Woke Google Maps, how Wells Fargo is losing money on fintech, and the global AI race | E1967

0:00Alright, everybody. Welcome back to this week in startups. He's Alex. I'm Jason at Alex at Jason on x.com. previously known as Twitter, full docket. Subscribe to our YouTube channel and just type in This Week in Startups and you will get a notification if you hit the bell when we go live. We're going to go live three days a week. We'll figure out if it's Monday, Wednesday, Friday, Monday, Tuesday, Thursday. It'll be what it is as we get through the summer and get our legs under us. But let's get started. It's a full, full docket. Yeah. So today we have up top what Jason is calling woke Google Maps, which I'm sure is going to be a great conversation for everybody.

0:33It's going to be fun. Then we're going to talk a little bit about a fintech company called Built and how they've managed to take Wells Fargo for about$120 million a year. It's my favorite story in tech today, this week, maybe this month. Then AI progress in China and Japan and who is building the fastest in and around the world. What's OpenAI really worth based off of yesterday's all in? And then new calls for social media regulation that could impact the next generation of startups, aka Jason's favorite issue today. This Week in Startups is brought to you by Squarespace. Turn your idea into a new website.

1:09Go to squarespace.com slash twist for a free trial. When you're ready to launch, use offer code twist to save 10 % off your first purchase of a website or domain. LinkedIn ads to redeem a$100 LinkedIn ad credit and launch your first campaign go to linkedin.com slash this week in startups and mercury with mercury you can simplify your financial operations with banking and software that power your critical financial workflows all within the one thing every business needs a bank account and with new bill pay and accounting integrations, you can pay bills faster and stay in control of company spend.

1:54Apply in minutes at mercury.com. First, woke Google Maps, you found this one, you brought it to the show. I have thoughts here. But why don't you start with what caught your eye? Yeah, so very simply, I, you know, I saw that somebody who worked at Google was tweeting and then subsequently deleted the tweets. So, you know, x is a pretty full contact platform. I've been spending a little time on threads, I'm getting destroyed on threads. It's like the anti-Twitter, anti, you know, it's journalists and people on the left, right? Basically, and Instagram folks. So it's kind of sad to me because we used to all be on one platform arguing.

2:29Now it's like two sets. But anytime I post over there, everybody's like, I hate you. And Sax is terrible. And this person's terrible. Your friends are terrible. Like, okay, whatever. But on X, you know, you get this Overton window is wide open. And what I thought was interesting about this was a Google was talking about, as you can see there from the tweet, if you're watching the video, why doesn't Google have a feature of the most scenic route? Because, you know, like, let's say you're walking through San Francisco or New York or Brooklyn, you might want to take the scenic route, that's something they could do.

3:04And so somebody who worked as I think a product manager or something at Google was talking about how, you know, actually, that came up a bunch. And so this person Casey K Limes, if they are in fact from Google, it's a very tantalizing idea. I did a lot of work and research on pedestrian navigation. This was among the top feature requests I heard from study participants. So it obviously is a great feature. So you're like, okay, great. Tell me more. And here comes the bomb. The next tweet was, yeah, we didn't do it because of equity, right? Right. And so because of its global scale, this is Casey, again, who we will take in good faith is a Googler, or was a Googler because of its global scale, even a small shift in maps routing from a seemingly innocuous, and frankly, very useful feature could create a reinforcing feedback loop with spatial inequity, inequality, spatial inequality.

4:02Now, obviously, it's very easy to mock spatial inequality. And this whole like tone of everything has to do with gender, race, identity, politics, income, but he goes on and says inadvertently diverting foot traffic from low income streets to high income streets takes revenue and potentially tax dollars from already struggling communities and funnels it instead to richer communities. Always remember, we live and build tools in complex systems for context. uh this idea was usually discussed with regard to walking navigation specifically okay so what what is your take because this is obviously anytime we bring up dei merit identity politics everyone gets along great and no one gets upset it's my everybody listens fully to each other's perspectives and takes them to heart so yeah and that's actually quite why i wanted to put this on because i as a twist of fate i've actually seen a bit of what happens when routing is changed in city and the economic impacts of it right here in Providence.

5:03So in Providence, we only have so many bridges. We're not a very big state, but there's a very critical bridge that goes out of Providence into East Providence and towards Massachusetts. Everyone goes across this who commutes and half of it broke. So quite literally, the number of lanes we have going across this river out of Providence went from two bridges to one that has to be shared. Traffic snarl, traffic jams, local investigations, a couple of hundred million dollars to fix. This happened in the last couple of months, it's been a hot mess. Like all across the state traffic is now just crap.

