Loading summary
Transcript569 lines
- [00:01]
John
You're watching TVPN.
- [00:03]
Jordy
Today is Thursday, May 21, 2026. We are live from the TVPN ultradome, the temple of technology, the fortress of finance, the capital of capital. We have a massive show. There's so much tech news. People said the technology industry, they were out of news. They weren't. There's plenty of tech news. They lied all over the Wall Street Journal. AI companies are duking it out for prime placement in the journal. So SpaceX got top billing in the journal with the IPO filing. SpaceX sets its IPO in motion. The SEC filing starts move to raise tens of billions of dollars in record debut. We've talked about this a lot on the show. Clock is officially ticking on SpaceX's huge stock offering. What are you laughing about?
- [00:51]
John
Ryan says. I knew Jordan. Did I not do it two days in a row?
- [00:55]
Jordy
Nope. Haven't done two days in a row in months. We can roll the tape. I mean, after read that piece about us, I feel like some brand differentiation is actually to our benefit since some people can't tell us apart. And so I've become a fan of the split in casual Friday, Thursday of just a casual look over there. More buttoned down, buttoned up button left and right over here.
- [01:24]
John
Got to be buttoned up.
- [01:24]
Jordy
Someone's got to do it. SpaceX on Wednesday revealed new details about how it's about its financials and how Chief Executive Officer Elon Musk will try to grow a sprawling enterprise dedicated to advancing cutting edge technologies in space and back on earth. The company disclosed the information in an investor prospectus. Publication of the document sets SpaceX on course to potentially raise 80 billion or more from a stock sale as soon as next month. The rumored date is what? June, July, was it?
- [01:57]
John
June 12th?
- [01:58]
Jordy
June 12th. That's just 20 days away. Basically they're going to beat out Saudi aramco that raised 26 billion when it went public in 2019. Musk has touted out of this world objectives for the company. From deploying a huge number of artificial intelligence satellites in the future to colonizing Mars. Texas based SpaceX has distinct businesses ranging from rocket launch to satellite operations to a nascent AI unit that it's rivals that it's racing to catch up with. Rivals founded by Musk nearly a quarter century ago. Yeah, it has been a long time. SpaceX revolutionized the commercial space industry. The company has grown from a startup with a handful of employees that almost went out of business to one of the world's most valuable private companies with over 22,000 workers as of March 31. It controls technologies that competitors and even nation states haven't been able to fully match. SpaceX reported its revenue last year at 18.67 billion, and Dan Primack had a post saying that the business was smaller than he expected. He's going on CNBC today to talk about but the IPO has had a couple interesting takes. People are going back and forth. Overall, the reception has been the S1 is an extremely enjoyable read. Kevin Kwok says it's the most enjoyable S1 read in a long time. Reads so easy, like sci fi or fiction. And
- [03:22]
John
it's kind of the perfect post or just regular post because if you're pro tech, you like space, you're excited about space. That could be a positive.
- [03:30]
Jordy
Yes.
- [03:30]
John
But if you're a bear, you can say it reads almost like fiction.
- [03:35]
Jordy
Pure fiction.
- [03:36]
John
Science fiction, of course. The best TAM slide ever.
- [03:40]
Jordy
Probably the best TAM slide ever. Sawyer Merritt has the screenshot here. SpaceX and IPO filing we believe we have identified the largest actionable total addressable market in human history. We estimate that our Quantifiable TAM is $28.5 trillion consisting of 370 billion in space from space enabled solutions, 1.6 trillion in connectivity across 870 billion in Starlink broadband and 740 billion in Starlink mobile, as well as additional opportunities in enterprise and government. 26.5 trillion in AI across 2.4 trillion in AI infrastructure, 760 billion in consumer subscriptions, 600 billion in digital advertising. That's massive.
- [04:27]
John
Well, is that for X? I don't the idea so so and 20 everything else is more believable. Everything else is more believable to me than X getting meaningful digital advertising penetration.
- [04:39]
Jordy
Yeah, I guess the time matters here because a lot of these markets aren't this big currently, I think. I don't know. But I guess over time. If you think about the next 25 years, the next hundred years, I don't know if these are inflation adjusted, but there's lots of things that could happen for illustrative purposes of sizing our addressable market. SpaceX excluded China and Russia from global estimates. I feel like you might want to put in China and Russia over the next couple decades. Who knows, maybe we become best buds with both companies with both countries. You know, anything can happen. World peace might come and that's going to expand tam. That's an economic incentive for world peace. I like to see it. There were some beautiful photos that were shared in the start of the pictures. Lots of pictures to start and then it gets very text dense. But the photos were I liked them. I thought that they were unique. I hadn't seen them like that often and they felt like they were kept in the back pocket for a while and they, I don't know, they just like remind you of SpaceX. It's like a beautiful thing. Dan Primack says, Incredible that Goldman beat out Morgan Stanley for the SpaceX IPO left lead left given that Michael Grimes returned to Morgan Stanley in part for this deal. Of course Morgan Stanley is on the deal, but that is. It is a big win for Goldman that DJ SpaceX is at the helm. Goldman Sachs Co LLC lead left in the joint book running managers. But everyone's getting a piece of the SpaceX IPO at this size. Will Bitsky says shout out to the Goldman analyst that was richly sacrificed to win this lead left ipo. It must have been an incredible amount of work. It's not just the biggest IPO of all time. It's not just this incredibly complex structure with multiple businesses. It's also you're reporting to Elon Musk. Elon Musk is your client and he's going to ask for things probably more aggressively than anyone who's a CEO of a company that's going public. So lots of things, lots of winners from the SpaceX IPO. Luke Nosek is a huge one. He was at Founders Fund, co founded Founders Fund with Peter Thiel. His next role will be leading. This is from a long time ago. He left to start gigafund, which was billed at the time as a new investment firm that initially will be focused on raising capital for Elon Musk's SpaceX, a founders fund portfolio company where Nosek is a director. And so David Kwan says, today I learned Luke Nosek left FF to fund to start a fund exclusively focused on investing in Space X. There are a few of those that we're hearing about these days. Of course, exclusive does not mean 100% of the capital went into Space X. It just means that they were very, very focused on that. Gigafund has a lot of different portfolio cover. We've had a bunch of founders on the show who have raised money from Gigafund. But SpaceX is where Luke is a director, deeply involved and has focused on participating in many, many rounds and so conviction will do that to an MF, says PocketJacks Capital. Lots of big winners. Frank asks Codex for SpaceX Fair value based on the S1 should be an interesting build up to the IPO. What was the result from CAP from
- [07:45]
John
Sid Landstrom 1.1 to 1 1/2.
- [07:47]
Jordy
It's not bad. That's not bad. Bull. Case gets to 1.7 to 1.9 if investors assume anthropic sticks. Infrastructure margins are strong. Starship unlocks major new markets and public market scarcity drives demand. But 2 trillion means the market is effectively assigning something like 88-800 billion to 1 trillion to the AI orbital compute story on top of an already rich Starlink valuation. Possible as an IPO mania print, but that's not what I'd call for fair. So we'll see what happens. I mean the big, the big news was the partnership with, with Anthropic where Anthropic is spending more over $1 billion a month.
- [08:23]
John
I think it's ramped $15 billion a
- [08:25]
Jordy
year and that's huge for SpaceX given that they did 18 and a half or something last year. This is a huge jump up in, in. I mean they have to be one of the biggest NEO clouds like overnight with this.
- [08:37]
John
Yeah, I was trying to find huge, huge. I was trying to find some of our conversations from last year where we were, you know, X sorry XAI and Grok was growing, but maybe not at the rate that. Not close to the rate that would require that much infrastructure.
- [08:56]
Jordy
Yeah, finding product market fit on the actual distribution side, obviously we love acts, but it's not the biggest platform.
- [09:02]
John
Yeah, it wasn't it certainly shoot for the stars and if you miss you have a pretty great Neo cloud business. Right. Anthropic has to pay way above traditional NEO cloud pricing for this compute and so ends up being a great outcome for SpaceX.
- [09:25]
Jordy
Yes, well, Antonio Gracias is another investor who's absolutely printing off the SpaceX IPO. Antonio Gracias at Valor has 30 entities invested in SpaceX in case you were wondering what truly going long looks like. He added some corrections saying that some people were assigning like oh, he's the only investor and he says no, no, no, I have a lot of LPs, I do a whole bunch of different funds. Like this is not just his windfall, although of course he's going to be doing very, very well personally. But so many different Valor For Space Holdings LLC, Valor M33 6 Like so many different investment vehicles because Elon has raised money so many times, both for primary capital and for tender offers for employees who had worked at SpaceX for 15 years and needed to buy houses, needed some liquidity. Elon was very good about never doing a down round, growing the valuation very Very gradually over decades to get to this point. And Peter Hague says, just reading the SpaceX SEC document, one thing that sticks out is the capital spend on AI is 3x that on space. It's an AI company with some rockets, which is a wild, wild pivot. It's the 11th hour. This has been a rocket company for 20 years or 15 years. Then an Internet company with Starlink, but that was still so tied and so clear and so quick to get to a logical link. You needed the launch capacity to build Starlink and so you have this new capability. Satellite Internet is amazing. And it went from idea to launching the satellites to consumers actually using it when they're traveling, camping off the grid, real and then showing up in planes and all sorts of different applications. It became very, very relevant, very real very quickly. And the Colossus Xai, that felt like a different company because it was, it felt like a different initiative, but it has just become so, so, so big so quickly.
- [11:32]
John
Yeah. And looking back at the plays Elon and his investors have made around this over the last year, right there was. That felt like somewhat of a coordinated effort. Was it beginning of this year or late last year when suddenly everyone started talking about space data centers? Very suddenly. Remember Gavin Baker?
- [11:52]
Jordy
Yeah.
- [11:53]
John
Started coming out talking about it. That's around the time when they sort of floated the. I believe it was December of last year. Started floating. Floating the idea of like what the potential valuation would be. Started building that AI narrative. Started, you know, made a play for Cursor, you know, partnered with Anthropic even though, you know, only a few months ago they were much more combative.
- [12:16]
Jordy
Yeah. Name calling.
- [12:18]
John
So, yeah, he, you know, I think this is why Elon has been able to accumulate so much capital. Is like he is the. Pretty much the best in the world at like making. Just making plays. Yeah, Making plays and doing whatever it takes.
- [12:33]
Jordy
Yeah. So the most recent play, unrelated to the news that made the front page of the Wall Street Journal, Anthropic revenue surges set to post first profit. Sales seen reaching 10.9 billion in second quarter, up 130% over previous quarter. Truly in, in the title of the. In the actual URL of the Wall Street Journal article, they call it mind blowing growth about to propel Anthropic to its first profit. Absolutely fantastic execution. So Tom Brown, co founder of Anthropic says we're expanding our partnership with SpaceX and we'll be scaling up GB200 capacity on Colossus 2 throughout June. Appreciate Elon Musk and the Team helping us find good homes for the clauds. Is Claude plural? I thought it was all one Claude. And the purpose of Anthropic was to build Claude. And Claude will eventually build Claude, but I guess you have multiple instances of Claude running on different servers on different GB. Two hundreds. Ray Wang over at Seminalysis sort of shares a little bit more. Anthropic's Q2 revenue is set to increase by over 200%. Will post an operating profit. The AI will never be profitable. Group is in absolute shambles right now. There have been a lot of folks who have been just doubting time and time again, will this ever make money? Will this ever make sense? And Dylan Patel sort of laid out on the Dwarkesh Patel show this idea that at a certain point the leading models might actually be able to raise money because they're. There are raise prices because they're driving so much economic value. Semiannalysis also put out a table showing for particular workflows that would take them, you know, $1,000 of human time that they would have to hire more people for. They were able to use AI and actually get an equivalent result for a tenth of the cost or a 100th of the cost or even, you know, a 30% savings sometimes.
