DOGE kills its first bill, Zuck vs OpenAI, Google's AI comeback with bestie Aaron Levie
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J. Cal, what just happened? Did you just have a moment, an emotional moment? I don't know. You know, I've been trying to get over sacks and it's hard to get over your ex. Even when they didn't treat you well? We were in a codependent relationship and we were working on it. You have no one to fight with anymore. Who are you going to fight with, J. Cal?

That's the emptiness you feel inside because you're a fighter. You're a street brawler and you have no one to brawl with anymore. So you feel... Well, you're the first guy to jump under the table in a bar fight. I mean... Here you go. Here you go. As I was saying. It's always worth a start. No, I feel like if shit goes down, I feel like Sax and I would have like... We would have thrown down. We were bulldogs. We would have fought like tooth and nail. Okay. I have this... I have this image. It's like we're in a bar. Okay? Okay.

And all of a sudden... You talking to me? A fight is about to break out. Four thought bubbles appear. Okay? J. Cal's like, let's go get him. Sax is like, this guy's a dipshit. Let's roll. I'm like, look at that chick. She's so good looking. And then Freeberg's like, what will happen to my invite to duck? Freeberg's like, how do I get out of this unscathed? Strike that. Strike.

All right, everybody, welcome to the number one podcast in the world with me again today. For better or worse, your Sultan of Science, David Friedberg is back. How you doing, Friedberg? I see you're a pawn, only a pawn in their game. What's going on with the pawn background? The imposter syndrome.

Pawn or queen? Hmm. What is that from? Is that from a movie? What movie is that from? It's called The Impostor Syndrome. Bye.

- It's like some French new wave I'm not aware of. - I've learned that Freeburg's backgrounds is some weird secret communication language. There's a small but fervent group of people that are really into these backgrounds. They're always trying to figure something out. - Absolutely. Of course, with us again, Chamath Palihapitiya, your chairman dictator. How you doing, Chamath? Nice sweater. - Thank you, sir. Good to see you.

You ready for it? Excited to see you. I know. Look at this. Three or four besties will be hitting the slopes. Three or four besties will be skiing together. Aaron might be there. Aaron, where are you going for the holidays? Oh, actually, we'll be in *** next week. What? Well, there you go. Oh, new bestie in ***. Aaron, are you staying in the town? Just at the hotel. Okay, this is perfect. We're all going to be there, bro.

$2,000 a night. How many rooms you got with the kids and the fam? You have three? Bro, boxes at all-time highs. Take it easy. What did you do? Did you start buying Bitcoin with your treasury? What do you mean boxes at an all-time high? Are you doing a Michael Saylor or something? You know, it turns out if you didn't get crushed during the post-COVID period, you can just keep cranking. So that's what we've been doing. Oh, you've been building a real business, of course, with us now. Our new fifth bestie, Aaron Levy.

He is the CEO of the publicly traded company Box, which means he's got the most to lose by coming here. So welcome back to the program. Centrisex. Based on what you guys were just talking about before this recording started, I have no idea what we're in for. Yes. Listen, we're living in an age of meme stocks and people selling convertible notes to buy Bitcoin for their treasury and then becoming a NASDAQ 100. It's that simple. Aaron, when you see...

a company buy billions of dollars worth of Bitcoin and get added to the NASDAQ 100, what method of suicide do you think of taking your own life with? There was a brief week in 2021 where the thought kind of crossed my mind. Yes. Sapuku, you're just going to use the sword, the short blade? We have a very sophisticated audit committee that prevented the action. So

Will you do this for me? Yeah. Just do this for me. Take, how much cash does Box have in the books? Ballpark. Well, we just did a convert, so we're probably six or 700 million. Okay, here's what I want to do. A little experiment for next week. Just put 5% of the treasury, 30 million in Bitcoin. And then we'll invite you back in two weeks and we'll see what happens, okay? Just put 5% of the treasury in Bitcoin. Hey, everybody.

Here's another announcement, a little housekeeping. As you know, we successfully got the allin.com domain. That was a big victory for us. And we now have an email list. So four years into this, Meshugana, we now have the ability to take your email address and spam you with all kinds of great information, like a notification when the pod drops. Wow, so compelling. Insights from the besties who you've had enough of.

And first dibs on overpriced event tickets to come hang out with us. Wow. This is the compelling pitch we have for giving us your emails. So if you'd like to give us your email and get spammed, go to all in dot com and let the spam begin. All right. That's out of the way. Saks is out again this week.

I don't know what's going on. We've been trying to figure out where he is. He's MIA. If anybody knows... No, he's in D.C. this week. Yeah. Oh, is that what's going on? Did you see all the meetings? I know. I'm being facetious. He's in meetings. Mr. Sachs went to Washington. He's creating waves. But Mr. Sachs is in Washington and...

Have you guys seen the photos? Aaron, what do you think of Sax in this role? I think it's a strong pick. Let the genuflecting begin. Go ahead and say more, Aaron. So Crypto I'm a little bit indifferent on. We haven't spent much time there, leaned in much there. But on AI, I think it's a very strong pick.

And I think you want somebody that has a general sort of deregulation, anti-regulation bent at this stage in the evolution of the technology. I think there's risk of sort of slowing down too much progress right now. And I think he'll provide some good support.

kind of parameters and principles around how to avoid that. So I think very strong. And then, you know, crypto again, don't know too much about. And then we'll see the rest of the topics. As a software CEO of a public company, when the Biden administration was putting forward their proposals on how to regulate AI and have definitions on the size of a model and what the models could or shouldn't do and the regulatory authority they would have over the software that's written,

What was your reaction? And you were supporting Harris at the time, I believe, or Biden at the time, right? But like, how did you react to that when you saw those proposals? And just to be clear, are you talking about the EO that went out?

Yeah, there was the EO, but then they were also drafting. They published a lot of detailed drafting. And then obviously California had its bill, which you probably saw as well, which specified like the number of parameters in a model, the size of a model, and all these kind of constraints. In reverse order was against SB 1047. It felt like, you know, you had two big issues. One, you probably don't want state by state legislation on this topic. That's going to be, you're in a world of hurt if every state has a different approach to this.

And then second, secondarily, if you just look at how it evolved from the very first proposal to the final proposal, and unfortunately, the kind of underlying philosophy that was in the bill, it was it was very clearly a sort of like, like viewing, you know, basically AI progress as inherently risky right now. And so it just ratcheted up the different levels of consequence.

for the AI model developers. And the risk is sort of the second or third order effects of that, which is like, does Zuck then want to release the next version of Llama if you're taking on that much risk? And even the incremental updates, the liability you have in terms of any of the model advancements. And so right now, we're benefiting from just an incredibly competitive market between five or six players

And you want them running as fast as possible, not having to have sort of this, you know, a whole council before every model gets released because they're, you know, in fear of getting sued by, you know, the government for hundreds of millions of dollars if one person does something wrong with the model. So that was the problem with SB 1047. That's been the problem with some of the proposals on national legislation. I felt like the first EO, it didn't have a lot of teeth in it. So it kind of was more like, let's watch, you know, this space and continue to study it.

The actual current head of OSTP, Arti Prabhakar, a lot of folks in Silicon Valley know her. She's actually very strong, very technical, understands the Valley well, does not lean into overregulation. So I actually think OSTP has had a pretty good steward, even under Biden.

But I think the efforts that Sachs would clearly be leading, I think, would lean even more toward AI progress and sort of not accidentally over-regulating too early in this journey. So let me ask you a question then about crypto. You're not into crypto. Crypto is a little bit harder to regulate. So with Sachs being there, what do we think the one, two, or three things he could do to actually make crypto...

Not a scam, not have consumers get left holding the bag. Obviously, sandboxing projects, maybe having people know your customer, you know, some basic regulation there. The sophisticated investor test comes to mind. Chamath, what do you think SAC should do in terms of crypto regulation in the short term, in the near term? That's a really good question. I think that

Today, there are a lot of really valuable use cases that can sit on top of crypto rails. I think the most obvious one is how you can have real-time payments using stablecoins. I think the United States government is already using some of these stablecoins for a bunch of purposes.

The number of companies that are beginning to adopt and use stablecoins is actually growing very quickly as well. Take a second to define stablecoins for the audience just to catch people up. Let me define what a stablecoin is, which is that you put a dollar into a wallet somewhere, and in return, you get a digital token of that dollar. There are two big purveyors of stablecoins. There's Tether and then there's USDC, which is this company called Circle.

