← All-In with Chamath, Jason, Sacks & Friedberg
All-In with Chamath, Jason, Sacks & Friedberg
Elon's Anthropic Deal, The Next AI Monopoly?, "FDA for AI" Panic, Trading the AI Boom
01:22:02
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- [00:00]
David Sachs
How do I sound?
- [00:01]
Brad Gerstner
You sound perfect.
- [00:01]
Chamath Palihapitiya
You sound great.
- [00:02]
David Sachs
How do I look?
- [00:03]
Jason Calacanis
Yeah, you sound great. Better than you look. Got the face made for radio.
- [00:08]
David Sachs
You don't look as tired as you
- [00:09]
Jason Calacanis
have in recent weeks. That's true. Yeah.
- [00:12]
Chamath Palihapitiya
Oh, yeah. Somebody was slagging me for the bags
- [00:14]
Jason Calacanis
in for my eyes.
- [00:15]
Chamath Palihapitiya
I mean, this audience is brutal.
- [00:17]
Jason Calacanis
They're brutal. They're brutal.
- [00:19]
David Sachs
It's a good thing I'm rich. Let your winners ride Rain Man.
- [00:28]
Jason Calacanis
David Sachs.
- [00:32]
David Sachs
We open sourced it to the fans and they've just gone crazy with it.
- [00:35]
Chamath Palihapitiya
Love you.
- [00:36]
Jason Calacanis
Best night, Queen of Quinoa.
- [00:38]
Chamath Palihapitiya
I'm going all in.
- [00:40]
Jason Calacanis
All right, everybody, welcome back to the number one podcast in the world. It's the all in podcast. With us today, Chamath Palihapitiya, David sacks, and our fifth bestie, Mr. Brad Gerstner is here. I think David Freeberg is suffering from some socialist related flu. He's very sick of reading about socialism, but he'll be back next week with two incredible, incredible interviews.
- [01:06]
David Sachs
You guys see those Spencer Pratt ads?
- [01:08]
Jason Calacanis
Wow.
- [01:08]
Brad Gerstner
It's one of the best political ads I've ever seen.
- [01:11]
Jason Calacanis
Oh, there's like three or four of them.
- [01:12]
Brad Gerstner
There are multiples.
- [01:13]
Chamath Palihapitiya
Whoever that social media team is, is on fire. If you get a good social media team and you get a good ad production team, I think it's next gen because these things go crazy. And Spencer Pratt, if he wins this election, which I think he's going to in Los Angeles, the reason is what Brad said. Those ads are incredible.
- [01:30]
David Sachs
Well, he's also quite a good debater. Did you see clips from this debate?
- [01:34]
Chamath Palihapitiya
Incredible. He's so funny. He's so chill.
- [01:38]
David Sachs
Yeah, well, he's up against Karen Bass, who's the mayor, who is basically extremely left wing. And then there's someone who's a city councilwoman who's even further to the left of Karen Bass. I mean, she's often like Fidel Castro territory.
- [01:51]
Chamath Palihapitiya
She's an Indian. Fidel Castro Rahman.
- [01:54]
David Sachs
So she was basically, I guess, criticizing the mayor for the homelessness problem. And then Pratt pointed out that this councilwoman is actually in charge of all these homeless programs already.
- [02:07]
Brad Gerstner
He eviscerated her. Eviscerated her.
- [02:09]
David Sachs
He eviscerated her. And he basically made the key point, which is, look, the problem here is not lack of housing. It's an addiction issue and it's a mental illness issue. And he said, look, if you.
- [02:19]
Chamath Palihapitiya
He said if she went to the street, she'd get stabbed in the neck.
- [02:22]
Jason Calacanis
Yeah. Which is pretty accurate if you've been to skid row. I mean, you would not want to walk through there. It was like the Spider man photo.
- [02:30]
Chamath Palihapitiya
Wait, Nick's got the clip. Play the clip, Nick.
- [02:32]
Jason Calacanis
Oh God. This clip is brilliant.
- [02:34]
Brad Gerstner
This is a different clip, but this went super viral.
- [02:35]
David Sachs
It reminded me of Trump a little bit.
- [02:37]
Jason Calacanis
Let's see. I'm not sure how to respond to
- [02:40]
Brad Gerstner
that vision of Los Angeles.
- [02:41]
Jason Calacanis
This is a MAGA Republican's idea of what Los Angeles looks like. This is really not
- [02:49]
Chamath Palihapitiya
unbelievable.
- [02:51]
Jason Calacanis
For those of you listening, he put his hands up and wiggled his head like, oh my God.
- [02:56]
Brad Gerstner
Hey, Sachs, you know, Steven Pratt wins Mayor Spencer. And then the, you know, the ballot initiative, the Retirement Protection and Savings act, right? It's going to pass, going to pass with big numbers. This is the, you know, referendum that effectively is going to knock out the wealth tax. Can you imagine if California effectively passes a constitutional amendment protecting retirement savings and personal assets and banning the wealth tax and crack gets elected. The message that would send to the country. That's a very non consensus view that I'm becoming increasingly optimistic about.
- [03:29]
David Sachs
Well, from your lips to God's ears. But until that message actually is sent, I think I'm going to be in Texas. In Texas.
- [03:39]
Jason Calacanis
Yee haw. Well, I mean this is also in the face of, I don't know, just a follow up story here, but Mondame did an attack video on Ken Griffin's house. We talked about it on the pod a couple of weeks ago and like literally stood in front of his house pointed at it. And this is in the face of like a CEO getting shot for ideological reasons. Sam Altman's house being targeted. This is like a really dangerous thing for Monda me to do. And Ken Griffin came out today or yesterday in an interview and said, hey, listen, I'm out. We're going to be putting our efforts into Florida. And this is the same thing that happened to Chicago. And he basically said like, I really felt offended and I was, you know, nervous about this because of my personal safety. And he called him out. Mondame came out with like a mealy mouthed response that didn't even apologize for what he did. Just doubled down on it essentially. All right, let's get to the dot. I don't know if you guys saw
- [04:31]
Chamath Palihapitiya
it or not, but who cares? New York is becoming a flyover city.
- [04:36]
Jason Calacanis
It's an interesting way to put it. Don't disagree. All right, first story. Elon just leased all of Colossus 1, his data center.
- [04:43]
Chamath Palihapitiya
He did Nostrakhanis.
- [04:46]
Jason Calacanis
What? Yes. Shocking to Dario and Anthropic Chamath on last week's pod. Go ahead and give yourself a pat on the back. You said Elon and Dario should do a deal tomorrow. It didn't happen the next day, it happened five days later. So you came close, Chamath, but no cigar. Because of Anthropic's obvious compute constraints, Anthropic just added over 220,000 Nvidia GPUs, over 300 megawatts of energy. The DL is already having an impact. As we've discussed here, Claude users have been experiencing rate limits. Well, CLAUDE has now doubled the CLAUDE code rate limits, removed peak usage caps for paid users and increased API volumes for opus models. XAI is now trading their models at Colossus too, so they have more than enough compute. Elon made a great bet on compute and built up those data centers really fast and that is now paying off. We had the cursor deal we talked about last week. Let's talk about the emergence of Elon Web Services EWS Chamath. He's now in the hyperscaler, competing against Google Cloud, Amazon Web Services in Azure, and I don't know if you had inside information or just a brilliant epiphany, but take us behind the call. And what do you think about the deal itself?
- [06:01]
Chamath Palihapitiya
I think the deal is fantastic. I'll say maybe three quick things. The first is, as I mentioned a couple weeks ago, Anthropic and OpenAI's revenue performance has nothing to do with Demand Zero. It is entirely to do with the supply constraints that exist in data centers and specifically in power. If they had infinite power, I think that their revenues would probably be even more parabolic. And so all the breathlessness about either exceeding or underperforming a forecast in my opinion mean nothing. I think the five year view for those two companies is quite robust. The thing that they really need is more compute and more power. That's the first thing. The second thing is while they need that, we have a very big problem, which is we unfortunately have very poor leadership at the head of most of these AI firms. I think they are coming off as untrustworthy or too self interested. The political reaction now is starting to turn negative. The community reaction is negative. You have about 9 gigawatts that are supposed to come online this year. Almost 50% of it now is being protested. More than likely if history holds, most of that will get turned off so they will get even more supply constrained. That's the setup. What's the opportunity I think for Elon, if you look inside of how people try to nitpick the SpaceX valuation case or let's be more generous, when people try to paint the bear case or they tried to red team the valuation, the biggest element is the on the come value around the orbital data centers. And by actually landing a bunch of terrestrial capacity, I think you start to blunt that because you can now start to say that even if the orbital data centers get delayed by a few months or a few quarters, even if the technological de risking of it takes longer, he now has a structural core business that will effectively subsidize his ability to train Grok, which I think is a really important and underreported theme. So you have all this infrastructure. He somehow saw the tea leaves before most people. He built to a level of scale and secure power before most people. It has now become the critical asset and now he's kind of king making. And I think that that's a really interesting valuation reinforcement as SpaceX goes through testing the waters and the roadshow.
- [08:52]
Jason Calacanis
Brad, your take?