- [14:35]
John
Any son. Al, Gabe says, can someone check on Gary February 23, 2026? He said, turns out, Jenny, I was a scam.
- [14:46]
Jordy
I had to check the date on this because this seems like something he would have written in like 2024. And I would have been like, yeah, okay, yeah, maybe the usages are a little limited. Maybe there is some sort of wall here, the data wall. Or you know, maybe we won't be able to, you know, maybe we'll need new, new paradigm. But to Write this in 2026 when we're in like the fastest period of acceleration in terms of actual value from these models is pretty, pretty remarkable. I'm interested to see where he goes from this. Is he going to double down? Is he going to stick with this? It has been a couple of months
- [15:17]
John
since I think, I think there's, I think, I think the, the entire crypto boom and NFTs in particular just broke a lot of people's brains.
- [15:29]
Jordy
Yeah. NVR Metaverse to Metaverse.
- [15:31]
John
Another thing that was over Metaverse and under delivered Metaverse. Yeah. Potentially even more.
- [15:36]
Jordy
Yeah, yeah, yeah. There was a lot of discussion about this will destroy Hollywood, this will destroy movies like the Metaverse.
- [15:43]
John
There was never, there was never a moment where you could use a product and have a mind blowing experience.
- [15:50]
Jordy
Well, without paying for it, like you had to.
- [15:52]
John
No, no, I'm just saying. I'm just saying, like period.
- [15:54]
Jordy
No, no, no. The Apple Vision Pro demo. Like there was a day you called me and you were like, why is everyone losing their mind on the timeline over the Apple Vision Pro? Do I need to buy one of these? And I was like, it's kind of like a preview. It's not like perfectly there. I like it. But it's.
- [16:07]
John
I don't even think, I think you're remembering correctly because there was no moment where I wanted to buy one.
- [16:15]
Jordy
No, no, no, you didn't want to. But you recognize that it was the current thing. When the Apple Vision Pro launched for like that week when everyone got them delivered and they tried them, there were a lot of people that were.
- [16:25]
John
They had Vision Pro psychosis.
- [16:26]
Jordy
Vision Pro psychosis. A lot of people had NFT psychosis. All sorts of psychosis. We'll see how the AI psychosis develops. It goes both ways. Yeah.
- [16:35]
John
But anyways, comparing it to Anyone can have a pretty wild experience with AI on a ton of different services. You could never do that with Metaverse.
- [16:52]
Jordy
So Lisan Al Gaib is contrasting Gary Marcus's substack post with what's happened in the AI industry. Anthropic valuation up 173% since the start of the year. Posting profits in Q2 according to the Wall Street Journal. Open air valuation up 67% since the start of the year. And OpenAI general purpose model solves long standing and well known Airdosh Airdos problem. Is it Air Dish or Airdose?
- [17:18]
Tyler Cosgrove
I believe it's air dose.
- [17:19]
Jordy
Air dosh. Air dosh problem. The two dots over the O get me on the pronunciation without a scaffold. And so there was a lot of questions about how hard is it to solve these problems. But fortunately we have Tyler Cosgrove who's going to take us through what actually happened with this solution to this math problem that people are very excited about. Noam Brown said, today we are sharing that a general purpose internal OpenAI model achieved a breakthrough on one of the best known combinatorial geometry problems. Less than one year ago. Frontier AI models were at IMO gold level performance. I expect this pace of progress to continue. And Sidharth Ramesh, I don't know if he was joking about this bet, but he says I have lost my $30,000 bet that I would never solve the planar unit.
- [18:09]
Tyler Cosgrove
Yes, I believe that was a joke.
- [18:10]
Jordy
That's a joke. I think if you jokes around A lot, but no, but a lot of people were surprised and a lot of people were excited about this. So take us through what actually happened.
- [18:20]
Tyler Cosgrove
Okay, yeah, so I can basically go through like a simple explanation of what the problem actually is. Okay, so. So just for some context, Paul Erdos, kind of this legendary mathematician throughout 20th century, he basically proposes, I think the number is like a little over 1200 different, like little problems. These are the airdrop problems. People talk a lot about these as like goals for AI to solve. And you've heard like over time there's been kind of like small iterative kind of solutions to a lot of these problems.
- [18:45]
Jordy
Yeah, sort of like collaborative. A mathematician working alongside sometimes or an easy one just getting.
- [18:52]
Tyler Cosgrove
There's like a main kind of like place where all of the solutions go. So sometimes people will find like I will like find a different paper that wasn't actually put on the website and then they're like, oh, I solved it. But it's honestly true. But this is kind of the first time we've really seen kind of a big step change. Like this is actually a new solution. This is using like, you know, kind of novel.
- [19:12]
Jordy
Doesn't exist in papers out there already.
- [19:15]
Tyler Cosgrove
So this was problem number 90. So I can kind of read. Please read the question, then I can explain what it means. So it's does every set of n distinct points in the real plane contain at most n to the one plus o of one over log log n many pairs which are one apart. Ok, so what does that mean? Basically we have the real plane 2D and we have a bunch of points on it. What is basically the, how many pairs of those will be basically one unit apart? And what's the max number? How do we basically organize those points such that we have the max number of them grid?
- [19:54]
Eric
No.
- [19:55]
Tyler Cosgrove
So you would think that, but I can basically explain why. So let's kind of formalize this better. So we have U of N and this is basically the largest number of unit distance pairs among endpoints in the plane. Okay, so basically we're thinking about how do we solve this naively. It's like ok, what if we just take all the points, we have n points and we just put them in a line and unit distance apart. So it looks something like this. So for this example we have four points, but it doesn't matter, it's just n. So 1, 2, 3, 4. How many pairs are there? There's three, right?
- [20:26]
Jordy
Okay, yeah.
- [20:27]
Tyler Cosgrove
So basically this scales with n minus one. So you could have a billion.
- [20:31]
Jordy
Yep.
- [20:31]
Tyler Cosgrove
Points and there's 9,999, whatever, N minus one. Okay, so now if we put it in a grid, what happens? So if we have a square grid here, there's nine points here, and then how many pairs are there? I believe there's 12. And basically as this number scales up, it's still linear. So it's 2N. Basically if you do a billion points, it's 2 billion pairs.
- [20:52]
Jordy
2 billion pairs, yeah.
- [20:53]
Tyler Cosgrove
Okay, so then basically specifically that line, the line represents. Yes. Because it's one unit distance.
- [21:00]
Jordy
Right. Because and diagonal doesn't count because it's not one.
- [21:03]
Tyler Cosgrove
Yeah, it's not a unit distance.
- [21:04]
Jordy
Got it.
- [21:05]
Tyler Cosgrove
So then, ok, what's the next thing we can do? The next kind of configuration is what's called the lattice construction. And so if we can pull up a picture of it, it's this kind of crazy looking grid that has all these super intricate lines in between. You can see it on the. This is from the OpenAI blog. If we can pull it up here.
- [21:27]
Jordy
Oh, I think I saw this.
- [21:29]
Tyler Cosgrove
So this is what it looks like. Okay, so if you can zoom in on any of these points, you see that it looks like a grid.
- [21:35]
Bill
Right.
- [21:35]
Tyler Cosgrove
But there's not just kind of pairs at the edges.
- [21:40]
Eric
Right.
- [21:40]
Tyler Cosgrove
There's like way more. Okay, so this scales at N to the one plus o one over log log n. This is basically the best kind of example that we know works.
- [21:52]
Jordy
Yes, but not a proof.
- [21:56]
Tyler Cosgrove
We know we can find this, but is this the upper bound? We don't know. So this is basically the lower bound. Okay, so then the question is like we have the lower bound, which is that this is the best one we found. This is the most number of pairs. And then we've theorized that the high bound upper bound scales with N to the four thirds. And then so Erdos, the original conjecture that he thought that the upper bound is still going to be less than N to the one plus o of one. So this means O of one. It's like as N scales to infinity. Right. So o of 1 basically scale to 0, it go to 0 as n goes to infinity. And then basically OpenAI figured out that this is not true and that there actually are some, there are some n's for which this kind of max number of pairs is greater than the original Erdos conjecture. So for infinitely many N, this is not for every single N, so it's not like five points or whatever, but there are infinitely many N's for which this is true, that it scales with that. It's Greater than N to the one plus some constant. Okay, that was basically the big thing. Right. This is like huge if you're into math. Decades old problem.
- [23:19]
Eric
Right.
- [23:20]
Tyler Cosgrove
This is incredible thing. Terrence Tao is like, wow, this is incredible. But yeah, that's basically the overview of the problem. But yeah, it's very exciting because this is not like a math model. This is just an internal model, general reasoning.
- [23:35]
John
You could say it's like generally intelligent.
- [23:37]
Tyler Cosgrove
Yes, I think you could say that. And then I think it's interesting because from public perception, it seems like this didn't take that many tokens. This was not like millions of dollars of inference time. It was like maybe something like hundreds to thousands of dollars of inference compute span.
- [23:58]
Jordy
Interesting because we were talking about like Gorn's conjecture about novel ideas coming from just like brute forcing different connections between things. And this is more token efficient.
- [24:08]
Tyler Cosgrove
Yeah. This is not just taking some solution to a different airdrop problem and just like spamming it on all 1200 of the problems and, oh, one of them works. This is like kind of a new novel idea. Like maybe this solution is the way that they found this. It's like super complex. You can read the proof. It's like 18 pages long.
- [24:25]
Jordy
Wow.
- [24:25]
Tyler Cosgrove
I don't really know what it means, but a lot of the mathematicians are saying, okay, this actually could be useful to a lot of other problems. This is like a new way to do things.
- [24:33]
Jordy
Interesting.
- [24:33]
Tyler Cosgrove
I think it's very exciting. This is like maybe similar to alpha fold moment or something where now this is like a real kind of step change in math capabilities.
- [24:45]
Jordy
Are people going to run out of problems? How many more problems do we have?
- [24:49]
Tyler Cosgrove
I don't know the exact number. I think. So there's 1200 in total of just airdrop problems. I believe there's. The number is around 500, 600 ones that have been solved. But I mean, there's so many of these famous open math problems. There's like the Millennium Prize.
- [25:04]
Jordy
Right.
- [25:05]
Tyler Cosgrove
Million dollars if you win.
- [25:06]
Jordy
How much did OpenAI win? If you get a million dollars for the Millennium Prize? How much do they get for cracking this puppy Open?
- [25:12]
Eric
Yes.
- [25:12]
Tyler Cosgrove
So every single Air Def prize, if you solve a problem, there is a prize.
- [25:16]
Jordy
Yes. I'm anchored at a million. So, yes.
- [25:19]
Tyler Cosgrove
So these are going to be slightly less. I think this one was around $500, 500 smackeroo, I believe scale. There's $25, $100 and $500. This was kind of the big one.
