, I will just say, this is a two-year-old iPhone.

1:08:07It's the first time I've had a two-year-old iPhone until it's cracked. Same with me. You skipped a generation. You skipped 15. Just because there was nothing that mattered. The camera's good enough. But to have that local AI model running, have my Jarvis, have my Gavin AI that knows me and likes me and is friendly to me and will protect me. Solves problems. Protect me in the Terminator world where we're... Worth upgrading. I can't remember if we're Gavin's angels or Jason's angels, but we're in the resistance. This has enough compute power to run that LLN. It doesn't have enough memory. And this is very important because right now, the two rate limiting factors for AI, they're no longer compute in GPUs.

1:08:53It's power. finding places to plug the GPUs in and to get to AGI, we're eventually going to have to have a one gigawatt data center and then a five gigawatt data center. In our lifetime, there will be data centers that are bigger than Manhattan. Forget the Pentagon. Whoa, whoa, whoa, whoa. Vertically, every way. All the largest buildings in our lifetimes, the hundred largest buildings in the world will be data centers. the world is now power constrained there's only three places in the United States that you can put in one of these data centers there's a massive competition to have them it's got to be somewhere near nuclear reactors you need multiple nuclear reactors that are unregulated within 50 miles of each other given the current state of technology but that's one constraining thing for AI the other is something called HBM memory high bandwidth memory this is the primary axis of competition of competition and most compute.

1:09:51Micron and Hynix today. Samsung has lost their way. And Micron and SK Hynix, it's a Korean company, it's a great company. To make high bend with memory, you need 4X more wafer space than the DRAM that goes into this iPhone. So if Apple doubles or triples the amount of memory in the iPhone and then Google do the same for Android phones, at the same time to enable AI on the phone that this is happening in the data centers, i think you could have the first real memory cycle since 1996 and in 1996 and we'll see this probability and it's not going to happen but in 1996 micron was a 50 bagger and you the prices of dram if it is the rate limiting thing for selling iphones and ai we'll see where it goes um so i think that's important to talk about in the context of apple but please what else uh i I think we got it.

1:10:47Okay. You gave it to us. Awesome. I mean, lightning round, Amazon sideways up or down. I mean, I haven't heard a peep. I would say they have been sideways. They're trying hard. A core belief of mine is if you're a foundation model company and you do not have unique data and internet scale distribution, you are the fastest depreciating asset in human history. And I think most of these companies are zeros and there's like 10 of them. Yeah. And I think the only hope most of them have of getting the preference back is for Amazon to acquihire them the way Microsoft did with inflection. And then when we're on the other side of that and we have AGI, I think those few companies that make it are going to be immensely valuable.

1:11:28But that's Amazon sideways. Sideways with AI. Sideways with AI. That's the question here. They could be crushing it in other places. But on that case. And then Microsoft, obviously, top of their game. Yeah, I would say top of their game, but everybody else has raised their game. So the relative advantage has probably slowed down and meta is in a much better position than they were. And just, you know, to me, true greatness for Mark Zuckerberg would be to rename the company. Again. Yes, again. To what? Call it Facebook again. Call it whatever. Call it Big Blue AI. Call it AGI. Just rename it. And I give the guy a lot of credit for being so publicly in on the metaverse, which by the way I think will still eventually happen um and in some ways that's gonna be a legendary misadventure yeah in CEOing I think in 15 years it'll probably look okay um but it was just the metaverse we just need many more cycles of Moore's Law so you can have AR glasses that work um you know the meta Ray-Bans are good and then ultimately we need brain computer interfaces to work and then you will have the metaverse nobody wants to shit on their face man it's hard enough to wear ski goggles for a couple hours i'd be i'd be so into like i mean i have prescription glasses yes but for goggles no yeah not for goggles but i mean i would be very into if they can that's what i mean you need you just need six years of moore's law making these chips smaller more energy efficient be able to fit in you know whatever kind of glasses they'll get it but he's pivoted hard hard putting a search box on the top of every app is gangster it's gangster that is a shot across the bow of google and anybody else in the industry like i am willing to take my top real estate the top of the search bar on every fucking app i have on three four billion phones whatever he's got and yeah i'll just divert all your traffic absolutely what's up yeah and we're gonna have an epic competition what's up what's up yeah he's like what's up gold chain what i'm going to mma by the way i thought that that was real the one of him with the goatee.

1:13:40I mean, I was like, he's like, I'm fucking, I'm hard. You guys, you guys want to get in my grill about meta? Yes. Fuck it. I'm going, I'm going MMA gold chain. Yes. Fuck it. This guy's coming out for Trump next. Yes. No, he doesn't care. All right. Give it up for Gavin Baker. Awesome. Thanks everybody. Thanks a lot. Thank you. Thanks Jason. Good stuff. I hope you enjoyed all of that. I took a lot of notes myself when they were talking, but I'd be remiss to not give three more shout outs before I let you go. So the sponsors of the event were fantastic. They helped make it happen. So a big thank you to Eventus Advisory.

1:14:12They are a leader in on-demand finance and accounting support. Then there's Vinsure, V-E-N-S-U-R-E. They do in-to-in solutions for payroll, HR benefits, and even risk management. And then there's Forge Global, a very well-known secondary marketplace for startup shares. So if you're looking to buy stock in that company you don't work for, well, Forge might have the answer for you. I'm Alex. I'm at Alex over on Twitter. I write at Cautious Optimism, and I also write the Twist 500 newsletter here for launch. I'll talk to you soon. Goodbye.