AI as a Value-Creation Engine in the Lower Middle Market

27:37Would that be learning too? Yeah, I think that there's a bunch of differences between starting a company now versus 10 years ago versus 20 years ago. So let's say that, let me take three different time crosses. 15, 20 years ago, if you wanted to start a software company, you literally needed like mainframe computer access. I mean, it was painful. It was expensive. You probably needed an HR department, a finance department. Your ability to start an initial company is expensive, time consuming. Even to get a baseline level would probably take you years. You know, as of seven, eight years ago, your ability to spin up a company, you can spin up a cloud environment pretty quickly.

28:15You can get Gusto payroll. You can get all the different components of the back office spun together really quickly. You can set up Salesforce. You can actually build scaffolding to build a business really quickly as of 70 years ago. But your obstacle back then would have been engineering predominantly. So you would have, you know, tried to figure out how you resource initial products. I think the most interesting difference now is, particularly with a lot of coding applications, with a lot of the multiplier effects of that, I think you're going to see the democratization of actually software engineering in some interesting ways.

28:51I'll give you an example. Think about, you know, when you were in university and you wanted to build a website. Like, you probably either had to pay somebody a pretty material amount to do a website, or you might have had to use Squarespace and something like that. The reality is now, you will be able to go text a website, you already can in a lot of ways, incredibly quickly. And so the barriers to stand up, one of the stats I heard recently was why combinators class this time and last are more than double the revenue of any prior vintage, just because of the speed of their engineering, right?

29:26So I think you have the ability to stand things up at a very different pace now. And so that actually has implications for companies in the middle market as well. Their ability to use modern engineering to take advantage of software development should be very different if they have a tech first mindset. Love that. Matt, thank you. It's been great to have you. Thank you for your partnership. And we're going to move on to Mark now. But we really appreciate you being on Why We Like It, and we'll see you soon. Thank you for having me. And really excited to be honest with Mark, who has done many amazing things in his career.

30:05Huge respect for that. Okay, my next guest. Not only is he a great friend, which I feel very fortunate, but we are joined today by the iconic innovator, one of the greats. someone who and i am going to make him blush has quite literally changed the world we live in he had a vision that everyone would walk around the world with a phone a smartphone in their pocket he transformed telecommunications created the blueprint for a whole host of technologies from intelligent agents to cloud to ios and android that came thereafter and since then And he's gone on to do things in the climate space, in artificial intelligence, in quantum computing, and a whole host of other things.

30:55He's also, as of just a couple weeks ago, the chief AI advisor at Access Holdings, helping us innovate the lower middle market to really make a difference for the backbone of America. Mark, thank you for joining us. It is my great pleasure, Sam. Really my great pleasure. so i mean i don't even know where to begin on the stats on ai we're going to talk big vision i want to blow everyone's brains with the scale of the opportunity the rate of change but just this morning when i was looking at the opening of the stock market nvidia is at 4.4 trillion dollars of market cap today fueling the growth in the ai agenda that's bigger than japan's gdp it's bigger on the UK's GDP, which is probably declining, but it continues to grow exponentially.

31:50And with it, the capability that's changing our lives. One of the areas I want to start though, is if we fast forward 10 years. So to talk to our audience, whether you're running a business in the lower middle market, or you're an investor, think about in 10 years time, what your company, what your platform might look like, but also think of the context it exists in. Mark, in 10 years' time, what does the world look like? Have we hit superintelligence? What is superintelligence? I would love to double down on what you said to encourage people viewing this, our guests, to do just that. Give yourself the permission to go 10 years, as Sam requested, into the future and give yourself permission to see it vividly.

32:40Even if you don't, even if it's kind of like foggy, just give yourself the permission because that's where the beginning of vision is, is going out there into the near future and having a very clear grasp, conviction in the moment that you've seen something. And then turn around and see where we came from. So, context. So, yes, AI has just been on the scene since the chat GPT moment for 20 minutes in decade time. immediately. They're now talking about the next wave, which is artificial, which is general intelligence, not just AI, but AGI. And then the next level beyond that is when super intelligence comes.

33:26And Sam, because you asked, out there in the future, there is an intelligence, intelligences that have been created that now are smarter, more capable, and more valuable than any human being in economic terms that can do things, than any human being. So imagine, you know, is that a subspecies? What is that? We've never seen anything like it. We've never been in an environment where we are not the alpha, top of the apex of the food chain. We are always the smartest. Well, we're about to create something that is synthetic, doesn't have all the human properties, the humane human properties. But nonetheless, it is smarter than us.