I think the easiest way to disambiguate them is Tether is abroad. I think it's run out of somewhere in the Caribbean. And USDC is American. It's run by this company called Circle. The other difference is that there is some ambiguity

around how these assets are secured. So what a stablecoin is supposed to do is when you give them a dollar, they're supposed to go and buy some short-term treasury security so that that dollar is always guaranteed, right? Because if you had a billion dollars of stablecoins, but only $900 million of assets to back them up,

there's an insolvency risk there. There's a run on the bank risk, right? So theoretically, a billion dollars of stable coins should have a billion dollars of cash in some short-term fungible security. What's incredible is at the scale in which these stable coins operate,

That has turned out to be an enormous business. Why? When you give them a billion dollars and get a billion dollars of stable coins in return, they just go and put it into the bank. And when interest rates are two, three, four, 5%, they're making billions and billions of dollars. They get the float. They get the float. So these businesses have turned out to be incredible, but that's beyond the point. The point is that

a lot of companies that you would never think. So for example, SpaceX uses these stablecoins. How? How do you think they collect payments from all the Starlink customers when they aggregate them in all of these long tail countries? They don't want to necessarily take the FX risk, the foreign exchange risk. They don't want to deal with sending wires. So what they do is they'll swap into stablecoin, send it back to the United States and then swap back to US dollars. So it's a very useful utility. So number one is

I think we need to make those rails the standard rails in the United States. And what that does is it allows us to chip away at all of this decrepit

infrastructure that the banks use to sort of slow down and tax a process that should never have been taxed. So this is good competition in a way, Chamath. It's incredible. Now the banks have somebody to challenge them for money transfer and money storage, and it could be regulated and stable. But I guess the question that, yeah. But that's the first thing. But then the second thing it allows you to do is you start, you can see a world where now you can have real competition against the traditional rails, specifically

specifically Visa, MasterCard, American Express. Because when you look at great companies like Stripe, I use Stripe, I pay them 3%. If I use stable coins from Stripe, I don't pay zero, but I don't pay 3%. It's kind of somewhere in the middle. If I was technically adept at implementing stable coins through the entire stack of my product,

So I use it for this learn with me thing where we publish research. I would save a lot of money. So the idea that you can take that 300 basis points you pay to these companies and crush it to zero would be a boon.

to global GDP, because that's 3% on many tens of trillions of dollars. Aaron, you're shaking your head. This is something that you're experimenting with at Box or you're aware of or a problem that you recognize? No, no, just the, I mean, the credit card rails is, I mean, the tax on transactions is obviously insane. So the stable coin being the intermediary for that in the future makes total sense if you could get everybody to kind of coordinate against that. So yeah.

Well, in regulating, it would get people off of Tether, hopefully, which has a checkered, colorful, sorted pass. You can go look it up. But they've had many, many legal actions against them. I'll leave it at that. Yeah, but in fairness to them, I think, again, both of these two companies look, as of today—

Again, you have a jurisdictional issue difference, but as of today, it looks like they're both pegged one for one. But anyways, the point is if Saks can really push the adoption of stable coins, number one, and then number two is to incentivize much, much cheaper transactional rails, then I think he can go to Bitcoin and these other more long-tail crypto projects

off of a back of momentum. Because these first two things, I think everybody will embrace, and he won't get caught in a political quagmire. These other things, you have these opponents always coming into the system. And they have even Bitcoin, like when I said this thing about encryption and quantum, and even though I thought I was very clear, the crypto is

community on the internet went absolutely crazy all last week. Yes, they piled on. But the thing is like some of the maxis piled on. Then when they actually took time to understand the technicalities of what I was saying, other people realized I was right that they were tweeting it. My point is

That world is so animated and energized that I think it's hard to use them as the first place where you find progress. So I would tell Sachs, go to stablecoins, then disrupt the Visa rails, and then go to the other stuff. I would go stablecoins, and I would go even before that, the accreditation test that I've been talking about, because the SEC has that mandate. People were educated, Aaron.

They could buy crypto and know they're going to lose their money or know that something's a fugazi, a fugazi, whatever it is. Yeah, I mean, I'm sure we want to move on. But I guess so there's a there's a parallel universe where where so no matter what, like, obviously, Gensler did not get his arms around this whole thing. So so that was a big, big mistake. But there's sort of like, like.

DeFi slash financial crypto, where almost everything is deflationary. It improves the rails. If you believe in Bitcoin as this store of value,

and digital gold, like all of those things can actually kind of make sense and be a bit rational and like improve things. And then, you know, you know, unfortunately or not, depending on your views, there was this other sort of, you know, fractal event that happened, which was, oh, let's also use these things as a means of, of kind of creating a virtual, you know, currency and, and, and token equities and tokens for anything where that then runs into, you

basically the SEC remit of like, are these things securities or not? And is there insider trading or not? And can anybody issue them at any time and promote them on Twitter or not? And so, you know, I think to some extent, if you could get back to like crypto 1.0, which was like, this is a financial infrastructure, I think you would have avoided a lot of the sort of noise and challenges with crypto. Now, I don't know, you can't put it back in the bag.

But but there's like I don't think you could get 10 crypto people to agree on how you regulate that second category, because some people some people believe I should be able to issue an NFT on anything and I should be able to trade that. And and and at the same time, they would obviously they would sort of claim, well, that's just the same as a as an aftermarket, you know, seat to a concert. And yet another group would would be treating this as as effectively, you know, a security. And so you I don't know how you're ever going to reel that in.

without some people being upset, you know, within the crypto community.

All right, well, more to come and Saks will be back. Saks will be back. And we will be rotating the fifth seat amongst, you know, friends of the pod and newsmakers. Sorry, did I already get rotated out based on... Well, yeah, basically. The energy was a little low, but, you know, I mean, it's just, I think... You already had to warn people that this is a... What's your resting heart rate versus we're boys and then we'll just make a decision. Okay, okay, okay.

All right, listen, Doge is fully operational. Elon and Vivek have helped kill the last minute omnibus spending bill. Wednesday night, the bill had been killed and we were looking at the government shutting down starting Friday, December 20th. Today, when you were listening to this,

For some quick background, in September, Congress approved a bill that would keep the government funded through December 20th, the day this episode published. Keep that December date in mind for a second. This Tuesday, December 17th, three days before the deadline, leaders in Congress unveiled what was presented as a bipartisan stopgap bill

That would keep the government funded through March 14. That kind of bill is called a continuing resolution. Basically, it gives you more time for the incoming GOP majority to reach an agreement on the funding for the government. But there are two major problems with the bill. It's a rushed job. It had to pass the House and the Senate by Friday night after being presented on Tuesday. It's absurdly long, 1,500 pages long.

with $340 billion in spending, including pay raises and better healthcare benefits for the members of Congress. My lord, read the room, gentlemen and ladies. Funding for a global engagement center for another year. That's the Disinformation Watchdog Group that was wrapped up in the Twitter files. $130 billion to renew the farm bill for another year. $110 billion in hurricane disaster aid. Just

Money being thrown everywhere, a billion three to replace the Francis Scott Key Bridge in Baltimore. Vivek had some spicy comments on it. Congress has known about the deadline since they created it in late September. He said the urgency is 100 percent manufactured, designed to avoid serious public debate. But serious public debate is exactly what's happening on Twitter. People are screenshotting and using chat GPT and Claude and Gemini to

work their way through these documents. And it looks like this is not going to happen. Freeberg, your thoughts. So the proposed bill made no real change to the current spending level of the federal government at roughly $6.2 trillion on an annualized basis, which, by the way, is roughly call it 23%.

of GDP. Just to give you some context, in 1860, nearly 100 years after the founding of the United States government, federal spending to GDP was less than 1%.

And it took off during the Civil War for a couple of years. But, you know, we're at these kind of like unprecedented levels year after year now, really speaking to how the federal government has grown, as we talked about many times so much in our life. And, you know, our roads were really bad back then, though.

Yeah. Our roads were really bad back then. Lots of problems, yeah. But remember, the objective of the republic was to have the states make local decisions about how to take care of their infrastructure. The national highway effort obviously changed that in the mid-20th century.

But this was kind of the original intention of the Republic. It wasn't to have the federal government come in and employ people, provide insurance to people, provide energy markets to people, own football stadiums, et cetera, et cetera, et cetera. As you go through the list of things in this bill, I think the $100 billion of natural disaster relief, everyone says that seems very reasonable. That's something the federal government should do. When we have a natural disaster, we need help, we need support. That's a great thing for the federal government to do.

But think about the incentive it creates. It distorts markets. So we've talked about this in the past. In areas where you have a higher probability of natural disasters and people have paid a lot of money for their homes, pay a lot of money for infrastructure, should the federal government come in and rebuild those homes and provide capital to those individuals and those businesses to help them rebuild those homes

if there's a high probability of natural disaster events happening again in the future. It means that the cost of insurance doesn't matter and the cost of real estate doesn't matter because the federal government effectively can come in and support those prices.

In the same way, the federal government comes in and supports the prices in agricultural products through the work in the Farm Bill and through the biofuels mandates, which were also proposed to be extended in this thing. So the federal government's playing both a market role and also kind of this role that I think fills the gap where people want to have a customer where there isn't a customer and an employer where there isn't one.

So like, how did we get to this point? So to reverse principles perspective, we've kind of, I think, lost the narrative on what the federal government was meant to do. If you think about the simple rubric in a bill, like just go back some period of time and someone says, hey, I want something, I want to have this in this bill. And you're the representative that's supposed to vote on that bill and say yes or no. It's very hard to just say, no, we are not going to spend that money. What's the incentive to say no?