5:31And there's been a lot of economic damage that's come as a part of this. So for example, a restaurant near where I live, Noodles 102 says, look, our traffic has been decimated. We got to shut down. They're done. Other restaurants are closing and so forth. And so when I saw this, my first thought was, it seems a little bit silly. But then when I was just thinking about the economic impact, I can kind of see the point. And here's my argument. Tell me if this is too, too woke or not, but if you said everyone who walks wants to take scenic route, or I think they also said the nicest route was the initial like point of the tweet.

6:01So nicest scenic people are going to go to where there's the most expensive, best kept parts of town and not go through parts of town that can probably use the foot traffic. And so my question is who does Google really serve or do they have a customer that is the world, AKA everyone out there, or is it just the person who's using the app that just wants to see the most trees? Exactly. And so this is a this is the ultimate Rorschach test. You can tell somebody's politics by how they would approach the story. This is why I wanted to put it on the docket to kind of just think from first principles.

6:34If you and you caught me off at the past, I was going to tell you about a town. There is a town in north of San Francisco, I have the name of it, but I was driving through it. And the highway used to go through the town. So you've ever been on one of those highways and it slows down. And then you're on Main Street and you hit three lights. And then it says after the 25 miles or 35 miles an hour. Now you're back on a highway. Now you can go 65 or whatever your your choices. It's like this in upstate New York as well. And I'm sure Providence. I've seen this in Austin where they have the 290 and the 290 slows down to go through certain towns and their stoplights.

7:13Okay, so they build a highway and they stop going through the town. This town has a lot of through traffic going out of wine country up to Portland and whatever. Town decimated. Nobody stops. They put billboards on it. Hey, get off here. See our beautiful town. But the place is hollowed out compared to what it used to be. So there is actually impact to how you route and Google Maps is going to have an impact. So certainly a reasonable person of good faith would say, hey, let's think about the impact here. on the other side to your point hey i want to see more trees i'm in australia i'm in sydney i would like to take this walk but is there a way for me to walk along the harbor i don't know right and when i try to do those walks it's always like here's the fastest route and i would love for it to be able to pick the most scenic or perhaps the most populous maybe it's safer if it's the most populous or i want more energy right and so and and conversely you might want the least populace.

8:18Maybe you're riding on a bike, you don't want to have like a bunch of foot traffic or something. So there's all kinds of reasons. Giving the consumer the power here is great. And having a thoughtful discussion about it is great. Not everything is bad intent, is I guess what I would say. That's the thing. So when I read these, you know, he says things, this Casey person, this got talked about a lot. And he says, well, I would love this feature and we can do it. Here's why I didn't think it was the right choice. So to me, this is describing a product team that is being as thoughtful as they can about how to build the best stuff.

8:48They mentioned studies, they're talking to users, and they want this to work out. I think we can easily say, we don't agree with the decision that they came to, but I don't think the intent here is bad. And that's why, with a lot of love, I do feel like we use the word woke a little bit too broadly. And I think much like liberal and conservative in this country, it gets used so much that it kind of loses its definitional value. And so they're not saying you can't walk over there because you then would only go to the rich part of town. They're saying we're trying to find the right balance. And drawing that middle line, I think, is there's not one answer, Jason, because back to your point about even a Rorschach test, what I think is not probably all the time what you think.

9:29And so we're going to end up different places. I do think that a system inside of Google Maps that is purely safety oriented for pedestrians, especially at night would make a lot of sense. Like just an anti-crime heat map, you know? Yeah. One thing that drives me crazy is when I want to buy something on a website, but there's too much friction when I go to check out. I want a smooth and easy payment experience. And of course, it's got to be safe and secure. And sometimes I like to have other ways to pay, like through my digital wallet, or even buy now, pay later, which by the way, is super popular these days with a lot of people.

10:05If you're a merchant, you got to be able to offer for alternative payment methods. They're called APMs in the industry. And you know who's the best at this? That's right, Squarespace. Squarespace payments makes it easy for customers to make purchases, which equates to more revenue for your business. It's super easy to set up and will keep your MRR going up and to the right, which is what we're all looking for. So check out squarespace.com slash twist for a free trial. And when you're ready to launch, go to squarespace.com slash twist to get 10 % off your first website or domain purchase. Once again, squarespace.com slash TWIST.

