E117: Did Stripe miss its window? Plus: VC market update, AI comes for SaaS, Trump's savvy move
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Check out what what time is IT IT over the well.

we started A D M. So now it's eight, twenty eight. It's eight twenty eight. I'm going to be the slopes at eleven year, so i'll be out there. Skin, i'm in nescio in japan take a quit fly to super a super o and then you drive two hours into the mound yesterday. There's an abandon by the way.

in honor of view, I grabbed the porter from the fridge today.

Very nice. Ah we episode rought you by so they drive the cat ski up and then you ski down and it's all fresh tracks. So it's a literally an abandoned ski resort during the financial .

crisis here I I just asked you all, I ask.

Called small talk. It's called banter. I thought you might be interested in your best is life, but probably.

We can all the fans and .

let's get to the show. Everybody wants to hear the show a lot of news going on. And you know in our industry, there has been a big discussion about R, S S and stock options, both the cost of these things.

And then there's another issue of people staying private for too long. If you remember a for folks listening, arab, nb, uber famously took over ten years to go public. People like, uh, bill girl wrote about this say, you should get public when the window is open.

Obviously, the window is closed right now or largely closed stripe. Now people are speculating. They miss their window. They have a four billion dollar tax will do to cover expiring employee R, S, U. Those are restricted stock units and at the same time, force. Where are a company from the web two point oh this you know ten fifteen years ago um when they were very popular check and software mobile location APP. They are going to let their previous employees stock option grants higher according to the information they issue these options in twenty sixteen seven year window before exportation, more than one hundred former employees be impacted and some of them were the very early team members. And this employee, uh, sack option problem is becoming a cute because, hey, you people waited to go public.

Basically what happens is you granted arrest you, which is effectively w to income when it's realized with an exploration date, but that expiration date forces you to be public so that that harass you can be exchanged for value. Then that's like a ten year window.

So then these guys have to go and modify that date and pushed out by another four, five, six years or whatever that is a deemed event by the I arrest that then creates with holding tax issues, right? So you then have to you then have to withhold tax on behalf of the employees. And so that collective number is the four billion that stripe is trainer is.

according to a leaked pitch deck, a stripe implied they need to two point three billion in capital by the end of q on twenty twenty three and working with common sax to raise a few billion at fifty five billion dollar valuation. That's down forty two percent from the peak of ninety five twenty one. One wonders if they're gone public, what the valuation will be right now.

Can we just say real quick why this matters?

Check IT. Like, yes. So anyway.

why does that matter to why? Why does matter to care?

Thank you. That's what .

we're I posted a link. This is a two thousand and thirteen interview that suck did with michelin ton of tech lunch. And if you go all the way back, the apprehension to go public was one thing that we really anchor to a lot at facebook in the early days.

And at the time, I don't know if you guys remember, but there was this arcane laws around the number of shareholders that you could have. And I think the issue specifically was that after five hundred shareholders, you have to publicly release your financials. And so we did all kinds of things to make sure we never hit the five hundred cap, and we try to push the IPO data for out as possible because we thought that I would keep people more focused.

And then in two thousand ten eleven, I then I told this story couple times. One of the things that I was advocating for pretty aggressively was trying to launch a mobile Operating system to compete with IOS and android. And we had put together all this work and rain in til in eighteen, eight of these people.

IT came down to the fact that we needed a couple billion dollars to flow this thing, and we didn't have that money. So the only solution to that would have been to go public. But IT wasn't the right moment in time, and that was uncomfortable with IT a year after going public.

One of the things that he said publicly in this technique thing as well, I should just come public sooner. I did. IT wasn't nearly the bad thing that I thought I was going to be. And when you look subsequently at how much money they have spent in A R and V R, spending half a quarters of that cash could have given them the chance to disrupt android in I O S in two thousand and ten and eleven, which in height sight is obviously a no brain or bet, right?

So even though I think we had facebook were the ones to really put this in the water table about not going public, I think a lot of startups should have gone back to first principles, truly question whether waiting as long as possible actually make sense. So I was curious about the strike situation. So I asked my team to do a little bit of work on how would you value this thing if IT we're going public.

And the interesting thing about strike, he said, IT Operates in a really transparent middle man business. So what's interesting about strike is that so many of the people in the ecosystem are public. And so what that means is you can build a pretty accurate mosaic of how well or not well that businesses doing by interpreting all the other data from all of these other companies that are public and are forced to report.

And so there's like a couple of really interesting things that jump off this page. And so the first thing that we did was we looked at what is the future profitability look like acts of growth. And what's interesting is that you look at companies like vision master card that are doing quite well and have done really well for a long time. But you look at this outlier in audio, and audio is probably the most obvious competitor to strike. And the thing that is demonstrated here is how incredibly profitable these businesses and how much Operating leverages they have, which means that their apex is relatively constrained .

because in the X, I access here are just so people who are listening to .

understand the church. If if you take the market cap on the x access and divided by their sales estimate, you get a multiple of the enterprise value to their sales got. And if you look at the two thousand twenty four estimated ebit in margin that they're forecasting x up their long term saleslady, what you start to get a sense of as the Operating leverage that this business has. And so all of this basically sets out to three interesting takeaway. S when strike got under written at ninety six billion dollars, hit this data point right here where, you know, you see stripe previous round .

five x enterprise. Now you to divide by twenty, twenty four.

their long term, the long term, the exactly by the and then if you look at the fifty five billion doll evaluation is down. So what IT looks like it's happening is appropriately. So people are doing the right thing, which is they're rerating the stock right by approximately fifty, sixty percent.

But what's interesting is not where they are in terms of where they used to be, but the interesting thing is where they are ready to their most obvious competitor agents. So neck, please bring up the next one. So this is where things get really interesting because we looked at what was od end and what was strives G M V per employee a couple of years ago before all help broke loose.

S in the private funding markets. And what you see is they were pretty equivalent businesses and they had roughly the same amount of employees. But this crazy thing happened, which is that if you look at the gray bar, this is the number of employees that striped IT went crazy from a little over two thousand to almost eight thousand. So a four accent of .

employees to, in twenty four months, they added six thousand people. Just cause for second that six thousand people in twenty four months and seven hundred days or so, right.

three people a day, if you do the same calculation for audience IT shows that they a little bit less than grew by about seventy five percent. And then if you look at the growth of G M V, and you compute how productive is each employee, basically, this is the the story of what's happened to stripe in origin, which is that origin has found Operating leverage, sprights of live found and maintained incredible profitability.

And stripe has added an enormous number of employees. Now the question is why? right? So IT turns out that these guys at the top line are grown roughly the same, except audient actually takes meaningfully less on a per transaction basis than striped us.

And the reason is that audience services, these large head customers think big, bulky folks that have huge amounts of transactions until, as result, have pricing power and strike pass some of those customers as well. In fact, they just announce that they're gonna process a large portion of amazons payment for him. But what's happened at the same time is that those kinds of deals aren't necessarily that profitable.

And so you have to hire a lot more people to build a lot more features so that you can generate revenue from the long tale of customers, all of these SBS. And this is the tale of these two companies, which is that stripe has some head customers, but many, many, many tail customers. Audio n has mostly head customers, fewer tail customers.

And so the leverage in the businesses that audience has, mostly these employees in europe, where the cost of these folks is much, much cheaper and they have less than half the number. And so as both of these companies continue to grow, you have one that has maintained and Frankly raised their long term profit projections because they see IT in the business even at lower transaction cost and strike, which is having a little bit more trouble. So I thought I was a really interesting exposure.

The takeaway for me is that if you were sitting inside the company and obviously hind side twenty twenty, the most profitable thing they could have done from an enterprise value perspective would probably have been to go public in twenty eighteen, twenty ninety because they could have raised max value at max valuation, cleaned out all these options issues and have a huge baLance sheet of cash with which to do stuff, whether it's acquisitions or other things. Because the thing that I have struggled this is there going to be long term profitability in all of these tail products. Because if you look in the sas ecosystem and sex, or hand the about you, there's companies building all the other stuff, and these point products are probably .

pretty good too. Sex, what do you think about agent going after the fat part of the long tail and then strike going after the long tail, having many more?

Well, I think there are both viable strategies. And I mean, i've actually written about this. I went to block some time ago called enterprises vers S.

M. B. Who's the Better customer for B2B Saa S com panies. And I think the sort of old school traditional view is that enterprises were always the best customers because they have the biggest budgets.

That translates IT to the biggest in your contract values or A C V S. This provides the highest R Y on sales efforts. Now you can make a sales driven distortion strake pencil the first place.