The alternative is you say yes, but give me X as well. There is an incentive in that response. And the incentive there is to get something for your electorate, the people that voted you in as a representative of the House, which is how we ended up at this point where everyone says, I want something if you're going to get something. And eventually the government, the federal government swells

to spending roughly 24% of our GDP. Now, the biggest mistake I think the founding fathers made was that they didn't create constitutional limits on spending and enrichment. And this was because they had these deeply held philosophical beliefs that relied on the House of Representatives to provide a check by the people. If you read the Federalist Papers, and I went through a couple of these recently, and I use ChatGPT to help me kind of

you know, bring out some of, I think, the key points. But in the Federalist Papers 10 and 51, James Madison emphasized that the structure of government

was meant to ensure that both state and federal governments would limit each other's excesses, including their financial ones. And then in the Federalist Paper No. 58, he said, "The House of Representatives has control over the 'power of the purse,' which gives the people's representatives authority over taxation and spending." But they also warned, along with Alexander Hamilton,

of the dangers of unchecked government power through burdensome taxation and excess spending, which would ultimately erode individual freedoms. So they recognized that there were going to be limits, but their expectation was that the House and the individuals that were electing people to the House that were members of this republic would come in and say, we're going to keep that from happening. And clearly something went wrong along the way that we got to this point where, again, spending is 24% of GDP. And I think

that the biggest thing they got wrong was that they didn't create these constitutional limits on federal spending or taxation through either a balanced budget structure, spending as a percentage of GDP, no federal debt or term limits or all of these other mechanisms that could have been introduced at the beginning that could have created some structural limits. Instead, they assumed that there was this natural limit that would emerge as a function of the democratic process because of how they formed the government. But unfortunately, I think they failed to realize

that the electorate would eventually not want the freedoms of the people of the time.

Back then in 1776, this was a pioneering country where everyone wanted to come here to have freedom to do anything they wanted, everywhere they wanted, to build a business, to homestead, to be rugged individuals. - It was entrepreneurial, yeah. - It was, and over the last 250 years, we've gotten used to an increment in lifestyle every year and discovered that we have a mechanism to force the increment in lifestyle through the actions of government.

And so the electorate has stood up and said, I want more each year and I want the government to provide it for me if the free markets are not doing it. And that's really where we kind of got to this point where I think we elected people to the House who ultimately had this incentive that said, if I give you this, I need to get this. And we ended up swelling this. So I don't know if it cracks with Doge. I really don't know if people step up and recognize the limits.

of government and what the limits should be of the federal government on an electorate basis. It's an amazing moment to see that Elon went on Twitter and said, hey guys, this is nuts. And everyone said, this is nuts. We're not gonna elect you if you do this. If that momentum and that transparency can keep up, I hope that people start to connect the dots that this isn't a free lunch, that the federal government spending is not limitless and it's not unaccountable. Aaron, I think we have enough people

who are notable now, speaking up about this excess spending and

the out of control debt, that it's now in vogue to talk about austerity, to talk about inefficiency. And that really all comes back to Doge. And dare I say, you know, the conversations we've been having this podcast for two years, that this is becoming acute. What are your thoughts on this vibe shift, this complete pivot where we've gone from my Lord, everybody's saying, I got to get mine. You got yours. I'm getting mine to, you

Name and shame. They're naming and shaming now very specific pieces of pork in these bills, you know, including stadiums for the NFL. And people are like, why is the NFL getting this if they're worth 20, 30, 40 billion dollars? Two just quick thoughts. One, Patrick Carlson had a tweet yesterday that basically said this sort of this this big misinformation kind of created by by people that want to be slow is that you you have to sort of choose two of fast, good and cheap.

And, and I think basically, you know, Elon's companies have sort of always effectively kind of proven the opposite, which is, which is actually, if you just like start to ask the question, like, why does that thing have to cost as much?

You know, if you're building a rocket or designing a car or developing batteries, like why, you know, if you just do ground up, why does it have to cost as much? And so so it's interesting is that that probably if most people looked at what the government was spending on, they wouldn't even feel like like, you know, it's not even helping them in the disaster relief sense of of, you know, I think like that. There are probably actually people that actually do experience the benefits of disaster relief.

It's actually just all of the overhead that we've created to getting anything done in the government that could actually make the government better serve all of the constituents. I was talking to a nameless individual in the government the other week where by Congress, they have to hire contractors to do work. The contracting firms charge them two and a half times

the sort of cost of an individual employee that they could otherwise hire. And so now they have to outsource the work and they don't have any accountability mechanism for that contractor. And so I think there's not a single American that could look at that and say, this is actually working well. We are spending more money to do less. And the ultimate outcome is actually lower quality

And so you have to, at some point, just kind of do a little bit of a reset moment. And that's obviously the upside of Doge is like, it's like, it breaks every rule of us thinking about how you would actually go and attack this problem. We thought you'd attack it through meetings.

And we would do it through congressional, you know, sort of processes and research. And it's actually just, it is, you know, obviously a much more sort of founder startup oriented way to approach this. There's gonna be lots of things that are broken glass around the edges. There's no question. But I think what's interesting about this week's event is,

I think that there's been this underlying kind of notion of like, you know, Elon and whatnot at all, you know, don't understand the government enough to be able to change it. And it might actually be the case that the government doesn't understand Elon in the sense of like, he will just see this thing through. And the tools at his disposal and Doge's disposal is sort of, you know, completely unprecedented in terms of the ability to put anybody in Congress on notice if Elon

you know, if basically they are promoting things that are not making the country better. So, so the, you know, the thing that we saw this week was actually that playing out. Everybody's been wondering, well, what are the actual, you know, what are the formal mechanisms Doge has to accomplish and enact change? And it's like, you just saw it. Like they can just, they can just create enough visibility and spotlight on the problem that it causes a level of discomfort in, in supporting moving forward with, with whatever that thing is. And so I think it's interesting.

I have no opinion on the actual elements of the bill other than from a process standpoint and a new kind of case study of how this is going to play out is I think we're seeing some early indication of what Doge will be able to do. Aaron, how do you feel about this Doge effort as someone who is a public Harris supporter? So you've come out, I think you've been public about this, but I want to understand like why people...

wouldn't be supportive of this effort, right? Like, like, what is like, what is the motivation for people saying this isn't a good thing? We shouldn't be doing this? Because there's a lot of folks that have gone on these shows. It's like they blast Elon, they blast Vivek. But like, aren't these principles like shouldn't they just be universal that we should not be wasting money and stuff? Sure, of course.

The I mean, so to give some credit, you know, you have Ro Khanna supporting it. You have Fetterman supporting it. Bernie Sanders, you know, everybody. Yeah. Bernie Sanders had a good call out for you. You have everybody has their thing in the government budget that they don't like. So assuming that they see that as something Doge can contribute to, you could probably get actually broad support. You know, there's a classic, you know, sort of reflex within within probably Democrat Party on at this point, just because of Elon's support of Trump.

That if something is an Elon project, they're going to instantly respond no matter what the thing is as a negative without, you know, kind of actually saying, does this actually support actually something I do agree with?

And so that's all partisan. None of its first principles. Right. Which is which is this group of people, which isn't everybody. That's going to be true of both sides. Like Michelle Obama, Michelle Obama was like, let's get kids healthy. And all of a sudden now it's in vogue to do that. So so I think I think we're just in an environment where where any anything will become partisan.

What's interesting is that because of the, you know, some of the cross-party elements of Trump and now his cabinet is it might pull in more of the Democrat Party than would usually happen. And I think because of Elon and the people that are surrounding Trump, you probably have a bit more air cover for the Rokhanas of the world to also step up because it's

If it was like Steve Bannon and Trump doing Doge, it would be like, ah, okay, you know, maybe this is not the thing to, you know, lend credibility to for pure political reasons. If you have, you know, some of the best entrepreneurs that are out there actually like literally in the cabinet driving this, at some point, you know, it is an IQ test if you're on board or not.

Shabbat, this is a sea change that we're seeing. And to Aaron's point, this administration gets to pick their priorities, but everything can't be a priority or it's not a priority. Therefore, they've picked the priority of smaller government, more controlled spending over, say, mass deportation or...

removing more rights from women to choose when they have an abortion, etc. So this seems like a distinctly different focus for Trump 2.0, the second term. What are your thoughts on what we saw this past 72 hours with relation to this bill? It was the most incredible change in how politics will be done going forward. I think that people are probably underestimating what happened here. This was a

multi-hundred-billion-dollar grift that was stopped on a dime over 12 hours of tweets. You would have never thought that that was possible. The point is, to put a dagger in something that big, that had so much broad support just a few hours earlier,

I think it's so consequential in how the United States can run going forward. So building on what you said, Chamath, also very interesting here is the fact that Trump hasn't taken office yet and they're having this huge impact. This is occurring a month before he's even in office.

If they can stop this, what will they do when they actually are in power? I think right now you're seeing the first order reaction, which is about the bill itself. And I think that misses the point. The bigger issue is going forward, you will have the ability to, and part of it is because we have a set of tools now that allows us to do this, to read 1500 pages in a matter of minutes.

to summarize it into the key essential elements, to really understand what's being asked and what's being offered, and then to put it in a digestible format that normal people can consume. Then all you'll have to do is just connect the dots and tell your congressman or congresswoman that you'd like or dislike this thing. And what you're going to see is a much more active form of government. And I think that's the really big deal.

The fact that it really becomes the voice of the people. Now, the alternative can also happen. Imagine there is a piece of legislation that is very controversial, but it turns out that people actually want it. Then the opposite will also happen and can also happen now. So I think that it's a very nuanced and interesting way that governance can happen. The other thing that I'll say, though, which is funny, is we should have a segment called Today in Hypocrisy.

And if I was running the segment, what I would say is today in hypocrisy, you have a group of people, i.e. the Democrats, who are very upset and who now point to Elon as sort of like some shadow cabinet minister or some shadow president-elect or some shadow first buddy, right? First buddy. I love that. Except then I thought to myself, well, hold on a second.

