Leopold is Back! Big Tech Earnings, Defense Tech Deep Dive | Richard Craib, Trae Stephens, Blake Resnick

Summary

TBPN Podcast Summary

Episode: Leopold is Back! Big Tech Earnings, Defense Tech Deep Dive
Date: July 31, 2026
Hosts: John Coogan, Tyler (guest co-host for Jordi Hays)

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Overview

This episode examines the recent turmoil surrounding hedge fund manager Leopold Aschenbrenner and his fund Situational Awareness LP, analyzing the drama, the “LP letter,” and the market reaction. The show then pivots to cover big tech Q2 earnings amid AI-driven volatility and hosts a series of deep-dive interviews: with Richard Craib (Numerai) on hedge fund risk and alpha, Trey Stephens (Anduril, Founders Fund) on defense tech and the venture market, and Blake Resnick (Brinc) showcasing the future of autonomous public safety drones.

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Key Segments & Timestamps

1. Leopold Aschenbrenner Crisis Analysis (00:14–28:25)
2. Big Tech Earnings & Market Volatility (29:05–32:48)
3. Interview: Richard Craib on Hedge Fund Risk, Alpha & AI (32:48–59:53)
4. Interview: Trey Stephens on Defense Tech, VC & Anduril (60:04–92:24)
5. Interview: Blake Resnick on Drones for Public Safety (94:49–113:44)
6. Benchmarking AI, Closing Thoughts (113:44–117:57)

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1. Leopold Aschenbrenner Crisis Analysis

[00:14–28:25]

Breakdown

• Crisis Recap:

  • Aschenbrenner's hedge fund, Situational Awareness LP, faced a severe drawdown in July, leading to a partial sale of its public equities to Citadel (Ken Griffin) to shore up liquidity and eliminate leverage.
  • The financial press and social media rumor mill debated whether this was a "blow-up" or a managed setback.
  • Leopold circulated an LP letter, directly addressing investors and detailing the aftermath.

• Highlights from the LP Letter:

  • “We let you down this month. We came closer to permanent capital impairment than is acceptable to us...We ultimately found a solution that protected the fund and you as investors.” [Host reading – 01:00]
  • Full responsibility taken; fund not shut down, not liquidated, not going "private only."
  • “Volatility is the price of long term investment returns…Our fund must always be structured such that we can take a loss and fight another day.” [Host quoting – 02:59]
  • Fund moves: Sold public equities, closed shorts, removed all leverage and margin risk.

• Market & Community Reactions:

  • Tyler and the host praise his candor and directness: “The writing in this letter is really good. Very clear…not being dodgy.” [Host – 03:12]
  • Massive drawdown: -67% for July, still up 80% YTD.
  • Debate whether this is a “margin call,” a “bailout,” or simply hard-nose risk management.
  • Community betting on fund's comeback: “Prediction: Situational Awareness will be bigger than Citadel by the end of the decade.” [Tyler quoting Sholto – 09:23]
  • Discussion of "tall poppy syndrome"—the cultural tendency to root for the downfall of a highly successful young manager.

• Meta Takeaways:

  • Most Street veterans see this as a “learning event.”
    • “All the goats on Wall Street have had some sort of blow up earlier in their career. Part of the game is being a live player on the field.” [Tyler quoting Deleon – 19:51]
  • Ongoing bets and memes circulate in the finance community.

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2. Big Tech Earnings & Market Volatility

[29:05–32:48]

Breakdown

• The "Mag 7" Whiplash:
  • Microsoft, Apple, Amazon, Meta, Alphabet all post earnings exceeding Wall Street's expectations; stocks swing violently—$450 billion gain for Apple in a day, Microsoft up 16% in a month, Meta tanks despite booming revenue.
  • Investor focus: Not just topline/beats, but “capex intensity” for AI infrastructure and how tightly the narrative moves stocks.
• Remarkable Volatility:
  • “It’s insane that anything can happen at that scale…trillion dollar companies move by 10%, 9%, 15%.” [Host – 07:16]
  • Uncertainties over AI CapEx, forecasts, and the macro environment drive this volatility.

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3. Interview: Richard Craib – Numerai, AI, and Hedge Fund Alpha

[32:48–59:53]

Background & Philosophy

• Numerai Backstory:
  • “I’m a hedge fund manager…I started Numerai in December 2015…we’re a quant fund, we trade stocks using AI. But we don’t simply invest in AI companies.” [Richard Craib – 33:09]
• Fund Structure:
  • More diversified, low volatility, multiple LPs; focus on market-neutral “alpha,” not “levered beta.”

Alpha, Risk, and Leopold’s Run

• On Alpha:

  • “There’s a place for that type of fund where you’re going to take a big bet with a lot of risk…But the trouble is the driver of the return is the risk more than the alpha.” [Richard Craib – 35:47]
  • “If you’re uncorrelated from all the factors, you have alpha.” [Richard Craib – 39:02]
  • “It’s almost childish to think that a sophisticated investor wouldn’t be able to pull those trades themselves.” [Richard – 39:47]

• On “Generational Runs”:

  • “It takes a generation, actually…that’s how you measure the investment performance of someone over a very long time.” [Richard – 41:17]
  • “Warren Buffett was up 5 million percent by basically being sensible for a very long time…do you want to do the 400 [percent] and then lose everything or do you want to do the 5 million that takes 30 years?” [Richard – 44:15]

• Leverage and Risk:

  • Real issue with Situational Awareness was “high volatility,” not simply leverage. “With more leverage than Situational Awareness, we have one-tenth of the volatility…risk is volatility squared. It’s a different ballgame.” [Richard – 53:07]
  • “Hero worship” in investing is a trap: “AI is smarter than all of us…just take out your pocket calculator and calculate the risk of ruin.” [Richard – 54:01]
  • “If you want to be Warren Buffett, just get 9% alpha per year and repeat. All the people taking too much risk are going to lose it all over and over again.” [Richard – 56:11]

Meta Market Thoughts

• The “meme-ification” of stocks leads to more volatility but doesn’t upend fundamentals.
• Variability and setbacks are part of the life for any serious manager: “50% of days we’ll lose money…It’s about running a survivable amount [of risk].” [Richard – 56:04]

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4. Interview: Trey Stephens – Deep Dive on Defense Tech, VC, Anduril

[60:04–92:24]

Market Turmoil and Venture Implications

• Public vs Private Markets ([60:42]):
  • “As there’s a reset on the public market side, I’m hoping that there will be somewhat of a reset on the private side as well because the market makes absolutely no sense in venture capital right now.” [Trey – 62:30]
• Advice for Founders on Funding: ([64:28])
  • Two schools: Raise as much as you can at the highest price and build a war chest, or raise progressively, match growth, maintain discipline.
  • “Most people believe they can have a billion in the bank and be responsible…very few actually can pull that off.” [Trey – 66:42]

Defense Tech Evolution & Supply Chain

• Govt. Contracts & Go-to-Market: ([68:15])

  • Path from R&D to production now more robust (e.g., Stratfi, SBIR), but “let all flowers bloom” funding—small contracts for many, few big production contracts.
  • “It’s much more better understood…muscle still needs to be developed.” [Trey – 69:46]

• Building the Supply Chain: ([71:17])

  • “There’s even more opportunity for entrepreneurs to pursue deeper supply chain opportunities, sometimes with Anduril as a customer rather than the government.”
  • Hype in defense tech is “making it very difficult to separate signal from noise.” [Trey – 72:13]
  • Space for non-VC/PE-style companies manufacturing, e.g. “drone motors in America”.

• Anduril Thunder & Fury Programs: ([74:15])

  • Demonstrated autonomy at scale: “Thunder…autonomous attack helicopter…we completed test flights with a full-scale surrogate. First flight for Thunder is planned for next year (2027).” [Trey – 75:09]
  • “Production line for Fury stood up in 18 months…already building the next shell. Tremendous ops effort.” [Trey – 78:10]
  • Supply chain: “Labor becomes a bottleneck. We started hiring people day one…you have to get ahead on every aspect.”

Civic Service, TSA, Cultural Thoughts

• Pitch for Mandatory Civil Service: ([81:43])
  • “There’s something important about ensuring a sense of civil duty…It doesn’t have to be military. Could be clerk, courthouse…I think it’s wise for Americans to take a hard look at ourselves.” [Trey – 82:03]
• TSA Is Underrated (Host Hot Take): ([84:00])
  • Trey: “It’s…gotten pretty efficient. I think we have the ability to lead the world in the way we process travel safety.”
• Movies, Founders Fund, Company Culture:
  • Nolan rankings: “Tenant is inarguably the worst Christopher Nolan movie. Interstellar is the best.” [Trey – 87:06, 87:12]
  • Founders Fund: “Still bullish about the companies we’re investing in, even if we’re more bearish on the macro.” [Trey – 88:48]
  • "Is Mafia an official part of FF recruitment?" – "Definitely not." [Trey – 89:34]
  • On avoiding late-stage financial esoterica: “We are a venture fund…It’s just not us.” [Trey – 90:32]

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5. Interview: Blake Resnick – Autonomous Drones for Public Safety

[94:49–113:44]

In the Field: Brinc's Drone Revolution

• Brinc’s Latest:

  • $125 million new capital, major expansion to deploy autonomous drones at scale on police and fire station roofs.
  • Facility tour: 3-story HQ, engineering, R&D, and manufacturing under one roof. “One of the largest drone factories in America.” [99:25–99:39]

• Drone Product Line:

  • Lemur 2: Small SWAT drone, used to reduce force and increase safety.
  • Responder: World’s first 911 response drone, now used by “hundreds of police & fire departments.”
  • Guardian: Helicopter replacement drone, 1 hour flight time, 60+ mph, Starlink enabled, HD thermal imagers, rapid robotic battery swaps.
    • “If I wanted to take Guardian off and fly it into the Pacific Ocean, that’s something I’d be able to do…without losing connectivity.” [Blake – 95:41].

• Sales/Go-to-Market:

  • “There are 20,000 police departments, 30,000 fire depts., 80,000 stations…eventually the vast majority will have a 911 response drone.” Only “4 or 500” currently. [100:19]
  • Strong partnership with Motorola Solutions, who have “pre-existing commercial relationships with literally every single one of our potential customers in the free world”. [106:15]

• Tech, Autonomy, and the Supply Chain:

  • “Camera payloads come to mind immediately”—calls for more American-made gimbal cameras with high-res thermal. [107:52]
  • Other wish-list gaps: “high energy density batteries, brushless motors, mesh networking radios…”
  • Technical Autonomy: “Drone launches on 911 call, plans path, avoids obstacles, can perform pre-programmed behaviors or pivot to manual control.” [109:32]
  • Benchmarking: NIST has standardized agility courses and tests, but “most customers care about specs.” [112:38]

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6. AI Benchmarks & Closing Thoughts

[113:44–117:57]

• AI Model Cost & Benchmarking:

  • OpenAI Luna Terra—massive token cost reductions, strong performance on industry-standard benchmarks.
  • “People were not expecting this…the model will just do it, but the harness/integration matters a lot.” [Tyler – 115:57]
  • Benchmarking is evolving: “It’s a great way to illustrate AI progress even to non-technical folks.” [Host – 116:41]

• Show Wrap-Up:

  • Invites for feedback, newsletter signup, and positive reviews.

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Notable Quotes & Moments

• On Fund Blowups & Risk:
  “The underlying completely makes sense, but you get into these crazy psychology things…”
  – Tyler [16:44]

• On Learning from Mistakes:
  “The optimal number of past blowups is one—not zero.”
  – John Arnold (as quoted by Host) [14:03]

• On Alpha & Return Replication:
  “There is nothing stopping an LP of Situational Awareness from buying Anthropics shares themselves.”
  – Richard Craib [39:47]

• Startups & Hype in Defense Tech:
  "Once a thing is a category, it’s too late. Seeing a lot of hype in defense tech is making it difficult to separate signal from noise."
  – Trey Stephens [72:13]

• On Civil Service & Social Fabric:
  “I think there’s something really important about ensuring a sense of civil duty into our next generation.”
  – Trey Stephens [82:03]

• On Benchmarking Drones:
  “NIST has put together something very similar to what you just described [agility courses]…but mostly customers care about specs.”
  – Blake Resnick [112:46]

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Flow & Tone

The episode is energetic, fast-paced, witty, and maintains a conversational yet highly informative tone. Technical explanations are made accessible without dumbing down, and there's a clear Silicon Valley "inside baseball" vibe—full of meme-references, direct quotes, and rapid back-and-forths. The interviews engage each guest at their intellectual edge, moving seamlessly from market drama (Leopold's situation) to broad sectoral analysis (AI, public markets, defense, supply chains) with practical business implications and personal anecdote.

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Summary for the Uninitiated

• Leopold Aschenbrenner, a young hedge fund manager, navigates a near-fund “meltdown,” survives by selling off public equities to Citadel, but keeps his fund alive. His handling—transparent, accountable—wins points with his peers and the investing public, who see him as bruised but not broken, perhaps even more formidable in the next act.
• Big tech earnings are record-breaking but markets are extremely volatile, with massive price swings even for trillion-dollar companies, driven by investor uncertainty over AI infrastructure spending.
• Industry experts like Richard Craib provide a “quant’s” view: real, repeatable returns must come from true alpha, not just wild bets or optimism; risk management is key to building a durable investment business.
• Venture/Defense: Trey Stephens explains the changing landscape for defense technology startups—opportunity is vast, but so is hype, and discipline in funding and production is rare but essential.
• Advanced Drones: Blake Resnick's Brinc demonstrates how American hardware startups are breaking through—scaling drone infrastructure for public safety, building manufacturing at home, and envisioning new supply chains.
• Meta: The entire show is a tour-de-force look at the intersections of technology, finance, and real-world implementation, delivered with wit, depth, and authenticity.