- [08:54]
Brad Gerstner
Yeah, no, I think it's well said. I mean first we know that there's nobody better on planet Earth than Elon at converting electrons to tokens. It's a critically important evolution to the story. You know, I think our friend Sean McGuire, he sent out a tweet that summed it up well and he said SpaceX has this five layer cake. Launch connectivity, compute hyperscaler, space data centers and then applications and models and then other bets. Right. The question on the roadshow has been but X AI isn't on the revenue trajectory of OpenAI and anthropic. And yet there are huge commitments. And now we see the ace card that Elon's playing. He said he was building AWS all along or EWC all along, all along. And so I estimate that this is going to generate in this year an incremental 4 to 5 billion dollars of revenue on top of what I've seen analysts estimates in the mid-20s. That's a material amount of incremental revenue to offset the cost of the investments that he's made here. And that will subsidize to Chamas point, all that he's investing to build the next generation of Grok. Remember too that he has three facilities, Colossus Macro Hard and Macro Harder. 1.2 GW in Macro Hard and Macro Harder in Blackwell. So he's given the one that's kind of less connected. H100 is great for inference to anthropic. He's monetizing it in A big way. It's terrific for Anthropic and it solves what I think was the biggest question in the valuation story, which is what if he spends ahead of X AI's revenue? It takes the pressure Chamath off X AI delivering immediate revenue. Now he becomes an immediate competitor in the hyperscaler. I don't think this is the last announcement. I think he's going to make a lot more moves in this direction. I think it will be a material part of their story and their revenue projections as they come together. And I would just say finally, again, everybody has talked about how we don't have enough power, how we don't have enough compute, how the revenues would not show up this year. You know, but the chaos that is American capitalism somehow finds a way, okay? And there's tremendous demand for anthropic and we find a way. I was so happy to see kind of the detente and the kind exchange between the team Anthropic and Elon because we need all of this in order to produce American frontier models to stay at the frontier. And then finally I just say, you know, Chamath, you referenced these activists that are protesting delaying these data centers in these localities. One thing I want to dispel this myth. This is not like organic hyper local protests by people in a community that aren't being spurred on. This is highly organized activists that are moving across the country to stir up trouble in the exact same way they did to stop all fission reactors being built 30 years ago in America. Now we have no nuclear reactors being built. China's got 100 of them. Who was funding those activists? I think we need to really look into who's funding the activists. Now, I'm not saying that there aren't any concerns, but the misinformation about water, the misinformation about electricity bills. Electricity bills are going up in the places that are not building data centers, New York and California, because they haven't built any supply on the grid. In Texas, where you're building the most data centers in the country, electricity costs are going down. So I think that's a boogeyman that we got to take on.
- [12:31]
Jason Calacanis
Sac, sure, that's.
- [12:33]
David Sachs
Well, look, the deal is highly complimentary. As Chamath and Brad pointed out, SpaceX has a profitable, I think very profitable space and telecommunications starlink business, the satellite business, but the XAI business had huge losses. The reason's pretty straightforward. You need these super large training clusters. They cost a lot of money. And until you have a model that's capable of competing at the Frontier, you're not making any revenue. And that problem is compounded by the fact that right now all the revenue is in enterprise, which is to say coding. We know that Xai just did that deal with Cursor to try and catch up, but they don't have a coding product yet. So they're not participating in the revenue, but they're participating in all of the costs. So this deal fixes that problem. Elon's now able to have a Frontier model company, but he's able to now not have these massive unpaid for capex commitments. Right, because he's able to kind of lease that capacity. So I think it solves a major problem for them and their balance sheet. And then you'd have to say that for Anthropic, this is a really great thing because they were compute constrained. And just to build on that point, I mean, I guess let me be the first to congratulate Dario on winning the AI race.
- [13:47]
Jason Calacanis
And you've been, let's be honest, Sax, you have been on this podcast, you've been moderately critical of that company and Dario himself for being, you know, a little P doomer110. And on your X account, you've been even a little spicier. So now that there's peace in the Middle east of the AI business, what's your take here?
- [14:09]
David Sachs
My take is, look, let's just honestly and accurately assess where the state of this AI market is at right now and Anthropic's place within it. So for the last three years, anthropic has been growing at a rate of 10x a year. I think going into this year, probably the conventional wisdom was that there'd be no way to sustain that kind of rate of growth at this level of scale. And what happened in the first four months of the year? First we find out that from January 1st to March 31st, they grew from roughly 10 billion of ARR to 30 billion. So it tripled. And then in April, if anything, the rate of increase seemed to accelerate. They went from 30 to 44 billion of ARR. Nobody in Silicon Valley has ever seen anything like it. Forget about the rest of the country. I mean, all we do in Silicon Valley is deal with exponentials. And still people have never seen that kind of growth at that level of scale. The only thing holding them back in the future was compute. Now they've made this deal, they've made other deals as well to get that compute. I think it's pretty much a foregone conclusion that they will Hit that forecast of 10x this year, exiting the year, call it roughly 100 billion of ARR. And now the only question is whether they hit a trillion in 2027. And we can debate whether that's getting on board. We can debate whether that's true or not. But look, if they do that, I think they'll easily be the most valuable tech company in history. In fact, they might even be more valuable than the rest of the Mag 7 put together. Just to give people some basis for comparison here, you know, the biggest tech companies, Apple, Nvidia. Nvidia, Google, I think they kind of do around 4 to 500 billion a year right now of revenue. I guess Nvidia is a little bit of a different category. But you look at the hyperscalers, the three hypers, the hyperscalers, Yeah. I mean Google is doing what, like 120 billion a quarter, something like that? 100 billion a quarter.
- [16:01]
Brad Gerstner
Correct.
- [16:01]
David Sachs
But growing at what, 20% year over year? Not 100%. It's certainly not 1000%. So the fact that Anthropic could be on track. In fact, let me correct you see
- [16:12]
Jason Calacanis
them going to the Maggie. It'll be a Maggie.
- [16:14]
David Sachs
I'm saying something else, which is that unless something about their current trajectory changes, Anthropic will be the most powerful monopoly ever created in human history. Again, it will be a trillion dollars of arrow growing at some exponential.
- [16:34]
Jason Calacanis
Interesting.
- [16:34]
David Sachs
Dario calls it AGI. I call it the biggest monopoly in human history.
- [16:38]
Jason Calacanis
Interesting to hear that word, monopoly. Sachs, very interesting placement. Chamath. Go ahead. And then
- [16:46]
Chamath Palihapitiya
in 2025 was 420 billion. Microsoft was 300 billion. Alphabet was 390 billion. Amazon 700 billion. Nvidia, 190 billion. Meta 185 billion. Tesla 110 billion. Total about 2.3 to 2.35 trillion. So if Sachs is right and Anthropic can tack on a trillion, it won't be the Mag 7, it'll be the Mag 1.
- [17:12]
Brad Gerstner
Just to put it in perspective though, Dario on Dwarkish said he thought the combined AI revenue of the market leaders would be about a trillion 29. I love what you're saying, Sax. I think there is unlimited tam. We may be over our skis a little bit in terms of the forecast. If you back your way from compute right, they expect to have five gigs by the end of this year, 10 gigs by the end of next year. It's kind of hard to get to those numbers for a single company. But I do believe that the trajectory that they're on I totally agree with you. Is on an exponential that not many people believed in four months ago.
- [17:46]
David Sachs
Right? So then the question is, okay, I think we all agree they're on an exponential curve and that the TAM is big enough to support that. Just one data point on tambourine. My understanding of the total market size just on coding is 1 trillion, meaning that a trillion dollars a year roughly, is spent on software developers and all things related to the creation of software. Now, I'm not saying that they eat that entire market, but I can easily see the market for software.
- [18:13]
Chamath Palihapitiya
I think it's doubling that.
- [18:15]
David Sachs
Well, hold on. Doubling from a trillion to 2 trillion. Given that coding tokens basically 10xs or 100xs, the value of that market and the ability to generate code. So I think we all agree that the TAM here is large enough to support a trillion dollars of revenue. Brad, I think you bring up a couple of really important constraints. First, there may not be enough compute and there's not enough energy. I'd say the second big one is what's the competitive reaction going to be? Totally, because I would say at the beginning of this year, all these frontier labs were playing around with a lot of different things. I mean, Anthropic was the porcupine. They believed in one thing. All these other companies were kind of acting like the fox who thinks they're good at a lot of different things. They were doing nano Banana, they were doing sora, they were doing, you know, they were doing image generation, they were doing fantasy character chatbots. In hindsight, they were doing a lot of things that appear to be kind of a waste of time. The whole market appears now to be coding. And the things that we built on coding tokens, like cowork, like agents. And so there is going to be a competitive response here where all the other guys realize, oh, wait a second, we were misfocused. They're going to get focused. I just don't know how much share they're going to be able to take. It does look like OpenAI has already made the pivot. We hear very good things about Codex now based on GPT5.555 is based on a new base model called SPUD. I think they're very optimistic about continuing improvements. Their rate of growth appears to be accelerating now because of 5.5. So look, there's reason to believe that OpenAI can take some share here. I'm sure that Google won't be asleep at the wheel. They're very, very good at coding. They've got a really good team and Elon just tied up with Cursor. So there is going to be more competition. But still, what you have to say, and I think all of us know this from Silicon Valley, is you always want to be the company in the lead that's on that trajectory where all you have to do is maintain inertia, whereas the other people have to change something in order to put themselves back in the race. So this is when I say, somewhat sort of facetiously, congratulations, Dario, on winning the AI race, I don't mean that he's won it, but he is winning it right now.
