The Automation Endgame, VCs Returning Cash, and the OpenAI Wager | E2019

0:00would i invest in open ai at 150 billion i said absolutely not because i believe it's a 2x in seven years I believe the company will go public, complete this insane flip from a nonprofit into a for-profit. As a public company, in seven years, if they were to grow 30 % year over year, they would double every two years. So we'd see a doubling three times. Ballpark. This is a seminal moment because this is, I think, the largest traditional-ish venture round we've ever seen. Oh my gosh, are we seeing real dollars in flight here? Especially after coming off the conversation about how there's no DPI.

0:37It's a little bit dissonant to see the crisis and then also the enormous infusion of cash. I worry, but also I love the boldness of it. This Week in Startups is brought to you by Notion. Notion combines your notes, docs, and projects into one beautifully designed space with AI built right in. Try it for free today at notion.com slash twist. Fidelity Private Shares. Manage your cap table and data room, get faster, more accurate 409A valuation, and fully automate your next financing round. Visit fidelityprivateshares.com. Mention our podcast and receive 20 % off your first year paid subscription.

1:24And Kite. Looking to get out of the city? Rent a car with Kite. Kite delivers rental cars to your door. no counter no lines no hassle download the kite app today and use code jason to save 10 on your first rental all right everybody welcome to this week in startups i'm jason he's alex we uh going to talk about a lot of great news stories today but i wanted to just get right to it alex this port stripe is a very interesting story to me because it pulls together what an incredible impact technology is having on the real world and the startup opportunity here plus it talks about labor and employment and unions uh and it's got spicy spicy videos so i think you know just queuing this up do we want to start i think we should just start with maybe you explaining what is happening with the port strike and why they're going on strike and then we're going to talk about the technology, the startups we found, and then we're going to talk about what we think the startup opportunity is in ports.

2:33Let's get started. Okay, so the big news item is that nearly 50 ,000 members of the ILA or the International Longshoremen's Association are on strike as of Tuesday. This has shut down ports on the East Coast of the United States and in the Gulf region. The West Coast is actually under a different union. I've learned a lot about unions today, Jason. But the point is this impacts 36 ports of which 14 are considered major. And without long shawing, you cannot get stuff on and off of boats. It's more complicated than that, but that's the key thing, which means that these ports are essentially shut down.

3:05And whenever I see a dispute of this sort, it always comes down to money. And in this case, yes, there is a contractual dispute between the labor union, the ILA and a group called USMX, which is a kind of business conglomerate for the shipping industry. But the thing that really, I think makes this a technology and therefore also a startup topic is that the union is vehemently anti-automation. And so when we talk about this, they are fomenting for more money, very reasonable unions do it all the time, but they're also saying no to automation and semi-automation. And so that is, I think, going to be a sticking point.

3:39I think that's why this has spiraled to a shutdown versus getting sorted out in a contractual monetary dispute. Okay. So this is like, what was the famous tale of the the guy who would do the railroad spikes is that john henry john henry versus the steam engine i guess was the uh the tail so these humans they i don't think they believe that they're better than the technology they believe that their jobs need to be protected from technology and automation this is you know a tale as old as time right um with factory automation uh there's been movies and the you know every decade probably and news stories about this but this is the first one that i think our generation is looking at and going wait a second this is coming to a head and this could be something we're going to see a lot more of and we're not going to just see it in blue collar we're going to see it in white collar but let's start here with what is the state of technology in other places because on x formerly known as twitter and in a bunch of publications people are starting to share videos of how insanely automated other ports are so let's look at i guess a good jumping off point here before we get into the controversial statements and the unions and the labor issues just what's the state of technology in a port in china in other places all right so let's go over to um guanxiu which is the capital of the guandang province and i know i'm butchering those i'm sorry everybody uh this is a video that blew up on twitter and or sorry x and shows i think what we might call the current state of the art you'll note when you watch this that there are no major cranes in sight this looks like an esports den all right hit play okay so what we're looking at is um human beings with joysticks and buttons like giant joysticks uh and they are not in the port they're in an office with eight or nine monitors it looked like a three by three so that would be nine and then there are containers um i don't know what the official word is for a shipping container but they're shipping containers it's a teu or 20 foot equivalent unit thank you a teu so you got these container ship uh you know these containers that people will use for pools or other things and they're moving around automated as you would expect because if you think about self-driving in the real world waymo as we well know is doing contained areas now they're in austin um and then we've had other people on the podcast here and there are remote interventions but the more predictable the location is in other words a grid that you set up the easier it is to do self-driving well this is the ultimate in easy because you're talking about a couple of football fields right it's a couple square miles a port and then you have the ability to control it there's no where for homeless people to or you know people who are high out of their mind in san francisco to jump in front of a waymo there is no way for somebody who's you know a vandal to put a cone on it you know a bicycle any number of things so that looks like the way they should work that kind of technology is going to save lives and it would make these things move faster i would think we don't have that in the u.s is what I'm getting from the reason why this spread.

6:55And this is specifically the type of thing, the type of work that the longshoremen don't want to do. Well, it's what they do want to do. They don't want this to become more automated. And you make a good point though about the US being a bit of an outlier. When you actually look at companies that are working in this space, and we're going to get to a list of some startups that are adjacent that we think are cool in a minute. But if you look at ports and companies that are working on port-related technology, it's often European companies. And one thing I learned is that ports like Rotterdam and so forth are actually very highly automated.