The prospects aren't easy to identify. After all, you're going after the fortune five hundred, you can just make a list of five hundred companies. So I think the traditional gold standard was sort of the head like your same place in the enterprises. However, I think in recent years has become more popular to pursue the stripe strategy of the sort of more S M B.

Why is that more popular?

Well, because first all starts are, uh, the S N B S are more early adopter. So when you are start up and is way easier to satisfy their standards, to satisfy needs, their needs are less complicated. You don't have to have socks to compliance everything else.

If you more is taking right?

Yeah yeah. If you solve an immediate pain point for them, we'll just buy IT, okay? Whether the enterprises are more later, doctors attempt more skeptical of new software categories yeah, I think in addition to that, the S M B sale cycle l is really quick.

I mean, I D say typically one to two months, you can close a deal. The sale itself is simpler. Like I said, the product requirements is simpler, and the low end of the market tends to be the most underserved part.

So it's great to me where the incomes are. Not that a traditional strategy is you go after the low end of the market that's been kind of overlooked or and that kind of a stripe has done here too as no one was really servers these these developers. So I didn't to think is a good strategy to and and the truth is it's not one of the other.

I think you just have to pick you know what you are, battles that you want to fight and some starts to go after enterprises and some we will go after S, M, B, S. And that really comes down. I think founder market fit, I think founders were a Better at sales, probably screw more towards an enterprise, got strategy where as if you're more of a product founder.

you go after us N B, B, summer over time, sex for a company to thrive over long time, do you have to service both you're using you can stay one of those things and grow. And definitely .

what what i've seen is that if you start the low end of the market with s BBS over time, you can move up market because what happens is that as your party is more more sophisticate and your company and your ability to excuse, deliver gets more sophisticated, you can start as fine the needs of bigger and bigger companies. So you start smb, then you go a mid market, then you eventually get to enterprises.

I think if you start with enterprises is very hard to go down market because it's not easier to add requirements to your product and to actually strip complexity eva product, that's actually surprisingly difficult to do. So I think I think either strategic can work. Either you started the low and and move up market that's a classic cake Christenin innovators, the limit that thing or you are you to start the top and you stay at the top make sense.

It's I mean adding ten people a day over two years. That's a large number people to add to a company.

While in fairness to strike, they were very honest about this and they were like we over estimated got confident and we over hired and they found that all the coordination costs to success point became too high. That's exactly what the calls is set in their memo. So I think that they're trying to course correcting get back to this.

I think the point that are making unemotionally, I don't know, strike no agent and I don't have a horse in this race is more than in this marked specifically in these middleman, highly transparent middleman markets is very difficult to hide the cheese, meaning the ability to get to an extremely precise valuation model is pretty easy. You know, this was half a day's work that we did. And the point is all the status out there. And so that means that if you're going to go public as a company like this, you have to be quite tough about how outside and folks will value you because the terminal buyer is very, very sophisticated and pretty smart about how to think about spaces like this.

freeburg. When you look at this, the kind of duv tails with the gets fit brag's. Are you on a twitter doing more with less employees? Zccm berg, a again, says he is getting rid of managers. He's asking managers to sexes discussion about, you know, the layers of management took out, added and added where high performers, we would have five people put under them, ten people put under them.

Is IT going to be? Or are you impressed with how quickly the industries is responding to this new environment? Or are they not responding fast enough in terms of heck count revenue? Because now we're looking at revenue per place. This really never want to. That been a decade since .

we looked about. This is a little bit of a different situation where it's about the capability of a business.

Like when I look at like the value that a business has created, you start first with, like can you make a product? Can you sell the product to people want to buy the product and then you know, can you make money selling IT? And then there's this metric that a lot of people use, which is L T V to cack, which is the lifetime value of acquiring a new customer divided by the cost to acquire that customer. But I think you can generalize that ratio to talk about business performance more broadly, which is, you know capital deployed, which is typically what cake is used in terms of growth um on the dominator and then capital returned over time, which can be the numerator.

And so you know you can kind of think about that L T V 的 calcite show being something more broadly defined as something like R Y C or what have you the the question for the scale ability of any business is， does that ratio, whether it's L T V A cake or R O Y C return investigation ital, does IT get bigger or smaller? Does IT increase or decrease? Does that racial crease or decrease as you get bigger, as you spend more money, as you deploy more money?

If it's getting smaller, then mathematically, you can resolve pretty quickly to the assets pic valuation of that business will achieve for the asthmatics revenue that, that business will achieve. And that's a very scary kind of circumstance when a business that tracking that metric starts to see that metric shrink. If that metric is growing, then you have, you know uh, a hyperbolic kind of moment and you can build platforms in our products and invest very heavily and take lots of risk, take lots of bets when it's going the wrong way.

You have two options. Number one is you have to make a change or pivot in the business to get IT to go the other way. Or number two, is you tough to take advantage of that moment before the market finds out about that moment because if IT is the market realizes that, that racial s is going the wrong way, your valuation multiple, what you're worth as a multiple of revenue profit shrinks dramatically because in the market can also see that asm token outcome.

So I think it's very often the case that one should, you know as a board members and investor, urge entrepreneur C E O S founders, managers to think really clearly about that metric. What's the right way define the denominator and to find the numerator in our business and define that ratio over time. And as soon as IT starts tracking the wrong way, you have a moment you can either fix IT or you got to go sell the business or go public and raise capital before the market catches on, on your valuation shrink. So I think what is higher.

So when I see what to moths showing in the data and talking about the the shrinking valuation issue for scribe IT, really, I think highlights this important point, this broad point, which is, did they miss the winter? Did they miss the moment where suddenly know the shrinkage is causing, you know, an automatic outcome for this business that, that IT makes investors a little bit like, well, not as excited about that because it's not does no there's no longer as much website and IT might be time to kind of devalue the company. And did they miss the moment to go public? Rather bunch of capital, you know, to to to go try new things and hopefully IT into a way. So I I don't know enough about the business, but that's my broad kind of assessment of this.

The interesting thing about that space, we talk to one of our friends at our broker game who runs a large consumer facing business. And I don't know if you were there for that conversation of freedom, was you were there are. And one of the interesting things he said is we are at a level of scale where we just bid these guys against each other, and these things tend to now be lost leaders for them, which is to say, effectively, that cost structure becomes really important.

So your cat becomes very important because L, T, V S are capped, right? And the L, T, V S are capped because these companies have enough negotiating leverage to say, well, if you want my business, here's the cost of doing this business, which makes a ton of sense if you are any large prevail of services that require payment processing infrastructure. So one of the interesting dynamics I think we're learning in this market is how it's really not a market, right? There are segments and there is a Better profitability in each segments.

So to your point, free bird, this is the sum of at least three or four different L, T, V to cack ratio, right? The tail looks very different, which is why you have to build a ton of features and the head just wants peer play. And it's all about costs first because all of these guys want want to pick up every nickel and dime that's on the floor because for them, on billions of transactions is meaningful to them.

It's it's an it's an E, P, S. Measure or beat, right for them, which has huge implications to their stock. This is a market that I think is going to be really fascinating to uncover and peel back the layers of over the next way.

We haven't even talked about what strike does as a business. I know we have a diverse audience that doesn't all come from tech.

yeah. So strike is will process your transactions. But there were the first people to make IT as simple as putting a snippy of code into your APP to processes payment.

They can be with VISA master card in the other places. They charge you a percentage each transaction. Such a trim x point, these larger uh, answer.

The developers five, ten years ago love this because they can installed a payments, right? Abstract the whole thing just same way cloud computing does right through. So you can kind of think about that that way.

But a large whale in the system, from of which he said addition has a lot of whales, not a lot of long tail strike because it's developers friendly and a snippy of code. They have a huge one tell anybody can do strike. In fact, people who are using things like for patro on, I believe they can just drop in their stripe account. So people now businesses of one have a stripe account. They just drop in their so for me, that seems like a huge potential in the future because some of those become the wealth in the system.

And the long tail gives stripe a lot of pricing power because there's there's no way for any one of those entities to have enough leverage to tell stripe pay. I don't want to pay two point nine percent plus twenty or thirty cents of transaction, right? Whether if you go to the head, I think audience is charging like one point three or four percent. So yeah, that is a holy different market and the pricing as a result.

this is to be different. Yeah it's interesting to me, sex that we now are getting down to you breast tax. Here we're analyzing these money printing businesses and saying, what is the ultimate value of this ten, twenty years from now to map? And I ve got a front rosey to that because there is a natural audience to every single service for A L. L. IT was thirty million paid subs a month, and I think the peak was thirty box among people were paying to month.