- [20:25]
Jason Calacanis
Well, here's the brilliance of what Elon's doing. If you look at the existing business, which is Starlink and basically the launch services at SpaceX, incredible business, obviously 20 billion this year, I think is the estimate. But if you look at the footprint of Amazon Web Services, Azure and GCP, you're looking at $300 billion in revenue and a market cap of combined 5 trillion, 4 trillion if these were independent companies. And if you look at what is Elon's core competency at Tesla, it's building factories. And if you look at the footprint of these factories, they're huge. What are data centers? They're basically big giant factories. And then if you look at energy, what else is Elon extremely good at? This is the battery deployment, and he's also got solar deployment from the SolarCity, often criticized acquisition he did years ago. So you put this all together. If this is 5 billion, as I think you referenced, Brad, if it's $5 billion in incremental Elon Web Services business and he's a Neo Cloud, what could he build on planet Earth? What could he build inside of Teslas in terms of extra compute? What could he build inside the powerwall? What if the powerwalls had his new fabs in them and you built a distributed system from home to home? The powerwall has compute in it, the cars have compute in it. And of course, the ultimate manifestation of this, where nobody can complain, is you go right out into space and that's what he's going to do. And the sneaky small part of this announcement from Elon and from Anthropic and Dario was they're also interested in space. So look for the race to go from factories and data centers to homes. The powerwall with compute in it, it's already online, right? And Starlink also gives him the ability to do distributed compute to people's homes. Again, you could be paying people to put powerwalls with compute in it. That's going to be the next shoe to drop, I believe.
- [22:25]
Chamath Palihapitiya
Did you guys see the deal that was announced yesterday between Pulte Homes, which is a huge builder.
- [22:32]
Jason Calacanis
They're doing it as well.
- [22:34]
Chamath Palihapitiya
And Span.
- [22:35]
Jason Calacanis
Yes.
- [22:35]
Chamath Palihapitiya
Nick, just throw this up here. It's super cool. What's happening is that these guys are putting many data centers with Nvidia GPU clusters beside every home and then allowing people to actually run those things. And that's just incredible. I thought that was so cool.
- [22:50]
Jason Calacanis
It's a great pivot. What this company did originally, Chamath, was they did the power panel. They made smart power panels. So, you know when you flip your breakers, all those breakers are in an app. I looked at it for my house, but I guess they pivoted to add this. And I think basepower, Brad, you're an investor in it. They're going to do the same thing.
- [23:06]
Brad Gerstner
Zach Dell's doing that. One of the things I just say in response, Jason, to what you just said about Elon. Right. This is why the SpaceX IPO is going to trade at 40 to 50 times what revenue. Okay. So next year, if they do 40 to 50 billion and this thing goes out at 2 trillion. Right. That they're going to trade at a really high revenue multiple compared to the MAG5 that are trading at like 25 times earnings. And there's only one person on the planet who has a future pipeline of innovation and the largest TAM in the world because he's playing in all these different spaces that can command that multiple. And it's Elon. And it's deserved and it's great to
- [23:44]
Jason Calacanis
have that same Tesla has that same Elon variable in it as well, which is people value his companies at, I would say two times market, three times market, four times market because of the future pipeline, you guys. And they devalue Apple because they don't have somebody like Elon or Steve Jobs there who is giving them the future.
- [24:04]
Chamath Palihapitiya
I don't think it's devalued, I think, or properly valued.
- [24:06]
Jason Calacanis
If you don't have an Elon and you have somebody like. I think that's exactly what it is. We talked about this last week, but explain why you think it's different.
- [24:12]
Chamath Palihapitiya
I think all of these companies are actually very fairly valued. And then Elon World gets a premium.
- [24:19]
Brad Gerstner
Totally.
- [24:19]
Chamath Palihapitiya
And that premium is because of what you guys said that I agree with. The big message that I take away from this, which the markets and retail are telling you is you guys have stopped innovating. There's a lot of incrementalism. And we as a society aren't benefiting broadly the way that you told us we would be. And so maybe this is the best way for them to get this message, which is to whack their valuation. And by the way, I'll just say it again. When Tesla and SpaceX merge and we have all things Elon and Elon Corp, which will happen probably by the end of the year, maybe it'll happen in the middle of next year. It's going to then break everybody's brains again because you'll have this one asset, as you guys said, that will trade at a valuation premium. And some people will say it's unexplainable. And I think it's logically explainable, which is everybody else has stopped innovating. People know how to draw more blood from the stone, how to target better ads. That does nothing for society anymore.
- [25:23]
Jason Calacanis
That's it. Literally.
- [25:25]
Chamath Palihapitiya
In fact, it does the opposite. There is no good left.
- [25:28]
Jason Calacanis
That was literally the exact point I was making when you cut me off. If you look, Tim Cook's greatest innovation, Tim Cook's greatest innovation before you got me off was Apple tv. Not even the hardware product. It was just spending money and making a Netflix knockoff. There's been no other product in. Hold on, let me finish again before you interrupt me making my.
- [25:46]
Chamath Palihapitiya
You don't like that? Oh, you don't like being interrupted?
- [25:47]
Jason Calacanis
Oh no. Oh, yeah. Well, okay, okay, go back to interesting hot meat kettle. If you look at their track record, and I think this is why we had a change, there is they have not done anything innovative. And in fact the things they were doing that were innovating in AI or self driving cars, they shut down. They won't take any swing to the bat. So they are getting penalized in their valuation.
- [26:09]
Chamath Palihapitiya
Penalized. They're just not getting a premium. They're not getting.
- [26:12]
Jason Calacanis
I think they're getting penalized every metric
- [26:14]
Chamath Palihapitiya
they're trading at incredible valuations. Just look at them.
- [26:17]
Jason Calacanis
Oh, no, I don't. I mean if you compare the two valuations, I think they're being penalized anyway.
- [26:21]
Chamath Palihapitiya
Let's.
- [26:22]
Jason Calacanis
Anybody else want to get in on this before we move on to the next one? Yeah.
- [26:25]
Chamath Palihapitiya
There is no world in which Google and Meta and Apple and Amazon could be viewed as being penalized in valuation. There is very clearly a world where Elon gets a massive premium because he's innovating.
- [26:41]
Brad Gerstner
You're saying the same things. You're saying the same thing.
- [26:43]
Jason Calacanis
I think we're saying the same thing.
- [26:44]
Chamath Palihapitiya
It's not the same thing.
- [26:45]
Jason Calacanis
Listen, I think we're debating semantics here. I'm not letting you off the hook, Saxypoo. When Sachs is very deliberate in how he speaks. They said he's the captain of the debate Club in his 20,000 word article this week and that he's a master debater. He's a masturbator. And you slipped in. You slipped it in. Are you saying that the FTC or whoever should be going in and looking at Anthropic? Oh, Brad's book is getting attacked. Headwinds. You said they're a monopoly or they're heading to monopoly. Tactics sacks. Are that what you're saying?
- [27:19]
David Sachs
Well, look, I mean that tech markets have a history of consolidating down and turning into either monopolies or duopolies. And, and if you just look at the revenue right now, there's only two companies making substantial revenue on AI. It's Anthropic and OpenAI. We know that OpenAI is growing at 3 to 4x, which is incredible at the level of scale they're at. Anthropic, though we said, is growing at an exponential 10x a year. And if they just do that for 18 more months, they'll be by far the most valuable company in human history and they'll have unprecedented control over the most important technology of our time. So I don't know what you call that, but it is something to think about. And I guess I do have a thought experiment for you guys, which is I just want you to think for a second about the case of John D. Rockefeller, who I think is known as probably the most successful, greatest businessman Everest monopolist in American history. But he wasn't very good at pr. He was terrible at pr. Everyone sort of recognized how ruthless he is. We see movies like There Will Be Blood, which is basically about him. In any event, imagine if John D. Rockefeller was way better at public relations and instead of calling his company Standard Oil, he called it Safe Oil. Okay, let's just play this thought experiment.
- [28:42]
Jason Calacanis
Clean, beautiful coal. Yes.
- [28:44]
David Sachs
Safe Oil. He called it Safe Oil because as we know, kerosene is dangerous. Their first big product was kerosene. And kerosene can light your house or it can burn it down and in the wrong hands it can torch a city or you can use it to make a bomb. So John Dee, let's say, should have called for the creation of a new government agency to regulate the safety of his product. And they could have done rigorous testing, licensing, common sense regulation. There would have been a Very intense debate over safety standards. What should the proper wick thickness be and should we allow all those dangerous independent refiners. And I think people would have gotten so wrapped up in this debate over what constituted safe oil or safe kerosene that they would have missed what was really going on, which is that Rockefeller was building the richest, most powerful monopoly of all time. In fact, people might even have called Rockefeller an effective altruist because, of course, he was so concerned about the safety of his product.
- [29:46]
Jason Calacanis
I love it. Shout out to David Sachs. Writers. Great, great, great writers.
- [29:51]
Chamath Palihapitiya
Newman. Newman wrote this?
- [29:52]
David Sachs
No, I wrote it.
- [29:53]
Jason Calacanis
Emmy award for best writing in a dramatic monologue goes to Newman.
- [29:58]
David Sachs
Wow, that's my writing.
- [29:59]
Jason Calacanis
You landed it. Very good, Sax.