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For Further Listening

• Minutes 1–15: Leopold’s crisis, transparency, LP letter breakdown
• 32–60: Richard Craib’s explainer on alpha, risk, and hedge fund philosophy
• 60–92: Trey Stephens on the future of defense tech and startup funding discipline
• 94–114: Blake Resnick’s drone factory tour & deep dive
• 114–118: State of AI benchmarks and “future-of-work” reflections

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Missed the show? This summary has you covered with every critical insight, quote, and market turn—minus the ads, banter, and memes (for those, tune in on X or Spotify).

Transcript

[Host]

You're watching TVPN. Today's Friday, July 31st. The end of the month 2026. We are live from the TVPN Ultra and the temple of technology, the fortress of finance, the capital of capital. We have a guest co host today. Introduce yourself.

[Tyler]

For those who don't know, Jordy's out again. I'm back.

[Host]

Yeah, we got Tyler in the Ultradome in the hot seat. Well, let me tell you about ramp.com, time is money save both easy use, corporate cards, bill pay accounting and a whole lot more all in one place. You're back. You know who else is back? Leopold Aschenbrenner's back. He says, you're gonna have to drag me out of salt, out of Situational Awareness LP because he's down but not out. Little beat up, but he shared a letter that's making the rounds. Thanks to some intrepid reporters on the DBPN team that posted this. He sent an LP letter that clarifies a lot of the questions yesterday. I mean, even internally, we were going back and forth on like, okay, he sold a bunch of the portfolio to Ken Griffin, to Citadel. Does this count as a liquidation? Does this count as blowing up? And these are like sort of vague terms like, what does it mean to blow up? It seems like there was definitely a drawdown. The fund definitely was underperforming that month. But what does it mean? Is the fund gone forever? Is he going to work at McDonald's as some people were trying to make it seem like it was happening? Obviously that's not going to happen. He's going to have a long career. Lots of people are rooting for him. I'm certainly rooting for him. But there are some facts in this letter that we should read through. So he writes, this is Leopold ochenbrenner to the LPs of Situational Awareness LP. We let you down this month. We came closer to permanent capital impairment than is acceptable to us. While we ultimately found a solution that protected the fund and you as investors. That was the sale of the, of the public equity book to Citadel. There was some other structure going on to get liquidity. He said, we ultimately found a solution that protected the fund and you as investors. Our intention in running the fund is to never find ourselves in such a position in the first place. Volatility is the price of long term investment returns. Over the past two years, we have delivered outstanding results. That's 100% true. Is up what, a thousand percent at one point or something like that?

[Tyler]

Yeah, something like That, I mean, it got up to what, 45 is the

[Host]

number.45 billion a from an original raise less than two years ago, I believe, of $250 million, which seemed crazy at the time. People were like, he's, he's a young, he's a young, first time hedge fund manager. He got $250 million. That's crazy. Then pretty soon it was like, oh, he's got a couple billion. That's crazy. Then it was like, he's got tens of billion. Then he's got half a centibillion. So he says over the past two years, we have delivered outstanding results despite occasional sharp pullbacks. Probably not the first time. There's been other pullbacks in the market and those have probably been amplified, but never gotten to this level of actually distressing the fund in this way. He said, but our fund must always be structured such that we can take a loss and fight another day. And that's a recurring theme in this. The writing in this letter is really good. Very clear, very direct, not being dodgy, very upfront. I love the way it's written.

[Tyler]

Almost kind of like there's the PG advice to like write very clearly. Yeah, I think it was very, kind of in that line.

[Host]

There's a lot of that in here. Yeah. So he says, I will make it my mission to ensure that we learn the necessary lessons from this experience. Here's where things stand. One, the portfolio experienced a significant drawdown over the course of July, which was exacerbated by extreme moves in core positions over the past week. Many AI names drew down by half or more, while our positive long, short spread reversed violently. While we could say much more about how unusual the month was, we hold ourselves to a higher standard irrespective of market conditions. Two, as these moves proceeded, we started to see increasingly adverse trading in names publicly associated with us. So this is the rumor that Martin Shkreli was talking about yesterday. This idea that there's blood in the water on screen.

[Tyler]

You start kind of sniff out if someone's hurting and then.

[Host]

Exactly. And then short sell those positions, sell those names, put some pressure on those downward pressure to actually intentionally hurt that fund. It's a knockout drag out fight there on Wall street, clearly, but that's the game you're playing. That's why you get paid the big bucks if you can pull it off. So these dynamics are essentially similar to a bank. Crazy to put that word in there. A lot of people would be dodging that. But very, very direct. I love it. Vulnerability begetting more vulnerability. We worked to keep the portfolio within our risk parameters. But gradually this became more difficult as positions rapidly moved against us and market liquidity dried up. On Wednesday night, Thursday morning, we took decisive action to protect LP Capital. We traded a portion of our public portfolio in a block transaction to remove all leverage from the fund and prevent further losses. All shorts were closed and reliance on portfolio financing removed. And we currently manage a fully paid for public book, long stock and long fully paid for options with no margin liquidity risk. This restored stability and allowed us to preserve our private positions. So this feels like down but not out for sure. And he says, I take full responsibility for these events. That's just the full paragraph. He just says I take responsibility. No equivocating. It's great. To be clear, this should rightly have been a very painful month in terms of the performance of our fund. When AI stocks draw down dramatically while AI technical business fundamentals are improving, you should expect our fund to be down a lot. We embrace volatility, but it should never jeopardize the fund. The fund was not shut down, it was not liquidated or transformed into a private only fund. This was something that a lot of people were speculating on was is this going to be private only? Are they only going to have their private book? Is just going to be the anthropic position that's going to be riding or is it just going to be liquidated and they're just going to return capital LPs and just say, hey, we're going to start completely fresh, do something completely different, even like an acqui hire, like the situational awareness becomes like a desk at another fund. None of that's happening. He's very clear about this. Situational awareness is not shutting down, it's not liquidating and it's not transforming into a private only fund. He says we are continuing to operate as a hybrid public private fund fund as before. However, we will manage our public book on a fully paid for basis while we draw the lessons from these developments. Most importantly, we took the steps that were necessary to fight another day. I love it. A rallying cry to both the LPs and the employees. I'm sure in the coming weeks I will focus on putting in motion the necessary changes across the portfolio management risk team and vigilance applied across the board to ensure a higher level of resilience going forward. AI may continue to intensify market volatility for years to come. And that is something that is so clear outside of the situational awareness bottleneck trade, long tail, low market cap, high volatility stocks like I have never seen the Mag 7 trading like this where across earnings we're going to get into this with recapping Metta, Apple, Amazon, Microsoft.

[Tyler]

Yeah I mean I think the stat was Microsoft had the biggest like day ever.

[Richard Craig]

Any public company.

[Tyler]

Yeah, the biggest move.

[Host]

Yeah so you're seeing, you're seeing trillion dollar companies move by 10%, 9%, 15%. It's insane that anything can happen at that scale. And so clearly there is going to be a lot of volatility and I think he's right to point out that it is based on the trade. There's so much uncertainty about one little number about how the capex is going to trade back. You know the investors in these, in these large companies let alone the small ones are moving the stocks significantly in that makes his job all the harder. He says these were very expensive scars but I am dedicated to ensuring they will be invaluable lessons for our organization and for myself as we move forward. My core promise to you is that we will not waste the opportunity to learn from these events on the portfolio itself. We are very optimistic about the current investment opportunity set. Of course I mean the thesis still holds the underlying fundamentals are accelerating at the very same time that prices have declined significantly. Thank you for your patience and your partnership. I'm fully invested alongside you. Virtually all of my capital is in the fund and I intend to work relentlessly to demonstrate that the events of this month have made me a wiser and stronger investor. He says he's available for calls but he also says that as an interim update the current unaudited estimate of net month to date performance, this is for all of July, basically negative 67% sounds atrocious until you realize that net year to date they're still up 80% which is better than any investment fund ever. So people are definitely you know, maybe down but not out that there's going to be a second act here which I think everyone's very excited for. A lot of people were praying for his downfall. It's very unfortunate to see this.

[Tyler]

I think this was really good letter. I mean this is like instills so much faith. Like yeah he's completely level headed. He's not like freaking out.

[Host]

You're calling it another billion dollar PDF

[Tyler]

that's going to be the second billion

[Host]

dollar might be, I mean Shelter agrees. Shelter had a great day, great position. What did he say?

[Tyler]

He said prediction situation awareness will be bigger than Citadel by the end of the Decade. Leopold has predicted the last two years better than anyone else. Now that he can combine that with very expensive lessons in risk, he will be unstoppable. He is my full confidence.

[Host]

This is such a wild Kane Griffin sitting there being like, you got to

[Tyler]

ride with your boys.

[Host]

Sholto. Like, you take a shot at me like that, bro. Really?

[Richard Craig]

Really?

[Host]

You're going to come for me like that? Because I will die before I am not the biggest hedge fund manager in the world. But no, I mean, I love that Sholto is coming out and supporting now. Interestingly, this is the battle of the Dwarf Cash. Dwarf Cash guests because Sholto has been on Door Cash, obviously also a roommate, and Leopold's been on. But Augustine LeBron is a little, little deep cut in the Dwarf Cash archive. One of the first Dwarkesh guests, Augustine lebron is taking the other side of it. He says, either even odds, I'll take the other side. It's gentleman's bet. And so they're putting money on the line. How much leverage will they be using? That's the key question. Sholto says $1,000 for fun. Anything more is better put in the fund even. And Augustine lebron says, done. And Sholto says, deal. And Augustine says, it's in my Google calendar. They're going back and forth now. John Chu wants to get in on the action. Everyone's doing derivative bets on whether or not Leopold surpasses Citadel by the end of the decade. So check back. December 31, 2029, I guess would be the end of the decade. Yeah, that counts, right?

[Tyler]

Yeah.

[Host]

So when the clock strikes midnight, there'll be a countdown. 10, 9. Everyone's going to be new decades. Tech people are just going to wonder which fund is bigger. This is the biggest thing of the decade. Hopefully the situational awareness will be taking over Times Square for a ball drop to celebrate being bigger than Citadel. No, I mean, if it happens, it's going to happen way before then. It won't be down to the wire. But let's pull up first this ad for Cisco. Critical infrastructure for the AI era unlocks seamless real time experiences and new value with Cisco. And then let's pull up a live view from the Citadel trading floor because we got some leaked video. This is not the vibe that Martin was articulating. Ken Griffin's wanting to be framed as like the savior, last resort, positive force.

[Tyler]

This is the guy you want to

[Host]

call, I guess this guy right here.

[Tyler]

Dune.

[Host]

So good. Is this from Dune one or Dune two?

[Richard Craig]

I think this one.

[Tyler]

I want to say June one.

[Richard Craig]

Yeah.

[Host]

Beautiful. It's very heavy.

[Tyler]

So I think one of the big stories of the last few days is we've seen all these new Leopold photos. We've never seen these before. Yeah, Brand new rare Leopolds from Wall Street Journal.

[Host]

This might be the biggest story of them all.

[Tyler]

Yeah. Because I mean, for a while the only image of Leopold was basically there was like one headshot and then it was just stills from Dwarf Ash podcast.

[Richard Craig]

Yeah.

[Tyler]

And now we're just seeing all these new ones. Where did these come from?

[Host]

There was one and then there was a photo that was done, I think for the Wall Street Journal. But then the New York Times writes up the whole story of the, of the situational awareness, you know, deal with Citadel and they just drop a banger new photo that they just had in the archive that they could have leaked. Let's pull it up. It's here. It's Leopold looking very pensive behind a glass wall. This one's in the Wall Street Journal today. This one's new too. Everyone's been clamoring for this because the one that goes viral is him in that green suit.

[Richard Craig]

This is the one.

[Tyler]

Yeah. I'm pretty sure that's AI, Right, that's

[Host]

AI, but this one is not. This is from the New York Times. They went and shot this and then never published anything. Like the first time Leopold was mentioned in the New York Times was yesterday. And they used this photo. And so you have to wonder if they were like working on a profile.

[Tyler]

Yeah. Have they just been sitting on it?

[Host]

But Leopold's been so quiet with his public relations strategy. He's not talking to media, doing photo shoots, doing profiles constantly. Like he certainly could be doing more in Bloomberg at Forbes and Fortune. Like he could be doing a lot. But he's had a very narrow strategy and I think it's worked very well for him. But it's funny that somehow all the mainstream media just has secret Leopold photos and dropping on the timeline. It's, it's a, it's a big day. Let me tell you about MongoDB. A strategic reserve indeed. What's the only thing faster than the AI market? Your business on MongoDB? Don't just build. I own the data platform platform that powers it. John Arnold is chiming in. He says, my philosophy when I used to hire traders was that the optimal number of past blow ups was one. He's not saying zero.

[Tyler]

Yeah.

[Host]

He says you got to learn your

[Tyler]

lesson is, is how does the FTX future fund count does that?

[Host]

I don't think that counts at all

[Tyler]

that it definitely doesn't count as a full blow up.

[Host]

He wasn't a fund manager of it. Right. It wasn't like donations and then FTX was just the one that was funding.

[Tyler]

Yeah, it was like philanthropy.

[Host]

He was stuff that seems. Yeah, that seems completely separate. Is, is the wedding photo AI or is this real? And is he carrying an American flag? Let's pull up this image.