So at the time for nine.

So you know you start looking at those numbers, you know a billion dollars a month almost in just. And IT was a fixed cost business. But then boom, me just hit a ceiling competition ever emerging in the case of broadband.

And then that business are slowly depreciated over time. So what does this moment tell you for founders? A lot of the listeners here and capital allocators in terms of assessing businesses for the last so piven into our next the last couple years.

You know, if you were first time fund manager, you are investing in nineteen twenty nine to twenty twenty one high valuations. Those those funds are they ever going to be able to throw a profit? And then people were investing in those based on momentum logo chasing. This is now back to, you know, sharpener ting your pencils build girl style investing. Ah yeah.

I talked about before. Is nothing new here when you're in a boom, the only three things that matter or growth, growth and growth. And when you're in a downturn, the three things that matter or growth burn and margins and thought that grow stops mattering.

This is that people also care about burn in margins. And you know, the companies that fear the worst are the ones that have inefficient growth that basically burn a lot of money to grow. They have lower negative gross margins.

They are burning way too much money that burn multiple doesn't make sense. spicy. The ratio of money burned to the new air are the threats those companies get called out when the all the sound of regime changed.

Like now, cack is one of the early signs of this h trip. You and I saw that member L L was sending D V D everywhere. And cat became two or three hundred dollars for every L L. describer. And then they were playing this funny accounting and and to remember this trauma where they were saying, hey, the ltv is like five years in school.

They were looking back at that number, not forward, with broadband coming like we can told, we spent three hundred dollars on T, V ads to get a dial customer twenty four a month and voided that whip s on them. So I listening, everybody talk here. I'm just like, wow, keep eye the cake folks. The customer acquisition costs, how would you get you spend to get a new A O, L, netflix or SaaS product or a stripe customer is critically important.

We look really closely a cat payback. You know how many months I take to, to pay back the cost of acquired customer. We don't look at that expensive though because you know what expenses go into cake is highly dependent on your accounting. Unpacked that for a second .

because there's the money you spend on a facebook ad or a linked in add or any other great platform for driving, you know customers to .

sign up for IT and money on the money on a sales person, obviously, that wasn't to cap. And then what about sales Operation account? Does that go in? Is that option counter? Is that sales account is that acquisition is something else.

So there's a lot of like suttles accounting decisions that have a big impact numbers, that number. Well, this is why this why i've always recommended us looking at burn multiple. all. What I really want to know, this is how much money is to start a burning in relation, how much revenue is adding. Delay the ratio of those two days.

because not high, burned a hundred. This, we spent three hundred thousand dollars, and we burned one hundred thousand dollars, and then we added a hundred thousand dollars in new customers. L R, ah, so that's one x, so that you have on your chart here, burn multiple of one to one point five or under one is amazing or great. But if you burn two hundred thousand and eight one hundred thousand.

I warn n founders going into this year do not have a burn multiple care than two. Because there is so many headwinds right now that what happens is if you end up missing your revenue forecasts, you're burn most kind of look terrible. They could shoot up to three, four, five and up. So it's Better to have some cushion by going into the year being .

super efficient on the conversed freedoms. G, if your lifetime value of a customer is incorrect, which we're seeing now with people cancelling SaaS products or reducing the number of seats or in cloud computing, people are now saying, hey, maybe I should take myself out of the cloud and host service or some of my own service and reducing the crowd bill. Cloud h growth is slowing ing and azure across the world.

Amazon web services is excepted.

It's still growing, but it's slowing in the growth. So that L, T, V, if you get that wrong, that can whip, are you as well? Yeah.

yeah. I mean, L, T, V, which is like what do you make over time from a customer or every one of asset IT the market to point IT IT should be on kind of net cash, meaning like how much profit do I pull back in to my bank accounts at the end of the day after paying third parties and internal people? And where a lot of people, I think in models i've seen on you know.

What's the lifestyle of a customer? They kind of take either revenue or just to simplify gross profit number. But the reality is if you're scaling the number of engineers you need because you have many more customers and you got customer service calls and you know you've got a new customer deployments with your customers, all of that kind of adds up to additional cost. And someone's business is you see that the sas companies, for example, that all have gotten their multiples hammed. It's because the kind of microscope has come out at this point to to some degree, set aside general macro economic factors that are driving some of the multiple compression.

But as the microscope has come out, IT turns out that the efficiency of the business is not what everyone hoped and dreamed assess business might be, that the efficiency of the business maybe looks a little bit more like either services business or there's a big kind of scaling hardware component that the margin that you actually make for every dollar of revenue generate fundamentally is smaller. Then you know what you think IT is, you have to add people to support and option new servers and all the stuff your highlighting and a lot of that's excluded. And then IT doesn't take you don't realize all that when you're small or when you're medium and growing.

You realize that when you're bigger, when you're bigger, you're like, oh, wow, how do we get these cost out? Well, if we cut these costs, custom quality would decline. Customers will turn, all this bad stuff would happen. So yeah, that L, T, V number is generally not right.

And that's why I say it's much more about kind of a true R Y C calculation, which is how much capital and I deploying, and it's not just being deployed in marketing dollars, is being deployed other ways and then how much capital by making back net profit over time. And I think that's the right way to always analyze a business generally. But like particularly in businesses where is easy to obfuscates either those numbers and they could see my keys, an extraordinary business.

You can get hurt when you get bigger or when you're scaling. And in a market like this where you're trying to go public, it's like that really hurt, you know. So I think that a lot of what we're seeing.

let's talk about the other side, the table to math. We've been living through a zero, zero interest rate hycy ation. Basically, people were growth, growth, growth logo, logo, logo, whatever, when they're making these bats capital allocators. Now we're back to breast tax.

Okay, what's the margin? What's the lifetime value in? Is this actually real? Is there a real business here? Or is just a grand hallucination that hu cinner exists not on only on the founder side, but on the capital? This week, we had an interesting.

Sami viral thread on twitter, some named Tyler tringles. He's an early stage investor, don't know who that is, but he did a thread predicting a sixteen years just to pick up one firm was a zero interest rate phenomenon and an incredible machine to accumulate A U. M.

S. Is under management. And so what we thought it's just writ large on the capital allocators side of the grand hallucination of zero interest strates.

I mean, I think it's a little unfair. I think this is written more just to try to generate views and clicks because OK, you have to see the underlying return data to really have a sense of knowing is IT. I think it's fair to say a couple of things that there was probably two and half for three years of capital raised in the industry that's gonna get really put under pressure.

And the reason is that there is not a lot of time diversity in that money, meaning people got IT and they put them into the ground right away. And one of the principles of having a more predictable return set of returns over time is that you leverage time, right? So if you had one hundred dollars and you wanted to have a diversified stream of returns, you're much Better off spending a dollar a month for one hundred months versus ten dollars a month for ten months.

So just that thing will cause a lot of impact in headwinds for a lot of the capital in twenty twenty one and twenty twenty two. Then the other thing you have to keep in mind is that over many cycles where we've had high rates and low rates and medium rates, our industry typically returns a dollar sixty for every dollar raises. And that over many cycles. And so if you believe that we're going to revert to the mean out of the trillion dollars we've raised, maybe will return one point six trillion. Now that sounds good, except the problem is that one point six string an is marked five and half so you could not have to give back.

So there's a lot of pain.

You going to have to give back a lot of paper profits in order to get back to that one point six and p OK with IT.

And the question is, what has happened in decision making in the meantime? Meaning, how many people did you hire? How many deals did you do that you regret? And then how does IT change your psychology? Gy, and how you treat the next investment that comes over the desk? Can you separate yourself from these bad losses and not be until then, make a good decision?

So you had a terrible two day session like the home you did last week, losing three hundred and fifty thousand dollars. Can you play the next week and not beyond llt and start to build backer stack and make thirty thousand and night for ten nights or ten of the next twenty fifteen sessions, whatever IT except you had a rebuttal or something you .

want to add to this? No, nearly a rebuttal. I mean, look, I think you're going to be interexchange honest about IT.

I think that twenty twenty one is get a likely be not a great vintage for VC. why? Because valuations were just yeah, the valuations were just really high. They've come down by what at least fifty percent on average, maybe more more .

twenty fifty percent now. But you still have more medicine to take. I think when .

you look at some of you into their valuation, look, I think for any given set of companies for any portfolio, the most important thing is what's in the portfolio. So if in twenty twenty one, you have the founding of the next google or whatever that effect is gna swarm, the effect of Price levels in that year because of the power law.