10:42There was that app that got very popular that kind of went the vigilante route. I think Sequoia had made a bet on it. I forgot what it was called. You're not thinking about Waze, are you? Not Waze. Waze is just like, hey, get there faster. And if you got to cut through somebody's backyard and run over there, you know, tulips, fuck it, we're doing it. We'll get you there quicker. I mean, I was talking to an Uber driver. i'm here in southern california taking the kids to disney and universal and doing that little tour you know the driver's like listen i lived here my whole life you're gonna get killed in ways here like it takes you on some crazy routes people are speeding you know whatever like i know the rats it's it's not worth it to save two minutes and i was like all right interesting um there was another one uh it was an app uh and one of the producers is probably searching for it but there was a crime app um that was specifically citizen um yeah if you remember and citizen was awesome but if you turned on unless you turned on notifications and lived in san francisco because literally you'd be like there was a stabbing 0.6 miles from you like there is a stabbing 0.6 miles from you three times a day in san francisco tragically 0.6 miles though in a density is a lot like points it's 12 blocks yeah where i grew up is halfway up my driveway yes san francisco in manhattan in shanghai yeah that's 10 blocks can be a lot i agree with you though it is a little bit unnerving to be constantly told about the crime in your area but i can just see like for example if i was a woman if i was smaller i can definitely see yeah having personal safety be higher on my hierarchy and then you could also just have people turn it off but i i just don't want to say that the intent was bad here because it's clear they tried to find a solution that worked for people and also the world because google is so big jason i think it should keep in mind its responsibility to the people because we all use it and ways had to do this as well because ways did start creating problems for neighborhoods where like now listen they're public streets so we understand the argument everybody has a right to them but it also kind of sucks if you know like hey the 405 is packed and they're like hey by the boy here's a great idea this street where all the kids used to play through a local neighborhood we're going to just send people through and that's why sometimes they put like no through traffic on the street or they put up a blocker and say listen there's kids at play here and we're going to you know during rush hour close the street to through traffic right and so they're you know you have to it's a it's a negotiation and i think it's an interesting one not everything is a race issue i think the word woke is also i was listening to sam harris and um bill maher yeah good friend of mine sam harris a bill morrow i didn't know you know sam i loved his book on um moral philosophy i convinced him to do a podcast he had come to my studio see what i was doing with this three good startups we have the same book agent and um he's like tell me about podcasting what do i need to do this and i was like a microphone and a guest you should tell me more and i told him the specific microphones were at a dinner and then couples dinner i was like get this microphone get this get this and i just went through it all with him and um yeah and so i'm to blame i think partially to blame for his podcasting which means he's not writing any books but they were having a good conversation about the word woke actually and like the word woke i think you know in the 60s and 70s the origin of it is hey if you're an african-american in america stay vigilant eyes wide open like you might get pulled over by cops you know in the south or somewhere like stay woke be aware be you know present of potential threats to your safety that's what it meant now woke has become like okay karens and white women fighting for whatever uh and you know a way to deride people here i just would put google's behavior is in being thoughtful and i'll take them on face value and good faith that they're being thoughtful you can make fun of them for the gemini stuff yeah so the gem oh god yes i i guess that's my point because if we call out every when i was growing up in the 90s in the conservative christian church everything was politically correct that was the the the stamp put on everything anything that wasn't aggressively racist or sexist was stamped politically correct and to me it ended up being a phrase that i viewed as a compliment but i think woke is always used as a pejorative so there's no like positive case to be made today for its use so it's spread a little bit anyways we're a bit off topic great let's keep going glad you're working on this um maybe next time the better pr strategy so that way one engineer does not end up engendering the entire uh collapse deleting all their tweets and be like oh my god what have i done yeah well you you've had those tweets you tweet out something innocuous and then suddenly bam bam bam the whole world's on your door you're like whoa i was just trying to talk about poodles and mexican food that's it or whatever the hell yes yeah yeah it is the human spirit and psyche is not designed to have thousands of people if not millions see your worst moment and then mock you for it for eternity so eternity is a long time but the cool thing about most social media is that you will become character of the day and then within a week you've become half-life is pretty short it's pretty dramatic like uh the woman who um the woman who had an incident on an airplane and she's like that guy is not real whatever that woman's name is like he's not real like she i think has made like a whole persona of it and i think she scored she secured the bag so congratulations to her as long as she gets the bag because otherwise i think you will have a hard time shaking about something at that level of national attention yeah um also just don't have a meltdown on a plane because everyone there's a phone everyone's bored what are you doing the problem yeah yeah definitely shout out to finnie gomez well here we are talking about her still right so yeah i mean i hope she's well okay so now the best story in technology today is i think built and wells fargo built if you're not familiar with it.