[Tyler]

Yeah, this one I've never seen before until yesterday as well.

[Host]

I mean like if it's the wedding, like the wedding's happening right now, this wouldn't exist. But I'm wondering if this like leaked onto the timeline from someone who was there. Also this photo hit like Wednesday and I think the wedding would be over the weekend. But it's cool that he's just rocking, carrying an American flag. International. Yeah. The real lesson here is never travel internationally because he takes one day off, one weekend off to go to Europe and everything, everything blows up. Now of course, this one I was laughing at before the show. Rambo says comparing Leopold Aschenbrenner to Bill Wang. Wang is, Wang is the goat. Bill Wang's from Archegos. Wang is the goat of degenerates and Leopold is a sheep compared to him. Did you know that Wang turned 200 million into 36 billion and it was all personal capital. The guy literally led prayer circles in the conference room before trading days started. He had $160 billion of stock exposure on just 36 billion of capital. It's like 5 or 6x levered. That's his blow up happened in two days and he literally caused the collapse of one of the most prestigious investment banks. Banks lost a total of $10 billion combined because of his collapse. Leopold is nothing compared to

[Tyler]

get your numbers up.

[Host]

Yeah, no, yeah. I mean that's the interesting thing here is that it is this sort of dramatic unwind. But at the end of the day it is just like an over the counter transaction with Citadel for a block of trades and block of equity positions.

[Tyler]

And the fund is still around. I mean they still seem to be probably going to be doing very well.

[Host]

Yeah, they'll be okay. Citadel will be like bigger than Citadel pretty soon. Any day now. And and importantly all of the prime brokers, the big banks, they were not affected. There was not a liquidity crisis. That contagion effect did not take root. Roy Driscoll says there's nothing to learn from the situational awareness situation about the AI trade. Leo was right in 2024 and based on the Amazon results, he's still right today. Hyperscale capex continues unabated. There's obviously something at to look learn about risk management. Forex leverage with high beta stocks is a mistake in trading stocks. Half the battle is getting the trend right, but the other half is nailing the portfolio construction.

[Tyler]

Well, I mean, this is what Martin was saying yesterday, right? Yeah, like the underlying completely makes sense, but like you get into these crazy psychology things where it's just like, yeah, who's really.

[Host]

Everyone's focused on the leverage. It does also seem like they were like, every time the 13F would drop, it would be like 12 names, which is like not a lot of diversification. So I wonder, like right now the message from the letter is we're not using leverage right now. We're going to be learning the lesson. Maybe the Lesson is, hey, 2x leverage or 3x or something like that, or 4 in certain scenarios with smaller trades, not portfolio wide or something like that. But it will be interesting to see if there's a difference in if the lesson that's learned. When the next 13F drops in a couple quarters, we see, oh, wow, he has like 100 names or, or there's, you know, he's, he's using more options or less options or, you know, whatever. However it changes, that will be interesting to see for sure. So Leopold still has Anthropic Maddox and fluid stack, tier one private companies. He can probably raise 2 to 3 billion more. It's not over for him by any means, says Zephyr. And people are going back and forth on this. A lot of people. It is interesting. I'm seeing. I don't know if it's just my algorithm, but I seem to be tuned to. I'm seeing more people dunk on people dunking on Leopold than actual people dunking on Leopold.

[Tyler]

Yeah, it's like mostly just defending him, like, yeah, he was correct and unfortunate circumstances, but.

[Host]

And a lot of people being like, it's in poor taste to dance on graves or you shouldn't be so negative. Why is everyone preying on his downfall? I'm not actually seeing that many people praying on his downfall. I have here and there throughout. And earlier in the week there was like the he's working at McDonald's memes and whatever.

[Tyler]

Yeah, yeah.

[Host]

But overall, it feels like that has been pretty quiet and low. But I do get where those takes are coming from. There's been this vibe of like, it's too good to be true.

[Tyler]

It's too good. It's got Tall Poppy syndrome. No, he's he's the can't keep getting away with it wonder kid.

[Host]

Yeah, yeah, yeah. People hate to see a young, a young goat young hedge fund manager run it up. Crazy. Let me tell you about Railway. Railway is the all in one intelligent cloud provider. Use your favorite agent to deploy web apps, servers, databases and more. While Railway automatically takes care of scaling, monitoring and security. We have Richard Craig from Numerai coming on in 10 minutes. He's been running an AI hedge fund for years now and has been through all sorts of different pullbacks. Understands this stuff really well. We opened the show with one of his takes and his analysis of how leverage affects the returns and risk profiles of hedge funds yesterday. So very excited to talk to him. He has been a very interesting voice in the world of tech and finance for years. I've been a fan of his. So very excited to have him on the show. So Alexi Guzzi says keep people keep making fun of Leopold on the timeline, but everyone one, everyone needs to get margin called once in their life. Is this true?

[Tyler]

Deleon had a similar take. Right. He said basically all the goats on Wall street have had some sort of blow up earlier in the career part of the game being live player on the field. So yeah. Is that true?

[Host]

I don't think that's actually true. I don't think Warren Buffett ever blew up. I don't even think Ken Griffin ever really blew up. I think he had a really bad year in 2008 during the financial, during the housing crisis. The financial crisis. But early on I think he got his start sort of post.com and was doing convertible debt trading and never really like the entity has always been Citadel. There was no precursor to that. But, but it's a fair take that like clearly people can blow. Can. Can build back up after there's a. Yeah.

[Tyler]

I mean there's a lot of comparisons to pt, right?

[Host]

Yeah.

[Tyler]

They're saying, oh, this is also kind of. Yeah, lose take. Right. Go into vc. Then you can kind of do the

[Host]

long only thing the real hack would be to just raise the smallest hedge fund ever, $10,000, lever it, blow it up and be like, wow, I'm post fall.

[Tyler]

Oh, yeah, he's post fall now.

[Host]

He's post fall now. But if you do it with like such a small amount of capital, but you can still be like, oh man, I learned so much. That was really crazy. Those crazy, crazy times. I lost $500. Ready for the real fund now? No. Leo still made incredible returns. His fund will do incredibly well in the Long term, lots of people coming out in support. One person that's not in support, Joe Eisenthal is going back and forth with Tracy.

[Tyler]

This is hilarious.

[Host]

This is funny. So Joe has been live tweeting this. He's been making a bunch of great points and just illuminating the deeper level of like what's going on with prime brokerages and all these different aspects of what's going on. But. So Joe started by sharing the Wall Street Journal article that said that Citadel buys situational awareness stock portfolio after big losses in AI. And Tracy says, why does he have to get bailed out at all? And this is another question, like, is this a liquidation? Is this a blow up? Is this a bailout?

[Trey Stevens]

It would be.

[Host]

It would have been a very different conversation in. If this had been like a government bailout of situational awareness. That's not what happened, but systemic risk. Tracy says, why can't we just let the speculators fail? Joe Weisenthal says, who says he's getting bailed out. He entered into a transaction with a willing counterparty. And Tracy says, isn't that a bailout? Why not just keep managing the fund? Why not be Cathie woods and have a bad day and live to tell another tale? Except there were probably too many redemptions. So it was spiraling. Joe says he got margin called. And Tracy says, so it is a bailout. Just let it fail. But maybe it was too big and could see the contagion. Joe says, I don't get what you're saying. Someone gets margin called and they have to pay the broker and the way they pay back the broker is selling off shares to some other counterparty. How is that a bailout? Like he's just selling and people associate every sale with a bailout. Now, I guess, but that's not what this is. This was not the government stepping in.

[Tyler]

He was not too big to fail.

[Host]

No, not at all.

[Tyler]

I mean, some people were saying that he could have been too big to fail going in, but.

[Host]

Hmm, yeah, it doesn't seem like that's what happened. It seemed like there were significant losses and then they ran an auction and there were three, three parties bidding and they. And the bids came in above, above, like, you know, liquidation level. So the fund is not liquidated and it remains. And so Joe, after fighting back and forth for several posts, he says, I think we might have a different definition of the term here. And I think you do. I think you, you do. Very fun. Anyway, let me tell you about Shopify. Shopify is the commerce platform that Grows with your business, lets you sell in seconds online, in store, on mobile, on social, on marketplaces, and now with AI agents. Yes, this was the post you were talking about from Delhi and he says Silicon Valley somehow unaware that basically all of the goats on Wall street hedge fund land have had some sort of blow up earlier in their career. Part of the game is being a live player on the field. He's obviously talented, never met, don't know him, and will be back. So people are in the comments.

[Tyler]

There's some counter examples. Paul Tudor Jones.

[Host]

Paul Tudor Jones.

[Tyler]

A lot of the, I mean a

[Host]

lot of people are like wildly different strategies. They're not really like, I don't know, like there's a whole class of like mutual fund managers that were like by design, never using leverage, never, never hedging anything, never going short. And if you never engage in a trade that can blow up on you, by definition you can go way down and just not sell. And if you have good relationships and there's not redemptions if the redemptions are locked up, I mean this is like VC funds have never like, there's not really any VC funds that have like blown up all of a sudden because it's like, okay, you invested a billion dollars over a decade and you returned 700 million of that. That's terrible. You lost money over a decade and you completely whiffed on the benchmark and it's a bad result. But there's not like a blow up. It's just like just a miss. And so you're sort of set up for a different thing. Anyway, let me tell you about FIGMA agents. Meet the canvas. Your AI agents can now create and modify your FIGMA files with design system context. I want to keep going on this. Let's see. Yeah, the fund is still up 80% year to date. That is a crazy, crazy stat. This might surprise some, but I continue to evaluate Leopold Aschenbrenner as a live player. So Samo Berja. Absence of setbacks isn't a technical criteria for who is or isn't a live player.

[Tyler]

I mean it is funny. Like I really, I can't think of any examples I've seen of people like actually hating on Liebling. Basically everyone's defending him.

[Host]

I think the algorithm might just be tuned to like positivity. I got gold retriever algorithm or something. This happens all the time where I will see the backlash to the backlash. I don't actually see the first backlash. I just see people dunking on like whatever's going on. So Unacceptable. No, I'm sure it's there. And there's also like, you can sort of feel it in the, in the replies and the nons and in the snarkier people a little bit. It's out there. This is an interesting scoop from Berber Jin over at the Wall Street Journal related to this. Situational awareness tried to sell a three and a half billion dollar stake in Anthropic to a group of investors led by Green Oaks and Sequoia. Obviously there's a lot of demand for the stock. The parties reached a deal late Wednesday, but then situational awareness pulled out Thursday morning.

[Tyler]

They turned it down.

[Host]

They turned it down.

[Tyler]

They were offered like 3.5 billion. Something like that.

[Host]

Something like that. And they turned it down just to grind for the public equity book. They sold that to, to, to Citadel. That obviously cleared a lot of the risk out and they said, hey, let's keep this position. We're extremely excited about this. We're bullish. And so I don't know, I think. Will this be the subject of a book? Will this be the subject of an actual movie? Is it, is it drama enough? Have we gotten the FTX movie yet? Because that's way more dramatic and I don't think that ever happened.

[Tyler]

Yeah, I haven't seen it.

[Host]

And then there was Infinity Machine. Not Infinity. Infinity Machine. There was a going infinite. Is that the one?

[Tyler]

That was the Michael Lewis book.

[Host]

Michael Lewis book. But that was written like before the blow up and so it was like sort of. It didn't really tell the story like day by day, but like an in the room fly on the wall minute by minute account of this would be interesting, but it's not that dramatic because it doesn't end with an explosion. It ends with like a, okay, we're back in the fight. Which is cool. I mean it's maybe more positive outcome. And so Augustine Lebrun has taken a victory lap because he tweeted a sha256 #12 29 of 2024 saying, Leopold Aschenbrenner has terrible instincts and he will fail spectacularly. This is of course the dwar cash on door cash guest battle that's playing out. And so this is an interesting thing that you can post Crypto Cryptic. A literal.

[Tyler]

I've seen a bunch of people do this. They post some prediction.

[Host]

Shouldn't you just post every possible prediction then? And then just delete the ones that don't come true?

[Tyler]

And then I think some people accuse other anons. You just post one trade and the opposite of it and then you delete it. Everyone's wrong. Then you look back and you.

[Host]

This is another way to get started in the hedge fund game. You start two hedge funds, True north capital, true south capital. One goes extremely levered short the market. The other one goes extremely levered long the market.

[Tyler]

Yeah.

[Host]

And then, and then after a year, one has exploded, the other one has ripped and then you wind down the one that didn't work and you're like, I called it isn't a bigger fund.

[Richard Craig]

I'm good.

[Host]

Exactly. I don't think that's what Augustine did. I think this is his, I think this is his real take. And maybe he's, he is, he is the example of someone who has been like not so secretly rooting against Leopoldor or just skeptical. And he continues to be skeptical because he's betting Sholto $1,000 that Leopold will not be bigger than Citadel. What if Citadel just pivots and just becomes something way smaller? It could just spin out, fracture. He could divest something, break up the company. Shelter could went on a technicality here.

[Richard Craig]

Yeah, yeah.

[Tyler]

You know I'm riding with Filter.