Again, the number one most important thing is just what's in that part fully, what's basket? The second most important thing is the entry Prices. And obviously, if the entry Prices are twice high in a given year than they are and every other year and twice as high as what the exit multiples are going to be in ten years when that portfolio o becomes liquid, that's going to a hurt the returns. But we won't know which of these effects predominates until five years now.

We I mean, when I saw that tweet thread, I thought maybe this is an issue for some venture firms, but we're not gonna. Even the inkling of IT for another five or seven years takes a while. That's a problem that may manifest itself. Lin year ten. And between now and then, any firm that he has a good track record of returning capital or Frankly, has a good brand and good Marks will still raise in the order amount of money because this is an assa class that I still think on the margins is IT more of a must have has set allocation than a on the margins I just rather ignore because IT is the future of how GDP will get created. And so everybody kind of has to pay attention.

Imagine if in twenty twenty one, the near the next great mega outcomes and A I were created, right? Because those founders were just slightly ahead of the curve. You know, they were like a couple years out of the curve. If those create, you know, the next whatever trillion dollar companies, apple.

then the fact that Price levels were two x.

what they should have been won't matter, really matters. The distribution to be a bunch of bad portfolios, i'll be really credible ones. And that's the way IT always is with venture.

The thing to keep in mind is in twenty one and twenty two, rates were still effectively too low. And I think we did this analysis make you can throw out that thing, but it's not correlated with big outcomes. Those vintage years, twenty twenty three is the is the first vintage year where we're actually starting to see high enough rates that have historically generated that kind of return.

And so I do agree with you, David. I just think it's shifted out by couple years, twenty three, twenty four, twenty five. Those can be some real power light years, I think because we're onna have just based on what the fed is saying, five and a half percent interest rates for the foreseeable future, which is is a huge, a huge number. The rest that's .

a huge what that is. You know, IT is so cheap, I think to build on your point and fed back up, bring you on after this, IT creates an environment in which discipline on all sides, the table boards, management teams, investors, ranked file, everybody has to be focused. Everybody has to have sharp and words.

And that little bit of headwind is in the the ability to raise capital. Being harder is building more reserve and more resilience and grit in the set of founders. It's kind of like parenting in a way like if you are too permissive, you give too many options. Kids are in discipline.

And now this group of entrepreneurs i'm seeing who haven't given up, my lord, are they becoming animals in terms of like pure sami, in terms of how they are running these businesses, anything that's efficient projects that were the third of fourth most important project? Cut, cut, cut. Now it's taking a meeting months freeburg to maybe get discipline, but maybe you could speak to the next three years and the opportunity for investing in this coward, because then that last coward is going to be really, really chAllenged.

And they will probably do six percent returns, just like your money market account can do right now, five or six or weapons can do. But this next group, and we're seeing dogging entrepreneurs, were focused on reality, and there is no hallucination. Now that this is gonna easy, there is no grand illusion here. Uh, what are you seeing .

in the market about if if the market average return in venture in early stage investing is going to be six percent? Remember it's it's not evenly distributed. So you know eighty percent of funds could end up having net negative real returns and twenty percent make money and then those you'll be a very few that will make real money.

And yeah that's the that the nature of having you know a very kind of low average return on the industry is there may be a lot of White outset on on the investor class folks that have only had one or two fines and then just cup loan up in the cycle. And I think there there's two groups of companies out there. One is companies that obviously have been funded and doing stuff and or active businesses and theyve raise money in the past, and that's where there's going to a be really ugly times.

I've mentioned this in the past, but I do think that there's a significant number y's companies that if they were to be truly valued on first principles in private markets today, they'll get value as at a value that's less than a preferred equity, which means that there is a difficult restructuring needed in the company and not everyone's going to be willing to embrace step. So that's what's gona trigger a lot of the White bats in the market. It's not like the businesses are values. It's at the capital structure makes IT difficult to refine them to funding and continue their their Operations. Now for all the new businesses, as you highlight men, so much extraordinary .

leverage out there.

You left and right. I think we talked about this maybe a year ago that there was a big bubble coming in A I but I am left and right. Nearly every market, every segment, you won't see a pitch deck but doesn't have those two letters in IT.

right? I mean, i'm sure you you guys find IT is IT is hard not to feel like you're a little bit of alarming if you buy into the A I stuff, but I will say that the use cases were seeing are really incredible. So I didn't feel this way.

The last couple of waves, like the whole web, three thing never totally made sense. And crypt, to always feel love is speculative, like kind of unsure. But the A I think seems like it's going to deliver a real value.

And i'm seeing like already three major enterprise use cases. Number one is just auto summaries like being able to summarize very quickly a thousand articles or a meeting you spitting out of like a summary of what has happened in a meeting. And IT could break IT down between a recap and action items. IT just does all the work for you. The second thing is like in APP customer service kind like a copilot, but there's a reason contact customer port anymore because you can just ask .

A I inside the APP like why and they will be faster yeah you'll get IT, right?

It's like a power user who sitting next to use your copilot and is making you much more effective in the APP. And then the third thing already seeing is all to complete for everything. I mean, IT is like bonkers, how you know how you get like a little type suggestions in the email that is like two or three words, the is going to do type ahead for any content, type p of times to do this. tables. So it's boker.

You see IT in google. You see IT in google sheet. Now like if you type you know equal sum, it's like, oh, here's what the seven most likely things to happen next door in which case it's kind like you use the chest.

So come. I don't know if you've used that with like the heads up display. Where are showing you the different moves? And this is a book move versus this is not a book with.

Let me make a prediction. All of the things that you guys said, I think our incredible consumer surplus business opportunities, which means that the ultimate winner is us and we're going na become mass consumer, not the consumer. Incredibly, incredibly production and more leveraged in how we spend our time, which will allow us to do all kinds of other interesting things all the time that we save.

That, I think, is almost now a certainty. The problem with consumer surplus businesses is often times there is no money made in the funding of them. And really, where the money is made is in enabling IT.

So for example, so far, what I would say is there is very little money that has been made in A I. There's been an enormous money of money that been made by invidia. And the reason is because they are the picking shovel provider into the industry.

And so as that an example, A M D I think can also benefit. So the silicon players seem pretty obvious here. Maybe some of the cloud players um the problem, the cloud players are trapped inside of other big companies with many other business models.

I just want to put out there that I think David write the consumer one hundred percent wins, but economically is not clear to me that there is a winner that is venture, fundable. Well, IT, hold on the second. Yeah, the levice shouts of the world right in the gold rush, the people that made the pixel shovel in the genes are sure to make money. Yeah, and the people that plan for gold is much more speculative .

and harder to see right now. Yeah, a couple of so I think you have a point that so I mentioned three use cases. I think our killer use cases are already seeing demos of today.

And when you look at them, you're like, okay, this has real applicability. I mean, the AI is going to be it's going to be powerfully change our work lives. I'm to focus on enterprise. So now I don't know who benefits economically from that, that functionality that I mentioned, I think, is likely to be pretty commoditized pretty soon, but it's going to be incorporated into lots of different apps ways that are hard to predict right now.

I think that this AI revolution is going to a do for as what mobile did for, you know, a lot of what one point of companies where, like for a law, these web one companies, they were either disrupted by mobile or they are turbo charged by a mobile. So you think about facebook is successful, made the transition and move its business so much Better because people are is using IT a lot more on their mobile vices, a lot of other businesses that just kind of fell by the wayside because they just couldn't make the adaptation from this top to mobile computing. I think A I is going to be like that for us where there's going to a lot of SaaS products or .

just after turbo hundred person, right?

You a hundred person if you can accelerate the AI into your service product, put in a copilot, put in auto complete and all search of other forms of value that we're just scratching the surface of, you're going to be able to deliver so much more business value. But if you're not able to do that and somebody else can, then you're going get disrupted.

Look at some of these enterprise spaces, like take something like A P M, right? Like application performance management, that's an entire ecosystem of enterprise companies is probably ten, fifteen, twenty billion dollars of collective market cap. And i'm just gonna something not to not defend anybody, but like that can must be him hit by a eye.

Those are simple heuristics that can be emitted in a way that's completely novel, where this code leverages es disrupt in and all of this stuff happens relatively automatic ics now. So there are all kinds of other sectors, to your point, that get crushed. Then the question is, who provides that layer now for free and their existing SaaS tool kit or their product that now all of a sudden captures more value as result. And they can sell IT for pennies because it's incremental to them in terms of their margin in revenue.

I think you're right. Hardware winds. I think cloud wins big because if you keep adding to these models and once tent, twenty percent Better, people going to be willing to pay for that.