16:28It's B-I-L-T. Jason, it is a FinTech service that allows people to pay their rent with a credit card to generate miles. This was my dream when I lived in San Francisco. I paid so much rent and I got nothing for it. However, it turns out that people working to try to figure out how this works have finally figured out the answer. But to work everyone into this, we're going to pull up a clip from CNBC with the founder, Anchor Jane, trying to explain how this works and see if you can parse out jason the the gesture it increases i mean i'm gonna go to ken on this because i and i apologize but okay you decided this company is worth three billion dollars right based on some kind of mathematical formula right about how much they're earning and what the future of this okay i'm gonna ask you to explain it because i unfortunately still don't understand it with what so is it i'm i now let's just pretend i'm related okay you come me and you say hey uh we want to process for you yep okay and i say to you okay i'd be very happy for you to process for me how much are you charging related pays for payment processing today right ach fees they pay check passion fees right they pay card fees when you pay your rent instead of that being our core business that we're trying to generate a huge margin on that right you can turn that into rewards for the customer that they can then use for airline miles somebody has to pay for those.

17:51That is already happening. That right there. Everybody else's business is just to keep that. So Related is already paying for payment processing before built using legacy. The thing here at the end of the day is the building, everyone converts to the built payments platform and they're paying a service fee for that. So the same way they used to pay for their legacy platform that gave none of that back to the renter, they now pay those same fees. If somebody wrote me a check, a person check, there'd be no fee on that. Correct. So then you get less rewards on that check payment. Right. Exactly. So when you pay electronically where there is a fee.

18:29Okay. So that sounds like there's two businesses here. Help me. There's the platform fee. So the software fee that I'm going to pay you to use, right? Payment processing. Payment processing, a fee per transaction. I'm not paying you some kind of other fee on top of that as a building. Correct. Okay. What am I paying you as a building? I'm a landlord. We have a lot landlords who are watching the show they may want to work with you or not how much are they are you charging the same that they currently pay for any other payment processing platform they use and that's different just like every enterprise deal has slightly different most of them don't usually allow you okay cards and all the online yep this is uh yeah what's your take here because i'm i'm confused and you and i are both in the industry covering this for a combined 50 years not only that we also know how credit cards work how the financials work how much swiping a card costs and what i do to three percent right depends on the card a little bit mx is higher which is why some businesses don't take them but our rewards corporate cards person and your safety um you know if you check people's driver's licenses you know like what background you do if you wait to have it clear all this stuff goes into your fees right absolutely yeah and the reason why people don't get, I think, credit card points for paying for rent is that often it's done via ACH.

19:50It's often done via cash or whatever, or just a check. And so there's not a lot of margin there. So people are trying to figure out CNBC in this case, how does built manage to offer rewards on a thing that doesn't generate margin? And the entire clip is these two poor CNBC hosts chasing this founder around in a circle, trying to figure out what it is you're selling, who's paying for and how it works out economically. And we have since found out, Jason, that it turns out that the answer is Wells Fargo. Ah, sugar daddy. Well, accidental sugar daddy. Oh, okay, explain. So the Wall Street Journal writes that essentially Wells Fargo wanted to get more deeply into credit cards, struck a deal with Bilt.

20:32It was super popular. Over a million people signed up in the first 18 months. Wow. And then the economics did not work out as they expected. People are not holding a balance. They are paying it off immediately. They are not being upsold to new things. They arrived because there was a perk. They are taking that perk and then they are effing off somewhere else. And so it turns out that built, which is now worth$3 billion, 3.1, I think, is losing Wells Fargo around$10 million a month, which is even for a bank, serious, serious money. Yeah, so, you know, unit economics is a discussion that we had a lot, maybe three times in my history in the industry.

21:14First, we had it with Webvan, which was Bill Gurley's investment in grocery delivery. We had it at that same time around Amazon. And could you deliver books? You know, was there a way for this to make sense to like actually ship a book and to give remember Amazon Prime free shipping? How is free shipping ever going to work? Right? And so in the answer in both those questions is it didn't work. And Webvan went out of business. And eventually, Amazon raised prices to I think right now, most people are paying for Amazon Prime$150 a year. So it is not as cheap as people thought it was the introductory price of Amazon Prime was between I think 40 and 50 bucks.