There was something untoward happening in the shadows, and I thought, well, actually, this is the exact opposite. The guy is tweeting in real time his stream of consciousness. You absolutely know everything that he wants because he just lays it all bare

And at the same time, I thought it was really interesting. The same people who were saying that were the ones that finally admitted that they were hiding Biden for the last two years. And I thought, did we just miss this? Like the same people that are like, hold on, Elon, I don't like the fact you're telling us what you actually want on Twitter transparently while we hired our president of the United States in a box.

Well, yeah. So you're referring to a Wall Street Journal story that broke this week in hypocrisy. Jason, take it away. Yeah. I mean, it was just as we said on this pod, we knew that they were hiding him. Now the cover up is worse than the crime and the cover up is a cover up. They were not letting him take meetings. They were limiting access to him. Dean B. Phillips came on this program. Shout out to him. Congratulations. He just told the truth here.

He's not up for it. He's sundowning, you know, terrible situation. People get old and people have cognitive decline. The end. Question. Hold on a second. So just to contrast and compare, Trump is not even in office. You know, Elon is not a member of the cabinet per se. These are effectively today still private citizens. But there's all of this noise about what happened over the last two days to stop an absolutely ridiculous pork barrel bill.

But when are we going to double click into what decisions have been made in the last two years that were actually Biden's versus surrogates that just decided and who gave them the authority to make those decisions? If they're going to do, Aaron, and you and I are left leaning moderates, I think that would be the most accurate way to describe us. I mean, if they want to do an investigation, there should be an investigation to it. Did they know that he was in massive cognitive decline and let him stay in charge of the nuclear codes? Do you agree or disagree?

This is this is sort of not not the part of politics I think about as much. So I'll leave that up to you as the other left leaning moderate. So, yeah, no, I just wonder if like this is a crime that they like. What if it turns out he actually has Parkinson's or Alzheimer's like a diagnosis? It's not out of the realm of possibility that they covered up an Alzheimer diagnosis, Chamath. And if they did, is that criminal?

I mean, it's unethical. It's deeply unethical. It's very dangerous. Yes. Again, it just goes back to the people elected Joe Biden. He won fair and square. He ran on a specific mandate that the people endorsed.

I just think it's devious, though, that certain figures in that White House took a level of power and decision-making authority that they were never entitled to. If they wanted that, they should have run and they should have been elected. That's what we all sign up for. And so I think that that idea that we let that happen or that that happened to the American voting public is, I think, very unfair. That's why I think you have to realize that

And you've said this before. We need these checks and balances going forward. And I think the way that you have these checks and balances, again, is veer towards transparency. The more transparency there is. And again, this is where I'll say you may or may not like Donald Trump, but the one thing you will never have to be worried about is whether you will not be able to hear from him in first person.

You're going to hear from him. That is absolutely true. I mean, simple suggestion here, Chamath. If you're ever in doubt, you will be able to know very quickly where he stands on whatever topic is important to you. And I think that that idea is very important because then if it's filtered through somebody else because of some health issue that's then covered up,

We're making decisions that impact the entire world. We're making decisions that impacts the economy. We're making decisions that touch hundreds of millions of American lives. Who are making those decisions? Yeah, it's kind of crazy. I have a simple suggestion here with these bills, by the way, when they're 1500 pages. How about for every 100 pages you release, you have one day of review. So if you want to release 1500 pages, 15 business days review,

Does that sound reasonable? Maybe three weeks and then just stop doing 1500 at a time, break these things up into two or 300 pages at a time. I just love the fact that people are motivated and they have the will and the desire to focus on these focus and desire because people have to have the will and people did not have the will to get in the weeds and examine the spending. And now it's becoming

Like in vogue, it's becoming a pastime to question the spending. This is a really great moment in time for America. The other thing, Jason, that we haven't done is I think that killing the bill was step one. The thing that America has not yet seen, and I think Aaron brought this up with the Patrick Collison tweet, which is just excellent. Nick, if you just want to put it up there, it really is true. America still believes that the more you spend, the more you get.

We do at the core. That's why there are 1500 pages of spending in here, because people want things because they want things to be better. What we need to train people to understand is actually that it's the lies that are told that make you think that with more money comes a better outcome.

And we see it every day in Silicon Valley. We all start with next to nothing as a startup. And we outmaneuver and we out-execute companies all day long with way more resources. So it has nothing to do with the resources. Conschaint leads to great art. Aaron, your thoughts?

No, I mean, I can't add that much more to this. I think it's there's probably a little bit of a disconnected times from the let's say the voting public and, you know, broad constituents from then those that have sort of seen this in real life being inside of a company having to, you know, do a startup and scaling up and, and just this, the perverse incentives to build bigger teams spend more your project then is more important, the more dollars it gets.

We have all of these systems in place, which is the stuff that gets attention are the things that you spent more on. So you have all these weird incentives to actually have your thing literally cost more, to have more overhead because you've brought in more contractors into the project that then you're going to get some kind of future benefit from in some way. So you have a lot that is sort of fully broken in this and there's no...

There's there's it's hard to imagine any other way to veer off from that path other than something that does shake things up, you know, as much as Doge is doing.

All right. Listen, we can't do any worse than being massively in debt. So just let's have a culture. Yes, we can. No, yes, we can. You could you could have runaway debt. Yeah, I think we already have that. I mean, this is for people who maybe are rooting against Trump in the audience or rooting against this because they're super partisan. All I'll say is I know these individuals around Trump root for them and root for this process, please, because this is a path.

to fixing the most acute existential problem we have, which is our debt. You don't have to like Trump to like Elon, to like Vivek, and to like these other individuals, Sachs included. There are great people who are being called to serve. Let's judge them based on their performance. That's all I ask for the people who hate

Trump, who hate these individuals, judge them on their performance. They've come out with a bold plan. Let them cook. Once they've cooked, then judge their results. That is what I'm telling everybody who hates Trump and who hates this administration and who's partisan on the other side. Let them cook. Judge the results. I'll just throw out one more thing on this because I think Doge, the branding of Doge is often the efficiency side, which people always go to the spend side.

But the corollary to that is the regulations that obviously are expensive to maintain. And that's what creates layers and layers of overhead on reviewing everything that's coming in then to the government. And unfortunately, we have great examples in California where literally we spend more to do less. And it's because we've ratcheted up these layers and layers of regulation. And I have friends literally doing climate tech

In in like climate tech, you couldn't imagine something more probably left leaning Democrat that they can't actually get things done in California, the state that you would imagine to be the most kind of climate first friendly state because of the amount of regulation that prevents them from getting things done.

So, you know, there's actually this like, you know, total combination of actually fewer regulations. You'll spend less money in government. You'll actually grow the economy faster, which will create more jobs. Like all of the things get solved, the more efficient you get, you know, kind of writ large on all of the topics. So this is spending. Great point, Aaron. Regulations next. Let's see what they do there. I was in the room when Antonio Grasso was doing zero regulation.

based budgeting at Twitter now x and Saxon I were looking at roles for people with the with this team can do in terms of making things more efficient. It's amazing what can happen when you do zero based budgeting. And when you just think from first principles, well, do we even need to do this?

Does this need to exist? Take all these regulations, put a 20-year clock on half of them, a 10-year clock on the other half. Can I just get one more random example? Feel free to edit it out. Chamath, you'll like this because it came out of meta. Have you followed the Z standard compression?

library from Meta. So this open source library, kind of a next gen compression on data. And we finally, it took us probably too long, but the team worked insanely hard, implemented this compression algorithm. We literally, our uploads and downloads got faster and

We spend less money on networking and compute. And it took some re-engineering of the system. But that's just not a concept that people go into problem solving with, which is like, what if the thing actually was cheaper to run and it was better? And so think about all the systems of government that could just be upgraded, and then you would spend less money actually maintaining them. I mean, we spend...

you know, hundreds of billions of dollars, way too much on legacy infrastructure, technology. We could automate more. You could spend way less money and then get better outcomes. So this is just happening everywhere. And I don't think people realize the scale of the opportunity. And I'll just give an example. When we went into Twitter, nobody was coming to the office.

There were people who hadn't committed, who hadn't come to the office, who hadn't committed code in six months. So what were they doing, right? So you start looking at the data. Then they were spending an enormous amount of money on SaaS software that nobody had logged into. And then they had desk software for route people around that was costing $10 per day, per desk, per, you know, location, whatever. Nobody was coming to the office, but they were paying for software to route people to the right desk in office suite.

The waste, when I tell you the waste and the grift, and I'll just call it what my interpretation is, stealing. They were stealing from those shareholders. The government is stealing from taxpayers. It has to be fixed. Let our boys cook. Freberg, you get the final word before we go on to conspiracy corner. You got nothing? All right, let's go straight to conspiracy corner. Everybody put your tinfoil hats on. There were drones over New Jersey. Thursday morning, the FAA banned drones.

This is breaking news in parts of New Jersey until January 17th due to, quote unquote, breaking news, special security reasons. They also warned that the government may respond with deadly force against drones posing a threat. This thing is getting crazier by the day. There have been thousands of reported drone sightings in New Jersey and bordering states over the last week.

Here's some examples. Play the clip. Yada, yada. Until Thursday morning, White House officials have been dismissive, saying repeatedly that nothing significant is going on. One of the theories was that the drones were looking for nuclear material, a.k.a. a dirty bomb or lost radioactive material or the ultimate, a lost nuclear weapon.

bomb from like an actual nuclear warhead from Ukraine. On Tuesday morning, the mayor of Belleville, New Jersey suggested the drones could be looking for that radioactive material that went missing on December 2nd. That was radioactive material, germanium 68. We'll get details on that from Freiburg in a moment.