7:27And so here in the US, we often look down on Europe as this, you know, fuddy-duddy place full of regulation and, you know, labor rules and so forth. Ironically, in this case, the US is much further behind in terms of automating its ports. And actually, Jason, this is kind of fun. I found a list of the most efficient ports in the world. Can we pull that up, guys? and um i want you to guess what is the first american port that arrives on the list here and where does it rank so what's the best american port compared to the best in the world well here's the thing there are a lot of ports in china and asia the the amount of um access to the south china sea the pacific ocean i mean that's a lot that's a long coastline and they produce more more exports than anybody so i gotta think the entire list is a combination of china india vietnam japan and then the united states is far away but we buy a lot of imports so we have them on the east coast the west coast obviously and then some in the gulf but man based on what i'm seeing especially from like this anti-technology we we're not in the top 50 or 100 like there's just so there's a large number of large ports in other countries yeah yeah so the the only american port in the top like i think like 75 is philadelphia at rank number of 53 so that means and what is this ranking if uh this is uh this is a ranking uh this is world bank data of major global shipping ports and these are based on total container ship in port time so essentially a boat comes in how fast do you get it unloaded god which is a great great metric wow what a great metric so this is speed to offloading what a great metric and so we're terrible at this and this is a super important one because there's only so many ports in a port in other words there's so many bays in a port to get stuff off there we're terrible at it um and other people are great at it and you know you look here you see singapore yeah i mean i mean hong kong is in there lots of chinese names as you might expect yep and also japanese there's kobe tokyo yeah uh but those seem to be very similar to ours so oh and then you have rio de janeiro columb colombo barcelona doing really well in spain they're really getting those ships cleared quickly congratulations on being 34th i would have thought based on uh all tropes that they would be relaxing at the ports in spain this is why data beats tropes there's no siesta at the port is what jason's trying to say i mean i've been to barcelona man it doesn't look like people are working much there man it's one of my favorite places to go.

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12:44When my men hit the streets from Maine to Texas, every single port will lock down. You know what's going to happen? I'll tell you. First week, tell us. Be all over the news every night, boom, boom. Second week, boom, boom. Guys who sell cars can't sell cars because the cars ain't coming in off the ships. No cars. They get laid off. No jobs. malls start closing down. They can't get the goods from China. They can't sell clothes. They can't do this. Everything in the United States comes on a ship. They go out of business. Construction workers get laid off because the materials aren't coming in. The steel's not coming in.

13:27The lumber's not coming in. They lose their job. Everybody's hating the longshoremen now because now they realize how important our jobs are. Now I have the president screaming at me. I'm putting a taff hardly on you go ahead taff hardly means I have to go back to work for 90 days I was a cool you up period Do you think when I go back for 90 days those men are gonna go to work on that pier? It's gonna cost the money the company's money to pay their salaries Well, they go went from 30 moves an hour maybe to eight They're gonna be like this He's using a choking symbol You're better off sitting down and let's get a contract and let's move on with this world and today's world i'll cripple you i will cripple you and you have no idea what that means nobody does wow i mean what i mean i number one i want this guy on my side for any negotiations i'm in number two i mean i have a strategy here of how to deal with this union give them anything they want just give them everything okay and then automate the hell out of these ports and then start laying them off because you cannot live with this kind of approach to i'm going to create chaos in society this is like a moment where a union is threatening to slow row slow roll in order to go back to work i mean this is like really damaging um speaking this way is really damaging i think uh to the cause of unions and then when you look at what they get paid i've seen now on tiktok and other places on social media and of course caveats that this could all be you know different puppets and people trying to get their agendas out uh obviously it's hard to fact check this stuff but construction workers and people are responding to that video who look like civilians and they're like but i don't get paid anywhere near that so if you look at what these individuals are making what they're asking for i mean these are big numbers uh you know the the the annual salary from what i understand you know uh these folks are doing manual labor hard work uh and nothing wrong with that and uh but they're getting paid 150 grand a year 100 150 grand a year uh and the starting pay is you know pretty generous 30 40 bucks an hour starting pay i think is 20 uh the current cap is 39 the way people make a lot of money right now in longshoreman activity is working overtime and then they make a higher rate the contention on the pay side is that the union wants um a 77 bump over the next seven years which would bring them up to 69 an hour which we factor in overtime does dramatically increased their earnings um but i think that there's a lot of data out there jason we were going down like purport data but the gist is i think you can clear over 100k if you're a longshoreman doing reasonable amounts of overtime here's my question isn't that great that people can make that amount of money like we talk about it as a negative but i think it's positive i think the negative thing here is if it's extortion if it feels extortionary and we're going to slow roll and we're going to not embrace efficiency to a lower cost for consumers in other words it feels it feels selfish if this union boss and this union has a stranglehold and they essentially have a monopoly you could talk about this as if it's a monopoly like at &t right they can charge you whatever if if you only have spectrum as an option there's no starlink spectrum can charge you whatever you want for broadband because you're going to pay it right uh cable tv you don't have an option remember the cable tv bundles were 100 150 a month it was crazy people were spending 1800 a year just to watch sports and have tv and entertainment that's a big number now it's broken down you buy netflix you buy you know whatever you get some stuff for free apple you know in an internet connection you're under it for half that amount and so this feels anti-competitive so if it was competitive and there were non-union ports competing for the work and they had lower prices great but how do you compete in the port business this is a an absolute absolute uh a monopoly the only other option is air freight and air freight is known to be four to ten times more so you know this then trickles down to hey if we're getting bananas from south america and they're coming up here on a they're going to be twice as much you know coming on or 50 more when they come from an airplane versus a port so i think that's why this feels totally unfair to people it also feels like we're not taking advantage of the latest technology to make things safer faster better but this could be this could wind up being like a preview of what happens in white collar work anyway what do you think it's a great question Is it fair or not?

18:36So the way that I think about this is we, there's two different groups that I care about because I'm a, I'm an antitrust guy a little bit more than you are, not as much as a Lena Khan, but I'm somewhere to your more extreme side of that. But when the reason why I don't get that mad about unions with monopolies is they're not the corporations themselves. The money goes to the individual workers. And that's kind of what I care about a lot. I want people to be solidly middle-class and have a shot at putting some money aside, buying a house, etc. So that's kind of where I start. The other thing that I'm going to say is port automation is coming.