- [25:30]
John
Non dilutive financing.
- [25:31]
Jordy
Yeah, non dilutive financing.
- [25:32]
Tyler Cosgrove
Yeah, yeah. So it could be a revenue pathway for OpenAI.
- [25:35]
Jordy
I have to imagine that the inference bill for this was over 500 bucks.
- [25:39]
Tyler Cosgrove
I think so, yes.
- [25:41]
Jordy
So the mathematician that just works with a coffee still ends up so obviously
- [25:45]
Tyler Cosgrove
like, okay, what does this actually impact? Does this, you know, bring us. How do we make. Maybe not, but. But it does show that, like, okay, these models are not just, you know, the average of all the training data. They can actually make novel ideas that
- [25:57]
Jordy
are outside of distribution, outside of the training data. It's not just knowledge retrieval.
- [26:01]
Tyler Cosgrove
Yeah, I think this is very much contrary to, you know, kind of the Gary Marcus take. These are just, you know, parrots. These are just predicting the next token. These aren't actually intelligent.
- [26:10]
Jordy
Yeah, yeah, yeah.
- [26:11]
Tyler Cosgrove
I think it's very exciting.
- [26:12]
Jordy
Yeah. Cool. Well, thanks for breaking.
- [26:14]
John
Why don't you hit the gong for the researchers?
- [26:17]
Jordy
Yes. Boom.
- [26:22]
John
Thank you for breaking that down. As universities classes become live podcast settings, podcasts are becoming.
- [26:30]
Jordy
This is where we're going.
- [26:31]
John
Universities.
- [26:32]
Jordy
This is where we're going. Well, let's take everyone through our lineup today because we have Alex Tabarak from George Mason University and co host of the Marginal Revolution podcast with good friend of the show, Tyler Cowen coming on Tabara a minute. Bill Clarico from Collective Capital is coming on. Alex Nordstrom Convective Capital from Spotify, the co CEO of Spotify is coming on. Then we have Jordan Schneider back from chinatalk. Going to probably spend a few minutes talking about the underwhelming summit in China and then move on to a bunch of other talks, a bunch of other topics. And then we have Christina Lee Storm from Secret level joining at 1pm Pacific. So the other news, rumors about OpenAI is being close, closing in on the IPO fund filing, and that pushed out Nvidia's results, which is normally something I would expect on the front page, but there was too much AI news. Nvidia results skyrocket on rise of AI agents. We talked a little bit about it yesterday, but the big news is that they're doing an $80 billion share buyback authorization. And take him was bullish. People were wondering where he would sit on Nvidia. He laid out pretty convincing case. You can go listen to the interview. It aired yesterday on tvpn. But without further ado, we have Alex Tabarrok in the waiting room. Let's bring him in to the TVPN ultradome. Alex, how are you doing? I think we don't have audio. Can we check your microphone, make sure it's working? We're good. Okay. It was something on our end. How are you doing?
- [28:08]
Alex Tabarrok
I'm still doing great.
- [28:09]
Jordy
Fantastic.
- [28:09]
John
Perfect.
- [28:10]
Jordy
Fantastic.
- [28:11]
John
Perfect. It's great to have you on the show.
- [28:13]
Jordy
It's been far too long. I'm a huge fan. I've read Marginal Revolution since I studied economics back in 2010, and huge fan of the Marginal Revolution podcast. I very much enjoyed your debate with Tyler Cowen, all about the cost disease, or Baumol effect. I think we should start there and then we can go all over the place in AI and labor and the economy broadly. But do you want to start with an introduction on the Baumol effect? Maybe why it captured your interest and some of the work that you've done around it.
- [28:49]
Alex Tabarrok
Sure. I mean, probably a lot of people have seen this famous chart where you have a bunch of things going up in price and a bunch of things going down in price.
- [28:58]
Jordan Schneider
Yeah.
- [28:58]
Alex Tabarrok
And the question is why? I mean, the things are going up in price, I think we all know is like, you know, health care, education. Right. And then things are going down in price. Often manufactured goods like automobiles, quality adjusted, or televisions, computers, things like that. And the question is like, why? Why do we see these big differences? And what Bama pointed to was that there's a problem with service industries, you know, like education. You know, think about what I do, which is teaching students, and you think about what Pythagoras did. Like Pythagoras, he's got, you know, 10 or 12 students around him and he, you know, he puts a triangle, you know, in the sand and, you know, draws some math there. It's more or less what I do. Right. I mean, thousands of years later, maybe I'm using chalk or Maybe I'm using PowerPoint, but basically, you know, it's me and a few students. And productivity really has not gone up at all in that. In the education industry. So because of that, prices have to go up. Because you take an industry where productivity is flat and you might say, okay, well, prices are going to be flat. But no, no, because all the other industries are improving in productivity. And the education industry, they have to attract labor from those industries which are getting better.
- [30:31]
Alex Norstrom
Right.
- [30:32]
Alex Tabarrok
So they still have to pay me as much as I would earn, you know, in another industry, but my productivity hasn't gone up, you know.
- [30:41]
Jordy
Yeah.
- [30:41]
Alex Tabarrok
So that means prices have to go up.
- [30:43]
Jordy
Yeah.
- [30:44]
Alex Tabarrok
So that's the basic Bommel effect, is that industries, especially services, where productivity is not going up, prices have to go up.
- [30:53]
Jordy
Yeah. We have the chart here, and I imagine that there are a Few logical pushbacks. One is regulation. Everyone will say that the number of licenses to practice medicine is restricted. It's a taxicab medallion system. It's a regulatory capture situation. Does that not play into this chart as much as people think? Is that to be disregarded or is overregulation still something worth contending with if you want to avoid runaway inflation in, or just disproportionate inflation in important services that people have demand for but are maybe paying through the nose for and not happy about?
- [31:37]
Alex Tabarrok
Right. Yeah. Look, I'm a free market guy. You know, I'm anti regulation, anti bureaucracy, all that kind of stuff. But you have to understand with these trends, we're talking about increases in prices, which have happened over 100 years. And, you know, medical care, people were complaining about medical care going up in price in like 1920, 1930. This is before, you know, Medicaid, Medicare, before a lot of government involvement. Education has been going up in price. So I think it's deeper than just regulation. And let me give you just one other example is think about car repair, okay. You know, or cobblers. When was the last time you took your shoes to a cobbler?
- [32:29]
Jordy
Right.
- [32:30]
Alex Tabarrok
You know, my mother will say, oh, the new generation, they just don't care about repairing things, you know, And I say, no, no, Mom, I love you. But look, it's that the cost of repair has just gone up so much compared to just the cost of buying a new pair of shoes.
- [32:47]
John
Yeah. How would you like. Yeah, how would you like to, you know, spend $70 to fix your $60 pair of shoes?
- [32:54]
Alex Tabarrok
Exactly, exactly. So, you know, I had a. My car had some. I bashed it in the parking lot, you know, and it was like, not a serious. Just a surface injury, but it was like a third the price of the car, the value of the car, just to repair the side. That's pretty typical.
- [33:17]
Jordy
Yeah. So, I mean, a lot of people in the AI world are saying that AI will do to services what technology has done previously to manufacture. To goods, to manufacture products. Products. Does that mean that the bommel effect goes away? Is it more pronounced in the industries that are AI resistant? And you see some sort of runaway inflation in the things that can't be automated. Because when I think about teaching a college course, I do see the sort of maybe linear scaling that you're discussing. But we have microphones now, we have amphitheaters. You can teach more students. There's online resources. There's ways to delegate and manage teams of homework reviewers and sort of disaggregate the work. And so you would imagine that technology would be a lever on services in some ways. But I'm wondering how you think it will change in the age of AI.
- [34:18]
Alex Tabarrok
Yeah. So the big question is robots, Right. If you can replace labor with capital.
- [34:24]
Jordy
Yeah.
- [34:24]
Alex Tabarrok
Then a lot of the Bombal effect goes away, which would be great. I mean, that would be great. Basically, you know, anything that improves productivity is good. But I think people also get a little bit too upset about the Bombel effect because really, why? Another way of putting it is why are services getting more expensive? It's because manufactured goods are getting cheaper, right?
- [34:56]
Jordy
Yeah.
- [34:57]
Alex Tabarrok
It's because what we have to pay for the services in terms of giving up other goods has gone up in price. But still we're richer than ever before, which is why people keep buying more education and more health care. Right. So that's another reason why I don't buy entirely the regulation story. Yeah. Because if it was sort of regulation and the price of health care was going up, people would buy less of it.
- [35:26]
Jordy
Yeah.
- [35:26]
Alex Tabarrok
But actually they're buying more of it.
- [35:28]
Jordy
Yeah.
- [35:29]
Alex Tabarrok
So it's the fact that, you know, our productivity is going up, we can afford more of it. That's really why the price of medical care is going up, is because the price of computers and other things is going down.
- [35:42]
Jordy
Yeah. How are you processing the. The latest and greatest in behavioral economics around maybe this concept of the vibe session, this idea that, yes, we are richer than we have been in history, and yet, I mean, right now consumer confidence is very low. There seems to be a lot of dissatisfaction with the progress that the economy is making. How much of that is grounded in real economic data versus psychological factors?
- [36:12]
Alex Tabarrok
I'm amazed at the amount of psychological factors. It's something I've changed my mind on how big the psychological factors can be. If you just look around the world today, no other country has done as well from globalization as the United States. I mean, it was us which kept open the sea lanes and globalized the world to our benefit. And we're the richest country in the history of the world. The richest at any point in our history. And yet somehow we're upset about free trade and globalization. And again, no other country has done as well at assimilating immigrants and doing well with immigrants than the United States. And yet we're upset about immigrants. So I think it's very disappointing. I hope we get over the bad vibes because the US Has a lot to be proud of and a lot to feel good about.
- [37:16]
Jordy
Is one of those Psychological factors, the average American's perception of debt to gdp. We seem to anchor debt, like nominal values of debt to gdp, which is a sort of an income stream. And we get very irritated or anxious when debt sort of touches GDP and relative values. How are you thinking about the level of indebtedness that is appropriate for a modern economy to sustain itself?
- [37:49]
Alex Tabarrok
I'm not happy about the debt. We still don't know. The US Has a big choice. Do they want higher taxes or do they want less spending? And the US Voter just keeps saying, how about neither? Sorry, this is not working. Right. I cook cake and eat it too. No, you cannot do that. So the American public has just not decided which way it works. That is what is driving the malaise. I don't know. I'm not sure. I don't know whether it's cell phones, I don't know whether it's Instagram, you know, but it does seem that there is an anger, a grievance culture in the United States. At first, you know, I thought it was just on the left, right? You know, when we had everyone is complaining, oh, African Americans are treated so poorly, the women are treated so poorly, the poor are treated so poorly, you know, and then with Trump, we've just changed our set of grievances, you know, and so now, oh, it's the foreigners who are ripping us off. You know, crime is terrible. And of course, it's not all of these things. We've just changed our set of grievances without actually focusing on.