21:54So, you know, if you look at both of those, it didn't work, destroyed one company and the other company had to raise their prices eventually. Okay, now let's fast forward. Uber, and Lyft, and DoorDash, negative unit economics on the lower price services, like Uber Pool was losing money, UberX was losing money, driver incentives when they were in the war over drivers and trying to build out their infrastructure. And that took, what, five years for Uber and Lyft to turn a corner, stop trying to grow at all costs. And what made them do that? Wall Street. Wall Street makes you do that. Because as I think Warren Buffett or Charlie Munger said, you know, it's eventually, you know, it's the stock market starts as a voting mechanism, and then it becomes a weighing mechanism.

22:45It's a scale. And that's what you're seeing here, a startup was like growth at all costs. It's a Zerp startup, obviously, it was a zero interest rate phenomenon startup. And they came up with a way to sell$100 bills for$80. If you sell, if I went out onto the middle of Main Street, and I said, here's a stack of 100 bucks, anybody want it for$80, a smart person would say, how many are you selling? I'll take them all. Just give me the difference. And that's what we have here. And so, you know, it's, if you're a founder, you have to understand your unit economics. You have to understand when you're trying to acquire customers and losing money in doing so.

23:26and if you would have the ability to flip it. And I think the problem here is if the average rent was 3 ,000, right? Just back of the envelope, man. And let's say you had about$40 ,000 in rent a year and you're getting all these miles and you're getting whatever, two or 3 % back. I don't think based on what you've said, there's a way to make that money back. Okay, so that's the thing that I'm absolutely stuck on is how was this ever supposed to actually work out? The only way it could function is if Wells Fargo's new customers were spending so much money and then letting those balances rest. but i mean i think those people the less financially savvy probably aren't also the same people who are out there looking for new fintech products to put their money into to take advantage of you know who does that the points people i'm not a points person i respect people who we all got a points person in our life though i you have to have one i tend to invite them over only for very short lunches so that i can't talk to me about why chase sapphire reserve platinum gold green is the way to go i don't know um i just it's a lot of lift it's a lot it's a lot of it's a there's that's a lot of squeeze for very little juice yeah they're like it's 0.5 better and i'm like boy i'll buy you two coffees and then you don't have to do the works i've cleared the difference for you but if it's a hobby i get it but the point is those people are not going to leave a fat balance on their bill card from wells fargo to generate the margin to pay for the rent rewards.

24:47And the second you take this away, that million will go down to half a million. Like literally people will just start canceling and churning out of it immediately. Yes. There's a name for these people in the sweepstakes business. They're called like sweepstake, you know, some offensive word. And they're basically like sweep holes or something. Like there's an industry term for it because there was at some point people going around doing like group sweepstakes, like sign up for 10 newsletters and then win a MacBook. and then all of a sudden you would do this for your email newsletter and you know what would happen you would get thousands of emails signing up and none of them and your open rate would go from 50 60 percent down to 40 percent and then out to 30 percent you're like what happened those were dead emails these people were creating thousands of emails to just join sweepstakes they were doing it programmatically so same thing here unit economics at some point become the truth and the truth shall make you free.

25:42This startup needs to just accept the truth that they did a hack and the hack is not sustainable. Navigating the B2B maze can feel really tough, huh? You're trying to hit the mark with all those top tier executives. You want them to pay attention to your enterprise product. But where can you find all those big fish, the whales, the ones who call the shots and make the buying decisions for corporations, for startups, and everybody in between. Well, here's where LinkedIn ads is going to solve that problem for you. And I've used this. It is one of my secret weapons. LinkedIn means business. Business equals LinkedIn in people's minds.

26:20When you're on LinkedIn, you're in the business mindset. So you're going to really be thinking about business products and services. You're open to those opportunities. And LinkedIn recently passed a billion users. 180 million of those billion are senior executives, 18%. But hey, we all know about the 1%. 10 million C-suite executives. That's your CFO, CTO, CIO. These are the people who are always looking for a new product or service to make their organization run better, but they are on LinkedIn. That's why LinkedIn's ad platform delivers two to five times greater return on investment compared to other social media platforms.