[Host]

Okay, well let's go through a quick. We, we have like one minute until Richard joins. So let's just go through some timeline. We'll take you through some, some Bitmag 7 earnings late later. But the, the interesting recap is that there's absolutely turmoil in the, in the big tech markets based on earnings. Big tech's AI spending is continuing to produce blockbuster financial results even as investors have become increasingly selective about which companies are willing to reward. Over the past two weeks, Microsoft, Apple, Amazon, Metta, Alphabet all reported quarterly earnings that largely exceeded Wall street expectations. It's very boring when you pull the. Did they beat on top line? Did they beat on bottom line? It's like everyone beats and then the stock goes down 10% or up 10% based on capex forecasts and also just messaging around AI diffusion and AI uptake. So Microsoft led the group with shares surging after reporting fiscal fourth quarter revenue of $90 billion of 18% year over year and ahead of the 87.4 billion that analysts were expecting. That was the consensus estimate. Eps came in at 474 versus expectations of 421. So they beat top line, beat bottom. Bottom line, azure revenue accelerated 43% over year over year.

[Tyler]

Apple, so they gained 450 billion in one day. 16%.

[Host]

50 billion in one day.

[Tyler]

That's for biggest one day market cap gain for any US company.

[Host]

Look at that. Thank God God, that's really, really impressive. It's up 25% over the month. Very impressive. Apple also beat expectations, reporting 109.4 billion in quarterly revenue. Earnings per share of 202 stock briefly pushed the company market cap above the $5 trillion mark. But it has been absolutely tanking today. Down what, 10% today or something like that? Let's see. Down 9.47% last. We'll go through two more. Amazon has also impressed investors with revenue climbing 20% to 200 billion. 200.6 AWS growing 37% to 42.4 billion, sending shares sharply higher in after hours trading. Here's Amazon. We can pull that up as well. The market is up 13.76% and the day is looking pretty good too, up 15% today. The market's reaction wasn't usually universally positive. Meta posted stronger than expected revenue of 60.8 billion, up 28% year over year. But earnings per share fell $6.186.18. Fell short of the $7.22 analysts had expected. Investors focused on the company's $31.1 billion in quarterly capex along with $3.6 billion in one time legal and severance costs, sending the stock sharply lower. Let's see what Meta's doing down just a bit alphabetical. Meanwhile reported revenue of 119.8 billion while earnings per share of $9.11 comfortably beating expectations while Google Cloud revenue surged 82% year over year to nearly 24.8 billion. Even so, investors remained focused on the escalating cost of AI infrastructure as hyperscalers continue pouring hundreds of billions of dollars into new compute capacity. And here's, here's Google so we can dig into this more. There's a whole bunch of deeper questions about what is the actual efficacy of Meta spending on AI? How much are they spending on tokens? How much are they spending on headcount? All these things matter. But we'll dig into it another time because we have Richard Craig from Numerai here with us in the TVP and Ultron. Richard, how are you doing?

[Tyler]

Hey, doing great.

[Richard Craig]

How are you?

[Host]

Thank you so much for taking the time. I'm so glad that you had a chance to top up the show on such short notice. Very excited to talk to you, but could you kick us off with a little bit of background for anyone who's unfamiliar with your career, your business and why it's relevant to talk to you today?

[Richard Craig]

Yeah. So I am a hedge fund manager. I started my hedge fund Numerai in San Francisco in December 2015. Before that, I studied mathematics and I was very, very interested in AI from a very early age. And in 2012, some of the key breakthroughs happened with self driving cars and things like that. Really see that this would be a really, a really good thing for, to kind of bet on in the future. But numero, you know, we're a quant hedge fund, so we trade stocks using AI. We don't simply invest in AI companies. Yeah. Although pretty much every company is in some way entangled with AI. So, you know, it has a lot to do with us.

[Host]

And in terms of like the fund structure, how similar or different is it to what we're talking about with situational awareness, where there's like a few LPs, maybe some institutions invested? How broad is the LP base? How concentrated are the bets? How big is the investment committee? How are investment decisions made?

[Richard Craig]

So, yeah, I mean, we're trying to make alpha, which is a kind of a technical term like we can't take any market risk, we can't take any factor risk. We can't go, go off on anything we think is, you know, some something's going to be big. Okay. We can't invest in that. Except for through our strategy, which is a low volatility strategy, the fund has been growing a lot. Assets are up 100% a year for two years now.

[Host]

Congratulations.

[Richard Craig]

Well, remember, that's a lot of, that's AUM growth. But the point of the company is to make this kind of thing called alpha, which I feel like is a term that gets abused a lot. And we are trying to make sure that our investors can make a better portfolio by holding a piece of us.

[Host]

Yes. So help me understand alpha in the context of situational awareness, because I've heard a lot of people throw around, it's just levered beta. It's, it's beta. But when I think about situational awareness and the ideas and the thesis that was contained in that PDF that was released almost two years years ago, that felt contrarian. It felt like alpha in the sense that you can understand the future in a way that other people can't. Is that not alpha?

[Richard Craig]

Yeah, it is. It kind of isn't in this, in a naive sense it is. And it's obviously the situational awareness blog post that came out was sort of super visionary and fun. I mean, I read the whole, the whole thing. We have a mutual friend. I think we were at Joey's wedding together in Vienna and Joey, I said, joey can you please introduce me to Leopold. This is so cool. There's a place for that type of fund where you're going to take a big bet with a lot of risk. And those types of funds can obviously produce extraordinary returns. But the trouble is the driver of the return is the risk more than the alpha. Okay, so the alpha is there, but the driver of the return is the risk.

[Host]

And so when people retreat to a more classic example of alpha, what are we talking about? What is the purest source of alpha?

[Richard Craig]

Yeah. So I mean, the, here's the naive way to have alpha, right? If you, if you, if you have, if you beat the market, you have alpha. Okay. So natural. Why, why, why? What's, what's so hot about that? If my portfolio is up 20%, but the market's up 9%, I have alpha.

[Host]

Yeah.

[Richard Craig]

But actually still kind of missing the point in actually a very deep way. And so the problem is there's not just one factor you have to look at. Do you beat the market? You have to look at, do you beat all the factors that there are in the market? So there's a factor called momentum, there's a factor called technology, there's a factor called US Technology, there's a factor called momentum times. Yeah. Okay. All of these things in the, As a term of art in quantitative finance, you call them risk premium. They're risks, but they, and they might have a premium, but they, but they're actually not the types of things you would call alpha. And so a fund like newer I, we're trying to hedge to things, so many things, thousands of different risks, that if someone ever looks at our portfolio and wants to say, do you have or are you making money just from risk? They can't argue that. It's very hard to say that. So we, that's our, that's, that's the goal. And that's the goal of all hedge funds. Citadel or a Millennium, they're trying to make this kind of alpha.

[Host]

How much should I, if I'm trying to understand, if I'm, if I'm looking at a fund's returns over a number of years, how much should I be able to identify alpha purely by uncorrelated results with the broader market is if the market goes down 10%, the fund goes up 20%, then the market goes up and the fund goes down. Is that, is that giving me like a sense of alpha that at least this fund is searching for that, or is that just uncorrelated returns and they're just throwing, throwing dark.

[Richard Craig]

So if you're uncorrelated from all the factors. You have alpha.

[Host]

Okay.

[Richard Craig]

I think there's a sort of sleight of hand that discretionary investors, hedge fund managers tend to pull, which is they say, well, look, we believe in the us we believe in AI. We want to take that factor risk because that's part of our return. And to which a sophisticated investor would say, we can take that risk ourselves without paying. Yeah. There is nothing stopping any LP of situational awareness from buying anthropic shares themselves. There's nothing stopping them from going long

[Host]

or something.

[Richard Craig]

It's really like almost childish to think that a sophisticated investor wouldn't be able to pull those trades themselves. And so to take a personal example, here's a fun thing. I bought. It's a good day to say this. I bought some Amazon options, some call options on Amazon. I'm a hedge fund manager. You know, I don't really trade very much, but I just think it's a cool company and it's going to benefit from AI. And I, and one of my friends said it would be a good thing to. To buy. That's it. Okay. Now my call options are up, whatever, 300% today. Yeah, whatever it is. Does that mean I'm on a generational run? I'm a genius investor? No, it just means a gamble I took paid off. And it paid off actually, probably appropriately for the risk I took. So in the hedge fund industry, the banality of that is extreme. No one numerous talking about how I bought Amazon options and made money. It's just so boring.

[Tyler]

Okay, so even the timeline, like the length that Leopold was. It was like a year and a half. He was on this generational one, as people say. Is there no difference between that and

[Host]

just when does a generational run start?

[Richard Craig]

How do you define.

[Host]

Is it a. 11 months and 30 days?

[Richard Craig]

I think it takes a generation, actually. I think that's how you measure the investment performance of someone over a very long time.

[Host]

You're right there.

[Richard Craig]

So that's why it's kind of a funny term.

[Host]

Okay, so wait, but what do you think about the idea that certain managers, it might be possible in theory to copy them, but they are getting paid to do something that you might emotionally not have the resilience to do. I'm thinking of this Jeremy Giffon post. He says people really miss that buy and hold means the ability to buy and hold. Not that you should buy and hold. And he quotes this screenshot from the Financial Times. It says, since 2010, Warren Buffett sold his entire holdings in 63 positions with an average hold time of four years and three months. Combs and Weschler two other managers exited 48 stocks holding for just two years and 10 months. And so even though we all know buy and hold, you know, buy low, sell high, psychologically it's hard to do. So that's maybe what some hedge fund managers are getting compensated for. Sure. I might have read situational awareness. Agreed with Leopold. But do I have what it takes to actually go and, and buy on margin and do all this crazy stuff and not paper hands?

[Richard Craig]

I love that discussion. I think there's a sort of feeling that he was the one with the courage to take all this risk or something. But even that falls flat on a hedge fund manager, I'm afraid, because it's like, it's like someone goes all in with pocket sevens and he, he doubles his money. Have you learned anything about his courage or his skill? Really? He's, it's a bit like, it's a bit foolish really. So it's basically like the. I also used to actually think this. I was a young hedge fund manager. I feel like maybe, maybe aging out now. But I, I was a 28 year old hedge and I did also have this perception that surely these big hedge funds are just so risk averse that it's almost like for psychological reasons they refuse to take enough risk. And I've come to learn that they're taking nearly the exact amount of risk that you should take. Because these things are mathematical. There's a right risk to take if you have a certain sharp risk ratio and those numbers are smaller than you think if you want to run money for a very long time. Yeah, right. So you know, Leopold was up 400% in H1 of 2026. Well, Warren Buffett was up 5 million percent by basically being sensible for a very long time.

[Trey Stevens]

Sure.

[Richard Craig]

So do you want to do the 400 and then lose everything or do you want to do the 5 million that it takes 30 years? So I think that's, that's kind of like the orientation you have to think about. So it's not that some people are unwilling to take risk, it's that they are already taking that risk. It's just a small part of their portfolio. So there's no doubt that in the markets, numerous AI models that are trading thousands of stocks at all times that we intersected with situational awareness and we bought some of their positions and sold some of their positions.

[Host]

Sure.

[Richard Craig]

And maybe had similar alpha. If you constrain our Portfolio to just look at that segment of the market. But we didn't do it at the wrong size.

[Host]

You could say, yeah, you actually ran the numbers on where you had call the numbers on how likely a catastrophic down, down drawdown would be based on a certain leverage ratio. What does that math say is the optimal amount of leverage the optimal amount of risk? Is it all based on the timeline? If you think, okay, well, I want to be the next Warren Buffett here, he's been investing for 60 years, I need to work backwards from that number. And then is that different than if I say, look, I actually believe the singularity is going to happen in 2030 and so I only need to survive another four years and then I'm done? Because it's whatever the singularity is.

[Richard Craig]

Yeah, well, that's in some ways almost the problem. You really have to have a long horizon for investing. You know, the market is not pricing that the world ends in 2030. Yeah. In fact, the market's pricing. I mean, it's just not like on every level, if the world was going to end, you know, the volatility of the stock market would be as high as. Situational awareness is fun. So it's like, you know, we basically, we have to have this orientation of long term. And if you don't have that orientation, kind of all bets are off. If you, if you're, if you're gambling and you're playing poker and it's late at night and you, you only have 30 minutes left to play before you have to catch a flight. Yeah, okay, let's up the risk.

[Host]

Yeah, yeah. I mean, there, there is an element, I'm not saying that this is what's happening there, but there is an element where you're like, if I believe that the world is ending in four years, I want to spend the next four years on a yacht. And so I need to get as much liquidity as possible in the short term. Sort of like you have, what was that meme? You have like six months to escape the permanent underclass. Sort of like the hedge fund version of that, I suppose. But you clearly don't, you know, believe in that. What are your beliefs about the future? Technology, the financial markets, broadly? Like, how are you feeling? Is that even something that you interrogate or are you preoccupied with other sources of alpha that are less macro and long term, trend based?

[Richard Craig]

Well, any long orientation. So if you're long, the stock market, the problem is all of our investors are already long. The stock market, you don't have to tell them you know, it's a good idea to buy stocks. And so, you know, if I. If I was running a fund and maybe this personal trade of buying Amazon, if I had sold that to an investor, they'd be like, well, bro, we already had Amazon and we already sized the risk appropriately. So all you did was add risk and not any reward, really. That's. It's that kind of tension that forces all the. All these issues. But, you know, I also want to say, I mean, I think one of the first things I said in my post is I think there's a place for these kinds of funds. Okay? So I've invested in funds like this. So there was a fund, it was basically the. The crypto version of this was a fund called Polychain. And it's good. And I was a big LP in that. In fact, the first LP and the biggest, I think the biggest one for a while. But I guess I never got that enthusiastic that if someone had made 1000% of the past two years or whatever it was, that this would be some permanent property of that manager. Do you see what I mean? If there's no amount of looking back on a track record of a manager that's just buying risk, risk will basically be able to overcome the reality of investing, which is that it's always going to be hard to make money. Yeah. So let me defend the situation more. Not just that these funds are cool because I invested in one, but. But I think they're cool because many investors want a high return on the risk that they're taking because they already have their portfolio entangled in all these investment. So they have bonds and stocks and all this stuff and this marginal 500 million that they're going to give to a small fund, they want that fund to kind of kick ass with that money. And so that's where I would say I don't think it's right to say Leopold did something wrong. In a certain sense, it was very likely to go badly. But I don't think it's intellectually wrong for any LP to have invested in that. In fact, maybe I would have invested in it or something if I could have understood it a bit more, and so on. But obviously there were a lot of red flags and the fact that the volatility was obviously much higher than 100%. You can't make 4% in six months without having that kind of volatility. Then you're basically saying we're literally doing a coin flip here. And I just hope that all the investors knew that. And by the way, if you're a huge investor and you put 5 million in and you lost it all on the very day you lost it all, you might still be up on your portfolio.