19:09These guys are going to eventually lose. So from that perspective, isn't it rational as an actor? Like, just think about this in economic terms. Isn't it rational for them to try to get as much as they can before they get entirely automated? Because I doubt the guys at Joysticks in the US that are eventually going to run all of our ports. are going to be highly paid union folks. They're going to make 13 bucks an hour and who cares? Or they could be union folks, but they just are able to do five times as much work, which is, you know, what's happening with the static team sizes that we talk about here as a theme, which is, hey, maybe your startup is going to be 10 people, you know, in year one, 12 in year two and 14 in year three, where usually that would double.

19:51Every time you want it to double revenue, you doubled the team size or more in some cases as you were investing. So maybe what's going to happen here is like, that kind of efficiency would take us from number 50 or 75 in terms of offloading stuff back into the top 25 and it would lower prices for consumers so that's what we have to think about and now this is only 50 000 people so there is an argument if it's only 50 000 people to just overpay them and deal with it but then this is the last time and then we have to start thinking if they are sincere about shutting down the economy and having millions of people or hundreds of thousands of people impacted by losing their jobs or being furloughed.

20:31Temporary layoffs, I think, would be more. I think he's exaggerating the shutdown here. I think it's more like furloughs. People might be furloughed, and that's a real thing. So, yeah, I mean... I just think it's the rational choice for the union to try to get as much as they can. The thing that I'm not sure about is how much they're going to hold fast on the automation point. Because under your idea, pay them a lot, automate them, fire them, I think They see that off ramp, they want to avoid it. But at the same time, we can't have the only set of ports in the world that are so far behind the times.

21:06At the same time, it scares me a little bit that where we are finding a lot of savings in automation is the underbelly of the economy where labor has carved out a portion of profitability for the individuals. and we're going after those as places to automate first it feels which again makes economic sense i absolutely get it but it's hard on people who had a shot at a middle or maybe even upper middle class life that are going to get their life turned upside down and i've seen a lot of really i'm just going to say it shitty comments on twitter x about people who have been saying oh you know we need to just basically classic like margaret thatcher union busting stuff and it makes me kind of giggle that people are willing to look at workers collectively bargaining and say that they are evil whereas that we allow for huge price inefficiencies for example new drug comes out they charge a million dollars for it cost five bucks to make and we look at that and we go that's business they can charge what the market will bear well why is it bad when the when the workers do it so i think if we're going to get mad about people um rent seeking and profit grabbing which everyone likes to do we should at least be mad at everybody for doing it and not just demonizing the gold chain union guy yeah who makes by the way reports are he makes 900 000 a year so he's doing really well um i think you know the tone i think that he's putting out there is going to work against them i think what they should say is hey we know that automation's coming it's only 50 000 of us give us a plan towards retirement the average age is 37 we retire at 62 to just like there are 65 so we got 25 years on average in our career path can we just keep the layoffs or the automation to you know this percentage and you just guarantee us that hey if you are going to lay us all off and automation comes in the next 10 20 years we'll get the following retraining and the following severance so we want to fight for you know if you lay off more than 5 % of people, everybody gets two weeks per year of service.

23:13So people who had 15 or 20 years of service get, you know, 40 weeks of severance. That's, that would be a more compassionate way to look at this. This also reminds me of like the coal voting, like the people working in coal mines had such electoral power for so long. And then you look at the numbers, there's like 13 ,000 coal miners left in the U S that always blew my mind. Like love y 'all, but you're the economic past how do you still have so much pull in west virginia crazy it makes no sense and i guess it's because you know sometimes these are swing seats you know uh pennsylvania being you know one of the the really critical swing states so we just over index on it but that would be the easiest thing in the world is to just give them unlimited training and pay them to go to retraining so there's a really this is how i would do it um because i do have like um compassion for the you know i'm come from a lower middle class background or blue collar background i think providing we will pay you during retraining is going to be what happens in this new automation as jobs compress we should just say to people here's here's your choices these are seven careers in the future solar panels nuclear data center podcasting i mean i'm joking but like the idea that we have an influencer podcaster career that you and i are here soaking in and there's another i don't know call it i don't know low millions of influencers who make a salary i would like to know how many influencers make a full-time salary yeah of a that would be the equivalent of a teacher or a journalist okay i have a data point for you on that though just to jump in so yesterday i was um i did a q a with future founders which is a chicago i think based program my friend's a manager there she asked me to come by and just talk to everybody so i just swung by for an hour and a half and basically got to just play q a with founders it was great fun um but one of them was doing a company that makes um special socks i don't know and she was talking about her influencer budget and was talking about how much money influencers can make and if you look at the power law distribution it goes up higher than you'd think so i don't know the total number but i do know that eight people at the top of that market crushing it and good for them yes um yeah there's been a bunch of surveys but um globally there's 5 million people this is a something that didn't exist i mean there was sponsorship for you know brad pitt or george clooney to drink yes you know uh a scotch you know like lost in translation in tokyo and only have the ads there and then there are you know obviously endorsement deals here oj simpson for hertz whatever he's running through an airport like that kind of stuff at the top end worked for everybody i don't know why that one came to mind that is quite the example i was thinking about the most memorable commercial i've ever seen for an endorsement and just oj simpson running through an airport because he was a running back i believe and he's just curdling stuff and spinning around other people it's a very genius uh it was it was a genius thing but so that would be a really interesting way to handle this is if you have x amount of years you get x amount of retraining and uh and maybe just have the salary uh taper off so you can have up to two years if you let's say you're a lifer you've been there for 20 years you got two years of retraining free your salary is like a hundred percent for the first six months 75 for the next six months 50 then 25 and you give people the soft landing that by the way ceos get you know you look at the ceo the exit package is usually like a couple years couple of million so give the rank and file like a a path here and let's make this less cantankerous i would say yeah no i mean i think that would be great i don't think that union dude is particularly interested in the jason and alex theory of changing economies thanks to automation but i do think that's going to be what happens no matter what in enough time all right listen interest rates are coming down but it's still hard to raise a new round everybody knows that The last thing you need is to get bogged down in the minutiae while raising.