26:56So easy to understand why this is because this is where all the business people are and they're in that business mindset. Super easy call to action. Make your B2B marketing everything it can be and get$100 credit on your next campaign. Go to linkedin.com slash thisweekinstartups to claim your credit. That's linkedin.com slash thisweekinstartups. No spaces, no dashes. Terms and conditions apply because they're giving you a hundy. So in a normal world, everything you said, bang on. They have a deal with Wells Fargo through 2029, which they're currently renegotiating. And if I was built, I would not renegotiate all of my business away.

27:31I might cut Wells Fargo a little break just so they don't go apoplectic. But I don't think Wells Fargo is going to be able to walk out of this as easily as we might think. This is not a month-to-month rental contract as far as I understand it. So I honestly, normally I would be like, Bill, you know, okay, it doesn't going to work out. But given Wells Fargo's history of large settlements with the government over alleged criminal behavior, I don't mind someone else making money at their expense. It kind of brings me joy. So Bill, shout out for me. Hope that the next model works out better than the first one because this one's not going to make it.

28:03Just go back and look at the history of Amazon Prime. It's$15 a month now, folks. $15 a month is$180 a year. So if those UPS packages were costing$10, they've got at least 18 deliveries, one and a half deliveries a month to your house that they've got covered. And then they have to make the rest back on the margin of selling products, which is why the prices have gone up over time on Amazon. And it's not the cheapest place to buy stuff. cheapest it's not even close actually what it is is the place where my credit card is always stored and if i need a thing they will have the thing it's not my preferred place though just because oh really say more well the interface is trash and it's hard to figure out anything and what i would like to do is have them curate slightly more so that way i don't have to go through 19 reddit threads to figure out which thing i need and also they're trying to generate lots of money from advertising.

29:00If you don't know, Amazon, like every major tech platform, makes hella bank off of advertising. I think they're up to 40 billion, by the way. Yeah. And I think they've pulled out 400 billion of customer surplus because using their services now just wading through SEO'd like descriptions and all the pictures are fake or they're AI generated. It's tough. But if I need a book by Wednesday, they will always have it. And so they still have me. And honestly, Jason, I didn't even know what Prime cost. We might actually have two prime accounts now that I think about it. We should probably not do that.

29:31But to me, it's like a Netflix. It's part of like electricity. It's a thing that you just have and it costs a number and you pay it. It's interesting that you call it a utility like that. The reason you call it a utility is because it's so goddamn reliable. And it gets more and more reliable. I'm here and like I said, I'm in SoCal. And like if I forget something, it's just super easy for me to just go on Amazon, zip, zip, zip. But if I just did like a search for podcast microphone, just as like a joke, and like, literally, the first row, three of the four are ads, they're sponsored. And then above it is roadie.

30:07And that's obviously sponsored. So of the top five, four are ads. And then in the next row, you know, you get like, the best sellers, the overall pick, the popular brand pick, all this other nonsense. then you go to the next row it's another row of paid it's a carousel paid i would pay somebody i'm not and i am not kidding here if somebody builds me i'll pay 500 bucks for a toolbar i literally pay 500 bucks for the toolbar that takes ads out of amazon results just does it exist does it exist anybody i mean literally i'll pay four times as much as i'm paying on prime to just stop the ad so i can just get a decision made quicker yes also same thing for Google, just Google search, not Google the company.

30:51Just, just, I want to be able to search for something and be able to scroll all the way past the fold before, before I get to content. I want to get rid of that experience. I want it to be inverted. That way it's good first, add second or to the right, not to the right ads. And then a result down there. Also that Google thing of people also ask, good. I'm glad you know that leave me alone. I don't need nine different ways to rephrase how do i cook a tortilla because if i wanted a different search for it i do it because i'm not yes because you're a power user how do you cook a perfect tortilla yeah got it i mean i would actually love to learn that that'd be fun yeah sure we someone pointed out in the comments as we're recording this that the amazon prime credit card offers five percent cash back which is apparently paid for by chase and the reason why those economics i think can work out is the average amazon customer is not your average points guy and so they are probably carrying a balance and therefore the economics are a little bit different and it can work out differently anyways built shout out to you wells fargo well enjoy your next three billion dollar fine all right uh let's talk about ai around the world because you had a couple of things here that you're excited about the first one is about a chinese investment group called high flyer capital management which was actually new to me apparently they've yeah eight billion aum as you heard of them yeah nope like a chinese hedge fund apparently they they are using technology and ai to make better trades, but something happened along the way.