[Host]

Sure.

[Richard Craig]

Because your other stuff went up. And so that's how investors should be managed. It's on their whole portfolio. So I don't want to say anything bad about anyone who invested in that fund. I'm sure there are some of the best wealthiest investors out there. So I'm sure they're.

[Host]

And I mean, from the letter that he sent today or yesterday, it seems like the Citadel deal put a lot of new cash on the balance sheet, cleared a lot of things out, and that there might not be permanent capital impairment, as he put it in the letter. So he is living to fight another day. What do you make of this idea that the optimal number of blow ups for a hedge fund manager is one, not zero.

[Blake Resnick]

Not.

[Host]

But do you agree?

[Richard Craig]

We had one, we had one losing year so far with.

[Trey Stevens]

Right.

[Richard Craig]

So we are not, you know, if you're in the business of being an investment manager, you almost putting yourself on the hook to be like, yeah, one time we lost money. In fact, about 50% of days we'll lose money. Right. So you really don't want to be negative about that.

[Host]

Yeah, Sorry, continue.

[Richard Craig]

No, so I think that's one very important piece. I would say though, the key thing that I think matters is not just leverage, which I think people are saying, oh, you use leverage, you lost money, we use leverage. I'll bet you we use way more leverage than situational awareness. Not leverage. Long we're not levered. Long we're not levered factors. So we're levered. If you were to plot our performance on a graph, you would see and you would say, show me the unlevered performance. It would basically look like the X axis. You wouldn't even notice it.

[Host]

Sure.

[Richard Craig]

It's so much kind of risk constraint that it requires leverage to get to appropriate volume.

[Host]

Got it.

[Richard Craig]

So with more leverage than situational awareness, we have one tenth of the volatility and risk is volatility squared. If they have 150 squared units of risk and we have 10% squared, it is a different ballgame. So I'm mostly critical about the high volatility. I think that was the mistake, not the leverage.

[Host]

Interesting. Where do you think the fund goes from here? It feels like he's set up for a second act. The fund is not liquidated, not private, only not converted. How do you think this evolves? Like, what is the Lesson to learn.

[Richard Craig]

I think, first of all, I don't think that we should have a culture of thinking people are intelligent anymore, because AI is smarter than all of us.

[Tyler]

Okay?

[Richard Craig]

So if one of the reasons is you think there's like a super genius investor out there that's clearly got something like a kind of same type of reason you might have invested in SBF is clearly on, you know, doing so well, that. Don't do that, don't do that hero worship thing. Just take out your pocket calculator and calculate the risk of ruin.

[Host]

Sure.

[Richard Craig]

Okay. And then you'll, like, probably avoid a lot of these types of mistakes. But I think, you know, I really believe in AI and I'm a singularitarian. I mean, I'm seriously a believer. I'm not moderate about it, but because of that, guess what? AI is in the stock market. AI is in citadel. AI is in numerai. So if someone comes up and says, oh, my thesis is we're going to buy AI stocks because AI going to be big. Okay? The stocks are in the market. The market is an artificial intelligence intelligence. So don't take it lightly, man. Like, yeah.

[Host]

What is the process psychologically for dealing with a career where 50% of your days are going to be bad days? There's a lot of people in most careers, I feel like, can show up and have a day that's successful. Like, they moved the needle forward, they didn't make backward progress. And yet with the job of a fund manager in your role, half the time you're going to wrap up your day and you're going to be worse off than the day before. Right.

[Richard Craig]

I think, well, you see my terminated hand in the back, right?

[Host]

Yeah.

[Richard Craig]

I think you need to lean on math and AI. You need to. Basically we say, you know, if. If the volatility. If you know what volatility means and you know what your volatility is, can there be anything to shake you if you. If you can just rest on that mathematics? I mean, so when our fund had a down year, we lost a bit more over the whole year, a bit more than one standard deviation of volatility. But guess what? That happens to practically any investment. You're guaranteed to lose one standard deviation, one unit. You guaranteed you lose your volatility. So the question is, were we running 100% volatility when that happened? No, we were running a survivable amount. So we didn't lose everything. But yeah, it's. So I think there's some. There's really a lot of comfort to be had in math and, and AI and just kind of trusting that you know, things, things will work out. You know, all you need to do to be Warren Buffett is, Is just get 9% alpha per year and add that to the S and P. So if you have a hedge fund that's making 9% alpha per year and they can repeat that, they're going to make 5 million percent return and all the people taking too much risk are going to lose it all over and over and over again. And so, you know, that's how you have to think about it.

[Host]

Last question and we'll let you go. Retail froth. There's an interesting arc here and I want to know if you think, think it's real or the shape of it, but it feels like when the situational awareness PDF drops no one's thinking about bottleneck stocks or memory. The smart money gets in.

[Richard Craig]

Everyone in Silicon Valley was already thinking about that.

[Host]

Yeah, yeah, but that's like maybe the smart money and then it gets bigger and bigger and then pretty soon it's like retail meme stock and it feels like one of the knock on effects of that is just more volatility like the last little leg up can be more tumultuous. Is that the way to think about that? Is, is it important to, to think about like the meme stockification of a particular asset class as a factor and then how to deal with it?

[Richard Craig]

Yeah, I, you know, often was. Was operating with high leverage during 2021 like meme stock rally.

[Host]

Sure.

[Richard Craig]

And it is a phenomenon. And Cliff Asness, a famous quant AQR talks about how the Internet sort of making the market less efficient because there's so many people who almost get the same message at the same time with the same media and then have the same trading account systems like on Robinhood or whatever that can instantly express that. But I think, you know, I don't think that's something to lose sleep over. I mean the, it's very easy to handle that type of thing. The what happened to Leopold wasn't something extraordinary. It was banal. It was. You had high volatility and you had a standard deviation drawdown.

[Host]

It's gonna make for a bad movie then.

[Richard Craig]

Well, it'll be a great movie. I'm sure the movie won't have any math in it, but it probably math will.

[Host]

It should. It should. It should. Well, thank you so much for taking the time to come chat with us. Have a great rest of your week, great weekend and hope to talk to you soon. Thanks so much.

[Tyler]

Thank you.

[Host]

We'll talk to you soon. Goodbye. Let me tell you about CrowdStrike. CrowdStrike secures AI and stops breaches. Your business's AI. Their business is securing it. Head over to CrowdStrike. We have Trey Stevens, the co founder of Anduril, general partner at Founders Fund. Trey, how you doing? Hello guys. Welcome back to the show. I don't know if you've met Tyler before.

[Tyler]

Jordy's out today.

[Host]

Jordy's out sick. So we have a guest co host. But great to see you. How you doing?

[Trey Stevens]

I'm good, can't complain.

[Host]

How is the market turmoil affecting you in the venture world?

[Trey Stevens]

You mean the public market turmoil?

[Host]

Public market. I mean first time in my career that I've seen trillion dollar stocks mag seven companies moving by 10% in a single day. That seems crazy of the situational awareness thing going on. Like the public markets seem insane and sometimes, you know, gyrations in the public markets reverberate into private markets. Sometimes they don't. Sometimes you're insulated as someone who can hold longer, who doesn't have to deal with that. But I'm just wondering if any of that chaos is bubbling up to what you're seeing in your seat.

[Trey Stevens]

Well, I think there's certainly like different places where that intersects. You know one of the things that Brian Singerman, who's one of the former partners here at Founders Fund, he used to tell us venture capital is a micro game, not a macro game. What matters is have you invested in the generational companies in every era? I think Founders Fund has performed incredibly well in that regard. We have large positions in some of the most important companies of the last 20 years. But obviously there's questions around things like SpaceX has gone public. There's been a reset back to basically the IPO price. The lockups haven't even released yet. So there's like all these questions about where that's going to stand as that kind of lockup happens over the next really two years almost. So I don't know, I guess is the answer. I'm not a finance person at heart in any way, so I understand very little about the public markets. But one thing that I hope happens is that as there's a reset on the public market side, I'm hoping that there will be somewhat of a reset on the private side as well because the, the, the market makes absolutely no sense in venture capital right now.

[Host]

Okay, is there, is there a steel man here where we're. The capex intensity that we saw Work out in hard tech companies like SpaceX, like Andrew, you know, this is a company that's doing something very important. It's going to take a little bit more capital to actually build something really hard. It's not just a couple lines of code and then an elegant, you know, website that just prints money. You're going to have to invest some real money to make Space X work, to make Android work. And that's coming for AI companies now. They have big training budgets, they have very expensive talent. Isn't there a reason why valuation should be higher? Because the, the rewards that people are going after are so much more, not just capital intensive, but potentially bigger.

[Trey Stevens]

Well, I mean, certainly if the outcomes are these multitrillion dollar businesses, then yeah, you can blend that risk over many rounds at higher prices. But that's the question is, is that necessarily the case? Are we going to have $10 trillion IPOs over the next five years, or is it going to look more like a reversion to the mean where we have companies like anthropic companies like OpenAI, companies like SpaceX, but then a lot of companies that are really successful, really interesting companies that are, you know, Uber scaled or Airbnb scaled or even, you know, when Meta first went public, you know, those would be tremendous venture capital success stories. But not if, you know, you're pricing a seed round at a billion dollars.

[Host]

Yeah, well, how do you, how do you advise founders who might have the option to raise that billion dollar seed round? Because you're in this sort of conflict of interest territory where if I come to you and I say, hey, I got an idea, I think I'm going to raise $1 billion seed round, you could be, you know, saying, I don't know, this doesn't seem like it's going to be $10 trillion anytime soon. Maybe you shouldn't do that. But then I come to you and I just say, hey, you're just the vc. You want a good deal.

[Trey Stevens]

Yeah, I mean, there's, there's two kind of schools of thought. The first school of thought is to say you should do that. You should raise as much money as you can at the highest price possible, build up a war chest and survive until you can justify that price. And that might actually be the right answer for some companies. I don't want to say that that's like always a bad idea. That might be a right idea. Obviously the worst thing you could do is raise a very small amount of money at a very high price, because that's where you're going to get yourself into trouble. But then the other side of this is like, can you build a financing strategy that allows you to grow responsibly over time and that you will see continuous momentum with every fundraise and you're never going to have your back against the wall. That's been the approach from the very beginning with Anduril. This is what we've tried to do and I don't think we have any regrets about doing that. We could have raised at a higher price at every round. But it's been nice to be able to go back to our employees and our investors on an annual basis and say, look, we just did a 2x markup. Look, we just did a 2x markup. LookSight, we just did a 2X markup. So it feels more sustainable and keeps us tethered to our company performance more than this belief that it's going to pay out at some point. I'm sure you guys watch the HBO show Silicon Valley, but there's the hilarious scene where what's his name, Rich or whatever? No, the Trace Comas guy where he has that famous line where he says no, whatever you do, don't get revenue. Once you have revenue, you're going to be judged on the basis of your revenue.

[Host]

Yeah, is is a billion dollar seed round. Is, is, is. Is too much capital? Like is it. Is it increasingly intoxicating? Is the level of intoxication with over funding at the early stage, is that problematic? Are there some founders that can work it out and not develop a culture that overspends early? Because your point was like, if a bunch of money shows up, you need to actually have it as a war chest. If you just have it flowing out easily, you're just going to run out of it and then you're in a corner. But I'm wondering, is there a path to actually setting your company up for war chest mode as opposed to just, oh, we're just spending freely and we're just going to burn through this?

[Trey Stevens]

I'm sure there is a path. You just don't see that dissonance discipline exhibited often and you can see this in every bubble that's happened over the last 20 years is that everyone believes that they can have a billion in the bank and be responsible with it. And very few people can actually pull that off. So I think there's something wise about metering that out and having a plan rather than just kind of yoloing into the abyss. But it's so hard because like I said, in some cases it might actually be the right decision to raise as much as you can at the highest price possible.

[Host]

In defense tech specifically, it feels like this was a category that was extremely hard to get revenue because you had to work with the government. The government is just a little bit slower than selling to your friend in B2B SaaS or something like that. And the traditional path that I remember talking to you about was sbir. And then at some point, there's the value of death, and you try and get to the program of record. But following the new programs in the Department of War, it feels like there's more of a menu. There's more ways for hard tech companies, defense tech companies, to work with the government just to get to revenue. Can you explain a little bit more of what you're seeing in terms of early, mid stage, different ways for defense technology companies to actually grow their business, prove what they're doing? And has it actually changed over the last decade that I'm feeling like there's a change?