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28:17I'm going to be going to some of them. So check out Fidelity Private Shares at fidelityprivateshares.com. Mention our podcast. You're going to receive 20 % off your first year paid subscription. Here's my concern, though. We've talked a lot on this show about automation, AI, static team size, increasing productivity per worker. All things that I'm excited about. Can't wait to see. Yeah. what are we going to do when there's just fewer total jobs? Because if everyone's more efficient, if everything is more automated, are we going to once again need full employment? And historically, we always have gotten back to it.

28:50Look at right now, after the internet, after the personal computing revolution, after mobile, after air travel becoming big in the earlier century, we're at 3%, 4 % unemployment. But I wonder if this time is going to be a little bit different and harder on people if their jobs literally just get automated for about one third of the cost. what are we going to do with all those people great question so i don't buy it that there aren't problems to solve that people will be able to go solve for ai to really displace let i'm just talking about the usa here let's just start with what we're having an american-centered conversation here in the united states the idea that we would have a massive disruption um is possible um then the question becomes do we find other work for those people and what i can tell you is you know as i've seen automation come to podcasting as an example there was research that we did two day before the show where i am pushing our team harder to do better research and better research and i had a conversation with you i really want us to go deeper in every episode and that costs money to do and now it's like well if you use you know claude chat gpt and you type in hey what are the startups working in ports or which are the largest ports or how much support people pay you start doing this first level of research instead of firing team members i'm just looking at saying increase quality increase quality increase quality so i think that's what's going to happen that's my best prediction i could be wrong it could get to the point where you and i show up and an ai says in zoom here's what you're talking about today and then when we hit the leave button in zoom it automatically knows how to produce it do the audio balancing and you don't need producers you don't need video editors etc that's possible i just don't think it's probable and i if it is possible i think it's like maybe in 20 years like you wouldn't want to put a polish on it right it's a ways out is what i would say because i'm looking at this tech and i'm just like it's definitely making us 20 30 better every six months 10 better a month 50 better every six months but it still takes time to do a lot of other work what were you going to say there well i was just going to say i'm thinking about these improvements that you get from automation uh in the case of of shanghai when they automated their ports i think they saw something like a 70 reduction in uh labor costs and so like these things uh yeah 70 reduction labor costs and 50 boost in productivity by automating a port in shanghai 70 reduction in labor is a lot and maybe what i'm highlighting is that there's going to be a period of time when there is massive job dislocation and then eventually later full employment, to your point.

31:34But I'm worried about that gap period. And frankly, societal unrest here in the US and around the world. I mean, you and I are pretty big bulls on how much of the world's going to get automated in the next five years. Yeah. Significant. So then it's just, is there other work for those people? As we talked about with Generation Toolbelt on a previous episode, we need plumbers. we need nurses we need doctors we need construction workers all of those things um waiters people working in the services industries the blue collar industries we still need those and it just might be people have to move around you know um now on the other side there is the argument of hey everybody's going to have a robot they're going those robots are going to go out into you know whatever 10 acre plot you know out in the hill country uh where i am in austin or you know outside of you know somewhere in in rhode island where there's plots of lands and they're just going to be out there in the fields building small homes and then they're going to be cleaning your laundry and changing diapers and please god please god come to learn to think of somebody but i mean think about it that's the that's the counter argument which is what is going to get dramatically cheaper transportation entertainment yes medicine health care and all other services so there is an argument here as well um that you'll need less money and you'll need to be employed less because you will not require as much money to do things and this is actually scary to capitalism so this is where the snake eats its tail what if consumers are like i got a home i'm living out here i'm going to choose to work three days a week i'm not going to come in for the other two i'm going to take four days off work three days i make enough money being a super commuter and then i can get in a self-driving car and drive 90 minutes watch a tv show whereas i wouldn't take that 90 minute or two hour commute previously i do the geographic arbitrage that's the kind of stuff i think we're going to actually see enabled as well and so it's going to be very your the amount of money you need to sustain yourself in america could go down in the modern world greatly you do see this in other places the average household in the united states is 2.5 people you start looking at like how many people live in other households if you look at and i just did a search you know in asia in the middle east oman they have bigger families larger family structures parents stay with the kids they live on compounds you might have seven people eight people living in a structure in the united states everybody like is kind of moving towards i got my own place i got my own car and if things truly did get bad here i think what you'd see is people bunking up with each other like i'm talking about like in a cataclysmic kind of thing like a depression era situation there's room for people to kind of uh you know consolidate live together lower expenses and we're seeing that with that movement of the fire movement um uh retire early financial independence for tar early a lot of people going towards that you might be on that track you might be fat fire where you want to have a really nice lifestyle but you know maybe work less as you you know have more options available to you and then put more money away you seem to be doing pretty good with that and then as soon as crunch base goes public boy i'm out see you you know i got some equity over there yeah like 60 000 shares so that company better get off the couch uh let's go i think you raise a really good point about possible future labor changes.