- [39:21]
John
Is that. Yeah, is that not. How much does the fact that so many people are downwardly mobile. I mean, I was born in the 90s, and I remember as probably an early teenager hearing, statistically, this is the first generation where you're more likely to do less well economically than your parents did. And I feel like part of the challenge with that is that America's culture is so progress oriented, right? Like the American dream is just centered around doing more, doing better. You know, if your father was a cobbler, like you own a shoe store, that kind of thing. And, and so now when you have still this massive wealth, and as you said, the richest country in history, there's this constant comparison to the past and I think frustration from that, which is making huge swaths of the country frustrated. And you want to blame it, you want to blame it on, like you said, foreigners or free trade, et cetera, but it's just like this sort of latent frustration.
- [40:41]
Alex Tabarrok
Yeah, there's definitely frustration. I agree with that. Compared to the past, we Are doing better. There's no question of that now to be sure, there are some key areas, like housing.
- [40:56]
Alex Norstrom
Right.
- [40:57]
Alex Tabarrok
Housing is much more expensive, you know, than it should be. You know, that's a, that's a zoning problem. That's a choice people have been making. I think a bad choice. I think we should ought to do something about it. But even with housing, you know, houses are so much better today. They're larger, kids have their own rooms, you know,
- [41:20]
Jordy
parking. Yeah. Enclosed parking structures. Yeah.
- [41:24]
Alex Tabarrok
A large fraction of the housing stock in 1960. Didn't have indoor toilet, didn't have indoor plumbing. I was still pretty common not to have indoor plumbing. So. So I don't think it's compared. I think if people are saying that we are worse off in the past, I think that's incorrect. Maybe what's going on is, is that inequality has gone up somewhat. Not as much as people often think, but it has gone up somewhat. And of course we have more access to seeing inequality, you know, Instagram and stuff like that, which is sort of a fake.
- [42:06]
Jordy
You know, the Lamborghini might be rented. No, I completely agree.
- [42:14]
John
Yeah. The other, the other, the other factor is that the forms of entertainment that are constantly being chosen today, like doom scrolling. Right. When you maybe had the hippie generation, it was like, hey, we don't have jobs, let's go to Yosemite, just live there. Right. And like what that would do to your sense of well being versus like, I don't have a job, I'm gonna sit on my phone all day long. Or last week there was.
- [42:42]
Jordy
Nobody really hitchhikes across America when they're in between gigs anymore. What happened?
- [42:48]
John
Yeah, yeah. I don't have anything going on. I don't have opportunity. I'm gonna go outside, I touch grass. Is gonna have a wildly different impact on your psyche.
- [42:57]
Jordy
I know a super successful corporate lawyer today that was in the middle of a career transition, spent a year surfing in South America and that is unheard of by today's standards. That just doesn't happen. Sorry, did you have. Yeah. I have also been thinking about like if there was an alien that showed up and had a quadrillion dollars. Like if you include that alien in the Gini Coefficient, it skyrockets it. But the existence of that alien doesn't affect your perception until you're made aware of the diamond spaceship that the alien comes to town with and starts flexing on you on Instagram. But the mere existence doesn't change your economic well being or anything real. But it does change your Psychology, once you see them flexing on you. I'm interested in the housing thing though. I want to go back to Bommel effect because housing seems to potentially fall in the middle. Like there's manufactured goods that go into building a house. There are also services that go into a house. How do we apply the thinking of the Bommel effect and what you've learned to. What would happen to housing? Like, is there a, is there a second step? Everyone, when they talk about housing will say, let's fix the zoning rules, let's make it easier to build. But is that enough?
- [44:16]
Alex Tabarrok
Yeah, I mean, look, with housing, it's not the construction of housing which has gotten so much more, you know, expensive. It's almost, almost 100% the land.
- [44:28]
Jordy
Okay.
- [44:28]
Alex Tabarrok
The cost of the land.
- [44:29]
Jordy
Yeah.
- [44:30]
Christina Lee Storm
So.
- [44:31]
Alex Tabarrok
And you look, I mean, you just go to, you know, San Francisco, San Jose, which ought to be. Right. Some glorious metropolis, you know, of the future with, you know, sky high buildings and people traveling around in, you know, fantastic.
- [44:52]
Jordy
Look like a Chinese city where there's LED wall and yeah, we have that on Salesforce Tower. But outside of that there aren't these massive skyscrapers and it just, it's a
- [45:03]
Alex Tabarrok
land of strip malls.
- [45:04]
Jordy
Yeah.
- [45:04]
Alex Tabarrok
You know, Silicon Valley is a land of strip malls.
- [45:07]
Jordy
It really is.
- [45:08]
Alex Tabarrok
And, and strip malls, which is extremely, extremely expensive. They're just lying on, you know, this very valuable land. Yeah, I'm hopeful of something like California forever, you know, where they're trying to get permission to, you know, start a new city. I'm hopeful for things of that nature. But none of this, this is all policy. This is, all of this is under our control in some sense. This is not like we, we haven't been hit by, you know, or a tornado and we're all poor and have no housing is because we've said no, you cannot build.
- [45:49]
Jordy
Yeah. I've been thinking about the push into cities, which makes so much sense in the sense that the economic opportunity is in the cities. And so we've seen successful college graduates leave their hometowns, go to San Francisco, Los Angeles, New York, Miami, Austin, these mega hubs that have been very expensive if they aren't building. But I was really optimistic that between remote work, self driving cars, like faster highways, we would get just an extension. Because I think as you look through history, the 45 minute commute is sort of a sweet spot where before the horse and carriage people would live a couple miles because that's where they could walk in 45 minutes. We got the horse and carriage once we went to 60 miles an hour it became, okay, you live 30 miles away from your workplace. But I was hoping that we would get another leg up on that and maybe it's coming, but we certainly haven't seen it yet. Have you been surprised by any of the, the fallout or, or lack thereof of the COVID era, the shift to remote work, any, any changes, technology or otherwise, in just the, the housing and labor markets?
- [46:58]
Alex Tabarrok
Yeah, I agree with you. I've been a little bit surprised that we haven't seen another city really take off. I mean we used to build new cities. Right. You know, like, and you know, Chicago, you know, not that long ago was a city of 50,000 people.
- [47:16]
Jordy
Yeah.
- [47:17]
Alex Tabarrok
And Trump briefly talked about freedom cities for a while, which I thought was a good idea, but it's sort of gone away. It does tell you that there's something very strong about these so called agglomeration, the technical term in economics, agglomeration effects that like people just get more productive when they are near other productive people.
- [47:44]
Jordy
Yeah.
- [47:45]
Alex Tabarrok
And you really need this big push to try and get this into the new city. I mean Miami briefly, you know, seemed to be jumping ahead, but that, that trend seemed to have gone away.
- [47:57]
Jordy
Yeah.
- [47:58]
Alex Tabarrok
Las Vegas, you know, tried it with Zappos, but that, you know, modestly only took off modestly. And I am somewhat surprised that we can't plant our flag and say the new city is going to be here and have a lot of companies all agree to move in at once.
- [48:16]
Jordy
Yeah, yeah. I've heard it referred to as like the rainforest theory, that why San Francisco is so resilient because you have so many different participants and the VCs can go to Miami but they're just a phone call away while so many other key pieces of the economy are still chugging along. And so San Francisco clearly made it through a trough and is on a major, major upswing.
- [48:38]
John
Jordan, what, what data are you most obsessed with following to try to understand the current moment? We see, we see AI in the GDP data primarily through CapEx right now. But what kind of productivity data are you looking at? You know, we've been very excited about, you know, what, what, what we've seen from Stripe. They have this incorporation product and they're seeing companies, you know, more companies formed, growing revenue faster. That's very exciting. But it's also like a certain type of person finds themselves incorporating, you know, their business with, with Stripe and is not perfectly a reflection of, of the economy more broadly. So what are you looking at to try to understand the impact and Try to ignore maybe the headlines from CEOs that say, oh, we laid off this 20% of people because of AI, because as we know, oftentimes it's marketing.
- [49:41]
Alex Tabarrok
Yeah, it's very interesting. There's a lot of theories about is this going to be a job apocalypse or something like that. Not much data. And of course all of the data we have so far is that AI is increasing the number of jobs, not decreasing the number of jobs. What I'm most excited about and most interested in seeing is the effect of AI on medical care. So, you know, we just saw yesterday that I had. You just had it on your, on your show, you know, had proved a new mathematical theorem or counter, counter proof. So AI is making these inroads into the highest levels of mathematics. If we could do that for drug discovery, you know, if we could have, you know, a 5% reduction in cancer mortality, that would be worth trillions. That would be worth trillions. So the opportunities there for AI to make tremendous leaps in human welfare by improving medical care, healthcare, I think are really exciting and well within the realm of possibility. You know, one new drug like solving an airdose problem, that would be incredible.
- [51:12]
Jordy
And what does that mean in the labor market? I'm just, I'm thinking back to like there was a time when there was sort of only one track for doctors. He was just like a generic doctor. Now there's much more specialization. There's a dermatologist, a podiatrist, all sorts of different doctors. Is this like there's a fracturing and fraction further employment creation from the administration distribution advisory around new treatments as it rolls out? Because you could imagine, okay, there's a new drug that's great, that helps everyone live longer. But I'm unclear on how it interfaces with the labor market.
- [51:52]
Alex Tabarrok
Yeah, I mean, I think the trend is division increases in the division of labor. Talked which Adam Smith talked about from the, the pin factory.
- [52:04]
Jordy
Yeah.
- [52:04]
Alex Tabarrok
And when you apply that idea of the pin factory, you know, somebody shapes the pin, somebody puts it on and that's when you apply that to the knowledge economy. Then it's exactly as you said. You no longer have a physician, you have a podiatrist and you have an optometrist and you have ear. No, you're no drug specialist. And so forth. So forth. And yeah, I think that will continue and they will all be using, you know, I. For sure. Right. But yeah, they're going to get more, more specialized and the tasks which physicians do will differ, will change. But so far, you know, I'M not terribly worried about the job market per se. Yeah, you know, look, this is a problem of people worried about. People are worried about the, oh, the AI is going to do all the jobs. Right. Like this means we're going to be fabulously wealthy. And you know, even without any jobs, just being fabulously wealthy, we'll figure things out. This is the sort of problem you want to have, right?
- [53:18]
John
Yeah.
- [53:19]
Alex Tabarrok
Again, this is not like a tornado or hurricane, the tsunami which destroys wealth. This is a tsunami which creates wealth. And yes, it could be a tsunami in the sense that it's going to be very dramatic. Okay. But it's going to be very dramatic like, you know, Santa Claus coming and leaving us goods, you know, under the, under the Christmas tree. So that's drama that we can, we can handle. It won't be, it won't be without problem. Okay, but problems where the pie gets bigger are problems that we can solve. You know, it's problems when the pie gets smaller. When we are forced into a zero sum society of one person versus another. That's when society breaks down, not when the pie is getting bigger. Like we'll figure out ways to, to make sure everyone gets a decent slice. If the pie is getting so much bigger, we can solve the problem of dividing it up with everybody being happy. I'm much less worried about that.
- [54:24]
John
How do you think about value capture with this technology way versus historical technologies? If you get really good at inventing engines, you can sell a lot of those engines and hopefully have a nice margin and maybe other people copy the engine and also make similar engines and benefit from that. But we're at a moment right now where frontier intelligence is very widely available. Right. There's certain internal models that aren't with the public yet. And if you have one of those Erdos moments in medicine, it could just be an off the shelf model that helps make a breakthrough and you pay for the tokens or you pay your subscription. But then right now the labs are not really set up well to capture that value at all. It could be a big company that captures the value. It could be another startup. There's small businesses. How are you thinking about value capture versus public benefit of this technology cycle and how it would differ to prior technologies, let's say like the Internet and telecom and all the way back to railroads and the steam engine, et cetera.