34:18It is doing fantastic things for us. Yes, it's creating abundance, productivity, unbelievable science that we haven't even dreamt of. it's made signs such that we can have therapeutics you know drugs, prescriptions that basically solve things solve problems, it's just out there and at the same time it is really can be really pernicious if this thing goes rogue so that's in the future that's the 10 year future, we will be grappling with the most amazing profound amplifier of the human intellect since language and i've been through what four or five major technological revolutions including the ones you mentioned and this is this is 10x that if not 100x in importance so in a world where and if i understand correctly mark you're saying we could ask super intelligence to cure cancer We could ask it to solve things that human beings haven't been able to solve through science, study, research, pattern recognition, and so on.

35:30And it would be able to do that for us. It would, yes. In a brief word, yes. This is how you get there.

35:43The superintelligence basically understands, in your case, understands biology. the one we talked about of curing cancer. It understands biology profoundly at a quantum level. And what that means is that its ability to see what is going on with expression of, you know, where cancer comes is seen by superintelligence, not seen by classical intelligence. First, it can create materials that don't exist in nature, never existed in nature, that are profound. It can finally create the compute alongside, in 10 years, by the way, there will be actually quantum computers, primitive ones. But that combination is incredibly potent.

36:29And it'll be able to solve equations, for example, that make fusion happen. What happens when fusion happens to energy? What happens to water desalination? What happens to food? What happens to everything that is dependent on energy? We've been talking about fusion for 30 years. We've been talking about hyper-personalized medicines for 20 years since RNA and DNA became something you could program with CRISPR. So we've been talking about this is now the capability that will make it happen on the science side. On the human side, running a business, creating and inventing, co-inventing, co-creating, which is something that you coined, which I really love.

37:14All of those things will amplify the human dimension in intellect and creativity because it lets you do that. Now, the final thing to know about superintelligence is that once it's given a purpose, it then learns from its own environment how to modify that purpose, how to create subgoals, how to create strategies. And it will continue to learn and evolve, and that's when superintelligence happens, is when we're not programming it, it is now able to program itself. It's able to realize what does it need and go out into the environment, the knowledge environment, and find ways to learn about what it needs to know and then generate the code to execute on that.

38:00So think of the lovely things that could happen and think of the not so lovely things that could happen in that context. Yeah, I mean, there are two parallel worlds here, one that's dystopian and one that's utopian, one where human beings are freed of the grind, freed of disease, freed of poverty, freed of struggle, but yet another world that looks more like Spielberg's Ready Player One, where we're all having to live in a digital world just to escape the reality of disparity. Which do you see? Thank you for that question. You see the background here. That's not a digital background. That's where I live and work.

38:40And this is San Francisco. And many of the AI companies, most of the big ones, are within a five-minute walking of where I am. So this is a bubble of AI. Very famous neighbors, right? We have famous neighbors. We have all kinds of incredible people. Blue Bottle Cafe down there. You walk in. It used to be empty because San Francisco went down. You walk in there, you can't get a seat at the table, and everyone is talking AI. I mean, everyone. This is a coffee shop. So, in any event, in these bubble circles, what you said, what you articulated, Sam, is exactly right. There is a really robust live debate, which is now global, and it's not just here, of are we tending to the, as you said, to the utopian, a place of abundance, a place of incredible progress in things that we want to have the defined high quality of life.

39:38And on the other side, the utopian side, on the dystopian side, what they talk about is not abundance, so they talk about extinction. That's the ultra, ultra, you know, sort of the extreme view of dystopian. And do you know how many people are on that extreme view? A lot. What does Peter Diamandis, Peter Diamandis wrote my favorite book, Abundance. If you haven't read it, you must. It's an incredibly positive spin about the trajectory of humankind. He's a friend of yours. What does Peter say? Well, Peter, as you said, says abundance. By the way, he has a podcast that's brilliant. He's prolific at that called Moonshots.

40:20It's well worth getting in the habit of seeing it if you're so inclined. By abundance, what he means is that everything that we want and need can be produced at a fraction of today's cost, possibly, and distributed widely to everyone. That's the superabundance thesis. is that Eric Schmid was on with Peter and said the economists that Eric, and Eric is extremely well-connected, the ex-chairman and CEO of Google, the economists he's speaking with are talking productivity gains that the world has never seen. Not 7%, 12%, 14%, which we have seen, GDP growth, China in its heyday, but 20%, 30 % productivity.