But then when you think about consumers, whether their enterprise or actual consumers, I believe, mop the stuff is going to provide so much value that people are going to take their wallets out and be more than willing to spend for IT. It's more valuable than netflix decision. okay.

I can take this time. Imagine you take your videos of you learning to ski and you put IT into an AI coach and it's like here's how to and IT just draws on IT, here's how to be a Better steer. This is going to blow people's Marks and you'll be more than willing to spend twenty five box of months.

I disagree with that. And the reason is because we spent now two decades and that's a lot of muscle memory to unwind of people that have been consistently given more for less. And I think that we shouldn't underestimate the expectations we've all collectively created by building support tools that have that inherent deflationary aspect of them.

And so I just think that it's going to get a very high, high bar. I still think there are substitution services to be built. I don't dispute with you there.

And I just think general though, the defect of business model that we've created in tech is more for less, and we've used technology to give us Operating leverage to create margin structures that other companies couldn't copy. And I still don't. And I think that A I accelerates that, not changes IT.

I think it's gonna be opposite. If you look at netflix, if you look at disney, they ve been raising Prices, providing more value.

I think that this is going to provide so much value that the incremental ten box among five box among poor employee is gna pay off so much that this could be a slack or like some presentations after there are a lot of people who are making powerpoint A I powerpoint introit makes you a new deck or a fig ma with A I these things, we are going to be so powerful. People like, it's totally worth an extra hundred box month because I can get rid of another employee. This one employee can now do the work of c i'll give you a thousand.

The the company is going to make more money saying it's deflationary. That's definitely okay. It's deflationary on the entire economy. That's sofa company that figures out how you can fire two accountants and keep one and make them as good as you know three yeah.

me on this.

You still with us.

So the signs the technology drives Prices down.

What technologies is about doing more with less, right, is about doing more with less. And the A, I helps you do so much more with the same out of time or less time.

I think your whole point about disney and netflix as because they aren't, you know, innovating on other sites until in order to drive earnings, groth, they're having a race Prices. But that doesn't s think to the benefit .

of technology innovating massively. They're adding massive features to their products and massive new shows. I I think there's pricing power in this. A I that that's just my belief.

I could be red about leverage. yeah. I mean, like I think I think your point like so my general rule of dum them on technology is the technology creator.

The technology company should generally be capturing about one third of the value that they delivered. The customer impact that why where do you come up with that? So I mean, it's just kind of where giving example, yeah yeah.

So like let's say that you as a food delivery company, you have to pay a human ten box, deliver food from unity. I run a robot. My amatis cost of running that robot is, uh, two box.

So it's a box cheaper or call IT one dollar. So nine dollars cheaper, I should charge you four box, you know, because four box is super competitive with the existing market and it'll keep me competitive against the other automation companies. Are you going to start to emerge? It's just kind of how market dynamics and are working out.

If you charge too much, you're gonna vite people to come in and compete with you. If you you're technology motives, remember all technology over time. And if you don't charge uh enough, you not going to make enough money to be able to reinvest, scaling your business and and doing more kind of interesting things.

Uh h as a platform. So you know, generally, A I provides more leverage at this point if I can build an application. I know if you guys, i've seen these incredible U I apps that are built in A I now where I can say with a prompt, hey, making up builds the dog up and give you bunch options, and you can pick you when you want.

I would typically have to pay a design firm fifty thousand dollars to do that work for me. So if I B A, I is doing IT automatically, you know, I should be paying, let's say, fifteen thousand dollars for that product, for that capability. The margin on that is one hundred percent try.

Is the margin right? whatever? IT is very low. And the margin on that one hundred percent, where is the margin on paying people to do design work as a design firm is very know not not a great march in you.

You're having to pay. I fired this stuff. You know why we're having we're working IT out in your heads right now. One group of us is talking about comparing A I software and A I services to the existing software sack. And on the other side of the discussion, we're comparing into the humans who are currently doing that work.

Imagine the six percent that two brokers get, you know, doing the cell of a million dollars and six thousand an A I could negotiate that and find you a Better home and sell your home for the optimal Price for a less than sixty thousand. What would you be willing to pay for that? right? And the same thing with the designer of the logo.

I don't think this has play out exactly JK out, because to completely eliminate a job function, you have to do, you know, one hundred percent of IT, and you do IT you know one hundred percent of the job function as as well as are Better than the human or as. I think as a post role model where you solve the humanity .

in the loop, but they're .

much more productive because they're working with the .

they're augmented more.

yes. So I think if there's a job reduction IT would be more the case where they've got a team of five accountants and they go to two or three because now there is much more productive. I don't think they go to zero. That's my sense. Anyway.

I look at outsourcing as a possible corner to this. Remember when you move the accountants to manilla, where their knowledge workers there and IT knocked out half the Price to, there is the Price, whatever IT was. This just feels like that on states to me.

If you have a business model like, you know, infuses or tati are one of these things that's lever to utilization rate. This is the most obvious way to basically add many potentially percentage points, if not tens of percentage points of utilization to your business.

That's all money free money for you, right? Because now you'll have fewer people, they'll be more utilized and they'll have more leverage because they'll be using a bot or some A I agent to help them right code, right unit tests, all that typical stuff, that right now you also worsen. Even if you pay marginal cost, you add the labor arbiters, technology arbitrage. Now a sudden these businesses look really, really interesting.

Yeah.

his support definitely gets revolutionized, right? because. The initial you know the first line of defense is going to be the A I using text to voice and you can choose what language that wants output to what accent. So you'll never know that you you'll think you're talking to the so on locally.

Literally, you'll be in fifty languages with the right answer and you don't need to build up that entire group. I mean, this I think we're underestimate in some ways yeah.

but I can happen here. But my point is I think that a lot of the customer support inquiries go away because the help the assistance gets going into the tool directly. So you know you gets the point yeah like why do you if you can just ask that people .

do that right now on youtube? If you just type the question into youtube and you find the video that takes five minutes, but you're thing is to take fifty second sex, but is going to be right there.

I think what sax said before is hugely important. When you think about how A I touches non technology businesses, what he said is the boundary condition, which I think is right. I think he nail this, which is the boundary condition for A I to replace a human is where the threshold air rate of that A I is the same or less than the human right.

If you look at very complicated markets, where does regulatory capture rear its ugly head? It's an allowing humans to be error prone. And you can't do anything about a tick healthcare.

If you're going to a hospital, there's a certain error rate. Every surgery, right? There's a certain error rate in the things that happened.

But there's probably a whole bunch of ways in which that entire infrastructure can be made much, much Better with A I right, a robot that does laser guided precision surgery characterising tumors, a hundred with one hundred percent accuracy. So you always get one hundred percent of the cancer out when you going get surgery on. All these things are possible now.

And all of a sudden you take these air rates that can be high as as highs on your thirty percent. For example, breast cancer series, the dirty secret of our health care industries is that has a thirty percent area you know, that can and should go to zero o and now all of the sudden, so these highly regulated markets, I think can become much, much more efficient and and leveraged and pass that consumer surplus on to people. In that case, it's helpfulness, which I thinks is a, is a big deal. I did my new interest.

I did. Govs, ah incredible. I mean, I got all the videos. S I got all the loops. I went to the one down on our community out IT was like going to spot and no big deal, but I got the results.

And if I call here, here's a tiny of little links that are not worth cutting your body until look at. But just say, you know your needs, your shoulder, your kidney. There's a little pop peer. There's a little pop peer, whatever. There's a little growth here, but let's see in two or three years, just monitor IT. And i'm like, oh my god, i'm so grateful if this thing gets down til like five hundred box, which had obviously well are a thousand box and everybody he's doing IT and then all that data in there. And then the A I is looking at, like you're saying, I mean, the A I detection.

was the A I able to tell the doctor how full shit you are?

No, you know, you're not supposed to eat IT four hours. So they didn't get an accurate reading on B. S.

I unch. There's called off in everybody. Yeah, I here's a really important clip for founders. Uh, play the Steve job clip.

This is super important when looking at what three verses I to in sexy point, you've gotta start with the customer experience and work backwards to the technology. You can start with the technology and try to figure out where you're going to try to sell IT. And i've made this mistake clearly more than anybody else in this room, and I got the scar tissue approve IT.

And I know that it's the case. And as we have tried to come up with a strategy and a vision for apple, IT started with what incredible benefits can we give to the customer, where can we take the customer, not, not starting with let's sit down with the engineers and and figure out what awesome technology we have and then how we going to market that. Um and I think that's the right path to take.