And then, of course, conspiracy theories are going wild. It's Iran, it's UFOs. And my favorite, Project Blue Beam, which is that NASA is using holograms and other technology to create a new world order and religion and projecting Jesus into the clouds.

You can look that stuff up or we'll have Alex Jones on in Sachs' seat one week. Okay, Freeberg, you're the genius here. Tell us what's going on. I think there are three likely explanations. The first is that the government's got some activities that can't be disclosed. So we don't know and they can't talk about it. No one can either, you know, say yes or say no to it. So, you know, that's kind of one that's pretty possible. The second is these are just individuals with a bunch of drones messing around, having fun, trying to wreak havoc. Could be fun.

Bunch of kids. I think we've all been there. The third is what I would call kind of a bit of a more nefarious, like, this is my conspiracy theory. I think it could be considered a psyop. Okay, so right now, the US has a significant regulatory burden on drone utilization in a commercial setting. And it's very hard to use drones. You have to have line of sight to the operator. These things aren't supposed to go on their own. There's all these rules and restrictions and so on and so forth.

Meanwhile, you've got countries like China rocketing ahead. So I don't know if you guys know the company Meituan in China, you know, the food delivery company. Have you guys, did you know that they do a large amount of drone delivery of their food now? I was not aware of that. We're testing that here in the US. The drone delivery business in China is already $30 billion a year. And they're also launching a pretty significant fleet of what we would call kind of the EVTOLs or flying cars.

The expectation is that by 2030, there'll be 100,000 flying cars moving people around in China. And these are huge efficiency gains. In fact, with Meituan, you can now order food while you're on the Great Wall at one of the ramparts, and the drone will bring the food to you while you're walking the Great Wall as a tourist.

And in the US, the reason that these things haven't taken off and the reason we don't have a large kind of drone industry, which is clearly emerging and is gonna be a huge economic driver for China and others around the world is simply the regulatory restrictions. And so if you were gonna try and mess with the US's ability to move forward with the drone economy,

you would probably try and wreak some havoc, stoke some fear, and get people to say, hey, this doesn't seem cool. What's going on? I don't like that there's all these drones in the sky. I'm freaking out. And try and get the regulators to come in and say, hey, we're banning drones. And...

Set up everyone including the people in the government to say we should take a beat We should think a little bit before we deregulate we should do this not the motivation who breaks and postmates this no no no No, no, no, it could be the other government. That's my sigh off point This could be you're saying this could be China doing this to try to slow down our economy think about it if you're gonna pass a bill in Congress and

to make drones more freely roamable in the skies, you're going to reference back this crazy story in New Jersey. Everyone's freaking out about it. And you're going to say, hey, wait, what about all that stuff that happened in New Jersey? Maybe this doesn't make as much sense. People are kind of scared about it. We shouldn't rush. We shouldn't rush. We shouldn't rush. That would be my PSYOP theory. That's my, you know, kind of concern.

conspiracy theory tinfoil hat. I don't often do them, but that's what I would kind of think about. I think the first two are probably more like that. Alex Jones would be proud. Aaron, why don't you jump the fence and tell us your best conspiracy theory of this? No, no, no. Jump the fence. That was all crazy pills when I just heard. Yeah, take some. I think there's like 10 higher psyops you would do if you wanted to get us to have a collapsing economy than going after drone deliveries. But

Um, no, I, what would they be? What would they be? I mean, well, first of all, I think, I think you'd have AI like, like do a robot. I think you'd have a robot AI thing that goes, you know, runs amok. Um, way soon. Rogue robot, Robocop. Yeah. Yeah. I think that would be way sooner than you worry about food delivery. No, you have 10 self-driving cars, hop the, you know, hop the curb and crash into a storefront. Self-driving is on ice for two years. That would be, uh, you know, an example.

Chamath, your thoughts? You got some conspiracies here? What do you think's going on here? No. But I thought that the most credible thing was that they were looking for radioactive material, that somehow some got lost. Why would they only look at night? Actually, it's interesting you say that.

There was somebody on Twitter, X, who claims to be an expert in this field. And there's a startup, actually, that I just talked about. Which one? Kenkoa the Great? I think it might have been Kenkoa the Great. Shout out to Kenkoa the Great in his mom's basement eating pizza bites. Why do you hate Kenkoa? He's a nice guy. I don't hate Kenkoa. I don't hate Kenkoa. Kenkoa tried to get me bad because he said I was trying to dox him. You always sh** Kenkoa. He's great. No, I just think it's hilarious that people are retrading Kenkoa.

King Cohen the Great as if he's like this great journalist and he's in his mom's basement eating Hot Pockets or he's working for Putin. He's a really good... I don't know. Do I want my news from J. Cal or Ken Koa? I don't know. I don't know. Who do you take? I mean, your conspiracy theory is pretty good. I subscribe to Ken Koa. Aaron Levy, you have a favorite? Who are you? Are you Autism Capital or King Koa? Oh, I like Autism Capital too. I think he's really good. Absolutely. I'm liking Geiger these days.

Oh, you're into Geiger Capital. Geiger Capital is good. I read them all. VC Braggs? I think the nighttime thing would be, it would be at least typical of this government to do a Streisand effect of just like, maybe if we cover it up, nobody will see. And then obviously it's the biggest thing. Yeah, and they have all these lights on them. Yeah, it's like, not as big. But if they, there is a startup that makes, we really looked it up, and there is a startup that makes drones

to do this specific task, to look for dirty bombs in ports. And ports obviously look for these things. It's a known threat. This is not rocket science. And why only at night? Oh, because that they can read the signatures better was the theory. That at night you can read the signature, which doesn't make sense to me. Science guy, you want to come in here?

I don't see how nighttime you'd get a better read on radioactive material. It doesn't make any sense. That made no sense. That sounded like a crazy thing. But anyway, we're living in crazy times.

Speaking of crazy. By the way, that was my first conspiracy theory in 208 episodes of the All In Pod. Very nice. I actually can participate in Conspiracy Corner now. I'm coming back next week with a better one. Okay, J. Cal, read us some more news. Go to Google News and read us some more news so we can do another topic. Jesus Christ, man. Read a article for us. No, you do it. Go ahead. No, no. You get the document in front of you. Okay, so today the Dow Jones Industrial Average is up 23,000 to...

44,000. I try to highlight you guys, make you look good. Kerry Gensler said he's super happy. I'm going skiing. That's enough. I'm going skiing. I thought it was cool how he read the entire congressional bill earlier. Yeah, all 1,500. J. Cal loves to filibuster. I'm not filibustering. All right, listen. Here, let's do another story. Let's see if you can contribute something. Open AI update. Mattis Leonard. Your contribution was amazing. I was actually using chat GPT to go into the...

to go into the founding fathers papers and I was reading the Federalist Papers with Gemini. I read number 13 and number 44. I would like to quote from Hamilton the Musical. Hamilton the Musical. I was comparing the lyrics from Hamilton the Musical. Oh my God. Hey Nick, can you send J. Cal another Yahoo news article? Let's get going. Come on. Let's go. Yahoo news article.

Let's go. Let's go. Can't wait to see you in the show tomorrow. Let's go, Nick. Come on. Oh, my God. Can we just end it here? Yeah.

No, do it, do it, because I want to talk about OpenAI. You want to talk about OpenAI? You do? Yeah, yeah. Give him his red meat. Gift your mom his red meat. All right, here's an update on closed AI flipping and Sam Altman, supervillain Sam Altman, secure in the bank. Meta wrote a letter to California's Attorney General. That was your best open yet. On OpenAI's for-profit conversion. Two months ago, OpenAI announced a $6.6 billion funding round, $100%.

$157 billion valuation. They're projecting $3.7 billion in revenue this year. Pretty great revenue growth. But there's a poison pill in the deal. OpenAI must convert to a for-profit within the next two years, or investors can ask for their money back. And right before they announced this round, you remember CTO Mira said,

Muradi and two other top researchers resigned. Many people saw this as a protest. Elon, who put the first 50 million in and co-founded OpenAI, is currently suing the company and seeking a court order that would stop the for-profit conversion. Now, Zuck is joining Team Elon. Elon and Zuck are in some weird pairing up. They're not in the ring, not in the octagon, no.

Last week, Meta sent a letter asking California's Attorney General to stop opening eyes for profit conversion. What do you think of this? We've got them now not in the octagon, but they're in the political arena. Chamath, your thoughts? I think that this is so interesting. So I was looking at all of these things. If you put them all together, it paints a really interesting story. So you have Elon filing an injunction, which basically says you should not allow this conversion to happen.

until we sort out all of these details, because if you allow it to convert and then I win, it'll be very messy to go backwards. I think that that's a pretty credible legal argument. Then you have Zuck basically say, hey, Elon's right, this company should not convert. But the more interesting thing that really got me thinking about this was a chart that Menlo Ventures put out. Nick, can you just show this? What this shows is

just what's happened in the last year. And what do you notice? What you notice is the market share of open AI has changed pretty meaningfully from half to about a third. And what you see is anthropic doubled, meta roughly staying the same, Google picking up steam. And it started to make me think this is very similar to...

a chart that I would have looked at in 2006 and 2007 when we were building Facebook because we had this huge competitor in MySpace that was the de facto winner. We were this upstart. It made me think, is there a replay of this same thing all over again where you have this incumbent that pioneers an idea and they start with 100% share,

And then all of these upstarts come around from nowhere. And then I thought, well, what is better today if you are a company that's just starting versus if you were the incumbent? And I think that there's a handful that are worth talking about. So the first is when you look at what XAI has done with respect to NVIDIA GPUs, the fact that they were able to get 100,000 to work as, you know, in one contiguous system,

and are now rapidly scaling up to basically a million over the next year, I think what it does, Jason, it puts you to the front of the line for all hardware. So now all of a sudden, if you were third or fourth in line, XAI is now first, and it pushes everybody else down. And in doing that, you either have to buy it yourself or work with your partner. And I think

For the folks like Meta, that translates and explains why they're spending so much more. It's sort of like this arms race. If you can't spend with my competitors, I'm just going to prefer my competitor to you. So I think that that creates a capital war. In a capital war, I think the big companies like Google, Amazon, Microsoft,

meta, and brands like Elon will always be able to attract effectively infinite capital. And their cost of capital goes to zero, which means they'll be able to win this hardware war. Okay, so put a pin in that. Then the second thing is what happens on the actual data and experience side on the training side. If you listen to Ilya Tsitskever, if you listen to Andrej Karpathy, what they effectively are saying is there's this terminal asymptote that we're seeing right now in model quality. So what happens?