- [55:37]
Alex Tabarrok
Yeah, it's a very interesting technology because this will sound odd, but it doesn't seem that hard. The fundamentals is it's linear algebra. It's very surprising I don't think anyone predicted this, but. And it's true, of course, that the frontier models are ahead. You know, open air, anthropic, you know, have the best models, but they're like six months ahead, you know, of open source models. And for most of what you want the models to do, you don't even need the frontier models. And you know what, today is a frontier model. Like tomorrow, you know, it'll be much cheaper, second rate model. Right. Like, like people are worried. Oh, you know, some people have access to, you know, 5.5 and other people are still working with 5.4. Well, the big point is that even 5.4, you know, the free model is 100 times better than 3.0, which was also incredible. So the models seem to be getting more powerful and cheaper at a faster rate than any other technology that I have ever seen. So I think the gains will be fairly widespread, if not at first, you know, then, then soon, soon afterwards. I mean, you know, some people are obviously open air and anthropic, you know, the people who got in early and the programmers there, you know, they're going to be fabulously wealthy, no question about that. But the technology itself, so much of it is open source, so much of it is really quite accessible. There's no magic there as far as I can see. Like it was just, you had a few good ideas and then those ideas just turned out to be incredibly powerful. So I'm expecting to see really the technology being quite widespread.
- [57:57]
John
Yeah, I know, I know we're out of time, but one last question. How, how do you think about part of the reason? I think we, we feel this insane acceleration with this technology shift, maybe more so than certainly mobile, but looking back to the Internet and everyone in this moment wants to figure out, okay, are we in 98, are we in 99, are we in early 2000 trying to figure out the moment that we're in. It feels like because we have the Internet today, there's this compression in the technology cycle because ideas get distributed faster, products get distributed faster. If there's a breakthrough, it's instantly everywhere. There's instantly, you know, hundreds or thousands of companies working on, you know, improving it, furthering it. And so I find it hard to try to think about where, where we are because it felt like in Q4 of last year we actually did have a correction. Like we were joking. We were joking, like, great, the bubble popped because, like, there was over, like, maybe too much excitement around chatbots and there was somewhat of a correction. And then we Got agents that really worked. And then it feels like in some ways we're in a new cycle now. And so I'm curious if you have any sort of frameworks or thinking around that, like compression in progress that we're getting because we're building on top of all these other technology cycles for this new one.
- [59:27]
Alex Tabarrok
Absolutely. And of course, the eyes themselves are starting to improve. The eyes. Right. So some people worry that precisely because of that, we'll get a sort of a foom scenario under which one day everything is fine and the next day you have a God in the laboratory. Right. I'm not too worried about that. But it's not. It's not insane. It's not insane. Yeah. So far my view is that I trust the technologists when they say that the technology is going to keep getting better quite rapidly. Where I think the technologists are not quite right is that it's going to take much longer than they think for this to start affecting, you know, jobs and the economy writ large and things of that nature that'll be slower. So the economists generally are on the slow side in terms of it's going to take time to adapt to this technology. I mean, we saw like with electricity, for example, you know, electricity was another, you know, incredible technology, but it took time, you know, it took time to adapt to that, even when the frontier, you know, was very far ahead. But for that to work its way in the economy and for people to figure out how they're going to change their production structures, that took time. And I think it will take time here as well. But as far as I can see, the technology is going to keep getting better, which it does. Give one pause and I will say, never in my life have I felt that the window of what is possible is as large as it is today. Both on the possibilities for superintelligence, huge gains, the boomers, and also on the doomer side, I don't discount those entirely. My view is more in the middle. But those two sides, they're not insane. So we do have to do a lot of thinking.
- [61:56]
Jordy
Yeah. Well, thank you so much for taking the time to come chat with us. We'd love to have you back on the the show soon. It was long overdue.
- [62:03]
John
But have a great thanks for the time, Alex.
- [62:05]
Jordy
Rest of your week, have a great weekend and hopefully we'll talk to you soon.
- [62:07]
John
Talk soon.
- [62:08]
Alex Tabarrok
Goodbye.
- [62:11]
Jordy
GMU economist, always so much fun to talk to. Well, our next guest is Bill from Convective Capital here with a new fund. Get that gong ready. Let's bring in Bill from Conveyor Convective Capital into the TVPN Elf. Jerome, welcome to the show. How are you doing?
- [62:31]
Bill
Doing great. Thanks for having me.
- [62:32]
Jordy
Guys, kick us off with the news. What happened today?
- [62:36]
Bill
Yeah, so we raised a new fund. $85 million. There it is.
- [62:42]
Jordy
Congratulations.
- [62:43]
Bill
Thank you so much. It's up 2x from our last fund and we're focused on disaster resilience. The thesis of the fund is that the world's getting warmer, our infrastructure is getting older, and that's literally a recipe for disaster. And so as disasters rise and volatility rises in the world, there's got to be private markets that can respond and that can build solutions and services and technology to stop that. And so we back founders that are building those things.
- [63:10]
John
Give us an overview of the fire. Give us a fire market map. What's exciting in fire. It's top of mind right now. There's a fire burning in la, I think Ventura County. And so my house has been very, been very smoky around my house and yeah, I want to know. This feels like a particularly brutal industry because there's these like insane spikes of interest and then people just kind of forget about.
- [63:39]
Jordy
Are you thinking watch duty for profit conversion?
- [63:41]
John
Yes.
- [63:42]
Jordy
It's got to happen.
- [63:42]
John
Yes. Lead a series A and watch duty,
- [63:45]
Jordy
please lever it up.
- [63:47]
Bill
Yeah, John, watch it. He's a good friend and we started, you know, I started my company around the same time he started that and he will never take that for profit. He's dyed in the wall.
- [63:55]
Jordy
It's such a good idea
- [63:59]
Bill
and it's actually become the standard not just for people that care about their homes, but also people in the fire service use it. I think it's an amazing example of how technology can address this problem. So I guess to get to your question around market map, you know, we think about a lot of like, who is the end buyer? Because that's actually what's kept people out of this space. Space historically. You know, the, you know, VCs typically don't get excited about companies that sell to utilities or insurance companies or government agencies. And, you know, our thesis is that that is in the middle of a really big change that, you know, if you see like PGD went bankrupt a couple of years ago, the insurance companies have had to leave California and some of these really large markets and that's changing behavior. You know, you lose $70 billion of market capitalization and you, you respond and you do something about it. You act differently. And so, you know, we think a lot about the market in terms of who's going to buy these technologies, We've had a lot of success investing in startups that sell to utilities, like overstory, which, you know, uses satellite imagery to help utilities trim trees around power lines. We just invested in fund two in a company called Voltaire, which does autonomous drone power line inspections. So, you know, utilities cost about 11% of fire ignitions, but about 70, 60% of the acres burned. And so if you can actually just help reduce utility ignitions, that's like a huge leverage point.
- [65:13]
Jordy
Interesting, interesting, interesting. What's going on on disaster prevention in more of the consumer prosumer space. I saw a house for sale over in Malibu, and it was by some actor, and he had installed, like, fire shutters and all this different equipment. He was like, like living off grid. And this was like his getaway. And it feels like I saw after the l. A Fires, like the autonomous water sprinkler that would be bolted to the top of the house. I think a lot of homeowners in Los Angeles, at least, were like, I want one of those. And they would have clicked the button to buy it if they'd seen an ad that day. But then a year goes by and nothing happens in the next fire season. And they think, maybe not, but it does feel like there's some fertile ground in the consumer space. But is that more challenging? Challenging than people might think it is in reality?
- [66:03]
Bill
I think you're totally right. Consumer demand goes and spikes. It's a very seasonal, volatile business. I just saw today watchduty is the number two downloaded app on the app store today, and that probably was not the case a couple weeks ago. It's certainly the nature of the beast here in terms of home hardening and things you can do to protect your home. I think that also goes in waves to your point. But to me, the real unlock is going to be when insurance companies create incentives for people to actually install these things around their home. So we're investors in a company called Stand. They help model homes. They use computational fluid dynamics to simulate wildfires moving through the property. They come up with a list of recommendations for the homeowner of what they should do with shutters and windows and remove certain vegetation. They remodel it, and then they can actually provide discounts on insurance. I think that's going to be the real unlock that drives at scale consumer behavior.
- [66:53]
John
Yeah, it has to be a real time. Like you're renewing your home insurance, and they're like, if you do spend in California, it could be like, spend $10,000 on this new system. And if you do that, we'll give you a $10,000 reduction this year and further discounts in the future so that you end up effectively saving real money.
- [67:16]
Bill
Yeah, exactly. I think historically insurance companies have not done that, but that's the key to protecting homes in this kind of new era. It's got to happen. The California Fair plan, which is like the state backed insurer of last resort, just announced that they're going to raise rates 30% this year after the LA fires. And so if we don't actually reduce the probability of homes burning housing and insurance is just going to become unaffordable,
- [67:41]
Jordy
how are you thinking about selling to the government, maybe in California or elsewhere? Anduril has this interesting story where they built a firefighting tank. They were trying to sell it to California firefighters, but there was pushback around job displacement. Even though it was ideally a new capability that would actually have support staff and not really take anyone's job because no firefighter can sit in the middle of a blaze like this particular firefighting tank could. But it was still became a political issue that and ultimately did not become a real product. Is there movement there? How are companies positioning themselves as additive? When I think about drone review of power lines, there's probably someone that went up there earlier. Cost savings is good, doing more with less is great. But also there's always that pushback around job displacement.
- [68:31]
Bill
Yeah, I think there's kind of two issues at play here. First is like, is there actually job displacement? I think the reality is no. I mean it's just, yeah, we are so under resourced relative to the scale of these disasters. They're happening three times more frequently with huge severity. You know, Cal Fire is the largest and best resourced firefighting agency in the world, bar none. Like that's not going to change. And I think it's really about how do we get leverage out of those investments. I do think though you're pointing out a cultural issue though, and that's something that we've really worked at trying to bridge. You know, I think it can be really harmful if like a bunch of guys in Palo Alto sipping lattes, like walk out to the fire line and try to tell people how to do their jobs. You know, there's just this huge disconnect. And so one of the things that we built is this conference called the Red Sky Summit where we actually get 600 fire chiefs and other emergency managers together every year in San Francisco and we kind of create like an off the record Venue for them to talk to people that are building stuff and technology. And it kind of creates this great sharing back and forth where you know, you can show the value of this technology. You can have these two way conversations. It sort of changes the tenor and that's been a real unlock. We've seen a lot of buying behavior come out of that event. I think things like watch duty that show how impactful technology can be. The firefighters see that and you know, I think the tide and the cultural tide is really changing. And so it's an exciting time to be building in this space.
- [69:48]
Jordy
Yeah. Is there any relevance? Like we talked to some other sector specific funds or thematic funds and the classic example is like in CPG they can be a harder business sometimes, but there's a number of like clear acquirers for mid scale companies like a unilever, Coca Cola will take out a lot of these, a lot of these companies at a unicorn valuation. And so it sort of changes the underwriting. It's worked for a lot of funds in that category. Is there a 800 pound gorilla in this category that's maybe not being disrupted but maybe can be a partner at some point in time? Or is the thinking like everything is ipo, it needs to be a standalone business or bust. Or is anything different financially about these, these businesses that you see?