35:11I think that's maybe a better way than disruptions. And I want to contrast the hustle and grind vibe that we often get in the world of technology and startups, which I don't have a beef with, big fan of work, frankly. And the idea of working less, living further away, almost living a lower consumption lifestyle. I wonder if there's a way to have both because it feels like the technology group right now is we're going to build the future. We're going to build it now and we're going to hurt it hell yeah and then some people are like well i'd rather not do that and i wonder if there's gonna be tension there well the fact that that's available is a beautiful thing that's the way i look at it there are people there's a movement called homesteaders i happen to know this because i live on a horse ranch now my horse ranch is like i'm not that far out folks i can get to austin like in 20 minutes like downtown austin it's literally like living in palo alto and going to san mateo or san mateo and going to the city it's really not like i'm way out in the sticks um but you know you go an hour outside of austin land is close to free i mean and construction is massively cheap if you're a startup like you hear my voice like i i'm the reason i'm here in a lot of ways too just aside from the personal stuff and what my family wanted is i think there's an opportunity to build like a really tip of the spear community here and if you're building a company here people can afford to live here they can afford to buy a house even with people complaining about like austin got more expensive like the core of austin's gotten really expensive you go two rings out it's unbelievably cheap and then in between that wing that one ring in between uh which they call infill i think around cities that is um you know uh still very affordable you can buy a home for 250k so you know if two people have two internet salaries or two decent salaries or even longshoremen salary, you're in good shape.

37:03You're going to own your home pretty quick. The American dream is here in Texas and some other places. One way that Austin actually crushes here, can we pull that chart up, John? This shows a median rental price over time in Austin. It's going down. And the reason why it's going down in Austin is that they built an enormous amount of houses. Yes. See that chart? That chart is going down. That is possible. It is. California. It is possible. you have to get the hell out of the way you know what people complain about here it's really interesting to see this juxtaposition people over here are complaining that they built too much houses and that i bought my house and now the value of my home i'm underwater 10 and people are like boo who like everywhere else you live it's just completely unaffordable and they're like oh we built too much because there's no regulation and i was talking to somebody who bought a beautiful penthouse and like do i please buy my penthouse and i'm like no thanks i'll i'll wait another year or two and buy your penthouse maybe but you know there's like five or six massive skyscrapers going up in austin if you travel a lot you got to deal with renting cars it's just a fact it can be slow confusing and most of the time the experience is stuck in the past it takes an hour to rent a car two hours to rent a car and i recently became aware of a really cool startup called KITE, K-Y-T-E.

38:24With KITE, instead of going to a gingy desk tucked into the bowels of some airport parking garage, a car is delivered right to you. That means you can get a new professionally maintained car brought to your door without dealing with the lines. And I use this. Many of you know, I moved to Texas. I'm in Austin. And I was in the Bay Area. I was going to be doing a lot of meetings. I was going to be traveling around. I needed a car. All my cars are in Austin now. So I popped out the kite app, bing, bing, bing, I had my car waiting for me at SFO, and I avoid waiting around, and I had my own car, so I could go to all these disparate meetings I had across the Bay Area.

39:01You can manage your entire trip in Kite's app, meaning you can avoid waiting around while someone else enters your data into a computer by hand, one slow keystroke at a time. It's like that scene from the movie with the sloth at the DMV. Anyway, Kite doesn't do extra fees. It operates in large cities around the United States, and I've used it in both LA and San Francisco. I love it. Here's your call to action. Download the Kite app or book online at kyte.com. That's kyte.com. Go ahead and download the app now so you have it ready to go. Use the code Jason at checkout. You get 10 % off your first rental, which could be significant.

39:33Don't forget to use the code Jason. Download the app, kyte.com, right now. Let's look at the opportunity here for startups. I think startups need to start looking at ports for opportunities because when we did our research, we found adjacencies, but we didn't find things in the core automation. It seems like that video from Guangzhou is the port company is probably building that technology themselves and it's state-owned. So we think there's probably a lot of state-owned technology in there or, you know, homespun. but we really should start thinking about how do we if we do modernize these ports how do we modernize them around the world because i was just looking at a statistic one of our producers had given to us only according to axio 62 of 1300 global container terminals were automated or semi-automated by the end of 2021 per research conducted by gnats and others published by maritime economics and logistics so we are just starting here there's a lot of container terminals to be automated we are just starting that process so let's look at what that process would be there you have to move the containers around you got to get the containers off the boats you got to get the boats to shore there's a lot of pieces here i would think yeah i want to show a quick graphic that we have prepared from the gao which goes and shows the different areas of port automation and what this does show is that everything from the gates themselves at the actual port over to the ships to how the containers are moved, how they're tracked and how they're loaded onto trains, for example, all of that can fall under the automation umbrella.

41:07And it's not an idle point because the reason why contractual negotiations broke down, Jason, between the ILA and their employer group in June of this year was they'd begun to automate gates. And the union said no to that. I don't know. It sounds a little whimsical, but they're predicting their jobs. So they want to have a human at the gate, raising the gate when yes like literally the gate software available for homes i'm like researching it because i'm on a ranch i got gates all this stuff i got like a solar power gate i gotta like get electricity to it the new gate technology i can put into the gate software the license plates of our cars when we drive up to our gate automatically opens i can get an alert as to a license plate at my gate on my phone yes and i can get alerts and i can then tag them and say that's the gardener that's the pool cleaner that's garbage whatever it is or it can alert me to hey these are unknown or like this unknown license plate has come to the gate three or four times especially at these time and i like that's for home use and i'm the entire cost of that package putting aside putting electrical to the gate and not having solar there um is maybe going to be a thousand dollars or something yeah which is effectively zero for what it offers you yes and your own case i am uh i've done okay in my life i literally was thinking about putting a gatehouse there and saying to myself maybe uh you know when i have events i'll just put a staffer at the gatehouse and whatever and then i was like what am i doing here this is crazy like that's unnecessary completely and i I wouldn't have a permanent one, obviously, but, you know, when I have an event or something, I have somebody at the gate.

42:53And I was like, that's completely unnecessary. I can control the gate from my phone. So what they could do here would be very similar. They would know your license plate. They would have facial recognition. They would record all that. My security cameras now have a database of everybody who ever comes on the property. So somebody hops the fence. I get them facial recognition. It sends me an alert of an unidentified human beings on the property. Then I can look for that human being in the database, record it. Like this stuff is available for consumers so that the gate, that's an obvious one. But also when the truck comes in, they should be able to text the text, the truck driver.