- [30:02]
Brad Gerstner
I thought after the Elon anthropic detente where Elon said, you know, complemented anthropic that and David started off with a bit of a compliment. I thought we maybe were passes first. It's ridiculous to think of this as a monopoly. You know, we're talking about annual run rate revenues, David, but on a GAAP basis, they're doing about the same revenue as OpenAI in the month of March. Okay, so we're way ahead of ourselves. By the way, five months ago, everybody thought OpenAI was going to run away with this. Google's revenues are very substantial in AI. And by the way, Google, Amazon, etcetera, these companies are producing $100 billion of free cash flow to justify their incremental investment. At the same time, you have these two startups that are still fledgling, that are still fragile in the scheme of things. You of all people should know we've got the best competition in AI on the planet, which is why we're at the frontier and kicking the tail of everybody else on the planet. So I just want to see these companies compete. I want to see DC stay out of the way. The last thing I want to be doing is seeing people talk about this and throwing roadblocks into the way of the competition. I think anthropic.
- [31:09]
Jason Calacanis
Well, hold on, let me translate Brad for you. Don't with my paper is what he's saying. He's got bets on these, so Sachs, Washington, D.C. don't with Brad's paper sacks. You want to get into the regulation stuff right now as a segue or.
- [31:24]
David Sachs
Let me respond to Brad and also translate what I'm saying satirically. Okay, satirically. First of all, nobody wants to see these companies compete vigorously more than me. That was the whole premise of the action plan that we worked on last year, is we want to bring out the best in everyone. This is how America's going to win the AI race. We have five major labs vigorously competing. And as long as that competition is taking place, I think that's a good thing. Doesn't mean we can't have guardrails and the rest of it, but basically, competition should be our North Star. All of that being said, okay, what I am pointing out, and I think it's historically true that people in Washington have woken up to monopolies on the late side, not early. Right? Because I mean, once a company has won 80% of the market, that's when they wake up and say, oh, we have a monopoly here. And I'm not saying that they have a monopoly yet, but. But if the trajectory continues for just 18 more months, then I think it will be in this unprecedentedly powerful position and hold on. And I don't think people should be distracted from that fact by this rhetoric around safety, because someone like Rockefeller could have used it too. And I do think. I mean, just like one last point on this, I do think that if you actually look at what a lot of the safeties policies are calling for, they're basically calling for a form of regulatory capture, and they're calling for things that would create a stronger moat around this monopoly or duopoly that's in the process of being created and it would get in the way of competition. So again, I think that people might not have such a charitable view of all this safety rhetoric if they understood that what was being created here is the biggest monopoly in human history. And I think we should just be a little bit more skeptical about some of these altruistic claims.
- [33:21]
Brad Gerstner
I can't believe that David is like, you know, talking monopolies when we haven't even left the starting gate of AI. I think this is a.
- [33:34]
David Sachs
To me, there's only two companies with revenue.
- [33:37]
Brad Gerstner
The last thing I want is DC trying to preemptively. Preemptively, which would be like a disastrous consequence, get in the game of picking winners and losers at the starting line of AI. That would be a disaster.
- [33:50]
Jason Calacanis
Brad, did you just put another soapbox on top of the soapbox you were standing on?
- [33:55]
David Sachs
Look, Brad, like I said, my North Star is competition. As long as there's competition going on, I support it. However, hold on, hold on. We know that monopolists want to stop competition and they use regulatory capture to do it. And furthermore, they do things like ban their competitors from using their product. What conceivable reason did Anthropic have for banning OpenClaw using its models. That is anti competitive, is it not?
- [34:22]
Jason Calacanis
I would double click on it. I would double click on it. I might not, you know, file, but I would double click. Okay, listen Chamath, the girls are fighting. Let's keep moving through the docket. We're gonna be here all day with these two. And one thing that you're gonna need to act on very quickly is the all in summit. It's selling out fast. Don't miss it. Speakers are top tier again. Freeberg busy working on some amazing speakers. Sax will be there. He's flying in and out every day for four hours. And then we're gonna have a lot of networking stuff going down. We're building some networking software so when you come to our events, you get to meet people. That's what we always say. My playbook for events. If you learn something from the speakers every day, one or two things. If you meet somebody new and you eat some great food and have some fun, you get two or three of those things. Ah, man. Even if you get one, you're going to come back to the event. You're going to get all three, all day long, all in.com events Los Angeles, September 13th, 14th and 15th. Apologies to everybody asking, but liquidity is sold out and we've shut down the wait list. There's just no more room. All right. The White House allegedly possibly is considering, according to reports, an FDA for AI that would vet. You heard that correct, folks. That would vet new models for safety. The thing we've been talking about not doing here, the thing David Sachs has spent the last year on, the White House is considering. New York Times reported Trump is considering an executive order to create an AI working group. This group would include tech execs and government officials who would, quote, examine potential oversight procedures, including quote, a review process for new AI models. Oi. According to the report, the catalyst was. Wait for it. Anthropic's Mythos model, which reportedly scared, spooked, made people really nervous at the White House. Quote, the White House wants to avoid any political repercussions if a devastating AI enabled cyber attack were to occur. They want a cya. According to the New York Times, Kevin Hassett, that guy. The director of the National Economic Council confirmed the report on Fox business. Here's your 15 second clip.
- [36:29]
Chamath Palihapitiya
We're studying possibly an executive order to give a clear roadmap to everybody about
- [36:34]
Jason Calacanis
how this is going to go and
- [36:35]
Chamath Palihapitiya
how future AIs that also potentially create vulnerabilities should go through a process so that you know, they're released in the wild after they've been proven safe, just like an FDA drug.
- [36:46]
Jason Calacanis
Additionally, friend of the pod, Scott Besson had something to say.
- [36:52]
Chamath Palihapitiya
What we've had in the past month was a step change in the power
- [36:56]
David Sachs
of one large language model. But we're going to see it from the other AI companies. What we are determined to do is work with our AI companies to allow them to continue innovate. But our charge of the US government is maintaining safety. And there is a very important calculus here between innovation and safety. And at the US Government, we're going to make sure that things stay safe.
- [37:20]
Jason Calacanis
There you go. Kevin Hassett and Besant, slightly different positions here. Brad, what do you think?
- [37:28]
Brad Gerstner
Actually, I don't think they're slightly different positions, but I would agree that Kevin bringing up the FDA kind of muddied the waters. I talked to Kevin last night after that clip ran and I asked him, I just said, do you think FDA is the right analog here? And he said, I was only bringing it up to say that we want them to show us the models so that we can coordinate them. Obviously our job is to make sure that the government is prepared, that we harden our systems, that our intelligence agencies are up to speed. But he does not think, and I can't find anybody on the right, you know, that believes that we're gonna move to an approval regime. Right, the approval regime. This idea that you're gonna have to share every model with an FDA in Washington and they're going to have to pre approve the model is a disaster. Sachs has been effectively fighting against this, correctly, over the course of the last year. It would just, it would lead to three bad things. Number one, we do not want to put the Washington in the position of picking winners and losers when it comes to these models. We're winning, we're on the winning horse in America. We're out in front of the rest of the world. There's no reason to change horses and regimes at this point. And we don't want to burden this with more democracy. But at the same time, obviously, I call these pre AGI or AGI models, Mistral, spud, et cetera. I see a lot of coordination going on between the industry and government. I think we can do an even better job of evolving that framework so that everybody in government is on the same page. We need to build more capacity and in government to quickly be able to do the cyber review on these models. Right now it takes too long when the coordination does occur. So we need to have a Finite amount of time that give government feedback, et cetera. But the last thing that we want is an FDA of models sitting in Washington. Kevin understands that, Scott Bessen understands that. So I expect that we will continue down the path that we've been on.
- [39:19]
Jason Calacanis
Chamath, obviously I think we all agree we don't need an FDA for AI, but there are things that reasonably people would want to have guardrails around AI. I'm sure you would agree it shouldn't be a total free for all. So what's your take on this? Is it just somebody gave a bad analogy here? Or maybe some people were weaseling their way into the White House to try to shift things when Sachs was back at home or something. What's going on here? Give us the. Because that's what I, that's what people say. They say the last person to talk to Trump kind of has his ear and that things can bend a certain way.
- [39:55]
Chamath Palihapitiya
I don't think it's that. I think that there's a pretty profound vibe shift with respect to tech, tech oligarchs, Silicon Valley and particularly the AI. That vibe shift has already happened on Main street and I think that that's starting to seep into Washington. I think that regulations are coming. I think there'll be worse under a democratic regime, but I think that some form of oversight is going to exist under a Republican regime. The question that I think is worth asking is why? And if you listen to everybody's tone, it's all around the negatives of AI. So I think we suffer from two things. Number one is we have horrible messaging. Nobody spends the time and the money to articulate the positive upside case so that there's broad based support. And two, the idea that there's going to be, as SAC said earlier, a few winners and many, many, many potential losers I think is really disconcerting to everybody. And the response from the tech community, again should be the leadership of the tech world coming together and actually reinvesting in America writ large. They're not doing that in enough of a scale that blunts this. So what you're seeing is the buildup of antibodies. Is it avoidable? Yes. Are we doing a good job of avoiding it? Absolutely not. We're doing a horrible job. I'd give the community, the tech leaders, a D minus, trending to an F. The response is what we're seeing. So I think the question, Jason, isn't regulation, no regulation, it's why did we get here? And I think we got here because the other version, the glass Half full version. The demonstrated investment, the broad based uplifting of American society hasn't happened. And if it has, it's been very poorly communicated. And so the response is, hey, hold on, we're going to give three guys trillion dollar net worths and we're going to allow them to control the keys. That's why this is happening.