[Trey Stevens]

Yeah, it really has. I mean, I was at Palantir very early, and, you know, that early era of the, you know, 2005 to 2015 range, where Palantir and SpaceX were really the only players that were doing this, I mean, it was the wild, wild west. Both companies had to sue the government for contracts to go through on the basis of this thing called Title 10 USC 2377, which is like a commercial preference authority. So there was really no path. It was like if you got to the point where you had a product that was worthy of going into production or going into scale with the government, they would do everything they could to block you and go back with the primes. That's shifted. That's not the case anymore. There are much better pathways. In the early Palantir days, we worked with Inkitel, which is the CIA's venture capital firm, on these work programs. That's the same way that we got started at Anduril. Actually, right around that same time, Raj Shah and Chris Kershaw were standing up the Defense Innovation Unit and making that a relevant contracting pathway. All of the softworks, afWorks, Army Futures Command, they all started developing pathways for companies to get funded. Now there's Stratfi funding, which can come through under the SBIR umbrella. That allows you to get tens of millions of dollars in matching funds from the government. As you're scaling, there's bridging funding to go from pilot to prototype to production. It's much more better understood. But the problem is that a lot of These are still at the end of the day funded out of the research and development budgets rather than production budgets. The US government has a history of this let all flowers bloom strategy where they are always happy to give out low single digit millions of dollars to hundreds or thousands of different companies. But there's a big difference between having 10 to 20 million dollars of research and development funding and having billions of dollars of production funding under like major weapons acquisition programs, program offices, things like that. And that muscle is still, it's still needing to be developed. It's early days.

[Host]

When you say the let all flowers bloom strategy, I'm thinking back to when we talked about this idea of the anderal for X is and are all. There's a lot that Anduril can solve. At the same time you've partnered with companies, companies like Dirac, you've partnered with other new startups in the hard tech defense tech space, broadly. And I'm wondering if there's maybe more opportunity now, now that we're, you know, maybe a decade into the defense tech boom, maybe five years, a couple, you know, we're deep into this. There's a path you've charted it is there more opportunity for new entrepreneurs to pursue deeper in the supply chain opportunities See an Anduril as a customer maybe instead of the government as a customer?

[Trey Stevens]

Absolutely. I think not only instead of, but also in addition to, I think a lot of these companies that are working down the supply chain, they have relevant government customers, they have old legacy customers like the Primes that are still needing to correct some of these problems or become more efficient as well as the big successful tech Companies like the SpaceXs, the Teslas, the Andurils, things like that. I think that the opportunity is definitely there. It's just a matter of having a novel idea and being really passionate about driving that single thing forward. I fear that when you look at the defense tech industrials ecosystem right now, it's a lot of hype, it's a lot of people that want to be part of a moment. The reality is that's not how tech investing or tech startup creation has ever worked. Once a thing is a category, it's too late. If you were a space tech investor and you didn't invest in SpaceX, you probably lost money. If you're a crypto infrastructure investor and you didn't invest in Coinbase, you probably lost money. I think that we're nearing overhype of volume in defense tech that is going to make it very difficult to separate signal from noise.

[Host]

I assume you're referring to on the venture side. Specifically, I'm interested in an idea of like, is there an opportunity for an entrepreneur who says, look, I'm not building a next trillion dollar company. I don't want money from Founders fund. It's not a fit. But I need some private equity dollars to go buy an old factory. And I'm going to make drone motors, small drone motors in America, pretty cheaply and efficiently, and I'm going to sell them to a bunch of people and it's going to be, you know, a $50 million revenue business after a decade. And it's going to continue chugging along at 10% growth. And the EBITDA is going to be reasonable. We're going to pay back the debt and we're never going to IPO it, but it's going to at the same time provide a career and jobs, but also financial return for the right person. But we're not going after the hype and venture funding and the big raises and all of that.

[Trey Stevens]

Well, I think the intersection of both of our points is that, yes, I think there's a ton of room to do that. And secondly, all of those companies that are doing the things that you're mentioning are trying to raise oodles of venture capital dollars. So if someone actually wanted to build this business in like a, a more normal financial structure, yeah, I think it makes a lot of sense. But there's 20 of the companies that you just mentioned. They've all raised tens of millions of venture dollars. And I'm not really sure what the end game is.

[Host]

I guess we'll find out. Take me through some of the recent Anduril announcements. I want to know about the Thunder autonomous attack aircraft. How did that come together? What is the, what is the program? What is the scale up? What's the manufacturing look like for that?

[Trey Stevens]

Yeah, so Thunder is an autonomous attack helicopter that we just announced at Farnborough in the United Kingdom last week. The proliferation of drones has turned the near surface fight into like a robotic kill zone. And so crewed helicopters, their crews, they're tremendously at risk. And so basically the same way that we approach Fury, the collaborative combat aircraft that we can talk about as well. We just rolled our first unit off the line to the Air Force earlier this week. But the same kind of concept with collaboration, with manned crews is what we're talking about here, except with helicopters instead of with fighter planes. So that process is fully in flight. We've been working on this project for years now. We've completed test Flights with a full scale surrogate. And we're planning for Thunder's first flight for next year in 2027.

[Tyler]

What is like the shape of the autonomy? Is it like you have one person kind of overseeing a bunch of these different crafts or like, how do you guys think about that?

[Trey Stevens]

Yeah, you can kind of think about the helicopter pilot. Whether it's, you know, an Apache or whatever, they're like Ender in Ender's game. And they have this, you know, fleet of autonomous vehicles that they can kind of command and control from the cockpit of their own aircraft. And you know, there's this really cool anime video that's the third in a series that just came out when we did the launch last week. And it kind of explains the concept of operations for this, which is, you know, you don't want to be putting the Apache and the human beings in the, in the helicopter in harm's way. When you're engaging with all of these autonomous assets that are creating risk out forward, you want these to be able to go out and take shots, give you a better sensor view of things or even become attritable and take the shot for you so that you're not the one that's eating that missile. They are.

[Host]

We talked years ago about the idea of building tradable systems, not building capital assets. These huge aircraft carriers, these exquisite systems. But if I'm charting the size of what you're building year over year, we go from the Anvil, we go from a very small drone, something bigger and bigger. If I chart it out, it looks like C130 is coming up any day now. Am I off? Is there a limit to this? Or is there a world where everything up and down the stack is on the table?

[Trey Stevens]

Well, at some point it becomes non attritable.

[Richard Craig]

Right.

[Trey Stevens]

Like, you know, the danger of an aircraft carrier is that there are 5,000 service members on a 20 plus billion dollar vehicle that can be destroyed by a single missile. That's a bad trade. We don't want to, we don't want to be doing that. Yeah, but you know, to the extent that there are assets that are physically larger but would be better suited to robots, yeah, I think that's very much in play. You know, the, the Dow has been talking for a long time about autonomous tanker aircraft for aerial refueling. That's the sort of thing that if you could actually get an autonomous system to do that really well, logistically it becomes easier, reduces risk. In theory, if you can get it to work really well. It also is a prime target for risk reduction, I think there are larger assets where it does make sense, but the trade off is really in human lives and total cost. Because at some point in either of those calculations, these things are no longer considered to be attributable.

[Host]

Yeah, talk about fury. And the Ohio production line arsenal won. How did that project, like what, 18 months from start to finish? I think is roughly the number. But was that the original plan? Were there setbacks? Was there a risk of not hitting that? Like, what did it take to actually nail that? Because that feels incredibly quick.

[Trey Stevens]

Yeah, it was incredibly fast. Yeah, we kind of did the ribbon cutting for the, the land that we were building on in January, I think was January of last year of 2025. And then factory is up and running in May of 2026. We rolled our fierce first fighter plane off the line on Monday of this week with the governor. And so, you know, things were very, very rapid. We could talk about this for a long time. There are a lot of advantages that we had going in. We had an existing building, an 800,000 square foot building. It was just a shell, just concrete shell. But we weren't starting totally greenfield. We had utility support to the site. Jobs. Ohio, which is the economic development agency for the state of Ohio, was partnered very closely with us on making sure that we have the resources that we needed to get that facility up and running. But of course there is like a tremendous operations effort that had to go into building, like designing the facility, building out all of the office space, setting up the factory line, and that's still a work in progress. We're not totally done with building one, but we've already stood up the shell of building two next door. So that will be in flight as well. You know, internally at Anduril, the person that eats all of the garbage around, this is Matt Grim, our coo, my co founder. So I would hesitate to pretend that I know what I'm talking about, but Grim is the man that made this really difficult project happen alongside his team on the manufacturing side. On the operations side, they really put off a heroic effort.

[Host]

So I don't know if you can actually show this, but are there long lead times for specific machines that you. That you sort of needed to think about sourcing and even signing contracts with, like years in advance? And then you were like, okay, we have the site so we can go drop this one expensive machine in the facility and get going faster? Because when we hear, when we talk about like semiconductor supply chains, like everything stretched out 24, 36 months and it feels Like. Like if you were to sign, get the building and then start ordering things and actually building the production line, you'd be behind schedule on day one.

[Trey Stevens]

Yeah. I mean, if we're comparing it to the semiconductor supply chain, nothing like an ASML EUV machine or anything like that, to be clear. But yeah, of course, there's all sorts of things you have to figure out in the supply chain. Not only the tooling, but also the materials that go into construction of the products that we're building. So, you know, natural resources are very challenging. Rare earths are very challenging. And we're working closely with the Department of War to ensure that we have offtake agreements to get those natural resources that we need to build the things that are important for them. They've been a great active partner with us in that. And in addition to that, I would say that labor becomes a big bottleneck. You can't, you know, say 18 months ago. Yeah. When we're ready to open the factory, when everything is back built, we're going to start hiring people. No, we started hiring people the day we announced that we were doing this. And we had them work out of our headquarters in Orange county, the entire team of people that are building furies at Arsenal 1 in Columbus, Ohio today. We're doing the exact same thing a few months ago in Orange county, where our headquarters is located. So you have to really get ahead of every aspect of this, and it's a very complicated task. But. But again, we're really happy to see that we have things up and running and rolling off the line today.

[Host]

Speaking of jobs, what is your pitch for mandatory civil service? Engaging solving the jobs crisis that may or may not be coming. Walk me through your latest thinking on the role of civil service in the modern American society.

[Trey Stevens]

Well, you know, I've actually had this thought for a long time. For probably close to 20 years now, I've been kind of beating this idea around. You know, it's not like a super contrarian idea, actually. Like there are a bunch of countries across the world that have some version of mandatory civil service. In fact, we have aspects of this inside of our own society. If you think about things like jury duty or being subpoenaed for court, or there are incidents, instances throughout the last even 50 years where people were called into service to do things like road construction and maintenance. So I understand there are all sorts of questions that you would have about the 13th amendment. I am not in a position to adjudicate those complicated constitutional issues, but I think that there's something really important about ensuring a sense of civil duty into our next generation. And I don't think that needs to be in a military service. I think it could just as easily be like going and working as a clerk at a county courthouse. There's all sorts of things that we can do to pull people in and have this feeling of shared progress that we all owe a responsibility towards. And I think if you were to go to Singapore or to Israel and ask them, is this a societal good or has this, has this been a disaster? Is it forced labor? Is it involuntary servitude? I think they would all say no. This is actually pretty great. It was a difficult thing that I did and I'm glad that I did. I learned a lot. I met a lot of people that are still part of my life today. And I think that it would be wise for Americans to take a hard look at ourselves and say, is what we're doing right now working? Are we happy with the pathways that have been created for our own kids? Are we happy with the political tribalism that's resulted from a lack of civic duty? I would say no. I'm not particularly happy with this. Is my particular recommendation the right answer? I don't know, but I think we should try things.

[Host]

Yeah, no, I love it. I have a hot take. I want you to react to. I believe that the TSA is underrated. I think people complain about the tsa, constantly, say it slows me down. I'm just trying to get to my airplane. But. But when I look at the record of the tsa, it seems pretty much flawless. Seems like they've done a great job securing our airways. And when I actually experience and think about the people there, I've had positive interactions. I haven't actually been offended by anyone or anything. It feels like a great. Yes, maybe it's a jobs program, but it feels like a great job. It feels like people, they're going to and they're working in a clean, air conditioned building. They're interacting with other Americans, meeting other people. I think that TSA might need a reevaluation after being the butt of every comedian's joke for two decades.

[Trey Stevens]

I mean, there are aspects that I would probably agree with you. I still do think it's sort of a jobs program, but again, that's maybe not the worst thing mandatory service is.

[Host]

Yeah, well, yeah. How does it fit in with like, mandatory civil service?

[Trey Stevens]

Yeah, I mean, it could definitely be into something like that. I mean, the reality is, like, it's actually gotten pretty efficient. Like, I Don't know if any of you. This is cbp, not tsa, but I'll use it as a similar kind of counter. I don't know if any of you have gone through global entry at one of the large international airports, but you just literally walk through now.

[Host]

It's amazing.

[Trey Stevens]

It's unbelievable. Like, you know, I think that we have the ability to lead the world in the way that we, you know, process travel safety, that we handle, you know, visas, that we handle immigration. And I think the Department of Homeland Security has actually done a pretty remarkable job, despite all the criticism that they've been levied.

[Host]

Yeah. I think that there's two steps to the argument, to the discussion around any sort of mandate. Mandatory civil service is first, you know, yes or no. And I think you made a good case for yes in some capacity. But the second stage is, okay, what will these civil servants be doing? Well, we'll have a new labor force. And how will, you know, we democratically decide to deploy these folks? Will they be repairing potholes or building parks or building data centers? Building data centers, potentially. That would be great.

[Trey Stevens]

That would be politically spicy.

[Host]

It might make people like it a lot more. They're like, hey, I got a hard day's work. I feel good. I feel like I accomplished something. The building's there. I don't know. But anyway, another random take. Oppenheimer or the Odyssey. Which one did you like more?