- [70:37]
Bill
Yes, good question. I don't look at Wildfire as like a market in and of itself. It's this sort of dynamic that touches these huge markets like energy, insurance, housing, real estate, forestry, you know, government emergency response.
- [70:52]
Jordy
Sure.
- [70:52]
Bill
And in each one of those categories there are, you know, really large companies. There are you know, contractors in the utility space or providers in all of, you know, all of those, those markets. So I think there's certainly exit paths, but the economics here are just like immense. You know, the Bloomberg just published a report. Disasters cost the US economy $1 trillion a year. That's like on par with what we pay for interest on the national debt or defense. And so it's like, you know, there are really big public companies that will be built, you know, solving that because that cost falls on these really large deep pocketed institutions. And you know, we think that there's just very big businesses to be built.
- [71:29]
Jordy
Yeah.
- [71:31]
John
Is there opportunities for wearables for firefighters? I was once the Sandy fire started here in L. A. I was, I was showing my son some videos on like wild, just like wildland firefighters and I was shocked that a lot of them just like weren't wearing gear. They were wearing, wear something like a piece of fabric over their face. Seems like there's probably opportunities there and potentially a decent size market.
- [72:02]
Bill
Yeah, I mean, it's. It's a travesty what we equip our firefighters with and send them out there. I mean, it's like, you know, the health impacts of wildfire and fire smoke are just terrible. I mean, and so. And there's really not a practical way currently to help filter that air for these wild and firefighters. So they're out there, you know, really, with no masks, sleeping in smoke days at a time, carrying packs. It's 110, hundred twenty degrees. You know, they're working hard with chainsaws and axes. I mean, it is. It's a really dangerous, really grueling job. And I think, you know, part of the original thesis for convective was I was actually volunteering with my local fire department up in Mendocino county. And, you know, I just was watching this and I'm like, I can't believe we're doing this with, you know, trucks from the 1970s and, you know, axes and like, that's the state of the art. And so there's a huge opportunity there. And I think, you know, it's the. And you can look at, you know, wild and fire as a. As a market, and it's a certain size, but it's also a path into all types of field service jobs and all types of worker safety. And so we've looked at a lot of companies there. We haven't made any investment, but that's a category we're really interested in.
- [73:06]
Jordy
We jump straight into discussion of the fund, the strategy. Can you take us back a little bit to what you were doing before? Why start this fund when you started it? Sort of the prehistory of the fund.
- [73:19]
Bill
Yeah. So I was a founder. I started a company called WePay back in 2008. It was an early fintech company. And we built that up over about 12 years and sold it to JP where.
- [73:28]
Jordy
What was that headquartered? Overnight success?
- [73:32]
Bill
Yeah, I wish it was headquartered in Palo Alto.
- [73:38]
Jordy
Palo Alto, okay.
- [73:40]
Alex Tabarrok
Yeah.
- [73:40]
Jordy
I just remember running into it in Boston, I think, in like 2012 or something. That was around the time I was probably Seattle, in Boston.
- [73:48]
Alex Tabarrok
Okay.
- [73:49]
Bill
Back then in Boston.
- [73:50]
Jordy
That's right. That's right. Yeah. Okay. Got it. Cool.
- [73:52]
Bill
Started in Boston, we were funded by Y Combinator, moved to west coast, built out of for about 12 years, and then we sold to JP Morgan. I left JP Morgan. And I think one of the things that really suited us well at LI Pay was we were early to like the financial technology market. People called it like banking technology at the time. And a lot of the same skepticism that I hear around utilities and government. We heard, you know, we're trying to raise money from Boston VCs in 2008. And, you know, they were wrong. I mean, the fintech market was like the most exciting sector of technology over the next 10 years. And, you know, so as I was leaving JP Morgan, I wanted to work on something that was, you know, a market that was early and that we could be sort of one of a kind that we could be a market leader in and that also had an important mission where we're helping people, doing good for the world. And this sort of lined up all of those things. My wife and I own a ranch up in Mendocino County a couple of hours north of San Francisco. And a fire almost burned under the property and, you know, all the dot started to connect and here I am.
- [74:51]
Jordy
Yeah, that's amazing. It's sort of like the VC version of like, build something, you use yourself. Like the YC ethos. Make something people want. Well, thank you so much for coming on the show and breaking it down for us. Congratulations.
- [75:02]
John
Yeah, I'm really glad you're doing this.
- [75:03]
Jordy
Yeah, thank you. We need more.
- [75:05]
Bill
Thanks, guys.
- [75:05]
Jordy
Love a great rest of your day. We'll talk to you soon.
- [75:07]
Eric
Cheers, Bill.
- [75:08]
Jordy
Goodbye. Up next, we have the co CEO of Spotify joining Alex Norstrom calling in from Spotify Investor Day. Welcome to the show. How are you doing?
- [75:20]
John
What's going on?
- [75:21]
Alex Norstrom
Thank you. Hey, John and Jordy, it's good to be here.
- [75:24]
Jordy
Great to have you. Fantastic first time on the show. Why don't you kick us off with the news today? What's new in Spotify's world?
- [75:35]
Alex Norstrom
We just had a Fantastic Investor Day 2026. We talked about what we've delivered in the past four years, which put us in a really great position in terms of user growth and financial metrics. We also laid out our four big ideas for the future. And then we also talked a little bit about how we can further monetize Spotify and grow all the financial metrics and goals of the company. I want to send my greetings from Gustav Satterstrom, who was also on your
- [76:03]
Jordy
show a while ago. Yeah, we talked to him in south by Southwest. It was a great conversation. We're very excited to have you here. Where should we start? I want to jump into.
- [76:14]
John
I love big ideas.
- [76:15]
Jordy
Yeah, I mean, let's start there. There's so many different things. Maybe we should start with the reserve ticket access, because I saw that organically promoted to me and it seems so logical and I'm fascinated by the rollout, the strategy and also like, sort of why did it take so long? Has this been in the chamber for a long time? What has been the plan? What has been the go to market with this particular product?
- [76:41]
Alex Norstrom
Great question. So I've been with Spotify for, I think it's now almost 16 years.
- [76:45]
Jordy
Yeah.
- [76:46]
Alex Norstrom
And this is one of the most, one, one of the most lovely improvements to Spotify Premium that we've done, I guess since the founding. Really. Yeah. So you're right, you know, it's not move overdue. It's a great one. And the reason why it's so great, it's really that it solves a couple of different problems. One is, who hasn't been sitting there in front of a website trying to get tickets for a concert? It's very hard. And if you get it, it's going to cost you a lot. Right. And the second thing is, even if you get tickets, it may not be to the artists that you actually listen to and love. So this solves that. So what we're launching is basically we're giving you, we're holding tickets for you for a certain time window for you to just go and pay and collect with our partners. So it really solves the problem in a unique way because we're matching the tickets and the concerts and the participating artists and tours with the users on our platform that are actually the true fans of this. And we look at it from many standpoints, like not just the number of streams that you're doing. So you can't just grind yourself there. It's also. Yeah, I imagine catalog engagement is on. Yeah. So it's terrific. This is a fantastic improvement in Spotify Premium.
- [77:53]
John
Yeah. A new problem which was. Which would be ticket scalpers setting up, you know, infinite.
- [78:00]
Jordy
Paying the monthly subscription fee for years
- [78:02]
John
just to try to run algorithm. No, but I think it's absolutely brilliant. Solves a problem, you know, even, even from the artists. Like being in this position where you're trying to make your ticket prices affordable for your fans. But due to market dynamics, no matter where you price it, they'll go way up. And then the only beneficiary in that transaction is the person that's just buying the tickets to resell and everyone else loses.
- [78:30]
Alex Norstrom
You're totally right. I mean, like many things that we do at Spotify, we look at what organically happens on the platform and what we do and then when we see that there is some sort of signal or trend that actually just come by way of organic behavior on the platform, then we double down on it. So we've done many events with artists and groups and bands and so on over the years. And on a yearly basis you probably do 150 to 200 events. And the magic really happens when we look at who to invite to those events. And if we can really strike the balance of getting enough people there that are really sort of on a very, very high engagement level with that artist, not only, again, not only just listening to the artist, but doing it maybe on a daily basis, having listened to the whole catalog and do it for at least an hour per day or something like that, it really gives the artist also, like a magical experience of facing your truest fans. And this is something that uniquely we can do for artists.
- [79:30]
Jordy
Yeah, AI is obviously at the top of everyone's mind. The large taste model is the latest technology from Spotify in the AI world. But I feel like you have to have been embedding every song into some sort of machine learning learning model for probably over a decade. Can you take me through a little bit of the history of machine learning or AI at Spotify and then what has actually changed? Like, where are you seeing a break in the graph? Like, where, where are you seeing. Okay, we're experiencing some sort of discontinuity in the progress we were making.
- [80:07]
Alex Norstrom
Yeah. So you're right. It was actually just about a decade ago when Daniel and Gustav and I started investing into AI then what's called machine learning. Right. And it was very basic, the Algos then it was almost like, okay, similar to what you do on Amazon. You know, John, listen to. This is similar to Jordy, who also listens to this other thing, therefore he should listen to that too. So look alike algorithm, if you will.
- [80:33]
Jordy
Yeah. Collaborative filtering, probably based on text. Not actually looking at the waveform even exactly like that.
- [80:39]
Alex Norstrom
Yeah. And so now, many, many years later, having continued to invest in that and just the data, not just the data, but the learnings we have and the feedback loops we've had over the years, it's been compounding. And now you're asking me what changed lately? Well, well, obviously what changed is that we've got access to large language models like general intelligence that we can use to reason over the data that we have. But what it comes down to really is the unique data at scale here. So we log probably between, I think it's 3 and 4 trillion events that happen per day on Spotify so we really get billions of signals that are relevant to feed it, to feed the algorithm with. And then the second thing that happened is obviously because we started to sort of understand English, algorithms started to understand English, we started importing a lot of knowledge from outside, from the outside world onto Spotify.
- [81:32]
Jordy
Yeah, I've noticed that the search bar has gotten so much better at detecting lyrics. Like I used to have to go and Google or search a lyric and then go to Spotify and now I can just type it right in and I get it. I'm like, this is an amazing experience. I'm interested in your build vs buy vs fine tune an open source model. What's working, what's interesting, music is obviously you're benefiting from transformer architectures from all the open source work, but I imagine that a lot of the tasks that you're doing aren't exactly okay, just fine tune a text based open source model. You might need to go a layer deeper. You might need to partner with someone. How have you been thinking about the way to deploy AI?