- [42:04]
Jason Calacanis
Exactly correct. And it's very easy, Sacks, to imagine all the bad things that can happen. Our minds are constructed to do that. We're vigilant, we look out for the tiger or the tornado to keep ourselves safe. Humans have a bias towards safety and they're gonna think about deepfakes, they're gonna think about robotics, they're gonna think about self driving cars, taking people's jobs, they're gonna think about, you know, all the dark things that could happen, bioweapons, et cetera. And we don't have anybody out there really talking about all the positives that could happen. What's your take on the palace intrigue we all have here. What's going on in the palace in the 47th administration around this debate. Who's leading Trump down the path of regulation and creating this AI? Fda. We know you're part of the camp that wants to keep this train moving and not overregulated, not have regulatory capture. Who are the people trying to slow this down?
- [43:03]
David Sachs
Well, look, I think there's several things going on here. The first one is there's a lot of fake news. This whole idea of an FDA for AI, I don't think any senior official supports it. Just like Brad was saying. I spoke to Hassett as well. That's not where his head is at. So I don't think anybody in the administration is saying they want an FDA for AI. Certainly I don't think that's the way the President thinks about these issues. He's the most pro innovation president we've ever had. And the White House chief of staff, Susie Wallace just put out a statement last night that I think pretty much shoots this down. So I think there's a big fake news component. Remember, it was not really the White House who was saying. It was the New York Times and really I think actually Andrew Ross Sorkin, I'm not criticizing him, but he's a commentator and he's the one who said this first. And then somehow that spin or that gloss somehow took on a life of its own. And I think Silicon Valley reacted accordingly. There's a very visceral negative reaction here because we know how damaging that would be to innovation. But Look, I think the good news is that that was fake news. Second, I think that there's another thing going on, which is a straw Manning of what the Trump administration did on AI in its first year. And in the same way that they want to spin this FDA for AI, they're also trying to spin what we did as this completely laissez faire attitude where there'd be no regulations whatsoever, no guardrails. It's a way of criticizing what we did. They're trying to portray it as unsafe. In fact, if you look, on March 20, the White House released a national AI regulatory framework that I worked on in which we put out a four page bulleted list of legislation that we would support if Congress wants to pass it. So we have not been against every conceivable regulation or every conceivable law. We just believe that there should be specific solutions to specific problems as opposed to a giant power grab by Washington that would squash innovation. So I think that's point number two. Point number three is there is a legitimate thing happening here with, let's call it Mythos or Cyber. Okay, we know that it's not just mythos. OpenAI now has a model that's just as cyber capable as Mythos. And within three to six months, all the major frontier labs and including Chinese models will have cyber capabilities. In response to that, we do need there to be a hardening of systems, and we do need there to be a scanning of code bases to find these vulnerabilities and patch them before the hackers do it. Because the hackers will have these capabilities in a matter of months. That's a certainty. Because the same capabilities you use for cyber defense can also be used for cyber offense. It's the same tool set. And the open source models will have these capabilities anyway.
- [45:56]
Jason Calacanis
They already have it to a certain extent. Let's be honest. They have 80% of it, 90% of it.
- [46:00]
David Sachs
It's simply the case that AI will be good at cyber. And so we do need a response to that. Now, my view on what should that response be should be, first of all, we should want the government and the private sector to work cooperatively. And I think they are. We have a giant cybersecurity industry in the United States whose sole job it is to protect systems and protect against breaches.
- [46:26]
Jason Calacanis
We have the best companies in the world doing that. We have CrowdStrike. We have Palo Alto networks. We talked about that before. We have the best defense.
- [46:34]
David Sachs
Right, exactly. And so what we should be doing, I think, is getting these tools Mythos and then the OpenAI model and others like it in the hands of our cybersecurity industry. And by the way, not just the public companies like Palo Alto Networks and CrowdStrike, although certainly they're two of the most noteworthy. But there's also some incredibly strong startups on the way out.
- [46:55]
Jason Calacanis
Oh, there's a long tail that are
- [46:57]
David Sachs
cutting edge of doing AI powered pen testing and all the rest of it. We need to get these tools into their hands as quickly as possible because they're a force multiplier for all the companies out there that aren't that good at cybersecurity or maybe they've got IT departments, they can use these companies as vendors. So I think that there is a
- [47:15]
Chamath Palihapitiya
role for us to play.
- [47:16]
David Sachs
Yeah.
- [47:17]
Chamath Palihapitiya
Do you think that the models should have a KYC wrapper going forward?
- [47:23]
Jason Calacanis
KYC for the audience is know your customer.
- [47:26]
Chamath Palihapitiya
Yeah. So really what it would mean is that identity, before you can use Mythos, you have to identify yourself so that we can try to know that you're not a state sponsored actor or a bad guy.
- [47:38]
David Sachs
I think that's the type of thing that we should be thinking about. So first of all, I want to say that both Anthropic and OpenAI acted responsibly here. No one was trying to release these super powerful models. So in a way all the people who are saying that we need pre release approvals for models, they're trying to solve a problem that didn't exist.
- [47:56]
Jason Calacanis
They self regulated.
- [47:57]
David Sachs
Yeah.
- [47:58]
Jason Calacanis
Which was the ideal situation.
- [48:00]
David Sachs
I wasn't trying to release this. They all understood the power and they were all acting responsibly.
- [48:03]
Jason Calacanis
They understood the ramifications acts. They would have been sued. So there is a self policing going on here, which is the ultimate way to do this.
- [48:10]
David Sachs
Yes. And. But to your point, Chamath. Yeah, look, I think that before giving your API for a super powerful model, you should not give that to a company or an actor. You don't know who they are. So yeah, some basic KYC makes sense. They should know who they're giving these tools to. And I guess my view on the Mythos preview and whatever the equivalent is of what OpenAI is doing is that we very rapidly need to get these tools into the hands of more good guys. You need to know who those good guys are. You need to know who they are. So yeah, KYC is like a predicate for that. Right.
- [48:44]
Jason Calacanis
Just to be clear, we'd all agree that if you did have identity for those Frontier models, which they're probably doing Anyway, right now. And you logged what people were doing with them to look for security breaches that wouldn't necessarily happen when you released it to the public because of privacy issues. Here's your Polymarket for Trump ordering a federal review of AI models by May 31st. 21% chance, I think, to our partner at Polymarket. Man, I gotta get in here. Do I have inside information here, being the world's greatest moderator on this podcast, or can I collect this money? Chamath, what am I going to do here?
- [49:17]
David Sachs
I would not. Do not. Do not place a bet.
- [49:20]
Jason Calacanis
Jcal, don't place a bet.
- [49:21]
David Sachs
Don't place a bet, but don't place a bet. To jama's point, I mean, look, I think we're kind of workshopping this in real time.
- [49:26]
Jason Calacanis
We are.
- [49:27]
David Sachs
Which is, I think that for the preview period we should definitely have kyc maybe.
- [49:32]
Jason Calacanis
What about logging? What about logging?
- [49:33]
David Sachs
Well, look, once you're past the preview period and it's in general release, I'm not sure if the KYC matters as much because so many people are going to have it, but during the preview period there should be kyc.
- [49:43]
Brad Gerstner
Let me, let me just say one thing. All the labs are already tracking API use. Okay. And anything suspicious, because there are major anti distillation efforts going on by all the labs. There's a ton of coordination going on with the government. There's way more happening, I think, in terms about API and API use. And anything suspicious is being flagged and being shared with the government. So the idea that we have no idea who's doing it, I think is not the case. And in fact, in some cases we may want to allow people to use it so that we can see exactly the types of things that they are extracting. So I would just, I would say we're already down that path, but better coordination may in fact be called for.
- [50:27]
David Sachs
Yeah. And just one last point in this whole thing is I just want to build on my point that pre release approvals is solving a problem that didn't really exist because again, Anthropic and OpenAI weren't trying to release these models yet, is that there is a substantial faction of, let's say AI ideologues or doomers who are basically employing the classic never let a crisis go to waste strategy. Right. That, yes, we do have this cyber issue that is real. You know, everyone needs to harden their systems now over the next three to six months. That is a real issue. But that is a problem that we will solve over the next six months. We have to. But what they're trying to do is use that issue to try and create a permanent new infrastructure in Washington. Again, I don't think that's not the administration's intention. That's not the administration's agenda. But you saw a lot of people on social media, a lot of the think tanks, and even Bernie Sanders weighed in and he said for the first time, I like something that the Trump administration wants to do.
- [51:27]
Jason Calacanis
The administration understands the 1% of the 1% of socks and everybody understand that this is out of control. The AI is going to take the jobs, they're going to take my summer home. It's going to be terrible.
- [51:37]
David Sachs
So there are people who have this agenda. Look, Bernie Sanders just wants to stop the progress. I mean, he's. Of course I do. He wants to ban data centers. He's put out a bunch of.
- [51:45]
Jason Calacanis
They're terrible.
- [51:47]
David Sachs
He basically has bought into the whole doomer narrative. So, look, that's why he likes the FDA idea, is because it would put the kibosh on innovation.