[Trey Stevens]

I liked the first two thirds of the Oppenheimer better than I liked the entirety of the Odyssey.

[Host]

Okay.

[Trey Stevens]

But I liked the Odyssey more than the last third of Oppenheimer.

[Host]

Oh, interesting. Okay, that's good. What can you tell us about.

[Trey Stevens]

They're both at the bottom, though, of the Christopher Nolan canon. Alongside Tenant, I would say.

[Host]

Oh, you were going to put Tenant at the bottom? I like Tenant. I think it's so fun at the very bottom.

[Trey Stevens]

Tenant is inarguably the worst Christopher Nolan movie.

[Host]

What's the best one? Dark Knight.

[Trey Stevens]

Interstellar.

[Host]

Interstellar.

[Trey Stevens]

Got to go with Interstellar.

[Tyler]

What did you not like about the Odyssey?

[Trey Stevens]

I didn't. I'll be very clear. I didn't say that I didn't like it. I just said it wasn't as good as any of his other movies other than Tennant. If it was any other director, I would have came out of the movie theater and been like, that was great. I'm glad that I watched that. But it was Christopher Nolan, so my expectations were much higher.

[Host]

Totally. It was the same thing. I was like, that's obviously the best picture I Can't think of any other movies that are going to be better than that this year. At the same time, I don't know if I'm going to rewatch that this year. I don't, I, you know, I don't

[Trey Stevens]

know that I would rewatch it. I don't think like, I watch Interstellar every year. I don't know that I would watch the Odyssey, you know, again, ever.

[Host]

Yeah, we'll see. Yeah. Also, there is just. It's a type of film. It's like a moment. It's a whole experience. You gotta see it in imax. It's three hours. It's a, you know, it. It's very much a slog. Whereas, you know, you could throw on the Dark Knight and it's just like a. It's like a party almost. It's like a very entertaining. It's a pop culture. This is not a. This is a whole, like journey that you're going on. That's the point and that's the experience. Anyway, what can you tell us about the future of Founders Fund? SpaceX? We were talking to an LP in Fund 2 yesterday. I think you said it's like potentially the best fund in human history. Are you resting on your laurels? Are you going to be incubating new things, bringing on new partners? You signed some new talent. Tell us what's going to happen with Founders Fund over the next couple of years.

[Trey Stevens]

Yeah, the worst thing about Fund 2 at Founders Fund is that I was not at Founders Fund, so I do not benefit from that fund. But yeah, it might actually be the greatest fund in venture capital history.

[Host]

That's a lot of booing.

[Trey Stevens]

But yeah, the fund is doing really well. We have a main venture fund and a growth fund. We have awesome names in both of those. We're still very bullish about the, again, the micro level, the companies that we're investing in, even if we are a little bit more bearish on the macro. We just added Ryan Beiermeister to the team as a partner. She and I worked together when we were in our early twenties at Palantir and then she went off to Meta and then to OpenAI and we just got her to join us over here. So really excited about what the future holds. We have a great team. We're all vibing really well.

[Host]

Everyone wants to know, is Mafia an official part of the Founders Fund recruitment process now?

[Trey Stevens]

It is definitely not.

[Host]

Okay.

[Trey Stevens]

And the joke that I made on X about this is that Ryan got crushed in game one of Mafia. So if it was actually Like a recruiting tool. That was not a great interview.

[Host]

At the same time, I feel like she entertained. She seemed like someone you would want to meet with and do business with. For sure.

[Trey Stevens]

She's very good. She's actually incredibly talented at Mafia. She just had a bad. An unlucky run.

[Host]

It could be you could go into a game of Mafia and display that you're going to backstab a founder that you're working with and that might be disqualifying. Maybe. I don't know.

[Trey Stevens]

That's true. Although isn't that the whole point of mafias to backstab other people?

[Host]

Yeah. Yeah. So I kind of want the backstabber on my side so I work with them. Exactly. What if about Ria, Are you happy that Founders Fund has stayed in the private markets or do you wish you could be just writing, just playing micron a little bit right now with a little bit of.

[Trey Stevens]

I'm so happy that we've stayed true to our origins. We are a venture fund. We invest in early stage companies and support founders throughout their entire journey. And I think there's all sorts of cool stuff that's happening that Andreessen's doing that Thrive is doing, that General Catalyst is doing, that Sequoia is doing with their evergreen funds. These are all very cool concepts. It's just not us.

[Host]

You mentioned Thrive. Any plan to buy a sports team?

[Trey Stevens]

Houde, baby, let's go.

[Host]

Hopefully. Hopefully soon. Well, thank you. Thank you so much for coming on the show.

[Tyler]

Wait. Okay, last question. What is that sword behind you?

[Trey Stevens]

This is Anduril.

[Host]

That's Anduril.

[Richard Craig]

Oh.

[Tyler]

Oh yeah.

[Host]

That's the sword Lord of the Rings. Yeah. Beautiful. Is there a criteria for getting one? Is this like five years of the company and you get a sword? Are there any Andoril like totems or artifacts you can just go online and buy one of those guys. You don't have to work your enderal.

[Trey Stevens]

Are there any totems? Well, I mean we do have an internal like exclusives gear store and I should point out that I'm also wearing one of our external available swag. So this [e-mail] you can pick up this sweatshirt and a bunch of other cool gear, including our partnership with nascar. So there's all sorts of Anduril NASCAR gear up as well. Right now there's an Anduril Hawaiian shirt. You know, harkening back to Palmer's love of Hawaiian shirts. So Miller times been cooking.

[Host]

Jeff Miller's been cooking.

[Trey Stevens]

Jeff Miller is cooking. No Doubt about it.

[Host]

A bunch of good stuff. Well, thank you so much for taking the time to come chat with us. Sorry we kept you a couple minutes late. Have a great weekend and we'll talk to you soon.

[Trey Stevens]

It's all good.

[Tyler]

Cheers.

[Trey Stevens]

Have a good one.

[Host]

Let me tell you about Codex. Codex is a powerful workspace for getting work done with AI agents. Whether you're writing code, analyzing data, creating content, or automating business workflows, Codex helps you move projects forward from start to finish. And when you're finished, head over to the New York Stock Exchange because if you want to change the world, you got to raise capital at the New York Stock Exchange. Up next, we have Blake Resnick from Brink Drones. He's going to be in the show, in the TVP and Ultradump in just a minute. Where do you stand, Tyler, on Oppenheimer vs Odyssey?

[Tyler]

I'm going Oppenheimer as well.

[Host]

You're going Oppenheimer?

[Richard Craig]

Yeah, yeah.

[Host]

I rewatched Oppenheimer within a couple days of seeing it the first time, and I think it's the movie that I will come back to more frequently. But also I think I like the story more because it's more recent history and it's easier to draw on, I suppose. I don't know. I don't know. Let us know. In the chat. Derek Thompson had a funny post here. He said, I went back and read some criticisms of big tech in the 2010s, and it's amazing how many of them bemoaned big tech's cash hoarding as a major failure of late stage capitalism.

[Tyler]

This is the PT point, right?

[Host]

Yeah, yeah, yeah. He literally. Peter Thiel stood on stage at a Forbes debate, I think with Eric Schmidt from Google, and said, you have $100 billion on your balance sheet and you don't do anything with it. You don't. You're out of ideas. You're chopped, basically. And now the hyperscalers are just pulling the cash and no one's happy. What's going on? You can't have it both ways. So you said. Just a few years ago, popular criticism of software giants, indeed of American capitalism, was that big companies hoarded their cash piles and refused to reinvest their profits in new ideas. But that era is over. Today, those same companies have depleted practically all of their cash flow. To thicken the irony, capitalism's critics seem to hate this new era of unprecedented corporate investment even more than they hated the era of corporate cash hoarding. So fascinating. It's, it's a, you know, Between a rock and a hard place, I suppose, for American big tech companies. Well, let me tell you about public.com investing for those that take it seriously. They got stocks, options, bonds, crypto treasuries, and more. With great customer service, you can find a company that's burning down all their cash flow if that's what you're interested in. Just be safe out there. Up next, we have Blake Resnick from Brink back on the show. Welcome to the show, Blake. How are you doing?

[Blake Resnick]

Really good. Thank you for having me.

[Host]

Thank you. I'm going to hand it over to you because it looks like you got a tour for us. Take us through it. What's new in your world? What can you show us?

[Blake Resnick]

Yeah, 100%. So Brink just raised a new $125 million of capital and that is all being directed towards putting these police and fire station roof in America.

[Host]

Amazing. What are we looking at here? Break it down for us.

[Blake Resnick]

Yep. So these are drone recharging pods. And you're currently watching one of our dedicated 911 response drones launch. So yeah, that's really the focus of the company. See if we can get that camera swung around here. And yeah, right now we are on top of our factory and headquarters. So we have three stories. Right now we're on our third, which is mostly dedicated towards engineering office space. Our engineering team is pretty cool. It's very multidisciplinary. We employ mechanical engineers, electrical engineers, embedded software folks, Autonomy, aerospace, and more. So many of those individuals are working in this volume of our facility. Now we are transiting down to our second story, which is mostly an R and D space. You'll see a lot of that in just a second here. This is one of our R and D areas. And to my right is our current product portfolio. So our smallest drone over here is where we started. This is Lemur 2 and it is designed to get eyes and ears in dangerous places. Today, about 20% of the SWAT teams in the country are actively utilizing this aircraft to reduce the probability of officer involved shootings and keep everyone safe in the most dangerous police response missions across from that. Put this guy back. We have responder. And this is the aircraft that you just watched launch. It was really the world's first purpose made 911 response drone. So already hundreds of police and fire departments around the country are using these things to respond to the majority of the 911 calls that occur in their jurisdictions. And our largest drone on this platform is Guardian. And this is really designed to replace police helicopters. Guardian can fly for over an hour. It has greater than a 60 mile an hour top speed integrated starlink. That is this panel on the top of the airframe, giving it unlimited range anywhere in the world. I'm calling in from Seattle. If I wanted to take Guardian off and fly it into the Pacific Ocean, that is something that I would be able to do without losing connectivity, which is pretty incredible. We also have an amazing camera payload on this drone. These two things are HD thermal imagers. The best thermal imagers on drones in production right now are 640 resolution. So that is a huge step up. And we have two thermal imagers that are built into Guardian with different field of view optics, meaning you can zoom in and out of your thermal picture with Guardian without losing any quality. We also have a pretty amazing HD vision system to 4K imagers with 640 times total zoom. So even from thousands of feet away, end users can zoom in and read license plate details, all sorts of stuff like that. Behind that we have a mini lrad, which is an incredibly loud speaker system. You can kind of see it buried in the back of the drone there. That can emit 130dB split, which is actually louder than a police car siren. So if we had Guardian playing a siren tone and a police car right next to it doing the same, Guardian would actually be the louder vehicle. And then the recharging station for this, you can see on a monitor back here, has a robotic system that is capable of physically swapping batteries. So with Guardian, 911 dispatch doesn't actually have to wait for the drone to recharge between flights. The second it touches down, our robotics will actually physically swap batteries, replace the batteries in the airframe with a fully charged set, and then it can launch immediately. And we use that same robotic system to load different payloads into the bottom of the drone as necessary. So if 911 got a call about someone having a heart attack, God forbid they could load in a defibrillator, go accomplish that delivery, come back, and then if the next call is about someone drowning in a lake, they could load in a personal flotation device. So very proud of that. I'll show you just two more things and then would love to chat.

[Host]

Yeah.

[Blake Resnick]

Downstairs to my left is where we are actually integrating airframes. So believe it or not, this is one of the larger drone factories in America. And then to my left currently is where we are building our recharging pods.

[Host]

Wow.

[Blake Resnick]

So, yeah, that's Brink HQ and a lot of of the stuff that we currently have in Production?

[Host]

Yeah. Wow, that is amazing. What progress since last time you came to the studio and brought, I believe, the smallest of the drones and flew it around for us. That was a lot of fun. What is the scale of each program right now? I mean, you mentioned that SWAT teams are using the smallest of the drones in something like 20% penetration. But it feels like that final largest drone is still sort of coming out of the R and D phase at this point. Is this, is that correct?

[Blake Resnick]

Yeah, that's totally a fair characterization. There are about 20,000 police departments in America, 30,000 fire departments, 80,000 police and fire stations. And we think in the future the vast majority of those buildings are going to have a 911 response drone in a recharging pod on their roof.

[Host]

Yeah.

[Blake Resnick]

Today though, that number is probably 4 or 500. And that's spread across all the manufacturers that are interested in this segment. You know, US, Skydio, DJI, et cetera. So yeah, I would say like 1% of the buildings that eventually are going to have this capability currently do. And a big focus for Brink over the course of the next couple of years is going to be increasing that number from, you know, 1% to 10, 30, 40, 50 and onwards.

[Host]

I remember talking to someone who was operating drones and single rotor drones actually in the Middle east in a military context and he was saying that at a certain scale they would actually use gasoline powered drones because the energy density was higher and it just made sense in that context. And I'm wondering about like, there are a bunch of good reasons to give someone a rechargeable battery if they're, you know, going to be filming themselves rock climbing or something. But this is an industrial company. This is a, you know, an enterprise level solution. Is there a, like a gasoline powered use case that would make sense or are we now at a point with a technology where an electric powertrain makes make sense across every possible, every possible opportunity or threat?