Can I ask you guys a question? I sometimes are going on these rabbit les, I watch hours and hours of Steve job clips. What do you think makes him so calm? Doesn't he just strike you as incredibly just like common, like comfortable with himself and .

just aware I know what IT is, what he was so much Better and aesthetically building product than anybody else? He when you think of that PC error of no taste page boxes and everybody having no style and just no swagger, he was studying, you know, german design bud's m tripping on acid.

And like, just understanding the universe at a level decades and the other contemporaries warrant, they just weren't t as transcendent in understanding product design as he was. So IT was like when you were saying you were playing poker with a bunch of four year oles or something, that's the analogy. He's just on a such a different level that he's watching people make you know A S four hundred and uh you know I B M P S, whatever, like just garbage computers, garbage Operating systems. And interesting .

the thing is like if you look at any era, just the way that he communicates, there's just a level of com. I don't describe IT understand. I'm trying to say like he he just seems like he just sees through all the noise like he's seen through the matrix like he's unplugged.

Taxes are impressed. okay? They have. No.

i'm very impressive. Steve jobs, I think he understands development Better than anybody else yeah clearly that I mean my favor. Save jobs passage is the one where he describes the john skull disease to get member. This.

yeah, no. Oh, here this. You know, one of the things that really hurt apple was, after I left, john skule got a very serious disease.

It's the disease of thinking that a really great idea as ninety percent of the work. And if you just tell all these other people, here's this great idea and of course, you can go off and make that happen. And the problem with that is that there is just a tremendous amount of crash manship in between a great idea and a great product. Yeah so true.

yeah. I mean, I tell people it's like a rug v gram. You go, you know you got to a whole team to get the ball down the field. It's not like one person put the ball down the field. You know they can maybe suggested to play, but once you're on the field, everything changes and everyone's involved .

in getting a dm field that quotes where .

the info craft interest come from. Oh.

really little fact section to third.

we talked about last week the gazala versus google case, the justice is hurt or arguments and planets seem to fair poorly. Quote from scoto blag justice lena hagen suggest that even if section two third is not well suit to address the current needs of today's internet, such as such a task was best left, as we predicted last week, executed best left to congress rather than the supreme court. Quote, these are not like the nine greatest experts on the internet. Cagan observe actual ts.

yeah. I mean, this is just, I think, really a quick update to what we talked about last week. The justices heard oral arguments. They seem to be very skeptic of the planet's arguments, even just as Thomas, who has written the most skep ally in recent years about the broad community that tech companies enjoy.

Section two thirty seem surprisingly sympathetic to the theory that the nine circuit court ruled on, which is that section two thirty protects recommendations as also providers algorithm at content websites similar. So even the justice, what I think was most likely to rain into thirty, seemed to be more comfortable with what the defendant, which was google, was saying. So IT looks to me like google and big tech .

grand win this one.

And no, not really. I think I wanted know what you guys think about trump showing up with big max and water in east palestine. Mean, he is his immediate genius. He be put judge to east policy. Yeah.

that was literally pull up my tweet. I think this is the power we, we, because trump has been out of the public these two years, he is immediately, he is literally bidness in ukraine, saber rattling over air signs that may or may not be true. They who cares?

So does this matter? No matter what do we do actually address, okay, because I don't I don't to be second, I don't need to be there because jack sol them just pay in a press conference. And IT is asked by a cbs news reporter if the U.

S. Gave the russians any kind of heads up, the president is going to be in key. And what solve, vans said, and I quote, is we did notify the russians that presidency.

We will be travel to keep. We did so some hours and forced departure for d confliction. purposes.

Know what deep confliction is, is when the us. Tries to avoid an accidental conflict. And, you know, points are crazy enough to trying to assassinate biden.

So the russians were not attacking keep that day. In fact, they haven't attacked kev, as I know, for weeks. So these arrange sirens were basically .

disputer theater. But the amazing thing is that you don't know if you don't know that bite.

just don't know.

doesn't mean by impress the button, so don't don't take you to the other. Who knows who went who, who, why the sign went up, but put IT aside.

this was a joint event between the by administration and the silence skii team. They organized IT. The whole thing was choregraphic. How do? How do that right corner get their Jason, was that an accident too?

Okay.

so let's put that asking like this with accident. Let me .

give you G O P. Let me give you G. O P. Donald trump is a savant, and he went to amErica to the place that we were reporting on the under reported story.

People in east palestine are being ignored, and he comes there to help the people. America, I give you all credit, your guy sex did the most amazing media move in history. He went to the middle america, where people are suffering, as opposed to a war that nobody wants to be in, and spend all that money. We won't spend money, but we will go spend billions in ukraine.

go. You don't know what this reminds me of, and you may think to say we are connection, but he reminds me the ending to the movie boys in the hood to remember what happens at the end of that .

movie that haven't years cope okay.

was thirty years old. But ice cube, you know, he plays, uh, this character, do boy, his brother gets killed. And at the very end of the movie, he gives this speech to cuba, good in junior, where he says, you do I turn on the TV. And there is all this shit about violence in a foreign land. And there was nothing on my brother getting killed, all the stuff what's happening, foreign countries, nothing about what's happening here.

And I think the most member of line was either they don't know, don't show, or they don't care what's going on the hood, right? So what's going on here is the people of east palestine, ohio, being engulfed in a plum of car, citizen and toxins. And biden is off right, pursuing the crusade in eastern ukraine, and is not just him dish out to match ma as well. mr. Mcconnell.

on T. V.

saying that the number one priority of the united states right now, defeating russia in ukraine is not helping the people of of ohio. IT is not securing the border IT is not solving crime in our cities. IT is not making our schools Better.

It's running off and basically supporting this war in ukraine. So both these octogenarians bin and the condo, both the either don't know, don't know or they don't care. What is the united states? america?

He's a genius.

obvious.

Go .

there. I go. There is not a genius.

Go there where he can.

He not because I think .

the most or democratic .

person that went over there was just shapia who's pensylvania he got there before? Booty judge.

what is going on? I mean, and this is, it's never ending war. And so, you know, this is, if nobody wants to fight and never running war, this is, this is what got bush in trouble, right? Like this was the big critique is like we're spending all this money over in the middle east on these conflicts.

Your time of bush senior? yes. So so this contest was both senior, I think actually is a good analogy. So the with bush senior, bush, actually, this is a ninety ninety one.

He won the iraq war that was actually a stunning foreign policy success because he actually didn't go too far. I didn't go all the way on the road to back that, the way that his son torture you. Bush wood, creating an epic disaster.

So bush forty one delivered a Victory there, and he still lost election. why? Because he seemed on a touch. He wasn't focused on domestic problems. The american people want an american president to focus on american problems. And even if by deliver some sort of Victory, ukraine, if he ignores his festering problems at home, that he is, I think, vulnerable for this reelection.

But I think the truth, the matter, is that this war is going to turn out much worse than the iraq war did in one thousand nine hundred and ninety one, because in ninety one we showed restraint and we knew what our vital interest was, and we kept our objectives limited, and we kept the timetable very short. What is biden doing here? Biden won't tells what the objective is, is just whatever the ukrainians want.

He won't tell us with the timetable is is basically as for as long as IT takes. And then meanwhile, this week at kalaa, hairs go to the munich summit declaring that the russians are guilty of crimes against humanity, which that something that we could have assessed after the war. Think about the incentives you're not giving the russian leadership before we said that we just want them to leave when you accuse them of war crimes that implies that weren't go chasing them all the way to moscow.

They're not going going to end this war. They can be put on trial at the hague. I mean, this is highly inflammatory. So you know, this thing is not going in the right direction.

Yeah, that was a thing I didn't like about biden speech over there is just he's escalating, escalating, escalating here that we have to stop putin, I mean, which you do. He didn't be another country. He didn't cause three, four hundred thousand russians have died.

According to reports, over one hundred thousand ukrainians have died. According to words. Neither side is given the accurate number because they don't want to demoralize their constituents. But the amount of suffering going on here is an ordinary, and I think I should be the west who is going send mccrone, send somebody from germany and a group of people to then go to ukraine and work this out. But you don't need to find you're sabor attn IT was too much labor.

And for me.

and not not d escalation, we need d escalates in these .

situations are not, but I said, but in is really paying himself into corner here. Because before the war, he refused to take nato expansion off the table. He refused to recognize the russian interesting premier.

And we gave no support to the muscular courts, which would have given some limited autonomy to the russian speakers in the dawn bast area. If we had just done those three things would have been no warn byan refused to do that. He refuses to the expansion of the table even today.