A lot of these folks are now experimenting on the things around the model, right? The user experience, how you use it. Can I keep things in memory? Can I cut and paste these things from here and there? Because what it says is like the data is kind of static and brittle, but it's actually not. That's what we said before, because you have this corpus of data on X that's pretty unique. I suppose if Elon fed in all this kinetic data that he controls through Tesla, that's very unique. Does that all of a sudden create this additive pool of information?

And then the third thing is, when you look at that chart, what that chart says is, hold on a second, why are corporates moving around? And what I can tell you just through the 80-90 lens is we are completely promiscuous in how we use models. And the reason is because these models are

offer different cost quality trade offs at different points in time for different tasks. And so what we are seeing is a world where instead of having two or three models you rely on, you're going to rely on 30 or 40 or 50. And you're going to trade them off and you're going to use effectively like an LLM router to distance, you know, to balance them, yeah, and to route or just or just to manage and route them. And then there's an intelligence above that that's constantly tasking and figuring out prompt optimization across these models.

So it's this thing where we were very reliant on open AI. Now we're reliant across three or four. Ideally, we'll be reliant on 30 or 40. And so I just see this world where it's all getting commoditized quite quickly.

And so I'm just like sort of scratching my head, like where is the market value here? Aaron, your thoughts? I know you're very promiscuous when it comes to LLMs as well. I mean, we have a very similar model as what Shema said, which is we're agnostic, so we work with multiple AI vendors. But I think a friend deep in AI land a couple years ago, right before ChatsBT, said there's no secrets in AI.

And I didn't totally understand kind of at the time it hadn't registered what that meant, but very quickly it kind of became obvious, which is the research breakthroughs sort of

propagate insanely quickly across the AI community. And so back to this Moss framework, if you just think about it as if the research effectively becomes open at some point in time quickly enough, because either the researchers move or people publish it or whatnot, then it really is a compute game and then maybe a data access game. And that means that there's four or five ad scale players that can fund this.

And, and I think as we've seen in other areas where it's an infrastructure play, you eventually have the underlying service with enough competition, you have the underlying service eventually trend toward the cost of the infrastructure. So, so what we should expect is that the price of a token in AI land, you know, basically will be whatever the price of running the computers are. And, and

Maybe with like a, you know, plus 10, 20% margin. Did you see the same thing happen with storage? I remember in the early days, Box and Dropbox and YouTube, you all had this major innovation with storage. And how did that play out? Let me give you a fun stat. We give our customers unlimited storage. We have 82% gross margin.

So, so the, the, what, what happened was the price of the underlying storage has gone down by hundreds of times since we started the company. And then our, all our value is in the software layer on top of the storage. So we've benefited by this incredible, just, you know, ruthless competition between Western Digital, Seagate, other players,

that are just trying to pack more, more, more, you know, basically more, more, uh, storage density into these drives. And every couple of years they have a new breakthrough. We're now, you know, upcoming we're up, we're heading toward maybe a 50 terabyte hard drive. When we started the company, they were kind of 80, uh,

80 gigabytes. How much of your time in the early days was spent on dealing with this infrastructure issue? And then how much of your time and your leadership team's time is spent on this issue now? Yeah. So back in the day, if we had 10 people in engineering, 80% of them was doing pure infrastructure work. Now, if we have 1,000 people...

uh, you know, be inverted in terms of the ratio. So you just get, you get more leverage, uh, both as the, the, you know, as you get the advancements in the technology, but then also as you get scale, but all of this is to say, you should basically anticipate a world where, and I think Zuck is this interesting counterbalance on all of this because of open source. Um, if at any moment, you know, that, that Zuck will, will basically provide an open source model that is at, at kind of best in class benchmarks,

And at the frontier, then there is a limit on how much you can charge for the tokens of your hosted model, because anybody will then be able to go host the open model and be able to provide infrastructure around it. So if you always have that counterbalance and the tokens eventually kind of look the same, the output tokens kind of look the same. Yeah, always. Isn't it also the truth that major enterprises, Fortune 500s, 200s,

you know, 20 years ago, weren't interested in open source. And now that's kind of their default. They want to buy into open source because they don't want to be locked into a vendor. It's actually not even necessarily the case that the customer has to pick the open source vendor. They might buy it through an abstraction layer that is letting them get the benefit of open source, but still buy through a proprietary. So you believe open source wins?

I believe in AI. No, no, no. So I believe open source causes pricing to always be extremely low. Right. But so, okay. But in this case, do you think open, do you think open source is going to ultimately win the day in models? No, not necessarily. You don't. No, because only, only meta has the, has the, the scale to be able to provide. I think what Aaron is saying here, let me, let me maybe try to frame it. I think what he's saying is there'll be,

open source models, there'll be closed source models, but the price that Aaron or me or anybody else pays these model makers will effectively go to zero. Got it.

And it'll go to the cost of the compute, to be clear, with a little bit of margin for the work of- The energy, the physicality of that compute. Got it. Now, it's important to step back and say, I still think you could probably have the entirety of the model providers make 10 times more revenue than they do today because we're just literally in like the first percent of the total TAM

So it'd be a mistake to think that that has some kind of downward pressure in terms of the long-term economics of these businesses, especially because I think OpenAI's revenue stream is increasingly looking like a SaaS revenue business as opposed to just the API kind of token pricing.

So, so none of this is, is to, you know, provide any, any sort of color on like, what would you bet on today? I agree with Chamath that you're going to have maybe not 30 providers, but let's say you at least have, you know, five to 10 good choices, all, all competing heavily for the next breakthrough. Like literally this morning, Google had a breakthrough in, in sort of this reasoning oriented model from, from their flat, from their Gemini family. 2.0. Yep. Yep.

And, and so what's, what's incredibly, you know, kind of great is it's, it's sort of the best time ever to be building software, assuming, you know, assuming that, that you have a play in the market that lets you remain differentiated. And the key there is just do enough on top of the AI model that there's enough value there. You know how much the world spends on software and software related things every year? It's about $5 trillion. So there's like, call it like a trillion and a half of

software licenses, a trillion and a half of consulting, and a trillion and a half of IT folks inside of companies, plus or minus a little bit more, you get about $5 trillion. And that's compounding 13% a year. I'm pretty sure that the market here shrinks by an order of magnitude. And instead of fighting over $5 trillion, I think we'll be fighting over $500 billion. What do you think? Aaron, you buy that? No, not at all.

I mean, I don't know if you want to make the case more, but... The only reason is that I think that as we de-lever the software development process from humans, I think the unit cost of creating code effectively becomes so cheap that it's going to be very hard to differentially price these products the way that they are. So an example would be that, let's say you use, I don't know, pick your favorite piece of software.

I don't want to pick on any of this, so I'm not saying anything. I'm just saying Office Suite. Let's pick an Office Suite. Everybody's got one. Sure. Let's pick on Excel because maybe that's like... Sure. Excel, Google Sheets. Yeah. It's not that Excel isn't valuable. It's incredibly valuable. It's what is the marginal cost of creating the Excel equivalent that is good enough that people switch? The marginal cost today is very expensive. And you can see that because it's what it costs Google to make Sheets.

But that's humans. So the real question is, if you have a legion of bots that works 24-7, incrementally and increasingly more accurately every day, the question is, what is the marginal cost? And I think the marginal cost of that is going to be very cheap. And when you do that,

It's very difficult to price it anywhere near the same. And the reason is that other companies will then replicate it and say, hold on, if Excel wants to charge $100, I'll charge 50 and I'll take a lower margin. That's just supply-demand economics. Yeah, yeah. So I think there's... I just don't agree with the TAM compression because...

Because I think there's another kind of counter event that's happening that AI is really going after, like services. And so that then conversely expands the TAM, the software, where IT budgets weren't usually applied to those types of things. But we can get into that in a second. But I think we've already seen this, though, and it hasn't exactly played out as you're saying. So you already have like a Zoho is this really interesting business. It's probably a couple billion in revenue at this point. And it's basically a suite of companies.

of extremely low-cost, affordable software products by category. The cycle time of Zoho is poor. But that's not been the reason people don't switch, though. No, it's all levered to humans. I just think it's not a good product. It's decent enough. Why do you think people don't switch, Aaron? By the way, sorry, I do agree with you, Aaron, by the way, that when you bring that...

whole offline services category online and you automate them with AI, I agree with you that that TAM could be ginormous. All I'm saying is the traditional software TAM today, what people spend $5.1 trillion on, I think people will spend $500 billion on and barely if that.