41:11Imagine, we've never seen anything like it, which means that gets you into a zone where the abundance is so abundant that you can have the equivalent of universal basic income. You can have free cheap water. You know, you can have things that are fundamental in life, as well as personalized education, personalized doctor, personalized trainer, personalized art teacher. the best talent worldwide can be made available to you. And that's an abundance. That's an abundance place. And that's where Peter lives. Peter, we should package his hormones, whatever. He is such a positive human being. He kind of almost lives in a state of just positivity and joy.

41:57So love listening to him. At the same time, and this is an important answer to your question, point of view of your question, which I think you meant, the other side is as articulate. The extinction thesis is brilliantly laid out, and when you read it, it does not sound like wacko science fiction. It sounds like it could be inevitable. So I am asking your viewers, your audience, to do something that's really hard, intellectually and emotionally. Stand in the possibility that both of those could be true at the same time. In other words, the promise of AI will create scenarios in medicine, let's say, or in education.

42:40Pick a field that are amazing and at exactly the same time, scary. And they can both be true at the same time. So our goal as kind of people, sentient people, not semi-sentient, is what do we do as a society to tilt in the direction of positive and tilt away from the direction of the negative? What can we do? What can we do with AI, with large language models? You know, NVIDIA is four trillion and change. It might go to six trillion. It is an astonishing, explosive, volcanic growth of power, AI power. So how do we, and we've never seen anything like it, as I mentioned, so how do we prepare? That's the open question that's here.

43:33Yeah, and let's double-click on that in the context of private equity and building companies, which after some of what we've talked about feels somewhat trivial. Who knows what the world will look like in 10 years' time. But how do people prepare now? Whether you're the founder of a company, a lower middle market business in the United States, or you're an asset owner and you're a private equity investor, how should you be thinking about not waking up in three, four, five years' time and being decimated by the competition? which could happen AI this stuff is we think in terms of discontinuity where something is going private equity firm a fund something's going along just fine and AI begins to really hit in a way that works as opposed to and there's a dot dot dot discontinuity to the upside there's a dot dot dot continuity to the downside in private equity it's an IQ test which side would you like to be on?

44:44The discontinuity is happening. So it's a question of choice. Before I get to kind of the real answer to what you're looking for, which is using AI for tactical things, operating efficiency, using it for strategic, create new revenue, or using it for transformational discontinuity level stuff, which is complete reinvention of the business. Before I get to that, there is a predicate. There's a precedent that something has to happen before that. before we introduce new services and new this and new that, each of us, each of you, if not already done and not already on the journey, is to deeply integrate AI into your personal life.

45:30Because that has juice. Use it. The invitation can only be done if you use ChatGBT at this time because it needs memory. others are not offering memory, is to create a digital twin of you that knows you intimately. Because you've permissioned it, you've given it documents, you've given it things that some of your viewers are going to say, no, you've given it health records, financial records, you've opened up your real-time communication, you know, this conversation we're having today, you know, just take the MP4 and drop it in and say, make that part of me. That, when you get to that point, whether you want to talk to the me, who knows you intimately, knows you incredibly intimately, if you let it.

46:21This is where some people in the audience are saying, no, no, no. But the ones that say yes, the value that I have, I've had a me for two years. I can only compare it to, do you remember before there was a Google? How did you learn? How did you know anything? Then it was Google. and then there was the chat GPT moment and the chat GPT moment from where we were before which is kind of where we were before is like this when you hear to me going from just using chat GPT to the amazingness experience is the same leap I've been living in it for the last two years I invite you to do it it's not hard to do it and learn whatever it is that you're that you need to know whether you know from the trivial to the profound um and people use it for both some people use it just as a google search you know augmented no have conversations remember we used to say prompt engineering and everybody else didn't no that's 2024 have conversations because you have an you know you have an intelligent person who knows you you're you're me i call my me mia by the way i've given her legend and then i know exactly who she is where she came and hi Mia and off we go I'm having a problem with my dishwasher how do I reset it to the most profound questions of all Mia can go find it so once you have that once you have that in your skills in your awareness of you know what AI means on a personal level then you can begin to understand some of the tactical strategic and discontinuity or transformative impact in the business.

48:12So if you're there, if you're a ninja power user of AI in your personal life, awesome. If you create an AMI, awesomer. Or go create a AMI and you'll see what AI can do. And then we can come back and talk about what are the tactical implications. And those are mostly about doing things we're doing today smarter, cheaper, faster. That's basically what it, and that reduces operating expense, which increases margin, increased satisfaction for the customer, and everything's good. So if we fast forward, Mark, does that mean that when it comes to sourcing companies and the proliferation of real-time data available for everyone or trying to find arbitrage in businesses, the leveling of the playing field is totally eroded.