[Blake Resnick]

I mean, you are spot on about the power density of gasoline. It is far in excess of lithium ion batteries. Yeah. However, our drones respond to emergencies in known locations around the United States and the rest of the world. And that means automated recharging and battery swapping infrastructure is actually a pretty good solution to this problem. Right. With Guardian you get an hour of flight time and then every hour you're only down at a recharging station for maybe 90 seconds. As that recharging station accomplishes an automated battery swap that gives you over 97% kind of applicability of the airframe you can fly. Guardian for greater than 23 and a half hours a day. So our customers generally are pretty satisfied with that. And I think the way that we'll continue to push flight times up progressively moving forward isn't necessarily with a gasoline powered drone, but instead with larger form factor drones that have, you know, intrinsically superior performance, propeller efficiency, and maybe also VTOL fixed wing aircraft that can stay in the sky, you know, for six to eight hours.

[Richard Craig]

Yeah.

[Blake Resnick]

Without, you know, requiring a battery swapping operation or recharge.

[Host]

Yeah. Not to leak the roadmap, but it just feels like you're just going to get bigger and bigger and bigger until it's, you know, the size of a manned airplane, but probably still autonomous.

[Richard Craig]

Yeah.

[Blake Resnick]

You know, there's, there's a segment, there's a segment of our customers customer base that has enormous jurisdiction.

[Host]

Sure.

[Blake Resnick]

Like sheriff's offices in Florida for example. I mean they can have thousands of square miles of jurisdiction. So for them a V12 fixed wing that can stay in the sky for eight hours is actually a pretty phenomenal fit.

[Host]

Yeah. What does the go to market look like for this company? Are you selling to every, every sheriff's department or police department individually? Are there conferences where you can meet them all? Are there any that are like collectively buying products together as a group because they might get a better price but they might also have better service level agreements or some sort of integration where it's like, oh well, like the town over is using the same system so let's go grab a battery from them. There's some value to that. But what does the actual sales process look like?

[Blake Resnick]

We're seeing all of that? You know, it's early days though.

[Richard Craig]

Yeah.

[Blake Resnick]

The vast majority of our go to market is focused on building direct relationships with police chiefs, fire chiefs, mayors and city council members. Yeah. And as discussed, there are a lot of these organizations in the US which, you know, necessitates us to have a pretty large sales team to build all the relationships that are necessary. So we've got, we've broken the United States into dozens of different sales territories. And each one of those territories is staffed with an account executive that holds a quota. Then they can pull from various other sales support organizations that we built like dedicated demo teams and you know, sales engineering teams and other things.

[Host]

Can you get me up to speed on Motorola Solutions? They raised. You raised $125 million round led by Motorola Solutions. Most people in the consumer world might think of the Motorola Razr V3, the cell phones, do they have a lineage in public safety or development of emergency response equipment. Is there more synergy there or is this purely just like it's a good deal and they did the deal?

[Blake Resnick]

No. So the vast majority of Motorola's business is selling body worn radios and public safety software to police and fire departments. Like the overwhelming majority of their business. Yeah, they are actually the largest company in our industry.

[Trey Stevens]

Yeah.

[Blake Resnick]

Motorola is number two. Excuse me, number one, Axon is number two. Lock is probably number three in terms, in terms of scale. So they have pre existing commercial relationships with literally every single one of our potential customers in the free world. Like that is their marketplace position.

[Richard Craig]

Yeah.

[Blake Resnick]

So if we ever have to go and meet like a net new PD or rfd, we can just ask them for the introduction.

[Host]

Sure.

[Blake Resnick]

And then we know when that organization decides they do want to adopt our technology, we can usually also fold it in through a pre existing contract that Motorola has. So they're, they're an incredible partner and I would say the relationship is very strategic on the go to market side, but it's also very strategic on the product side. We've developed a feature for example where if a police officer or a firefighter pushes the emergency button on one of their radios that can automatically trigger one of our drones to launch and fly to their exact location.

[Host]

Sure.

[Blake Resnick]

Motorola has a huge percentage of the 9:1 call taking software market. So we can grab the coordinates of 9 to 1 calls from there and then use those to trigger drone flights. They have an ALPR business. They have a very large computer aided dispatch business. In fact, most of the very large police departments around the country utilize Motorola cad. So yeah, there are synergies left and right with them. They've been great partners.

[Host]

Y Combinator has their request for startups. I want your request for startups. If someone in the audience is thinking about building a company deep in the drone supply chain, deep in the battery supply chain, deep in any industrial supply chain. What is a category or product or subcomponent where you would love to meet an entrepreneur who's thinking about building a new company based in America to solve that particular problem?

[Blake Resnick]

I mean camera payloads come to mind immediately. There are very few American made gimbalized camera payloads that have high resolution thermal, you know, good zoom optics, three axis stabilization and that don't cost an obscene amount on a per unit basis. So yeah, that would absolutely be one. They're nice like self contained components that a lot of drone manufacturers don't want to make for various reasons. Even Anduril is actually a consumer of a lot of These parts, like they're not doing totally their own. Their own payloads in that category. Yeah, so yeah, that would be of interest, I would say. You know, very high energy density. Batteries, of course, always are of interest to drone manufacturers. Brushless outrunner motors, mesh networking, radio, the whole supply chain.

[Host]

Just do anything in there? No, it makes sense. It feels like, it feels like, like a decade ago you would have been, you probably were called crazy when you started the company, but you would have been called crazy for trying to just build a hardware company, because hardware was hard. You had to be a billionaire to start a defense tech company, et cetera, et cetera. And now there's enough motion and there's enough energy that you can build this company, hire, raise, get to market, sell it effectively. And now the next challenge is deeper in the supply chain, which is, which is exciting. There's a lot of opportunity there. Tyler, do you have any questions?

[Tyler]

Yeah, I was wondering what's kind of the shape of autonomy and response drones? Like how important is this, is this getting autonomy? Much better. Is that like a big bottleneck to selling more of these or how do you think about that?

[Blake Resnick]

Yeah, no, that's a great question. I mean, the way our technology works in general is someone will call 911 in a jurisdiction. We will grab the GPS coordinate of that call from computer aided dispatch or 9:1 call taking software from some other source. Our software will then find the nearest 911 response drone in a recharging pod that has sufficient battery state of charge to actually respond to the emergency. Then it will plot out a path from that location to the emergency, taking into account manned air traffic, no fly zones, altitude limitations, and so forth. The doors on one of our recharging pods will open up, drone will launch, it'll follow that pre programmed flight path out. But if it encounters anything that it doesn't expect, it also has an onboard obstacle avoidance system. So it'll be able to deal with those unforeseen events. Then when the drone arrives, it can engage in a number of pre programmed on arrival behaviors. Like it can orbit a structure fire and just keep on circling around, you know, with its camera gimbal pointed in the right place. Or it can be programmed to stop at a specific GPS point, but then move its gimbal to point at an area that might be of interest and a number of other things. Or at that point, the drone could then be manually controlled in order to interact with the scene. Our drones have onboard red and blue lights and sirens, so an end user might decide to turn those on. Depending on the circumstances of the call, they can deliver, as discussed, life saving emergency medical payloads. So an operator might decide to engage in an action like that or they could just follow a person or vehicle. That can be done manually, but we also have automated tracking features that utilized in those instances. So an end user could like click on a person or click on a vehicle and the drone would just sort of, you know, follow for that end user.

[Host]

Do you have benchmarks?

[Blake Resnick]

Yeah. In terms of the impact that we make on communities.

[Host]

No technical benchmarks. Every AI company is like trying to get their LLM to solve math problems and there's a very clear battery of progress. And I'm wondering if you have like, you know, there's. Is there a standard benchmark for like drone agility or like something that's measurable but a little. The thing with the benchmarks is that they're not, they're not purely quantitative in the sense of like, you know, how like response time is in milliseconds, like for a computer system that's very quantifiable. It's often like you need to solve this puzzle. And so what I'm wondering is when we will enter or maybe we already have the era of there's like a standardized drone agility course and you can unleash a drone on it and say, oh yeah, it did it in this time or it was 90% effective at this, or no one else can do this. I'm wondering if there's any of that going on in just the drone community

[Blake Resnick]

broadly that does exist. Actually, NIST has put together something very similar to what you just described.

[Host]

Okay, cool.

[Blake Resnick]

So yes, that absolutely happens. I would say though mostly customers are focused on specs right now.

[Host]

Yeah, I'm sure.

[Blake Resnick]

So they're curious about exactly flight time, top speed, HD camera resolution, thermal resolution, recharge time, what integrations exist, all of that.

[Host]

Sure, sure, sure. We got to get the police department bench, bench pilled so that they're just like, oh, how did you do on, on humanity's last drone competition anyway? That'd be funny.

[Blake Resnick]

We do bake offs. You know, there are a lot of instances where Brink drones will go up against Skydio drones.

[Host]

Sure, sure, sure.

[Blake Resnick]

Charlotte Mecklenburg in particular ran a pretty extensive evaluation of different companies aircraft and we ended up winning that.

[Host]

Congratulations.

[Blake Resnick]

Yeah, no, this is definitely on people's minds.

[Host]

Yeah. Well, thank you so much for breaking it down. Thanks so much for the tour. This is fantastic. Have a great weekend and we'll talk to you soon.

[Tyler]

Cheers.

[Blake Resnick]

I can't wait.

[Tyler]

Truly.

[Host]

Let me tell you about console. Console builds AI agents that automate 70% of it HR and finance support, giving employees instant resolution to access requests and password rate resets. Take us through what's going on with OpenAI pushing the model for Frontier access across efficiency. What happened? They dropped the cost of Luna.

[Tyler]

Yeah. So there's. There's Luna Terra. Sold. This is the cheapest model.

[Host]

Yes.

[Tyler]

Massively reduced cost. You can see on the kind of prudhoe curve. This is like actually much cheaper than a lot of like open source models because you could. We've been talking about this recently. It's like there's cost per. Per task, not just like, can it do it and how much do like it depends a lot how token efficient the model is.

[Host]

Yeah. Because there's. You could measure it on cost per token, but if a certain model takes 10 times the amount of tokens, it's only half the cost. You wind up spending more. Why is the Pareto frontier in this graph flipped? I feel like the Pareto frontier used to be this direction. Am I hallucinating that it's always been this way? You always want to be on the left side. I thought you wanted to be on the right side or something like that.

[Tyler]

Well, it depends on where you are

[Host]

in the Purdue frontier, I suppose.

[Tyler]

But I guess I think I see what you're saying.

[Host]

I suppose. Anyway, we also. I don't think we touched on this, but. Arc Agiv 3, the leading labs have been going back and forth. Opus 5 put up a very, very impressive number. Then OpenAI fired back with 5.6. Sol used to solve open problems in mathematics. So why was it struggling with Arc AGI v3, which you at one point were in the top 10, right?

[Tyler]

Yeah, I was globally ranked. Arc AGI v3, I don't think it's still up, but Arc AGI v3 player, that's out there.

[Host]

You were like. You were Pro am.

[Tyler]

Yeah. Yeah. I would say.

[Host]

You didn't go pro. You turned it down.

[Tyler]

I turned it down.

[Host]

You had the opportunity to be an architect.

[Tyler]

They were going to give me like 10 more tasks. More tasks. Something like that.

[Host]

Something like that, yeah. But apparently OpenAI was able to investigate the low score of 5.6 SOL on RKGI v3. And the harness was not letting it remember what it had learned. We found that enabling two API settings tripled our scores with 6x fewer output tokens. So very interesting to watch these.

[Tyler]

Fascinating. I mean, we've seen this a lot over the past Like, I don't know, year and a half almost where the harness, like, really matters a lot.

[Richard Craig]

Yeah.

[Tyler]

And if you have the wrong harness or it's like, limiting the model in some way. I mean, it can have, like, massive, totally, like, effects on the downstream task.

[Richard Craig]

Yeah.

[Host]

People were not expecting this. It was definitely like the model, the God model will be just one model and you'll just ask it to predict the next token and it'll just do it perfectly. There's a lot more that goes into the integration here. I still think Arc Agiv 3. I mean, fantastic benchmark. Love the team. Obviously, Mike's been on the show multiple times, but it's also just a great way to actually illustrate AI progress to someone that maybe just doesn't want. Want to build software or hasn't built software before and doesn't really. Can't really feel that visceral this visceral this year. Viscerally. I can't say viscerally. I don't know.

[Tyler]

Well, especially, you know, the famous, like, time horizon task. Doubling.

[Blake Resnick]

Yeah.

[Host]

Meter.

[Tyler]

Like, that's basically like, we can't actually measure the high end now. It's, like, too hard. We don't have enough tasks to, like, measure it efficiently.

[Host]

Yeah. And a lot of people are just like, why? It's a task that takes me 12 hours.

[Blake Resnick]

Hours.

[Host]

Like, what is that? I don't even know.

[Tyler]

Yeah, it is a bit hard to

[Host]

think of that off the top of your head. Like, what does that mean? Like, like building a whole report or something. Or like, a lot of people work in, like, various ways. Like, yeah, 12 hours of meetings. Is that one task? I don't know. But if you show someone the Arc AGI v1 puzzle, and it's very easy, and v2 is very, very, very easy. And then you. And then you walk them through the story of how AI has progressed on this and how hidden the answers are. You can pretty easily help someone feel the AGI, which is very, very, very, very fun. Anyway, that's our show, folks. We will see you at 11am Pacific on Monday. Have a great weekend. Have the best weekend ever. Be like a golden retriever going after the tennis ball. And Also leave us 5 stars on Apple Podcasts and Spotify. Sign up for our [e-mail] and we'll see you on Monday.

[Tyler]

See you.

[Host]

Goodbye.