- [82:19]
Alex Norstrom
Yeah, we certainly believe in general intelligence and we've been riding that cost curve that's going to come down collapsed by a thousand x over the last four or five years or so. So we believe in this industry commoditizing more and more. So we are going to buy the best reasoning capabilities that are out there and then we're going to use that on of top of what we call a large taste model which we are uniquely able to using proprietary data to actually build out much thanks to the stuff that I was talking to. The other side of the equation here that is important I think is also that we get a lot of feedback and data from artists as well via our Spotify for Artists application which feeds us with data that's also proprietary and unique, which is great. So you ask about build and buy and so on. I think it's a great question. If we see opportunities to actually build something to help bootstrap or add a capability, we will do it. And I'll draw two examples that are quite good. I think three years ago we bought Synantic which really helped us create aidjx. It really accelerated the build out of AI dj. And now AI DJ is all over the world and we have it in different languages and people are using it at scale. So that was a great, I think transaction that we made another one that is also, it's more recent actually. It was just before the end of last year we bought whosampled which provided us not with so much capability, but a unique set of data. So I don't know if you've used song DNA lately. It's been killing it. I think 50 to 60 million people are using it already. You can listen to a song and then you can check which were the samples and that song. And then you can also, like follow the threads down through the lineage. What's the original? Yeah, you can listen to the original track and then hear how they sort of flip that into the new one and you can see who was in there, the studio technicians, the artists, the composers and so on. And a lot of this we couldn't have done or it would have taken us much longer time without who sampled.
- [84:15]
Jordy
Yeah. Structurally, how. How is AI changing the work that Spotify employees are doing? Matthew Prince from Cloudflare was talking about this concept of you have builders and sellers, but just the raw measurement, that's less important as a discipline. And so he's pushing more of his staff to build new things and then go and sell it. Do you have a framework for thinking about how your employees should be using AI in the future?
- [84:45]
Alex Norstrom
Yeah, I mean, we, you know, a couple of years ago, I think we all went through that, the chatgpt moment. And just before the holidays of last year, we had a similar moment around coding tools and we all sort of got enamored with it and started adopting it. But at Spotify, the engineering and development teams have just done a crazy good job adopting it. So we now have, I think, close to 99% adoption across Spotify. And this goes beyond the engineering team, but also into the marketing team that are using it, not just for design, but also for better gaining insight into what type of compelling stories to tell on top of the story. So we do have very many different use cases and people are crazy about just creating prototypes now all around. Spotify just test things in a way, faster way. So what you get basically is a lot of productivity gains. And I know for a fact one of my dear colleagues, the chief co architect of Spotify ngn, he was just at Anthropic and he was doing a presentation for their staff. And I hear from Anthropic that we are actually one of the leading developers out there in adopting AI and using it to gain productivity improvements.
- [85:59]
Jordy
Yeah. Have you thought about the. I don't know if there is a trade off, you might be doing both, but there's a world where you have some sort of engineering pod and there's an opportunity to have more members of that team pushing code, shifting to individual contributor Roles but of course they're managing agents. So it's also a managerial role versus embedding more technically minded folks across different organizations. You have more cross functional teams. A marketing team gets an engineer who can over oversee agents. How are you thinking about just spreading different AI tool use across different organizations that might not previously have been in a position to build a piece of software? Maybe they're in the market to buy a couple SaaS products for whatever their vertical is, but now they have the
- [86:49]
Alex Norstrom
opportunity to actually build what you're seeing actually happening organically. Spotify is that as adoption goes up it's typically, you know, you're by your own and you're, you know, looking at what's out there, which MCPs to connect to and how that can help your work. And then you're basically sort of copying some other people's skills around at the company and you just sort of experiencing how it is to use AI to do your work, your particular field. But what now is more happening is that we, all of our slack groups and in our communities we see people sharing, you know, use cases with each other. And the next step really is that for instance, someone a product developer and an engineer sits down with a marketer, starts to understand, hey, okay, the three of us can actually build something of a holistic experience of not just new product and feature, but also tell a compelling story about it in a much, much more sort of amplified and leveraged way. Which I think is fantastic when that happens.
- [87:48]
Jordy
Love it.
- [87:49]
John
We gotta talk about fan made covers and remixes. The new deal with umg. Super, super excited about this personally. And of course it's been, you got
- [87:59]
Jordy
a song you wanna cover, you're gonna do that. You're finally gonna do the Gunna cover you were planning on.
- [88:03]
Eric
What are you listening to?
- [88:04]
Alex Norstrom
What's your favorite track right now? Is it a Drake track?
- [88:07]
Jordy
I've been.
- [88:08]
John
No, I think I, I think I was expecting Drake to kind of grow up by this point in his career and maybe evolve a bit more. I feel like I grew up maybe faster than Drake. He, he's still obviously, you know, an incredible, incredible superstar. But yeah, John was talking about Gunna. I'm a big Gunna Gunna fan. Oh yeah. So I'll be making some Gunna covers and remixes. But yeah, talk about this deal. Certainly controversial, but this feels like one of those things that people will have one reaction and then have a yep. Which I'm assuming will be, you know, incredibly magical. And you know, we've had Mikey from Suno on the show, he's a friend, friend of ours. And you know people, people fundamentally, they, they, they say one thing on the Internet but when they use the products they love them. And so I think it's, I think it's super exciting. So yeah, talk about this deal. What, what were the factors that were most important in getting this right so that you know, fans win, artists win and everyone involved wins?
- [89:13]
Alex Norstrom
Yeah, certainly, I am certainly very, very pleased with it. I mean it's a landmark deal and it's a landmark deal from the vantage point of we're enabling something that is for the first time a legal product for users and fans to actually create these remixes and covers. And what's more is that it's really the first time in a controlled and licensed medium that artists get to partake in, in the AI economy really. So that is like the core of it. And then if you think a little bit about what is that we're doing here. Well, you know, people love, to your point, like people love remixes and covers and they've always done that but there hasn't been any scaled way to really sort of tap into this opportunity. And what we're doing right now with our product is that we're unlocking this market so where we think actually in the end it's going to be very additive to both, both the music industry and ourselves, including artists and songwriters. So it's very cool. We're launching it as a paid add on which means that if you have Spotify Premium, you're eligible to actually buy into this add on. And when you have the add on you can actually go ahead and create remixes, it covers. And what's cool with Spotify is that we're very experienced when it comes to free and premium and how to convert people and lead people up the ladder. And so what we're going to do is obviously give you a certain limited usage on Premium so you can actually try it out, play with it, create habits around it and then commit to buying add on. But the important point here is that you can think about it as creation is paid for and consumption is included. So basically the output that you create around the Ghana, the Ghana remix that you're going to create, that I'll be able to listen and everyone will be able to listen.
- [90:58]
Tyler Cosgrove
Yeah.
- [90:59]
John
Is there so, so I can imagine, I can imagine a world, you know, maybe six months from now where the number one track globally on Spotify is a fan made remix. Like, you know, may, may take more time but it doesn't feel, doesn't feel doesn't feel impossible, is there. Is. Do you think this could potentially create a new category of actual artists on Spotify? Would the person that creates a remix ever be able to get, you know, some elements of. Of rev share? Or is this, like, entirely going to be more like, you know, more like a live DJ where, you know, you're putting. You're mixing and matching and putting things together and maybe you can build up your brand. You're not getting royalties or any. Any revenue share.
- [91:48]
Jordy
Yeah.
- [91:49]
Alex Norstrom
I can't speak to the specifics of it, but I can tell you how I think about it. When I started at Spotify together with Gustav 16 years ago, we had roughly, I think it was 2 million tracks in the catalog, and I've lost count, but I think it's in the order of 200 million tracks now, 15, 16 years later. So the catalog being big and growing is a good thing. And the problem you're talking about, real opportunity is for us to do recommendations well, and that's always been at the heart of Spotify. If you ask someone, why do you love Spotify? Well, most people say, hey, it's because they seem to know me. So we're able to sort of help you discover by way of personalization, help you kind of find your tracks again that you like and so on. So really, this is what you're talking to is really a personalization problem. Right. So when this product creates more catalog, our job is to make sure that the best song gets to the best place.
- [92:44]
Jordy
Last question. Talk about the app icon redesign. I thought it was really cool. I loved it.
- [92:51]
John
We loved it.
- [92:53]
Jordy
But I'm interested in the actual. I mean, I want to know how
- [92:56]
John
you processed it internally that a disco ball could get people.
- [93:00]
Jordy
People were really talking about it, but my assumption was that it was. The Spotify icon is on my home screen and I click it when I want to listen to music. But it jumped out to me, and I feel like that would show up in the metrics of jarring people awake. But I'm interested to know what actually happened. Are you going to be changing the icon randomly every five years? Is it got to be every 20 years? What is the learning from doing something sort of bold, right.
- [93:31]
Alex Norstrom
So about 10 days ago, we decided to change the Spotify app icon or Spotify logo to one that is more of like a glittery disco ball version of the Spotify logo. And, you know, to your point, this just sparked a massive conversation around the Internet on basically every major social platform. And, you know, what a lovely and wonderful piece of culture to have a conversation around the change of our logo and icon. So not only users have been sounding off, but also other big brands. OpenAI made their version, suggested that they would make a version like that. KitKat, join in on the funk. So when you have hundreds of millions of people that passionate about culture and, and art and Spotify, this is what happens, Right? So this sparks like a massive conversation that I think is lively and fun. And to be honest with you, the reason why this is happening, having reflected on it a few days later now, it's pretty intense when it happens because there are two sides.
- [94:38]
Jordy
Right.
- [94:39]
Alex Norstrom
And then there's also all of this byproduct. The Internet coined a new design term around this called discomorphism.
- [94:48]
Jordy
Oh yeah, I love. And people have been asking for an answer to flat design. Lots of people have been lamenting how boring things have gotten. You spice it up. And then people. I didn't mean that. Which is a very funny way to process it, but. Sorry, continue.
- [95:02]
Alex Norstrom
I mean, the reason why this is happening after having sort of thought about it for a few days and discussed it internally really is because we are truly at the intersection of the humanities and technology. And I think we're in a good place when it comes to that. We're at scale. When hundreds of millions of people, potentially even billions, are talking about you, then you did something interesting.
- [95:23]
Jordy
I love it. I love it. Yeah. A really, really well executed stunt and just got everyone talking and reminding and it's hard to break through with something like a 20 year anniversary with a milestone, but it's important to do something like that. So congratulations.
- [95:40]
Alex Norstrom
Thank you. We did it mostly for ourselves in the beginning, but now it turns out that
- [95:45]
Jordy
building a company around music should be fun. Like all of this. I know people have their think pieces and their deep dives on contrast ratios and all sorts of things, but at the end of the day, it's fun for a company like Spotify to do something fun with an app icon for a few days.
- [95:59]
John
I love it also. I push back on those people. I thought it looked exactly like a disco ball would look if you were in a dark room.
- [96:06]
Jordy
That's right.
- [96:07]
John
Listening to music. So I thought it was. Yeah, pure to the. To the disco ball brand.
- [96:13]
Jordy
I agree, I agree.
- [96:14]
Alex Norstrom
That's good. Thank you. Keep it up, man.
- [96:17]
Jordy
Anyway, thank you so much for coming on the show.
- [96:19]
Alex Tabarrok
Thanks for having me.
- [96:19]
John
Alex, Great to hang out.
- [96:20]
Jordy
Congratulations on the progress.
- [96:22]
John
Congrats to the team on all the new milestones.
- [96:24]
Jordy
We will talk to you soon. Have a great rest of your day.
- [96:25]
Alex Norstrom
Thanks so much.
- [96:26]
Jordy
Goodbye. And if you haven't been following, the Stock is up 13% today. Spotify is a $103 billion company. Not too shabby. Our next guest, Jordan Schneider from Chinatalk. You know him, you love him. He's back on the show for the third, fourth, fifth, sixth time. Who knows how many times it's been. We lost count, but it's been too long. And we're happy to have you here. How are you doing?