49:15There is no competitive edge on that stuff in five years' time because everyone has access to the same tools, technology, data sets. What becomes the edge in the industry? So to just touch briefly on the other things, we talked about operating expense and efficiency. Strategic is massive revenue acceleration for a whole host of reasons. And transforming is inventing a new business around your business. The expression around here is if you don't cannibalize yourself, your competitor will. So completely transform your business. In five years' time or so, yes, people will have these tools and they'll be able to do the operating expense, cheaper, faster, better, increase revenue and transform.

50:08So what's the edge for a private equity firm? It's the creativity to match a company and see a company and say, oh, that is an operating expense, low-hanging fruit. And efficiency, which means customer service is going to go through the roof because we're able to do that. Or they can see, the private equity firm can see some strategic ideas here that massively increase revenue and income. They see that. Or, top of the heap is, we can take that company with a discontinuity and create a new category and crush it. and you know historically you know whoever creates a new category gets 80 of the market cap and you know the enterprise value out of that new category that's transformative that is that is the content of the conversation in the future private equity circles where the investment committee lives that's what you're talking about and if someone has a tactical operational idea a strategic idea or a transformative idea, everyone's going to go to their smartphone or their computer and say, what do you think of this idea?

51:26And I just thought it was something fun. Do it across, so everybody uses a different large language model. You ask Gemini, and you ask Anthropoc Claude, and you ask JGBT, and you ask Grok, okay, why not, of what do you think of this idea? And rather than dispatching a committee to go study it per month, four answers come back within a minute, which could be stupid answers. They could be hallucination answers. They could be dead wrong. But if you train your professional me, if you create one, the investment committee and the CEO will be using, in my prediction, if they create a me, that me, that professional me will know how the CEO is thinking, to how the senior managing director partners are thinking.

52:20They know where they're coming from. They know their prejudice, their blind spots, their strengths, their genius. They kind of get a holistic view. So that's the extension of the personal me is to create a professional me. And the way they'll be exercising differentiation and competitive dominance is the creativity of that team, augmented by AI, to converse, to debate, to bring in data, facts, bring in hypotheses, look for torpedoes, red team, blue team, do all the things that an executive team needs to do in coming to an answer or to a point of view. And given the same exact tools in two private equity firms with exactly the same profile across the street from each other, those teams will come up with different ideas.

53:09And that's the differentiation. And if your transformative idea is better than the one across the street, boom, you start getting a flood of lps that want to be in your funds i've got so many questions for you and you've already tolerated a lot of mine uh the last uh few weeks and months i'm not going to go any further on the private equity side because that's some of the access secret source that we're working on uh but i want to ask some fun personal questions uh to to close out so people really get to know the icon that is Mark. I first heard of you when I watched the General Magic trailer.

53:47I watched it on an airplane. It changed my life and it led to me meeting you. I sought you out and here we are, friends, partners, doing all sorts of exciting things together. That documentary changed my life. What documentary changed yours? Oh my goodness. That's a great question. What was it about General Magic that changed yours? And I've actually heard that from others. Is the ability to, you should speak for yourself, but others have said, it's the ability to see something, a culture, an inventive place, extraordinary people, and that's possible. It's possible to get that level of, you know, kind of genius and fun and purpose all in one room.

54:37So it gave them the ability to go think in that way. That's one. There are many others. Mine are connected to a dark place, unfortunately, because of my background is there's a Holocaust family, you know, tragic thing. And from World War II. and that does take me to films and documentaries but films that explore that I don't want to go into it but there's that which other documentary I don't know I'll pick a one let's touch on general magic for me there are two things that stood out and have shaped the way I think the way I lead the way I live one is the ability to take people on a journey that is your vision that feels like their vision the the cult philosophy that you built which was just a beautiful thing you feel the energy in the documentary I wasn't there but I feel like I was and the second thing is contrary to popular belief success doesn't mean you build a unicorn success doesn't mean you need to look like nvidia um you know we talked you and i talked about the butterfly effect where um actions in one place that may be seemingly not successful at the end or not have longevity change the world we live in and that's what general magic did um to tell me uh i'm gonna ask some some specific questions but you assembled an all-star team that spun out of apple um who was the greatest unsung hero of that bunch uh bowser was a rabbit that ran around um our children our kids the ones that came in as not knowing much um uh where tony tony fidel is one no others i'll just talk about Tony.