43:29It's your turn. Go to this bay, back your truck in, and it should automatically put the container on that truck. That's what's happening in China. That's not happening here. It should be even more than that. It should be an automated truck that comes in, automatically decouples from its standardized base that holds one to EU or two. It gets routed somewhere else to get recharged. That gets picked up by a robot, brought in, auto loaded, brought out onto a new self-driving truck and out. That is where we are going. It is going to be very efficient when we get there. Let's see. That's actually a really interesting idea.

44:06Like when you get those containers, those containers should be on little robots like the ones we see, like the sleds in those other videos. i'm sure those sleds are bringing them from the port to a parking lot then the rigs can just back into them if they're using human rigs and that would just get in terms of the time to clear these containers from the port that would go super fast you would need zero humans to do that yeah yeah and that's my concern because it's going to be great for me mr buys too much stuff on amazon well he's up all night with the newborn last night uh sorry about that well it's my fault for having two um but for folks that are currently doing those jobs just worry about their displacement and how they survive because in a post-inflation world shit isn't cheap jason and so i yeah my my compassionate human side always competes with my technology libertarian side it's this war inside of me i have two we'll find new work for folks all those people will find great jobs you just have to do a little bit of retraining and you know give them a soft landing but let's look at just some of the companies we found because i know one of the things is tugboats right you have to get tugged into port you can't run these commercial shipping containers into port because they spew a lot of dirty fuel etc in fact they have two different types of fuel one they use on the open ocean that is really dirty then i think they use like a cleaner fuel as they get closer to shore that's all gotta be turned into batteries at some point or nuclear reactors on these ships at some point but that company uh is called open tug so we found yeah we found open tug they've raised three million bucks yeah they're really cool and one thing i like about open tug is that they've absolutely aped apple's naming nomenclature so open tug has an uh has a service called barge os the operating system for barges i know that's funny for us probably in their world no one gets why that's humorous but it's super cool and if you do need to move stuff around rivers or around ports and so forth having tugs is super important that's a cool company it's adjacent though to what we're talking about other things that are a bit closer jason um identic solutions does a lot of the kind of automation tracking for refrigerated containers or what are called reefers so that is really stuff moving on and off the boats but it's not the cranes it's not the automated robots that we're talking about those companies that we found prepping for today were older and so i was thinking isn't this a massive opportunity for startups to go out there and build the next generation of automated port tech comma not in the u.s though because currently the union is kind of control there at least for now so i wonder if this is really a european and asia latin america and african startup opportunity australian you know versus a domestic one yeah and then you have to think i wonder if there is a first principles way of looking at this and going faster so one of the startups i saw was going to do delivery with drones from ships to consumers that to me was insane now i know that when you get your you know stuff shipped from timu or apple products if you pre-order them like your return address is shenzhen or guangzhou or something and you'll you ever get that and you're like wow that's really weird like they're putting the shipping labels on in guangzhou for me for my apple device like this is tim cook's brilliant so i think there's something around you know maybe thinking from first principles how do we get those containers and those ships to you know operate even more effectively what if there were different sizes of these containers i know there are half containers and all kinds of other interesting things what if these containers had more autonomy in them themselves in other words the ship comes up and these things just unload themselves there's no cranes they just are smaller and they look like minivans or something and they get off like a procession of cars themselves so they drive on and drive off more efficiently themselves or they i mean this sounds really crazy but like soldiers at the beach in normandy the ship gets close to the port and they just get off the ship into the water and they make their way to micro ports or smaller ports like maybe there's other options here maybe the shipping containers are smaller and they ship more efficiently and those ones are also becoming robotic and need less folks so what about automated smaller ones that go from smaller ports and then we open up many more ports which reduce the shipping time so it does seem like some first principle thinking here would be really powerful um uh for how to do this you know in in a more interesting way yeah we have actually reached kind of the limit of some things we can do i think it's getting harder and harder to actually put the largest container ships through major throughways like um canals for example yes because we have some boats that are now so big they can't fit through places or they can't dock at certain ports it's kind of the airbus a380 problem if you recall when that came out airports had to like make separate terminals, runways.

49:19Yeah. Terminal. Yeah. Those for it, because it was so big. And now the boats are so big. We've almost kind of run that playbook to the end. And I would say that is like the peak of the TEU era because having containerized shipping that is the same around the world unlocked a lot because it meant that they were the same in every single port, every single city, same technology, super cheap, super easy. But maybe we have run that kind of to its natural conclusion and maybe we need something else. uh last thought here for me jason is we talk a lot about um geopolitics generally speaking not here on the show as much but uh shipping is a big thing that does rub up against geopolitics as we've seen in the middle east recently we talk a lot of the south china sea and shipping lanes through that area uh this is not just a port labor story it's much bigger but i do think lately this flashpoint underscores as you said the upcoming battles between labor and automation we're not done here yeah we're gonna have truck drivers um and then it will go to um yeah who would come after truck drivers uh uber drivers taxi drivers so uber drivers taxi drivers livery drivers drivers in general we had cashiers nobody seems to be crying about the cashiers making 15 bucks an hour losing their jobs because they don't seem to have a great union when that union fought really hard and this is the the thing i've learned as a technologist and an investor in technology companies when one side overplays their hand uh people start looking for solutions i perceive that's what's happened here they've overplayed their hand people are starting to look for solutions i know this because i was looking at a category of uh kiosks that would let you order food and everybody was like people want to talk to a human it'll never happen you know mcdonald's is not getting rid of their cashiers starbucks is not getting rid of their cashiers like that was the sentiment 15 years ago when i first looked at this cohort when the ipad came out because the ipad oh and again this is what happens with platforms a platform comes out founders get inspired the ipad was actually a platform it was a micro platform but it was one nonetheless and people said hey if you took these ipads you put them on stands and they would build stands for them and they'd say look you can order the food and the ticket goes in and you don't have to talk to this person here and so instead of having six cashiers we're going to go to two and we'll force people over there now you go to mcdonald's you go to starbucks you know even dunkin donuts has it now app ordering the app is the same as the kiosk and when you go into almost every fast food place and i don't go to fast food places all that often um they have these uh kiosks and the kiosk now is pushing you to the app the drive-thru is pushing you to the app so i took my daughter she wanted the mcflurry i ate the flail fish actually i think that's quite tasty um i hate mcdonald's uh like uh you know as a like staple of food source but once in a while man that that flail fish will hit the right spot and i i don't eat it often but um the guy's like did you when i went to the drive-thru which i thought was peak efficiency and i know that person is probably remote in india or manila taking my order he's the first thing he said was are you did you order through the app and i was like no he says do you have the app i said i do have the app he goes oh if you order through the app you can skip the first window go right to the second and i was like ah so this is what people are doing now they put their order in boom and they drive there so again this technology is going to get rid of jobs hopefully um we can have some basic humanity in while this happens the The McDonald's example is really good because McDonald's employment is at once something that we kind of like mock, like, oh, you're going to be flipping burgers, right?