So he has nothing to compromise with. He is dug in. And the problem we have now is that it's a loose u scenario. If the ukrainians keep doing poorly because right now looks like they're on the back foot, what is the united is going to do? We're going to let them lose this war, or we going to keep giving them more aid and step in.

IT looks to me like bit now he is investing his whole presences y in this, and he can just let them lose, which means more estate lation from us. And on the russian side, if the russians lose, then they have an incentives to use nuclear weapons to rescue the situation. So IT seems to me that both scenarios here are really bad, and we don't really have a good way out of this.

We're looking for some sort of magical goldlike scenario where the russians sort to lose, but not enough to use nukes. The administration has not given us a clear picture of what Victory looks like here. That's actually achievable in a reason time frame, at a reason cost.

What do we think? A freeburg of cheeking ping making overtures. And hey, maybe we should work towards piece if you follow the money.

He wants cheap oil. He wants the stink to end, and he wants the west to be buying goods from china. The west wants to sell a bunch of armaments.

The military industrial uh complex is absolutely in the light of replanting ing all of these weapons. Perhaps a little signal to follow the money concept, but what we should take on the chessboard of using ping is GTA visit putin before bind us. Uh and he wants to build bridges and we want to say, where all what are you that only getting like?

I mean, china buys energy from russia today. They by oil that Price. So if i'm china, I was the last longer, don't I I why would I want to end this and then have russian markets open up? Could if their markets open up, the markets Normalize to market Prices? Right now, they are getting a discount.

So think yeah rather, they certainly don't want things to create. The question is how quickly do they want them to deescalate. So i'm china. I'm kind of probably playing a little bit of a you know middle line hair.

I I just I obviously.

I don't want to see a big hot war. China's got its own domestic c problems right now that seem pretty significant and sensual and having access to cheap energy seems like a benefit. Obviously, if there is significant conflict to escalate tion, a conflict that would be very dead from an economic perspective for china. So problem somewhere in middle, like a slow resolution.

let's say, I don't know. I mean, this is pure speculation. This is just meet. Europe isn't .

going to buy oil anytime soon. india. In the rest of the world, there is actually article in today's new york times about how the west may be unified about ukraine.

But the rest world is not. The article was saying something that Chris ware said for a while, which is we actually don't have the whole world with us at all. The brick's countries are not with us.

The emerging world, the whole southern hemisphere are basis is not with us. They would like the us. To play a more constructive role in finding a peace deal, not like you said Jessie sabor attn or escalating.

So the rest of world is not happy with us. And this is why the russian sanctions have not been affected. I think the russian economies had like a three to four percent hit. IT is not the collapse that was predicted because there are enough other countries going to do business with them.

Would this have happened from off the troubles, president? And how would trump have handled IT? Do you think? Just game there here? I'm just curious because truck, almost one, right.

And if trump had won, what would this look like would put and have gone in there? Trump was president. And how would trump have handled IT? Because trump seems to think I would just told them don't do this and they wouldn't have done IT.

I mean, this is the most obvious component I can give him. I think that he is exceptionally pragmatic on being anti war. And I think that that is one of the most positive characteristics that he showed.

He was really the only president, I think, in modern history. right? Sexy, that having got to .

IT is the best .

part of a mea.

He's been incredibly, incredibly consistent. So I suspect that there would have been some kind of a deal. I know that sounds so, dict ous to say, but there have been a deal.

O R, I actually agree. Heal maker, he .

gave a th. He went to north amErica and met with.

he'll take into .

anybody exactly he would have fired all of the the deep state blob that started to position anything towards a conflict. So I think he would have shut the door so ferociously on on ukraine and nato and anybody that cross that line, he would have tired and feared publicly. And I think the end result would have been that putin could have found an off frame well before he invaded.

problem. totally? Yes, I agree. I and laim .

germany for all this. He called IT.

Well, trump very early asked the question why we spending all this money to defend germany when germany has this big pipeline deal with russia. Doesn't seem like they need our protection. They should pay for themselves. But I think there is a separate point that to mothers made. That is a really good point, which is trumps instinctual resistance to what the deep state wants.

And he actually said, IT, this week he gave A A two minute televised statement that was all over twitter, where he basically made the argument that, listen, the reason why we're in this war is because the military industrial complex and the foreign policy establishment, they basically quoted this conflict, and they are working at odds with the interest american people. It's actually a fairly radical critique. I don't think a major presidential candidate has run against the military industrial complex the way that he is now positioning himself.

And let me tell you this, i've set up before, and I prefer candidate. But if this war spirals out of control, either, you know, IT turns into a even bigger conflict that draws us in, or IT turns into a bigger recession, because I don't think we ve seen the last of the supply shocks from the war. If we get a recession, that trumpet can, I think, lay at the feet of this war.

He's positioning himself to take advances. This could be a silver bullet for him. I don't think he has any other way of winning, but you know, if this turns into a big mess.

trumps pose, hat sacs, you have your tin foil hat there, put IT on per second. And I want to have ten foil sacks, hat sex, let's put them the ten for all heads on here. Do you think putin is escalating this as a way to position trump to wear? Putin says he could say this during the election, like, listen, you know, I would love to talk to trump. And what if trump goes and talk .

to talk with? Your theory is putin theory. So your theory is that putin s lin this into potentially a new clear war to get trumpery elected. Does your theory and .

i'm trump capable him, i'm just ten for had IT that this is occurred? No, no. Now that this has occurred, not that he did, he did.

He want to my and you are the one to feel how territory.

soil, high corner at the end.

the reason not to .

start the war for IT, that he would end the war to give trump a win.

Has you going to end the war for you? What he .

talking about during the election, he does a call with trump, and he says, and I talked to trump about this, and i'd love to do some negotiations with trump. A A always had appreciation for his ability to help negotiate things I would love. I would feel Better about negotiating with trump, who hasn't sabor adult and told everybody in the world that I have to be that that there is regime change.

So I have you come with these conspiracy theories and then attribute them to me and called me the ten foil hat guy. You little joke.

Know you just said this is a bullet.

lt. rails. yeah. If this war is off the rails and the economy goes off the rails because of this war, he trump right now is positioning himself to take a vange of that fact.

And the sentence is too much critical .

things about the war, sceptical, I would say, things about the war this week. It's not just prom, but look, the thing you understand about this war is is existential for it's existent al, this place he can not back .

and it's and it's actual curricular for us yeah yeah. And that's why that .

obama said back in two thousand and fourteen that the russians have escalator dominance. They will always clip the s militory later, always up to nux s if they have to. And as soon we recognize fact that Better off going to be.

I think the good new that we speech that I did very kind of.

I didn't see the speech was a good we just talked to about IT was IT was two minutes that was failed.

The crazy thing is a sent a lot like what would be talking on this podcast, which is he talked about all these .

generals that retired ta.

umm.

by named he, he really did. We explained the distance.

I because i'm a different time zone and the broken when I was just a minute video in which he.

like I said, he attacked the military industrial complex and the foremen icy estate s for creating and the immense ed Victoria newland by name, let me tell you some me .

newland is going to be is .

a popular message. This is very popular. Newland is the fault y of this situation.

Okay, the same way that felt you were supposed to be protecting us from viruses. And then fund can get a function research. Victoria newland law, just information.

Victoria newlin was .

proposed to be our chief diplomat with respect to russia in eastern europe. And what did he do instead? SHE gin up .

this conflict? How up?

We backed an insurrection in ukraine in two thousand and fourteen. Jason, if you didn't like the insurrection of generally six, let me tell you, are going to like the interaction that SHE staged in ukraine, because they brought in these ukrainian far right nationalists as the muscle. And that is what we can bring.

Did he bring big max? Did he bring big max with him? Did you say he brought big max to his punishment to them?

Yeah.

shot up.

But you're ignoring what sax said.

But no, no, I got that. I am not disagree .

with him. I think. Never the body.

Nobody wants to be in a fur everywhere.

Yeah but explained why he mention Victoria newland. He mentioned her because he was the state department official who was responsible for backing this insurrection of a democratically elected leader in ukraine in two thousand and fourteen named yana kovach. Okay, yana cov, which was trying IT, was doing A A balancing act between ukranian national alist and russia.

And IT was a very delicate balancing act, and we basically toppled him. And ever since then, the relations with the russians over ukraine of an head itself, if you're wondering why putin seize crimea, IT was a director talian for the coup that we backed in ukraine. And two thousand and fourteen.