56:48And the others were very, very young, really young people. It's like, you know, don't build a company with anybody over 30. It's a little harsh, but these are really young people. Two engineers sat next to each other, essentially 10 feet apart. Tony Fidel, Andy Rubin. Tony came in not knowing anything. I mean, I think it might have been his first job. he pounded the door down because he heard that the Mac team the Mac team had assembled and were doing something amazing which was a secret and it was a smartphone so he pounded the door down, came in, knew nothing eventually after the general magic experience where he was working on smartphones he went to Apple and worked on the iPhone team and created the iPhone with first the iPod then the iPhone big surprise, unbelievable The other one is Andy Rubin, who sat next to him, they were friends, who did the same thing.

57:44He was inspired by the vision, the passion, the sheer IQ points that were floating around. I can't imagine how many IQ points. And then went off after General Magic and created Android. And so these two guys sitting 10 feet apart were responsible for what is now 95 % to 98 % of all the smartphone operating systems in the world. I came out of 20 feet, two cubicles, they're 10 by 10 cubicles, we were generous in those days. 20 feet by 10 feet. So in those 200 square feet, you know, a butterfly, you know, that was a chrysalis. A butterfly came out of that and flapped its wings and 12 years later, Steve, with some of the magicians, we call them general magic, the magicians, went on stage and, you know, and introduced iPhone 1.

58:43And the rest is history of what's been going on. Unbelievable. I was going to ask you, if you could have dinner with anyone, who would it be with? You've had dinner with many amazing people. In fact, you had dinner with the author of this book, Tim Berners-Litton, recently. So maybe I'll ask a question about that. How was dinner bringing together Mark Porat and Sir Tim Berners-Lee in one sitting? Astonishing. So Sam has been friends with Sir Tim and his wife for a while, a long time. So coincidence that we knew each other. Tim Berners-Lee invented the World Wide Web. As simple as that. He invented it.

59:32the fathers of the internet, which is the internet without the web, there were four fathers. One of them, Vint Cerf, by the way, was my first boss. I worked on, as a graduate student, I worked on the internet under Vint Cerf, who created one of the forefathers. And at that time, there were 14 computers. That was the internet. So having dinner with Tim, who created the web, was mind-blowing. I mean, this is single-handedly, wrote the entire spec that became the World Wide Web. And he just wrote a book, and I went to the dinner party that you cited. Tim said something to me that just brought tears to my eyes.

1:00:22He said, out of the blue, I was at CERN, I was doing physics, and I heard about General Magic. I should have joined General Magic. And I started, you know, tears going. Why? Because the World Wide Web was just, the internet was just washing over the industry. And we scrambled to make a internet native experience. Agent technology, agentics, which is what it's called now. Agent technology and smartphones and these things, you know, watches. Which, by the way, is being made in Apple by Kevin. Kevin Lynch, who worked on the same thing, Smartphone. He's now doing the watch. So where we need to be is more people like Tim Berners-Lee, who have the audacity to break out and do something.

1:01:19That book is one of the best examples of a discontinuity. There was the world before, and then there was the world after. And people who saw the world after, dot, dot, dot, created trillions of dollars of value. Maybe tens of trillions, but certainly trillions of dollars of value out of that awareness. That's what happens when you see something on the horizon. Tim is a perfect example of that. And by the way, after the World Wide Web, in terms of revenue and impact, it didn't do anything for 10 years. It was just kind of lobbying around, and then it went exponential. That's how technology is. so we're now you haven't so you you know watching this going oh my god I've missed the train no we're now in the early exuberance stage where everybody's throwing money at it 90 % fail rate and that's okay because because the experimentation has begun that's a discontinuity in 10 years it'll have it'll climb that same exponential maybe less, maybe five years because it's growing so quickly and multi-trillion dollar market cap companies that do not even exist today there may be a couple of people across the street there the next NVIDIA or the next Apple or the next Google will hatch and that's where we're headed Mark, I'm going to leave it there That's a perfect place to start.

1:02:58And thank you for sharing that with our audience. Thank you for sharing it with me. And thank you for being a great partner on all of this stuff. I couldn't be more excited about doing it with you. And you give me a level of comfort that this crazy world we're going into isn't going to be quite so scary after all. So thank you for everything you've done. And thanks for being here. Thank you for being so gracious. And on it, I really appreciate the chance to speak with you, Sam. Thanks for joining Why We Like It. Don't miss an episode. Be sure to subscribe. Expect big perspectives, big profiles, and big potential.

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