53:06Just the colloquialism for you're going to end up at one of these lowest paid jobs in the economy. But at the same time, there's a stat that I don't have pulled up because I didn't know we were going to end up in McDonald's zone. But the percentage of Americans who have worked at McDonald's or was their first job. And it's a pretty astoundingly large number, just given how pervasive that chain is in the US, which you can tell from the obesity numbers. but it is a place where people get that first work experience often when they're still in high school when they're 16 and so as long as we don't automate away the on-ramps to like labor like that that is the concern that i have the first rung on the ladder yeah you start taking the first or second rung out where do people even start to learn how to be an employee like as a child as a young adult being a barista working at mcdonald's is kind of like a rite of passage for a lot of people are working in retail working at target working at you know i don't know sephora where my daughter wants to work at sephora she keeps asking me what's the youngest age i can work at sephora because she loves she wants a discount well she wants a discount too i think but she also like loves the idea of like helping people with that yeah um yeah i was talking to a vc who people would know by name um and their children work at an ice cream store over the summer and that's their summer job to have work experience and you could automate that encounter but i just I want to leave enough inefficiency in the labor market that people can eat well and have a career path.

54:32I want to make sure we don't end up automating everything away so that only eight people can afford to live. But at the same time, automation is coming. You cannot stop the economic forces behind it. It is a wave that is approaching every economy in the world at once. Yeah. All right. There you go, folks. A lot of opportunities in startup land. if you have a great idea ping us launch.co slash apply to apply for funding go to founder.university come up with a great idea get two people i'll fund it i'll give you the first 25k c check your friends and family check for 25k or i'll give you the first 125k like the yc tech stars bet if you come to our accelerator if you're a little further along you got a prototype or a customer you know we're here for it uh we want to see people take risk and pursue bold amazing visions of the future.

55:23Okay. All right. Now moving on, Jason, two options. Do you want to do open AI first or the venture capital firm that's returning$275 million to its investors uninvested? Yeah. I think the CRV story is the one that we didn't see coming. So I think we go with that. All right. So CRV, Charles River Ventures is going to return just over half of its$500 million dollar select fund it's going to basically ship back 275 million to its investors though jason fact check me here if they're giving that money back it just means they're not going to call that capital from their lps correct the way it works in venture capital is you do what's called a capital call so your lps agree let's say this is a 500 million dollar fund let's say you had 10 lps of 50 million each when you do your first closing you might take 10 of that down you deploy it then in year two or you have a big investment you call down the money as you do the investment some of these folks will call the money as they're doing the investments that's annoying but why do they do it well the marks for your irr are set for when you make the investment so if you pull down the 500 million day one but you only deployed 50 let's say 100 million a year over five years your clock is ticking on the 400 million you didn't deploy in the first year so there's an even more interesting device uh there are people who give you a loan against your um capital calls or the gp the venture firm so instead of me making a capital call on day one for this 500 million i've got all the documents signed so that's locked up it's very rare that somebody drops out if they do they'll lose their stake i do the first capital call i take down 50 million for the next 50 million when i make the next investments over the next six months i draw down from um a five percent a year line of credit i deploy that money now if i'm expected to run 15 or 20 percent per year i'm arbitraging that and i don't have to do a capital call so i can do less frequent capital calls because i have that loan as a device to pull down the money from the capital calls which then sets the clock further back which then gooses your irr okay that to me sounds smart is that slimy at all or is that do you think a legitimate approach i think it's fine to do i think it's actually okay um i think it's over optimizing perhaps would be the the thing to say about it it does yes if you didn't know about it and you're an lp would you care it doesn't affect you um and it actually in a way kind of abstracts out them sitting on the money so you get the advantage of sending the money later and money has time you know the money time value equation is there yeah but crv is saying here by doing this we're not going to call down half the fund why why are they saying this alex why do they not want they spend all this time raising that fund and they're giving half of it back why they raised in 2022 so this is not something that just came out they've had this money for a while and they've only invested 225 million so what they said was is that the firm's partner said in a joint interview with the Times is that, quote, market conditions have changed for the worse and valuations for startups are too high relative to their potential payoff.

58:35And this matters basically because the select fund was not their early stage fund. This was designed for later stage investments, defending ownership percentages, putting bigger checks to work into later stage companies that would go public. And then my read is there's no DPI. Late stage is kind of locked right now. And there's just not that many attractive deals. So as a review said, look, we don't want our LPs to think that we're just sitting on their capital to collect 2%. If we can't use it, here you go. I mean, it's a bold statement. I think it's a focus issue too. You know, when you try to build the full stack of venture capital, it's very hard.