- [51:56]
Jason Calacanis
It's enough already. Let's give. Let's have a go back to paper and pen. It was a better society.
- [52:00]
Chamath Palihapitiya
So, Jason, what do you think?
- [52:02]
Jason Calacanis
I think there's two really interesting things I want to build on here. The first is your point chamath around. How do we turn around the sort of bad vibes around AI? I think we have to have two strategies here. One is giving what you've been working on, Brad, with your project, we should see more people giving. There's no reason why Nvidia SpaceX when they go public, anthropic when they go public OpenAI if and when they go public or if they stay as nonprofit. There's no reason those folks in an IPO couldn't give a portion of the IPO to every American citizen. So IPO K IPO for kids. They all take, you know, whatever it is, 5%, 1%, whatever they choose, and they put it into the Invest America accounts. And we should see some major giving from the people who are becoming trillionaires, hundred billionaires, whatever it happens to be. There's no reason not to. But those people haven't been doing that. We had this giving pledge, which was a little bit of virtue signaling and it wasn't real. It was just, you know, at the end of your life, you promise to give away half your money. So let's have something real. Let's have something where, you know, people say, I'm going to give away 1% of my stock over the next 20 years of my life. Every year 1% will go into Invest America. Whatever it is, it won't cost anybody anything. You can't spend this money, whether it's Bezos or whoever second in that same thing in terms of giving back, we have not talked about how massive this could be for health and extending people's life and reducing suffering. We need to work on that. That's where contributions to basic science could come in. And obviously education and lowering the cost of education. And if you look at what Americans on the bottom half, you were talking about the cup half empty, there's really two or three things they really feel anxiety about. One of it is income and the second is health care and on the margins, housing and their kids, their kids education. The cost of those things we should really take a look deeply at, and I know this is very unpopular amongst capitalists, including myself. We should really look at the minimum wage and study what happened in New Zealand, Sweden, Switzerland, Australia when they raised it. What actually happened when they raised it. And there was a lot of hand wringing about it, but when they slowly raised it, what they found was those consumers don't save money, they spend it. They're always behind the eight ball in terms of their spending. We should opt in to trying to raise the minimum wage company by company by company and just give people who are at the end of the spectrum that understanding that hey, year over year, whether it's Amazon or Target, et cetera, restaurants, we're all collectively going to add a little bit to that minimum wage and try to lift the bottom third of society. That's the stuff we're not talking about. We don't talk about it here on this podcast. We don't talk about universal health care, we don't talk about the minimum wage. But that's what capitalists should be talking about. And if we did that, if we increased the minimum wage, and I'm not a socialist, I'm a capitalist who think this is good for capitalism. If we increase the minimum wage just modestly each year and we opted into doing that and we figured out a way to give universal health care, companies wouldn't have to deal with universal healthcare and we would have customers. And we're a customer driven economy. Like 60, 70, 80% of what happens in this country is driven by the consumer. We need consumer spending. It's great for companies. If we had more people being able to buy Netflix or order on Amazon. Anyway, that's my, that's my TED Talk. Thanks for coming.
- [55:20]
David Sachs
How do we get from AI to The minimum wage. I'm still.
- [55:23]
Jason Calacanis
Well, no. Because of the black eye. No, the black eye we have in this country with polarization of wealth and people scared of losing their jobs we should look at. Why are they scared? David and I talked to you privately and you said to me privately, you can strike this if you want, but you said to me privately, you wouldn't be against necessarily figuring out a way to do universal healthcare if there was a way to do it. You want to see every human have health care?
- [55:47]
David Sachs
Yes, sure. I mean, the issue is not the desirability of it, it's the cost.
- [55:52]
Jason Calacanis
I mean, so you're a great entrepreneur of our time. How would you do it? Have you given any cycles to it?
- [55:58]
David Sachs
I haven't studied that issue, so I don't know, I just.
- [56:01]
Jason Calacanis
Convenient. How about you study countries?
- [56:04]
David Sachs
I remember what P.J. o' Rourke once said, which is, if you think health care is expensive now, just wait until you make it free.
- [56:10]
Jason Calacanis
Yeah.
- [56:11]
David Sachs
So you take away all the incentives and you have an even bigger problem. What do you think?
- [56:15]
Jason Calacanis
Minimum wage? Yeah, Go ahead.
- [56:16]
David Sachs
Well, let me just please get back to AI. Listen, you guys are right about the unpopularity of AI. We've all seen those polls. But I want to just put up this additional poll that came out about the salience of this issue, which is how important do people think it is? And AI ranked 29 out of 39. So although AI is not very popular, it is certainly not top of mind for voters. It's not in the top 10 issues, it's not in the top 20 issues. What is top of mind for voters? Number one, cost of living. Number two, the economy. And we know that AI is deflationary. It helps with the cost of living, and it's creating an economic boom right now. Okay, it's 75% of GDP growth in Q1, by the way, that, that economic growth is not just limited to startups In Silicon Valley, we're seeing a construction boom, we're seeing a blue collar BOOM, we're seeing 25 to 30% wage increases for construction workers and so on down the line. So.
- [57:12]
Jason Calacanis
And Brad, if you, if you look at that chart, there's health care in there, too.
- [57:15]
David Sachs
So. Look, my point is that AI may not be popular, but the effects of it actually are popular. If the media would honestly report what was happening, which is AI is creating an economic boom right now, it couldn't
- [57:28]
Brad Gerstner
be better said, David. You know, Bernie Sanders calling for a moratorium, shutting out all data, data centers, we'd have negative GDP growth this year the stock market would be down 15 to 20%. Unemployment would be on the rise. You know, there is a consequence to the government controlling through command and control of the economy. In 1929 we had 4% unemployment. Three years later it was, unemployment was 23% because government got involved in regulating everything and shutting down, you know, what was working. That is the greatest threat we have here. AI is delivering huge net benefits today in terms of unemployment rate, in terms of economic growth and productivity growth. We need to tell the story. But to Chamas earlier point, we also need to deliver net benefits. Jason, thanks for the shout out. Yes, every American having an investment account that compounds with the upside of AI. We're going to do that, going to deliver that, and that's going to be massive. But I also think ideas like if we're going to put a data center in Abilene, Texas, let's make electricity in Abilene free for the households in Abilene, Texas, right? There are ideas that can deliver net benefits. We got to deliver those. I think optimism will be on the march. I think we're in the trough right now.
- [58:37]
Jason Calacanis
What's your take on minimum wage and universal healthcare, Brad? How do you think about it as a capitalist, as an innovator and in the face of AI, which could have a dramatic impact on these issues, you
- [58:49]
Brad Gerstner
know, like Zach's, you know, to me, I haven't spent a ton of time thinking about those, except that as a society we're $38 trillion in debt. We haven't been able to afford to deliver those things. I generally think the market works out those issues better than the government, top down, trying to, you know, the government gets more and more involved in healthcare and the only thing that happens, it gets more expensive. So we've all seen the charts of the most expensive categories where we've had inflation, education, health care, et cetera. It's where the government's involved. I actually think if you just let the markets work, we're entering into an age of abundance. A lot of these problems are going to be solved. People are going to have a lot of AI coaches in health care and education, et cetera. Let the market work, government stay at bay, keep things safe, we're on a good march.
- [59:31]
Jason Calacanis
I think this proves my point perfectly. If you talk to any founder, they're not thinking about housing, they're not thinking about higher education costs, they're not thinking about minimum wage, you know, and they're not thinking about health care all that often. Some, some do though. There's some innovation there. And it's because it's so regulated that entrepreneurs and VCs are just like, that's kryptonite. The government has poisoned the well. We can't participate in that. And that's the roadblock. And that's where Americans are suffering. And that's where it would be great if founders actually put their minds to it. And the government's gotta get rid of all that regulation and let us cook in those specific verticals. All right, the market is in hyperdrive. Hyperscaler revenue has made the markets move up. We hit on this briefly, but we didn't have you here. 5th bestiebg cloud computing on a tear. I referenced it earlier, but AWS is now on $150 billion run rate. Azure 108 billion GCP. Google Cloud 80 billion. There's a little bit of fun with numbers there because Azure and Microsoft include some of their software products in there and Google Cloud includes things like Google All Office or Google Suite in there. But the growth numbers are tremendous. AWS, which is the more pure play of the 3.28% growth on a very big number. Azure 39% Google Cloud stunning everybody with 63% growth. It is incredible what the ARR numbers are. Google Cloud Edit 10, AWS 10 Azure 9.5. So basically 30 billion collectively. Jammin ball, who works for you, I think put out some data on the Twitter. Brad. Markets at all time highs. Mag 7 cooking. Uber blowing out growth. Disney blowing out growth. The consumer seems absurdly strong based on those two bellwethers. Tech seems extremely strong based on the cloud computing. What's your take on the overall market and overall economy? Obviously inflation up a bit, people hand wringing about the never ending war and the cost of oil.
- [61:33]
Brad Gerstner
Let's just telescope way up the level of criticism directed to this administration. Tariffs were going to cause hyperinflation. We're going to destroy gdp. Conflicts in Venezuela and Iran were going to do the same. We've heard all of the negative stories, but what's happening? Accelerating GDP, a tenure that's sitting at 4:3, inflation totally under control. AI, AI, AI. Compute, compute, compute. We're leading the world. It's contributing massively to GDP growth in the country. We see the S and P only up 8% this year. Right. So we're not in bubble territory here. Meta's trading at 17 times, fully tax gap earnings. Nvidia at 19 times. Microsoft at 20 times. Google at 24 times. And then the memory stocks that everybody's excited about. We have 25% of our portfolio in SK Hynix five times, fully taxed GAAP earnings. Samsung six times. Micron seven times.