There may be other things that people spend money on that are wrapped in AI. Yeah. I guess the counter, and maybe you'd look at an ERP system or a CRM system or something else, like that is sort of- Like those things are totally screwed.

No, but like, but this is my point, the opposite. Like the last thing you want to touch is the system that is like, like powering your supply chain. The companies I talk to, they're consistently like rip it up, get us to a point where we can rip it up. And the reason is because what they've realized is they'll spend 50 to $100 million a year for five features. And they're like, just give me these five features as workflows. Yes. Give me a simple CRUD database and just get me get out of the way. And it's like the trade off for that.

makes a lot of sense because look, let's face it. Like when you have to build one piece of software that has to sell to 50,000 companies, the reality is that that piece of software is trying to do everything and then some

And it's trying to solve two or three use cases, plus around, you know, five or six common use cases that are generalized. Yep. For 50,000 customers. So you end up with 50,000 features. You know, it's really interesting because, Aaron, you kind of alluded to there's a TAM expansion moment there. And I'm seeing this on the front lines. We run a program, Found University, I've talked about it here before, where we see people pitching us.

their year zero startups, two or three person teams. And what they're doing is they're not going after existing legacy software. They're kind of going after jobs. They're looking at a position or a job somewhere. This is an accountant. We're going to take an accountant. We're going to make the number one accountant in the world. That's an AI agent, an agent. We're going to make a podcast producer with podcast AI. We're going to make a virtual assistant with Athena. We're just seeing it over and over again. That's a whole nother category of

where you study a person's behavior as they work, a social media manager, and what they do, and then you replicate it with AI. And that's something that just hasn't previously been done. So there could be two things occurring here, Chamath and Aaron, at the same time, which is a deflation in legacy systems, and they'll be replaced. And then additionally,

Human capital and jobs that are easy enough for AI to do as an agent will also expand the TAM. Two things at the same time. You are completely right about the usage. All I'm debating is when you have to price something, you have to look at the total cost of what it took to make it.

And then you want to try to build in a reasonable amount of margin and some reasonable expansion and you discount it back. And this is what you think it's worth. Even though you may not think you're doing that when you implicitly price something that way, that is what's happening underneath the hood to the unemotional buyer of that good. And all I'm saying is,

If what Aaron says before, which I agree with is true, which is the cost of using a model to get to an output effectively goes to zero, somewhat what I've been saying before, the marginal cost of compute goes to zero.

The marginal cost of energy goes to zero. The real question is, what does it take to make a good in the digital world? Let me ask Freeburn a question here. You're back in the CEO slot at Ohalo. You're doing it every day, Dave. You're making these choices as to what SaaS products and how you're going to solve problems. Are you looking at it saying, I'm going to hire developers who can work 10x because of all these new tools, and I'm going to build my own internal systems? Or are you looking and saying, I'm going to buy off the shelf

SaaS products. What are you doing when you make your own decisions every day? David Freiberg. Well, I try and encourage the teams to build stuff that better meets our needs and then it can actually be a better solution and it can be built in-house. And I think we did a, I think I mentioned this the last episode, but we did a hackathon where we brought in people

to learn how to use cursor and chat GPT to build software that had never done it before to try and create this as a capability for people broadly in the organization. And they were great tools that came out of it. So I think that that's really the future. As and this is kind of like, you know, I'd say early generation, but as we get to further later generation capabilities, you could see

the instruction to a chat GPT or like interface, hey, I'd love to do the following things with a piece of software shows you a couple options, you pick one shows you a couple UX, you pick one, it does user testing automatically for you, it does QA for you. And ultimately, it puts it into production for you, which is the biggest challenging step right now, you still need engineers that can load stuff into production and do QA. But if all of that gets automated as well,

Now, any user in a company can actually stand up software to do something for them. A non-developer, you're saying? Non-developer. Stand up software. Maybe. So, Chamath, just to clarify, are you there's two different ways to approach the lowering the cost of developing software. One is that it just creates more competitors in each of these categories, which then lowers my price because now there's there's some downward pressure. Dave's bringing up a different example, which I'm going to build my own software at effectively the price of zero.

The challenge on this, especially the second one is, is like when you like most organizations don't want to be in the business of having to think about about building their own software. They just like want it done for them. Like it's like not a core part of their like. So, you know, your business would be very unique relative to the broad economy, which is like I just want like just like I want a place to put my CRM records. I want a place to like just like have my HR get managed. And I think the downward pricing pressure due to software cost lowering makes total sense. I don't think it's a 10x factor.

But, you know, I think that we've always had a long tail of applications that enterprises build. You did it in Microsoft Access. Now you do it in Retool. So the next era of that will be obviously AI built and there'll be 10 times the amount of that software. But it's not obvious to me why that would go after the kind of core, the core systems of running a business because just most companies are like not looking to reinvent the wheel of that. We're working with an aerospace partner. Won't say who it is.

And we sat there and they walked us through everything.

what they deal with to make the things that they're making. It's convoluted. And this is not a software problem. It's that there is no piece of software that understands how they want to run their company. And so instead, they have to morph their org chart to the tools that are available. So I think what Freeberg is saying is some version of that as well. There were probably people there using the tools that were available. And as a result, at some point, some HR person said, we need to hire this other person and this other person.

Instead, what it allows companies to do is just completely reimagine. How do you want your company to work? What is the business process you actually need to implement? Then let's just get that built. I don't know if you guys saw this, but Satya Nadella had this clip that's gone pretty viral in the last couple of days where he effectively said the same thing. What he's effectively saying is,

All these big software systems are business rules wrapping a database plus an incredible go-to-market team. And this is what Alex Karp points to as sharp knives, steak dinners, and basketball game tickets. I don't know if you guys saw that clip. I did see the clip. Yeah, he likes to win based on product, not on sales effort. Nick, you should find this clip.

- We don't play golf. What we do do is we play software. We will put, if you wanna actually compete, compete on your product. And what's very special, and yes, do I enjoy humiliating people who have better steak dinners and sharper knives and better golf swings? Yes, I do. You know what? I really like that we win in that way. It makes me very happy. And it makes our clients happy.

But it really points to the heart of how the software industrial complex, that's what I call it. This $5.1 trillion, this software industrial complex, how has it evolved? I think it's people that build good point products, but when the market, meaning the shareholders and the public investors, demand growth,

you have this natural expansion. And what do they do? They inflate the feature set, they inflate the cost. And then in order to sell that, they inflate the set of

incentives that they give to the buyer. So the CIO inside of these large organizations, they control budgets. They're equivalent to like state level budgets in some cases. What do you think the CIO of a top five bank is spending? It's probably 15 to $20 billion a year. They are getting wined and dined

to a way that you could not even imagine. I don't even think the CEO probably understands. And that filters down through the org, and so they make these-- - Hey, don't totally ruin our whole game here. - Well, I'm just pointing it out. - Well, I mean, I'll say the counterbalance of that. - It's the game on the field. - Which is. - But here's another part of the game on the field. If these tools make your team 10, 20, 6%, whatever you can quantify, more effective at their jobs,

then it's a de minimis amount for most organizations who have created very profitable businesses. I see this where I was mentioning some companies earlier and their SaaS pricing is broken because the number of employees at a company has been going down because people are getting more efficient. So now they're looking at saying, well, what value do we provide with this podcast, you know, producer in a box and whatever it does?

They say they were starting with like $99 a month or $49 a seat. I said, listen, just charge a minimum of $500 to get the software. Nobody complained. And they got rid of the bottom tiers. So there's a value being created here that is so great that I don't think everybody's going to roll their own like Friedberg because they're going to be like, you know what? This is so great. It's $6,000 a year. F**k it, YOLO. I'll just buy it. It is today. And-

In five years, just like we're all going to, and we're all using chat-like interfaces more frequently. Yeah. You go to your chat-like interface and eventually you realize you can ask it to build some tool for you that does something. And it renders the tool and it makes it possible and it stands it up in production. And suddenly you're using it at your company.

And then you ask it to do another tool and it does it exactly to spec and you define the UX you want, you define what you want it to do, and it works. And it interoperates really clearly and really cleanly with the other tool. And there's a big aspect of this where you can start to build all of the software infrastructure that you as an organization want. Right, but I think you and Aaron mentioned this though, the extreme difficulty is not that front end part. That's easy. It's like,

I think it's less than 3% or 4% of the work. The 96% of the work is how you actually integrate it in the backend and how do you provision it, how do you have controls, and how do you do security? Because if those things fail and those are implemented in a bot in a highly regulated market, as an example,

you may not actually be allowed to operate. - Let's go through that example and let's say that you're in a bank and you tell the AI, "Figure out all the security and permissions and authority rules that are necessary for me to operate as a bank." And it can actually render it. It sounds far-fetched today, but there's no reason that in seven years that is not the standard du jour, that I don't have the ability to say, "Go look at all the software that's out there in the world today and help me build a tool that meets compliance standards, that meets all of my security standards."

And you can actually instruct the AI to operate like a large number of software engineers need to operate today. The practical issue where the rubber meets the road there is when there is a penetration and a regulator who's a human, because it will not have been a bot, comes and knocks on your door. And you're like, well, here's this immutable log of the things that I did. And they're like, I don't want an immutable log. Who the hell tested this? Show me the unit test that you created and signed off on.