59:11I know this because, you know, I went from an angel investor to running programs like an accelerator. And then I created this new concept that nobody ever had, but pre-accelerator. like a year i call it the year zero accelerator like you're not even incorporated but come hang out and we might give you some money uh to incorporate and just running those two programs founder university and launch accelerator it competes with us doing and the time it takes to do direct investing when we start doing direct investing putting 250k in a seed or pre-seed investment um now we're working with seed funds and then there's the series a the sequoias the andreason they all want to do that series a crv series a craft series a sometimes seed and you have to be great at something now if you start trying to do this late stage stuff why combinator did it gary tan canceled it these guys did a late stage fund it was available to them and they've now canceled it why i think there's the the limit is how many things can you be good at um and what is the return profile of each of these if the returns in seed are you know higher typically let's say a 20 % IRR and then series a is a 15 % IRR and then you do late stage and it goes down to 12 % which is still better than the 7 % of the market well if you're really good at the earlier stage why not focus on that because you it's not like we can't find another founder university or accelerator company so then why would we be competing for series a's we don't compete for series a's we will say we might participate in one we might defend we might do pro rata but generally speaking there's so many people doing the series a and there were too many people do in the series b this is a great thing focus on your knitting do what you're great at let other people do what they're great at and that's a better ecosystem it's kind of like nike i don't know if you're following this nike saga where they decided they would be a direct to consumer company and they kind of this entire channel system they had of like nikes in every store and you could buy nikes anywhere when they kind of got rid of the retail channel it caused problems for them it seems um now going direct is also great um but i think you got to be you're only good at so many things that's what this signals to me it's a mature thing to do and it's also saying that late stage is so broken because the valuations of public companies are dramatically lower than the valuations of private companies and that they don't think there's an opportunity there which means entrepreneurs and board members are going i have to start thinking about maybe the valuations in that it's kind of like a snake that ate an elephant it's like the valuations are low on either end they're skinny you know the snake is skinny at the beginning in the accelerator in series a the snake is skinny when it goes public but it's got this big fat part indigestion in the middle so that's where we are the snake is digesting the water buffalo the python is you know swallowed an alligator and you know it's like we'll see if the python survives it or if the alligator starts ripping out of its stomach i hate to be graphic here but that's the analogy here we went from lion king to alien there real quick i don't know how crazy yeah the images in my head are terrible uh i want to point out that the tension that you're describing is pretty pandemic in the adventure industry i was going through some all in summit talks and i found a couple of charts from coitus thomas uh lafont and i want to just quickly run through these so can we get the uh oh great talk this is uh vc distributions over time and um if you're on the audio version essentially vc distributions as a share of net asset value for funds age five to ten years has fallen to basically a tie for the all-time low at five percent was as high as about 33 in 2021 a complete collapse is how i read this chart yeah we have no distributions um after a massive um you know a great run from 2013 all the way to 2022 you know you had this really nice distributions um and now you know it's uh there's a lot of funds who just haven't distributed uh and there's not a lot of ipos but hopefully that picks up and so bill gurley and and brad gerstner have a chip company they just put up to go ipo i'm sure we'll talk about that here on the show um and hopefully we get you know stripe out the door and and spacex maybe or star link spins out whatever you know these kind of things would be colossal for the industry to have all that dpi start flowing out would recharge the industry and of course we've talked about it here a million times if lena con and her reign of terror ends we can start having mid-market m &a uh the industry might get up off the floor because right now we're on the floor it's literally like 2009 but what you see from 2009 2010 which is when i started angel investing and became a sequoia scout it was straight up and we just had this really great run so so hopefully we go back to the future yeah it's worse than it was back in 2009 let's pull up the very few new ipos chart here yeah um no not to correct but to improve and extend your point jason no no even beyond correcting i'm just saying great like oh god i do remember this from from uh his talk thomas's talk but you'll note that in 2001, so the year after the first dot-com bubble burst, there were still 21 IPOs.

1:04:29And then in 2008, there were nine. So compared to last year's five and 2022's two, this is the worst IPO technology venture-backed company crunch that I think we've ever seen. And I've been screaming about this, but the tensions are behind the scenes between LPs and GPs. And so they're not, it's not super public it's not like a founder on founder beef it's no wordpress engine versus automatic you know what i mean i i just i really worry and eventually it has to change and i don't think you can blame it all in a con well i think you know it's things got too overheated uh low um the thing for about lena con is you know she's not responsible the company's not going public she's responsible for the mna market freezing so what we're showing here is the other side of the which is a lot of founders aren't brave enough to go public when we did things like spax and we put out product early some of the product was nascent would be generous um they were really venture back companies that hadn't didn't have product market fit you know you look at something like virgin galactic or joeby and two of my friends did those companies or two of my friends were involved in those companies you know uh those are incredibly speculative space tourism and flying cars now do i think people should have the ability to invest in them yes but did people get too excited about these and think well everything's going to be uber airbnb stripe spacex yes as well and so you had too enthusiastic of a population who wanted to play vc they wanted to be venture capitalists i get it it's alluring they wanted to be angel investors they wanted to be seduced by getting the hundred x the thousand x the problem was those companies people didn't look at the valuation so if you blindly invest whether it's donald trump's back or virgin galactic or joe b you know the list goes on and on you're you're playing venture capitalists which means zero is a default possibility it is the majority public market investors did not understand that zero was a possibility they thought up into the right stonks go up as you know the president of uh dave port and i says stonks go up you know it's that that's the uh that that's not the case for venture no we just went through venture can freeze up it can lock and then we're sitting here with our lps with our founders trying to grind out some wins is it not for the faint of heart i can tell you i'm living it you know what i'm not for the faint of heart there nothing nothing is easy that's a lesson that I've learned.