32:15Yeah. So they got into a lot of AI to crunch all the data to help them run this quant fund, as they call it. And so they ended up spinning some of that technology out. And now they have a model called DeepSeek V2, which is apparently a quite good LLM. And then the prices have come down so much that we're now actually seeing a price war inside of the Chinese AI market. So DeepSeek costs two yuan for every million output tokens. And then after that launched in May, ByteDance cut its prices dramatically. Alibaba cut prices dramatically and made some of its models free. So it seems that we're seeing an investment company accidentally subsidize an AI product that caused a price collapse in the value of AI technologies in China.

32:59But to me, Jason, the thing that sticks out the most is the pace here. This is moving fast. And people talk about China being behind in AI now. It doesn't feel that way when I read this story. Yeah. What's interesting about this is I think, you know, building language models in other cultures and other languages is going to be slightly different, I think. And, you know, the pricing and the competitiveness here, I think, is moving all of these language models down to zero or close to zero. It reminds me of storage. Yeah. Storage was such a blocker in our industry for so long. Google Photos. And that's why the product launch of Gmail was so special.

33:44For those of you who are under the age of 40, when Gmail came out as the second product out of Google, you were fighting. People were selling on eBay and Craigslist invites. It was the first service to really do an invite system because they were trying to manage the storage. and the idea that you could have unlimited email storage broke people's brains how is that possible and it started with like five gig ten gig you know and just you guys have whatever it was maybe it was 50 megs or something you guys know how that story went once we cracked that open then youtube netflix just photos as another example like the idea that you would save high-res photos before you put photos into your backup storage the first thing you did was downgrade them yes you would use a piece of software to make them smaller and then you back them up now it's like do you want raw files go for it and now that i'm in my av phase i'm in my audio file phase yeah uh j file uh i am super into this audio stuff i'm using flax these things are 20 30 40 times as big and i'm storing them through a service called kobuz q-o-b-u-z which has it's basically like spotify for nerds from france and they take every album they make a high-res flat version of it so when you're using these special headphones like the vocals i use whatever you know in order to hear the sound you you don't want compressed audio files like m3s or whatever and so it's just extraordinary again enabled by storage so i think the trend here is going to be as the number the cost per token go down i think two one is like um i think it's still seven eight one to the dollar uh you know basically about renminbi yeah seven ish they basically control it so it's been seven for 20 years i think uh the chinese are like huh seven so what's what's trading it today so two yuan is worth about 14 cents i believe okay no sorry 28 cents i'm a big liar 28 cents yeah so it's like it's a quarter yeah uh and they will just you know and if energy is going to become the constraint well you know in china there's a lot of nuclear power plants and hydro plants and you could just put all the data centers there and pay somebody off to like the bitcoin miners did so um it's going to be really interesting to see how different countries approach these language models for self-defense you know security reaching super intelligence you know that's like one existential part of this and then the other part is a very practical part like how are we going to compete in efficiency when i don't know the producers of this podcast can use all these ai tools to make show notes faster or people who are transcribing and transcribe or the average analyst at mckinsey can you know research stuff faster and faster these other countries and other languages that they are going to be like still doing things manually that would be like they're still you know i don't know using like rocks yeah they're doing steam engines and everybody moved to electricity it's like really you're burning coal to run your factory like there's electricity you could use that and so this is existential on an efficiency basis and the efficiency of your populace and businesses and then there's super intelligence obviously and that's where i dovetail this one with what's happening in japan yes so so there's a company called and jason i might butcher this sakana sakana sakana it's a tokyo-based llm developer it is built by some deep mind alumni so some google heads have gone over to work on this and according to the information they're raising about a hundred million dollars at a one billion valuation i know we're all a little inured to large dollar ai investments but here's another nine figure round into a brand new unicorn essentially so worth keeping in mind and the things that they do that matter are twofold one is yes they are building japanese language large language models so in japanese language most of the internet is is english i think about half so So that's very important.

37:44But also they put out a paper talking about how to make LLNs or train them, I suppose, for less. So back to your efficiency point, the actual model creation, according to Sakana AI, is going to become cheaper. So localized language and less expensive. That means we can do more models in more language at a higher quality point. And I think that means every single language is going to have their own best of breed LLNs within the next 12 months, 18 months. Absolutely. And you have the Falcon Project out of the UAE. You know, I think the sovereign wealth funds and countries are starting to realize, wait a second, America is running away with this, we need to be in the game.