So there is a critical human in the loop problem on that other 95%, which is where I agree with Aaron. In like stage one, like we're in stage zero. No, no, no. In stage one, that'll be the case. No, but I think it's in stage five and six. I think you'll need governments to take an entirely different risk posture for highly regulated markets. I don't see that happening in any time in the near future. In life sciences-

If you want anything in a clinical system, I don't need to tell you guys this, but you have to do a QA test on every single change that ever happens and be able to prove that you tested every single thing. So the idea of a probabilistic AI system generating the kind of code for you in a clinical trial workflow, I just think, yeah, it's going to take a lot of change.

from regulators. Yeah, I mean, we've got another decade of evolution here to make these things sustainable and have a high quality. I think it'll happen faster than everyone thinks. Yeah, and I think actually that's, like, there's actually no reason why that wouldn't be a good thing if that did happen, to be clear. I think, though, back to, you know, Jason's earlier point, though, like, then the counterbalance on the TAM compression is

is just now the sort of thing that we think of as software, that market now is much larger. So if you're selling security... Yeah, yeah, yeah. Yeah. But that means that if you're selling, let's say, $50,000 of security software, maybe that goes down a little bit to $25,000. But you might sell $100,000 of... Exactly, right? An agent of the new agent. Yeah. So I agree 100% with that. My only comment is...

The software industrial complex today has to shrink because the stranglehold that it has on how companies run is incredibly high for an experience that's incredibly poor. Nobody raises their hand and says, gosh, this piece of enterprise software that I use in my day-to-day life is as good as Instagram or TikTok. Nobody says that. Well, I mean, except about Box. I was reading the reviews earlier today. Okay, good. And I was on G2 or one of those sites, and just Box was just a rating for a tremendous. Unbelievable.

I love box. I love box. It's incredible. Well, I mean, I mean, just to bring it all. What's the ticker symbol? Is it dollar box? We try to make it very simple for people. So. Is it dollar box? Is that what it is? I'm putting a J trade in here because I may have to J trade this.

It sounds like a really great opportunity for me. All right, listen, Aaron, you just got Kramer. What was your last year? Yeah, you got Kramer. My last year trade is I'm just I'm loading up on MSTR and Bitcoin. I'm doing a I'm shorting Bitcoin and I'm buying MST. I don't know what that I'm not. I'm not trading stocks right now. I'm focused on investing in 100 startups per year, 100 new startups per year and putting the first check into them. That's what I do.

All right, listen, enough. This has been a great episode. Aaron, you're amazing. Thank you for coming on constantly. Everybody follow. What is your Twitter app on AI? Can I just tell you guys, are you at Levy or at Aaron? Yeah, yeah. I love you. Levia. Is that the French pronunciation? L-E-V-I-E. Levia. Have you guys seen the VO model from

From Google? Yeah. Have you guys talked about how Google has gotten some religion? Google's incredible. They are firing on all cylinders. I literally paid- Shout out to Sundar. And Sergey's going to work every day, by the way. He's at work. What can Brown do for you, J. Kel? Sundar, back in the group chat. Okay, there we go. By the way, did you guys see Genesis yesterday? Well, okay. Let me just put this up here and then I'll tee it up to you, Freeberg. Google has been putting out new models. They have this new Google Gemini.

And they have one with deep reasoning and their 2.0 model. I did a side-by-side test, same prompts with our friends in Deep Madra on This Week in Startups just this week. We did multiple tests. He has the 01 Pro, the $200 per month. Gemini was beating that hands down for me. And I think he conceded that with their free model and their $20 model if we just gave a decent prompts.

I think Google now has reached parity and they have an app out. Freeberg, what are your thoughts? Because people were counting them out and here we are. I think not only have they caught up,

I think they have exceeded. What are your thoughts? They were late. The compounding effects are playing out and it's only going to continue to compound. And I will say the data repository at Google, the engine that they have, the infrastructure, the team, everything down to components is advantaged. And so everyone's been kind of counting them out, but it's clear they're in it to win it. They're here to play. 70% of the usage of

Open AI is consumer. 70% is consumer. What does that mean for them as Gemini and Google get momentum? I think you'll end up having a Gemini that has ads eventually. And you could pay and have no ads or you could not pay and have ads. Meaning, do you provide enough value and of enough quality where folks don't need to then... Folks stay on Google?

I'm asking you whether it impacts open AI, the quality of Gemini as it increases, or do you think that these usage cohorts are roughly set?

I jump back and forth personally, my experiences, I don't feel like I've got embedded data on open AI or on Gemini that makes me stick with one. I'm just like with Google, I'm going to go to the best interface, the best engine. So I do think that there's fungibility here and people will move over as they realize better results, better performance. But I will say that what we're seeing now with the data advantage at Google, so you know, the internet, all these LLMs are language models trained on text from the internet, right? There's

call it 50 billion words on the internet. And I think if you estimate the data repository in these training sets, it's like probably a couple terabytes, one to five terabytes or something like that. But if you look at the video data that's out there, there's hundreds of billions of hours or 100 billion plus hours of video data. A large amount of that is sitting on YouTube. And by some estimates, there's a thousand exabytes of video data on the internet. So about a billion times more video data than there is word or text data.

And I think we just saw that play out with the VO model that launched yesterday. But here's some examples of VO. Google has all of this YouTube data. Whether or not they're using it to train, I don't know the answer. I don't think they're allowed to, is what I heard from the insiders. They have to redo their terms of service to get explicit permission to use it. But you're right. These models are tremendous. Whatever they're using. And it's basically rendering physics, or it looks like it's rendering physics. Now, Genesis came out yesterday.

and it's open source. So you can actually go play with this Genesis model, which similarly renders the actual 3D objects into a 3D environment. So rather than rendering a two-dimensional set of pixels to look at a video visual, with Genesis, as you can see here, you can type in a prompt and it renders this extraordinary video that also has underlying it the 3D

the three-dimensional objects that make up the video. Which means you could change the angle, right? And you could work with it. And also with Google and this, you can start to implement three-dimensional models based on some prompt that says something like, I want to have the camera angle at this point in the room. I want to have the room look like this. I want to have this color, this wallpaper. And suddenly everything starts to prompt in a way that you can actually render in real time

a video game, a movie, a visual experience. And it goes to this point that we're unleashing the capacity for human imagination and creativity with these systems, 'cause it's no longer just a lookalike two-dimensional image, it's now an actual three-dimensional object that then renders the visuals to make this happen. So we're starting to see, I think, the next era of these models that goes beyond just text prediction. - What do you think, Aaron? - There was another release last week of a experimental project for browser use

by Gemini, which is another advantage because YouTube has obviously an incredible amount of screen sharing data and videos. So, so you have, you know, like, like we think about visual as just like, okay, it's, it's going to be, you know, for, for developing, you know, CG characters or something, but it's, it's actually just like, like just all of the use cases of a computer are also on YouTube. Project Mariner is the name of it, right?

where your Chrome extension AI can control your browser to do things. And if you go to the AI studio from Gemini, they have a mode where you can turn on your webcam and then you basically, it has full visual kind of access to anything. And so they're cranking. And it's super exciting because like just you can tell that Google's woken up

And they are just on full assault. So, I mean, just in 10 days, the quantum, the AI, open source, Gemini updates. It's like every morning you're waking up to a Sundar tweet that is some new breakthrough. Well, yeah, it's amazing when you fire 20,000 people who weren't doing any work and were involved in DEI nonsense. And then you say, hey, and then Sergey shows up. That's not the point. The point is they've had this compounding infrastructure advantage, data advantage, performance advantage.

personnel advantage. And now they were just a little late to the game, but when you have a better engine... But they were also distracted is my point. They were distracted with nonsense. You know that's true. Come on, the first version of this came out, it was making Abraham Lincoln... Remember, remember a big part of... African American and... Okay, that may be true. Betsy Ross was Asian. You know, like they were distracted. Okay, a big part of Google's orientation historically has been don't mess up the machine. A classic kind of big company dilemma where if I do something that's either disruptive to my core business or...

Or if I do something wrong where I will invite regulatory and consumer scrutiny, I'm going to get wrecked. And so they avoided launching stuff early. And what they've done is they've changed the posture in the last two years. And now the posture is launch early, launch aggressively, push hard. We have to win this battle or we're going to get eaten alive. And it's amazing to see the founders and Sundar lead this organization. I think there were a lot of question marks a year ago, but I think that the questions have been answered. Hi.

I agree. I'm saying it right now. I think we've hit peak OpenAI in the market. I think they're going to be the number three or four player. I think Gemini, Meta, and XAI are going to lead them. If we're sitting here in three years, I think OpenAI is number three, four, or five, not one or two. I don't think they get the one or two slot. What do you think, Aaron? OpenAI, who's in the one and two slot?

I don't think you want to bet against Sam and Greg. You don't want to bet against Elon. You don't want to bet against Sergey now, you know, in office with Sundar. You don't want to bet against Zuck. So I think the rankings are kind of less interesting as much as just the fact that it's like game is on. You do not have incumbents that are sleeping at this point. That's just going to push everybody forward. So...

Just an incredible time for everybody. What a time to be alive. All right. For the Sultan of Science, David Freeburg, the Chairman Dictator, Tamal Paya-Hapatia, and I don't have a nickname for you, Aaron Levy, but we will have one soon. This is the All In Podcast. We miss you, Saxy Poo.

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