- [62:33]
Jason Calacanis
Right.
- [62:33]
Brad Gerstner
This is not the stuff that bubbles are made of. You know, David referenced it earlier. We started the year OpenAI and Anthropic. We're doing combined about 30 billion in revenue now combined, four months later, 80 billion in revenue. The policies of this administration on the economy are working. They're working in spades. Our gap on the rest of the world and is growing. And so from, from my perspective, you know, you know, we've been all in on the market. I talked about it earlier in the year. We're heavily.
- [63:05]
Jason Calacanis
When did you make that switch to go all in on the market because you were bearish?
- [63:09]
Brad Gerstner
I would say toward the, toward the end of last year, the market had run up a lot. We had a lot of these questions. Listen, entering this year there was a huge question hanging over the market. Would the AI revenue show up? If the anthropic revenues hadn't shown up and we didn't see this re acceleration out of the hyperscalers, the market would be down 10 to 15% because people would say there's no ROI on all of this. So you would have been bearish in infrastructure. Exactly. When I saw the numbers start showing up in December and into January, we went from medium to large in terms of our exposures. And 80% of our exposures or more have been in compute, AI memory, et cetera.
- [63:49]
Jason Calacanis
And this is why it's great to operate in the private market and the public market, because you can see things in the private markets that inform the public markets. But the question remains, Brad, how much better would the economy have been doing? You know, as much credit as you're giving to the administration if they didn't start a hundred billion dollar war that we did not need to go into according to all reports. And if we didn't do a bunch of tariffs that wound up being unconstitutional by the Supreme Court, which Trump himself put in, we would have been further ahead. That's my take on it. We would be ripping even more if we didn't have those solutions.
- [64:26]
Brad Gerstner
It's hard to imagine. Okay, just to set up again here, it's hard to imagine a more Goldilocks situation for the United States of America. We have reset the table geopolitically and the discount rate globally is actually coming down, not going up, evidenced by markets at all, time high and the bond market in control. And then look at the private markets. We have multiple trillion dollar companies that have been created in the private markets that are now coming public, SpaceX coming public is going to be a multi trillion dollar, you know, OpenAI anthropic. At some point you just have to acknowledge USA is winning. Of course, there are always things that we could be doing better, but there's not a country on the world that wouldn't trade all of its fortune for the United states.
- [65:11]
Jason Calacanis
Fortune today, 100% in agreement. American exceptionalism as embodied by the great companies in America. SpaceX, Google, et cetera. All the ones we've been talking here. That is the story. And I give infinite credit to this administration for being business friendly. I do think they've made two critical mistakes. I think the tariffs were poorly executed and I think we shouldn't have gone to this war and we should find a quick resolution to it, which the administration seems to be desperately doing. Sachs, your take on the economy?
- [65:39]
David Sachs
Well, look, we have an AI boom going on right now and I think that's thanks to President Trump's policies. Remember the first week he was in office, he rescinded the Biden policies on chips and models. And what were those policies? It was the approval regime that we're talking about. Models would have to go to Washington to get approved if they were trained with some number of flops. And then every sale of a GPU worldwide would have to be licensed from Washington unless it fit into some narrow exemptions. So the whole approach of the Biden administration that President Trump inherited was everything approved in Washington. He rescinded that. He declared that we had to win the AI race and he unleashed our companies to do that. Now, one other really important thing is energy. Remember, it was this president, going back a decade who said, drill baby, drill. He said, we have to unleash American energy. That's the basis for the American economy. It's also the basis for AI. He also has said that he wanted to allow our AI companies to become energy companies so they could bring their own power to these data centers. So they're not drawing off the grid, they're not competing with consumers for electricity. They're generating their own power. And it's thanks to this president that we have seen this blue collar construction boom right now powering all of this infrastructure. What would the alternative have been? We know, I mean, Bernie Sanders has said it would have been banned on data centers. So yeah, I think you need to
- [67:03]
Jason Calacanis
give credit rat banned data centers, that would be a much, a much worse choice. Chamath, I'll give you the last word here as we wrap on the economy
- [67:11]
Chamath Palihapitiya
generally, I Think the markets are going to keep going up for a while and then at some point they're going to go down.
- [67:19]
Jason Calacanis
Okay, I wrote it down. Chamath, you said markets are up and then eventually they're going to come down. Those are the two things up. And we put a U here and then a D here.
- [67:31]
David Sachs
I think you're doing an impression of the taking notes emoji. Is that what you're doing?
- [67:35]
Jason Calacanis
Yes. Okay. Ups and down.
- [67:38]
Chamath Palihapitiya
Wow.
- [67:38]
Jason Calacanis
Thank you for tuning into all in where you can get your great calls and market action advice. Going to go up and then down, folks. Act accordingly. In all seriousness, but what makes you bullish, let's say in the next six months, 12 months, catalysts. And then what do you think the headwinds are as well? Let's take the short to midterm, six months to two years.
- [67:58]
Chamath Palihapitiya
I think that in the short term the people that makes the new thing needs to get valued and needs to demonstrate value. So who are the people making the new thing? It's the Nvidias, it's the memory makers, it's the anthropics, it's the SpaceXs and it's the OpenAI's. But eventually it all comes home to roost. And you can't just make things for a market who then doesn't have a measurable benefit themselves. To be very clear and blunt, there is literally not a scintilla of evidence that AI has helped lift the operating margins of the S&P 500. There's all kinds of bluster. There's going to be an important fork in the road. It's probably two or three years from now. One path will be OPEX shrinks, hence margins increase. And the other path is revenues grow and margins expand and OPEX stays flat. Or maybe it even goes up. Those two things are very important differences because in the former you're talking about shrinking workforce and shrinking OPEX as a percentage of operating margin and revenue. In the latter you're actually growing through it. The answer to that question I think is critical about how the markets will respond and how society will respond. So I think we have call it 500 days where you just got to be net long, but I think it's literally in the hundreds of days from now 500, you're going to have to have an important reckoning moment. The people that are paying for all these tokens need to see an actual benefit.
- [69:41]
Jason Calacanis
Yeah, that's reasonable.
- [69:42]
David Sachs
Yeah, that's a really interesting point. Let me connect a couple of dots here between something Jamal said and what Brad said, which is Brad said at the beginning of the year, we went into this year with this massive capex, this massive investment infrastructure. But people weren't sure that the ROI was going to be there in terms of model revenue. And that was true. And then the model revenue has proven out and now what Chamath is saying is that we're going to be at another fork in the road soon in terms of whether there's going to be ROI on all those tokens that are being sold and generating the revenue for those model companies. And I agree with you that that is not proven out yet. But I'm optimistic that it is going to be proven out and otherwise these you wouldn't be seeing. Look, I Enterprises continue to buy. Hold on, let me just finish the point. You wouldn't be seeing enterprise continue their month over month spend on coding tokens if they didn't feel like the ROI was going to be there. But you make a good point which is what is the impact on the economy going to be when all of this new software, this bespoke software that's being created through again, all these coding tokens are being bought? It's going to power a wave of productivity like I think we've never seen before. So I think what you're seeing is the ROI is getting sort of trickling down from infrastructure to model to application to end user and I think it's going to create an economic boom.
- [71:03]
Jason Calacanis
I got it. I'm with you Sachs. This is deja vu all over again. We watched this happen with the PC revolution, the Internet revolution, cloud revolution, mobile revolution. We had all this hand wringing. Will this ever pay off? Should I build an app? Should I build a website? Should I, should I not? Should I move to the cloud? Should I keep it on prem all of these questions over and over and over again and then they went from question marks to exclamation points. I can tell you inside of my firm we have started, we were using agents, then we started building code and I've got three people on the team who are making all the interfaces and products that a 22 person investment firm should not be making internally. They should be using SaaS software and they are shipping product day in and day out. The ROI is fait accompli, Brad. It is fait accompli. I think this has been decided. I think it's been decided.
- [71:46]
Chamath Palihapitiya
It has not been decided at all. It has not been decided at all.
- [71:49]
Jason Calacanis
You have 80, 90, you're working with the big enterprises. I invest in 100 startups a year, I work with the small ones. It is fait accompli with startups. They are building software, they're shipping. They are getting massive value from these tokens. And they're getting so much value that they don't have to add, you know, but half the number of employees that they would with the same amount of capital. They're getting further with less money. It is working in startup land. I don't know what's happening at 80, 90. You would have a better picture obviously of the enterprise. Tell us what you see there.
- [72:17]
Chamath Palihapitiya
I mean, our business is doing well, but what I'm trying to get across to you guys is that you can't will profits to go up. Okay, so ultimately what happens is I'm just going to take a company randomly, Anheuser Busch, they have to eventually sell more beer. Okay? Take Nike, they ultimately have to sell more shoes. Take a medical devices company, they have to sell more artificial hips and knees. So the point I'm trying to get across is right now there's an enormous amount of very constructive and creative experimentation. But I think it's what is also true is a lot of that has not yet proven value. I don't think that means it's going to stop. All I'm just trying to say is until a company can trace very directly, I spent X and I made Y where Y is now greater than X and it's lifted my margins. That is the thing that causes the flywheel to spin faster. And right now we've started the first part of that equation. We've spent the X and we have not seen the why. You would see it in global gdp. You haven't. You would see it in global productivity. You haven't. You would see it in the global profit margins of the S&P 500. We haven't. It doesn't mean it's not coming.