This is the origin of the conflict. And you know, if you won't understand where this comes from, you have to go back to this. And the fact that just was going to talk .

about IT is pretty incredible. I think that the good news for us is I think that heading into june and the dead fiasco that's looming, I think we're going to and I think this will help a lot, get distracted with domestic issues in the sense that IT take some heat off of escalating. All this foreign adventurism is such a seat like this, is such a scene from wag the dog.

Every time there's something inside that, the united states, that we should really focus on. We have this wagged the dog moment where we get distracted by some adventurism abroad and we forget and we lose sight. So we have the east palestine thing right now in june were going have to come back to terms with this dead ceiling issue, which is a huge one, how how we're going to resolve IT.

It's not clear just this week, the federal reserve basically said he folks were taken rates to five and a half plus they're onna stay there. That seems like no news, people who seem to digested and move on. It's really incredible how we just find where we are like, uh, what is IT chasen the dog that chased the bumper and hot the car.

whatever yeah you ut the number of plenty of big problems here in the united states.

plenty of big problems. And I don't know that wag the dog works anymore because I think the american people, like I said, they wanted in american present to focus first information on american problems, and even remember bush senior and ninety one, one that warns, still lost. So I don't think wagon a dog works anymore. IT works for some short period of time, especially while the media .

portraying this so you should off of the person of war was like a ninety one or two percent approval rating. I mean, we've never seen anything like IT, but he violated a simple tenor of his domestic policy, which is, read my lips, no new taxes, boom, lost. And IT was not even close in in the end.

So I think you're right. I think people really care about the economy. Go, nicky, hello.

And do how much do how much debt do we want to go into over farmers? The only thing I ever liked about trump was his policy of not starting wars and not getting into them. And americans want to .

focus on our baLance.

on the baLance sheet, vote. Right now. I'm voting based on who is gonna be fiscally responsible. I mean, free burger and same boat.

We very, very real careful in how we handle china because you had blinking on all the sunday shows, basic denouncing them, expressing outrage that they might support the russians, actually shock, shock that they could do that. We don't even have the ability anymore to understand that other countries do things in their own interest, and we can accept that.

And instead we act as if forever policy should be conducted according to this morality play that we've created. And if you don't do what we think is right, they were going express all this outrage and contamination at you and somehow that's onna get you to violate your own interest that thought the way the world works. And what we're doing right now, we are doing right now is pushing china and russia together into a new access block.

This is very foolish, very foolish, even during the cold war. Okay, we work to keep russia in china apart. And and whenever you think of those regimes today, they were much worse back then.

Remember the soviets, you had a stalest regime. The chinese had mail. Those were two of the three biggest mass murderer of the twelve century, and nicks on and kisses still in to china and shook mel's hand and toasted him.

Because it's important to keep china and the so union divided. And what are we doing today? We are basically pushing them together with all this condo nation in an outrage. IT is not a smart.

can disagree, ready to be built in bridges with india. That's a key, key relationship. And china, I don't know why we're .

not poison our relationship with india. India is the biggest democracy in the world, and our relations with them have gone south since this war because they have a friendship with russia.

And I would rather see and go to india and start building some bridges there. Degree, check your fundraising .

going for lunch. Tran for that.

It's a great question. You know, we're doing that public five or six public fun racing thing. And so I did a bunch of webinars, and without doing a single in person meeting, fifty one million dollars in request, came in just, you know, to a typhoon, basically a form online, uh, now we're gonna starting the next month.

I very good back from japan, actually meeting with the you big L P. In the world. And I want to make a trip to the in the east and just go, can you imagine fifty two million dollars in commitments before actually doing the actual tour?

Awesome, just out of the gate. And my last one was forty four. And so I think this five six, like I can be public about the fact that we're raising a fund. And so it's just .

absolutely amazing. And for yes.

go head.

can you be replace with .

an A I the world's grades moderate? I mean, it's not going to make great jokes, not not for now. And you know what I had an interesting point about managing with fees and these funds. Um just to go back, did you know this is what I heard that benchmark during that worst vintage, you know after I think the great financial crisis or maybe is the dotcom was either of those they took their management fees because that fund was so you know chAllenged, they deployed the management fees into primary investing or i'm going to follow on investing on their winners to regain the results.

Can you imagine in this market, A V C, who deploy capital in twenty, twenty, twenty, twenty one, saying, you know what, we've got these management, these millions of dollars in the future to pay for managing these. Instead of taking that money, i'm going to put that into your into the companies for my launch fun three month, I had a couple of opportunities and I like, you know what, i'm going to take some of the manager fees and invest in some of those existing companies to try to goose the returns for my L. P.

S. And so we're at one hundred and four percent, one hundred, three percent invested in the capital despite just taking a couple of hundred grand off of the management fees. And this is a really interesting review. Like am I playing for the management fees or am I playing for the moke i'm paying for the movie.

right? I mean.

you should be Jason. By the way, it's not true that the A, I can tell jokes, a friend Billy tweed, how the AI told a joke in the the style of jury science field. He asked the television in the style date of peelin IT refused.

So the AI can tell a joke if he wants to. It's racist. But not only clean drugs.

Oh, I see. IT IT doesn't work.

Blue, I guess every, I don't think dave chapelle a has to be blue. But IT would not tell a joke .

about this. Wow, I mean, we got to get he's an iconic plastic like he would be that would be in the park all in fifty .

two or by the way, I he's got a shot there. After our last episode in which we were raising concerns about the AI bias, they publish a blog post saying .

yes the day after.

if bias has occurred, IT is a bug, not a feature, and they are trying to be even handed. So i'm glad they have that's pronounce that and that's their standard and we're going to hold him to that standard. But i'm glad .

well there to be public about yeah I know I read the blog post that seemed reasonable. It's greater y're addressing IT and I also think they're now doing embedded itself. So somebody treated at me after we had the whole discussion about credit and when they were doing facts, they're now saying, and they have been and not what about this yet, but they were saying according to this source, the following according to this source.

So they're starring to source in the copy that's being written. So that's a big step. And then I was talking to adam Angelo about poll, which is an amazing APP you should try to think is the best one out there right now of all the chats, pois an APP based on the core dataset.

And I asked questions about the trip to japan in the echo. And this and that, and IT was extraordinary, how well done the answer was with bullets. And then I asked him online here, what about situations back to the original correct questions.

And he said, yes, we're going to be adding that. So then I was inking, wow, if you add to the core corpus and then they link back to your answer, that's awesome for me as a person whose answered hundreds of questions on core to do my reputation. So I think cora is for me, I think cora is the could be the google, I think corner got a Better data and if they play that right, I think they could be Better than ChatGPT .

and they said, you, based on the cora data set dataset pull that will answer questions like the best answers on core is said, yeah actually is using .

cora as the primary is that I am sure it's using the rest of the web to and wikipedia and everything I think I don't know why they're calling a pow. I think they should just do cora chatbot .

or whatever yeah.

but just try IT call .

pow downloads that you can use IT.

What I mean core was always like, are they ever gonna money? Or are they just going to build this incredible data set and .

do nothing with IT? Yeah, what I said, I said, I said A I is going to a be to the to basically SaaS what mobile was. Web one you either disruptor to get turn charged IT.

It's going to be I think cora is the number one player in A I going for IT. I know that sounds crazy. But the fact that and I think redit also has this in same potential if a redit had a chat box, because think about how many times people do a search and youtube the other one where they say, what's the best I F I movie the year, or which directors make the best screen players, whatever. And then they put the word reit at the end, where they put the word core at the end, where they put the word youtube at the end, to just narrow down the corpus of where to find.

I've worked, i've on the Angel for seventeen years now.

smart, and he was the .

city of facebook. And I work through the single, smartest and best single of smart st. Person I work with. And then separately, one of the most absolute, genuinely best human beings in the world.

Can we get him? He does. He doesn't is he's not a good public speaker or something because I never hear him talk. I like to .

get him at all in summer .

about the social networking platforms and hand is on the board of opening OK.

That's oh, get up on the park or maybe you want summer twenty.

twenty three or everybody, you will. Definitely the style list.

definitely entire establishment. yeah. okay. So for the sultan of sneaking out, uh.

he left. And the dictator.

And what do you want to be referred to now peaceman, you are the exist in the world undisputed greatest moderator on the number one podcast in the world for now.

until the A I replaces you.

Yeah, I trained the A, I to replace your sex. Ukraine, U. K.

In u. Kine, bin, bin, bin, no. Nick helly, no. Start making nicki heli happened, then the data has been done.

your.

World, man.

We open sources to the fans and they .

just got crazy with.

You should all just get a room room like .

sexual .

attention .

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