- [73:42]
Jason Calacanis
Brad, you want to pick up on this? Because I'm definitely taking the other side of it because I'm seeing with a lot of these companies, massive lowering of costs, their ads are getting more effective at the same time, they've stopped, stopped hiring. They're not adding positions in a lot of cases and things like just pick the Nike example. A lot of the photo shoots they used to do for their app. Excuse me, a lot of the imagery they used to make. Now they're able to make more of it without having to hire photographers and do that stuff. I know this example because we have a startup that does this specifically for brands like Nike. They've seen a massive drop. We have one that helped Door Dash with their food pictures. All those pictures used to have to be taken by photographers. Now it's all done by AI. Massive reduction in cost. And they're using ads and ad creative now. That is, you know, double digit percentage more effective while costing half as much. So I definitely think we're seeing it on the earnings. But is that true? Are you seeing it in the earnings of these companies yet?
- [74:37]
Brad Gerstner
Yeah. So two data points. Number one, we just saw Azure grow 39% in the quarter. We saw Google Cloud grow 63% in the quarter. Headcount growth for those companies the last three years mag five combined is about 3%. So their operating margins are all expanding. If you look at The S&P 500 writ large in Q1 of 24, operating margins were about 11.8%. That was up from 11% in 23. This year they're 13%. So we've had a 200 basis point improvement in the operating margins of the S&P 500, which is massive. Do you think that's AI across those businesses and chamath? I think that that's the question where, where it could dovetail with the donuts.
- [75:21]
Chamath Palihapitiya
It's not AI.
- [75:22]
Brad Gerstner
Yeah. So any amount of money is not AI.
- [75:24]
Chamath Palihapitiya
Bet we are same financial engineering that got these earnings to rise in the last decade.
- [75:29]
Jason Calacanis
Yeah.
- [75:29]
Brad Gerstner
So I think that's the question. Is this margin expansion durable? The forecast, the consensus forecast and estimate is that margins are going to continue to expand over the course of the next two years. You and I both know back in 22, 23, we went from the age of excess to the age of fitness. Right. A lot of these companies were able to shed people, you know, with the excuse of AI just because they had become, you know, too excessive during the period of COVID So I think it's a legitimate question whether or not that's all from AI. But I will tell you anecdotally it maps for me. I'm hearing like Jason and David, a lot of these companies that are, you know, really growing their top lines at an accelerating rate without expanding headcount nearly at the same pace.
- [76:15]
Jason Calacanis
Okay, Sachs, I'll give you the final word while we wrap.
- [76:17]
David Sachs
Brad was talking about how we got all these operating efficiency improvements. The unemployment rate stayed at historic lows during that time. I mean the economists consider full employment to be 4 to 5%. And we've stayed at, you know, the low low 4%, 4.2% roughly during this time. So you're able to get these efficiency improvements while unemployment is still extremely low. Moreover, there was just a big article saying that the unemployment rate for young college graduates has dropped. So there was this whole narrative recently that recent college graduates were going to have the hardest time finding jobs because there's going to be no work left for entry level jobs because of AI. And in fact, it has gotten easier for recent college graduates to find work recently. Maybe that's because they're AI natives. Maybe that's because they know how to use AI better. So in any event, I mean, we're just not seeing any evidence yet of these theoretical downsides of AI around job loss and unemployment, and we are starting to see big productivity gains.
- [77:18]
Jason Calacanis
Yeah, this is going to be a circular discussion, but yeah, there's a lot of conflicting evidence. The last piece of evidence, obviously, is the labor participation rate, because if you are not even a opting in to participate, then you don't get counted as unemployed. And that's been, I think, a big challenge. 61.9% in March. Labor participation rate. Back in before COVID we were at 63.3. Yeah. And college graduates, you're hearing different stories. Certain degrees getting jobs, other ones not getting jobs. It's too early to tell. I think is probably what we all agree in, and it's a mixed bag.
- [77:54]
Brad Gerstner
No, no, I don't agree with that.
- [77:56]
Jason Calacanis
No.
- [77:56]
David Sachs
Which, look, whenever. Whenever I have data to refute one of your narratives, you always say it's too soon to tell.
- [78:02]
Jason Calacanis
No, no, no. What I do.
- [78:03]
David Sachs
Wall Street Journal. Nick, put it on the screen. College graduates are finally catching a break in this job market.
- [78:08]
Jason Calacanis
Yeah.
- [78:09]
David Sachs
Jake. Al, you should be happy about this.
- [78:10]
Jason Calacanis
I know, I'm. Listen, I'm happy anybody gets a job, but what you do is then you say we don't trust the numbers and we should get rid of the Fed and we should get rid of the numbers. So we all know the debate.
- [78:18]
David Sachs
Get rid of the Fed.
- [78:19]
Jason Calacanis
No, that was. But you chose to ma. Let's get rid of the Fed because we don't like the numbers. Listen, it's all great. Welcome to the debate club.
- [78:25]
Chamath Palihapitiya
What did I say?
- [78:26]
Jason Calacanis
You said abolish the Fed. Abolish the Fed. What is the Fed here for? All right, listen, enough. We're getting into Trump derangement syndrome or Trump bend the knee syndrome. It's the end of the show. We had a great show, everybody. We had some laughs. We all learned. We workshop some stuff. Let's leave it where it is. Great job, President Trump.
- [78:45]
David Sachs
I want to congratulate oh, here we go. I want to congratulate all of our innovators and I want to congratulate Elon and Dario D. Rockefeller on their recent deal.
- [78:55]
Jason Calacanis
Oh, shots fire. He's getting straight. Come on the program anytime, Dario. Hey, you know Dario well, Brad, get him on the program next week. I want him on the program. Have him come in. Will you ask him for me? I. Will you ask him for me?
- [79:09]
Brad Gerstner
Well, I. Sure, I'll ask him. And yeah, thank you. The fact of the matter is, I think our lucky stars, that we have Elon, that we have Anthropic, that we have OpenAI, that we have Google, that we have Amazon, all innovating in this country. I know we like to poke fun on the edges at these things, but the fact of the matter is I see them all showing up, sharing their models, driving as hard as they can to innovate. We have the best competitive framework in the country. David's right. It's been transformed over the course of the last 14 months. We need to stay the course. We're on the winning horse. We just had the derby last week.
- [79:49]
Jason Calacanis
There it is.
- [79:50]
Brad Gerstner
On the winning horse. Stay on the horse, Senator for the win. America for the win.
- [79:54]
Jason Calacanis
There it is. Senator Brad Gerstner. I think if you're going to run, you got to get rid of the red glasses. We've got to get tortoiseshells in there, but I think you got to. You got a serious shot, Senator.
- [80:03]
Chamath Palihapitiya
Senator Gerstner, I like secretary better. Secretary.
- [80:07]
Jason Calacanis
Secretary who is.
- [80:09]
Chamath Palihapitiya
Yes.
- [80:09]
Jason Calacanis
Secretary of the Treasury Brad Gerstner. Secretariat.
- [80:13]
Chamath Palihapitiya
Secretary of State David Sachs.
- [80:16]
Jason Calacanis
Secretary of cashmere and wine Chamath Palihavji. How are you doing with your.
- [80:20]
David Sachs
There's so much fake news out there. Because, I mean, look, I totally agree with everything Brad said. Look, I poke fun at some of these companies for some of the things they do, but I am happy that they are American companies and that they're innovating here.
- [80:30]
Jason Calacanis
Of course. Congratulations on your move. Absolutely.
- [80:34]
David Sachs
Yes. And look, there's so much fake news out there. I mean, we just covered on this podcast how beneficial some of these economic trends are. You never get it from the media.
- [80:43]
Jason Calacanis
No.
- [80:44]
David Sachs
And they are trying to derail us from the policies that have been so successful.
- [80:49]
Jason Calacanis
Yes. But they did some great, inspiring coverage of micro looting. So get your micro looting on. Congratulations, New York Times. We'll see you next time, everybody. Bye. Bye.
- [81:00]
Chamath Palihapitiya
Love you, boys.
- [81:00]
Jason Calacanis
Bye.
- [81:04]
David Sachs
Let your winners ride.
- [81:06]
Jason Calacanis
Rain Man, David Sack.
- [81:10]
David Sachs
And instead we open sourced it to the fans and they've just gone crazy with it.
- [81:14]
Chamath Palihapitiya
Love you.
- [81:23]
Jason Calacanis
Besties are that. Is my dog taking a notice in your driveway?
- [81:31]
David Sachs
Oh man.
- [81:32]
Chamath Palihapitiya
My appet will meet me at. We should all just get a room and just have one big huge orgy.
- [81:37]
David Sachs
Cuz they're all just useless.
- [81:38]
Chamath Palihapitiya
It's like this like sexual tension that they just need to release somehow.
- [81:42]
Brad Gerstner
Let your feet be wet.
- [81:44]
David Sachs
Your feet.
- [81:47]
Jason Calacanis
We need to get murder. I'm going all in.