- [96:49]
Jordan Schneider
I'm good. I gotta be honest, was also pretty confused by the Spotify.
- [96:54]
Jordy
You were confused by it?
- [96:55]
John
I thought, why $100 billion company can't have fun in this country?
- [97:00]
Jordy
Yeah.
- [97:00]
John
What's wrong? I'm just saying you can't be a little.
- [97:04]
Jordan Schneider
I thought I had like some weird, weird iOS update, Tahoe, whatever.
- [97:09]
Jordy
Oh, yeah, sure, sure, sure. I just think that, like, the fact that you processed it, even if it slowed you down, it put you in the fast thinking, slow thinking. You were in slow thinking mode.
- [97:19]
John
You're not addicted to your phone enough. You're not addicted to your phone enough.
- [97:22]
Jordy
Are they still rocking the. Are they still rocking it? It's still a disco ball. I like it. I think they should just keep this thing. It stands out so much from every other app on my phone right now. I love it. Anyway, how are you doing? Give us maybe let's start with the postmortem on last week. How is the China summit? And then we can just go into everything else.
- [97:41]
Jordan Schneider
So boring, man.
- [97:43]
Jordy
I knew you were gonna say that. I was like, we're gonna talk about everything but China because it was so boring. But.
- [97:47]
Jordan Schneider
And they let me down. I mean, look, I think there is a clear period of stalemate which we've gotten into, where the US has some leverage over China, which has been something that really since like 2017. Trump won Obama, Trump won Biden. And then the start of Trump. True thought that they could kind of keep turning the temperature up and squeezing on tariffs and export controls and investment restrictions. Then all of a sudden, China, April 2025, punches back with rare earths. And all of a sudden the. They realize they run the experiment and it works. That actually the PRC has real leverage over the US and is able to kind of meaningfully constrain what American presidents want to do when it comes to more course of actions on China's technological and economic expansion. So both sides have kind of realized that. And what we got is a, you know, what was my headline, Prestige on the cheap, where the US Decide where, you know, you have the whole cabinet flying over. You have every fancy CEO flying over just being awed and wowed by, you know, their 36 hour vacation to Beijing.
- [99:14]
John
Yeah, it felt like tourism.
- [99:17]
Jordan Schneider
Yeah. And look, there's an interesting debate to be had about whether the, like, giving them the face and giving them the atmospherics of that is actually like kind of in some level, costless. And maybe this, like, makes them feel less aggrieved, less likely to start World War Three. I mean, this is the argument with Putin. Right. It's just like we kept disrespecting him and then he decided, no, like, I'm going to show you just how tough I am. So I'm not kind of on face, opposed to it. But, you know, it was, it was kind of just more or nothing.
- [99:53]
Jordy
Yeah. I mean, you mentioned every fancy American CEO was there, but were you surprised or were you expecting or did it break your expectations that no Sam, no Dario, no Demis, no Sundar, A sort of lack of AI representation? Yes, you have Elon and yes, you have Jensen. Very important figures in the AI American AI buildout, but no true lab leaders from my rough estimate, if I define it a certain way. And it felt like, okay, maybe this discussion should be about AI and they're not even bringing the people to let them get a word in edgewise. Not even a single line of conversation will happen. Was that as expected or how do you process that?
- [100:39]
Jordan Schneider
Yeah, I mean, it's interesting because like, this is phrased, this is framed as like a trade delegation.
- [100:46]
Jordy
Sure.
- [100:46]
Jordan Schneider
Right. And so almost all of those companies like Meta excluded. I mean, I guess they had a
- [100:52]
Jordy
person there, but Zuck wasn't there.
- [100:54]
Jordan Schneider
Yeah, yeah, but. But that person is like a Trump one person, kind of just like keeping with the vibes. And I guess Meta builds glasses. Builds glasses in China.
- [101:03]
Jordy
Yeah. And they, and they acquire agent companies, manage. They are of Chinese companies or formerly Chinese companies that have moved to Singapore,
- [101:13]
Jordan Schneider
which they're now not allowed to do. So, yeah, they had some lobbying to do, I guess, but, like, the, you know, the asks, I think are really inchoate. Look, the US government, we just had news today that Trump 86A executive order because he doesn't know what he wants to do about this sort of thing about AI safety. And if, like, you can't even figure out what you want from a domestic regulatory perspective, like, are you really ready to, like, put all the cards on the table and have this big, you know, grand summit with the Chinese to make sure that bioweapons don't kill us all in 2029. I don't think so. I mean it'll happen at some point, but it's, it's just a little premature. I think maybe not from the technological perspective, but from a sort of policy perspective that you do expect much of a serious discussion between.
- [102:07]
Jordy
Yeah. Sebastian Malabai had an op ed where he was sort of gesturing towards like the possibility of more collaboration on AI between America and China. You have your hands in your face or your face in your hands. So I assume you are skeptical that that will take place anytime soon. But I mean also the 2027 folks, very good at forecasting, have predicted a lot of what's happened. Say China wakes up in 2026.
- [102:36]
Jordan Schneider
Yeah. I mean it's not impossible. I think the sort of, look, if the American political system has not yet woken up to an understanding that you need a different regulatory strategy in order to keep humanity safe, I think it is unrealistic to expect a strategic adversary who does, who is, you know, six, 12, 18 months behind where you are on the sort of technology development trajectory to come to the same realization now. You know, it'll happen at some point. I think this stuff is really powerful and the, the sort of logic that America doesn't want, you know, bioweapons to be developed by Al Qaeda or ISIS or Hezbollah, just in the same way that China wouldn't want it to be done by, you know, the Falun Gong or Tibetan separatists or you know, any, any group that they see as like a non separate state actor that would, that would want to kind of take down the party applies. Right. But China I think is deeply, the Chinese leadership is deeply hardware pilled. I think they're deeply skeptical of these sorts of arguments on face because they're kind of sci fi and the sort of the analogy or the journey that the US and Soviet Union went on over the, the course of the Cold War to start to have real kind of discussions about strategic stability and arms control happened after you had the Berlin crisis and after you had the Cuban missile crisis. So like, look, anthropic. Putting out a paper saying Claude Mythos is really scary is one thing, but it is different at a fundamental level than like completely shaking a society society and like having the entire world realize that you are on the verge of apocalypse. So yeah, I hope we don't need that. But I am, I am not particularly optimistic that that much will come of this and what do you. Before it really accelerates.
- [104:50]
Jordy
Yeah.
- [104:51]
John
How much have you read into the theories that, you know, maybe China would, would fund data center, you know, pushback in the United States. I don't know that they, they would need to, but if they were, if they felt that was important enough, it would signal something about how they think about the technology.
- [105:10]
Jordan Schneider
I think this is cope by the labs look like.
- [105:15]
Jordy
Yeah, won the election for Trump.
- [105:18]
Jordan Schneider
Okay. I mean, you know, it is. I think Ben Thompson had the right take on this a few days ago. This can be solved with money. Like if, if you really put it, you know, put the choice to a town saying, okay, we will pay everyone within a 20 mile radius $10,000 a year. People like this ugly thing.
- [105:45]
John
People will start frantically trying to live next door.
- [105:49]
Jordan Schneider
Or like, look, make the data centers beautiful. Build a park on top of them.
- [105:54]
Jordy
Like, give me some playground. That is the one that I'm the most skeptical of in the American society. I feel like they will be. Companies will be paying dividends and mailing checks far beyond long before anything looks beautiful. In this country, we build massive, like monolithic structures all the time. It's a lot of cement over here. I don't know.
- [106:16]
John
Turn the, turn, turn the GPU racks into free slots.
- [106:20]
Jordy
Every time I see one of these, like beautiful industrial structures. It's always in the Nordics, it's never in America. Sometimes it's in China. They build a truck.
- [106:27]
John
So you have the data center, you got all the, all the different racks of GPU and you just put a slot machine attached to one of them, maybe that through and, and you get like three or four.
- [106:39]
Jordy
I wonder, I wonder what's that? You know, those cell phone towers that look like trees. And I don't think they look any better really. But I guess they do sort of blend in. I wonder what, what the like, economic mechanism was for going that direction. Because when I'm driving la, I see normal cell phone towers and I see tree, like fake trees, cell phone towers. And there had to be a reason, like it has extra cost to make it look like a tree. Like, is that just a choice? Is this like a nonprofit that's funding this? Like, who's, who's lobbying for this? Is there a law?
- [107:08]
Alex Tabarrok
I don't know, we gotta do it
- [107:09]
John
every time I drive.
- [107:10]
Jordan Schneider
Can we please get the TVPN segment?
- [107:13]
Jordy
Yeah, we need to dig into the tree phone pole. Come for the questions, not the answers. I'm just riffing about things I don't know and would like to know.
- [107:23]
John
Every time I drive by and they get me, I just start slapping.
- [107:26]
Alex Tabarrok
Wait, really?
- [107:27]
John
And I'm like, you got me. Big telecom. You got me. I thought it was a tree. From the distance.
- [107:33]
Jordy
From the distance, yeah.
- [107:34]
John
Every time.
- [107:35]
Jordan Schneider
Well the bad ones are like when they're five times as tall as all the other trees around just like. And like the branches only start like 4/5 of the way up. Yeah, it's just.
- [107:46]
Jordy
Yeah, yeah, yeah, yeah. It's very, it's very half hearted in its attempt at disguising itself. Ridiculous. On other China issues, did you see there are two sort of dueling predictions? Maybe, maybe I'm making them dueling predictions. Chamath Palihapatiya says Taiwan not going to be a factor geopolitically in 18 months. Dan Wong has talked about how technologists over represent the chip story in the Taiwan story. And in fact the discussion over Taiwan goes back much further and is grounded in more of like capitalist versus communist decision making and alliances. Where do you stand on the. On Taiwan today versus in two years?
- [108:30]
Jordan Schneider
I have to acknowledge Chamath's existence. I refuse to do that. I think that Taiwan is a place that has mattered for a while and will continue to matter for a very long time to come. I mean first only on the chips thing, the idea like I don't know,
- [108:49]
Alex Tabarrok
assembly analysis, like the percentage of chips
- [108:52]
Jordan Schneider
that are going to be manufactured in Taiwan 18 months from now is still, still going to be like 85% or 90%. So yeah, it used to, you know, it was 100% for a window. I am glad intel isn't a flaming pile of crap anymore and it's like nice to see Samsung also starting to get their act together. But if, if really that's the only thing you care about. No, you will still have a, you know, global economic catastrophe if the lights go off in Taiwan in 2028. Now why should you care about Taiwan besides the chips? I mean it's a democracy. People have, you know, deserve to have self determination. We can set principles aside if we really have to do that. But look, I think from a sort of geostrategic perspective there's also this kind of concept of the first island chain. I think it makes the broader Pacific architecture that America has built over the course of the past 75 years in Asia a lot more tenuous. If all of a sudden the kind of anchor to both Southeast Asia as well as North Asia becomes a plot and base. So yeah, they're wrong.
- [110:21]
Jordy
So many reasons that Taiwan will remain important into the distant future regardless of what happens with intel and TSMC, AZ et cetera. Agree with you on that. What do you think the next Catalyst might be in the rare earth story because we're starting to see rumblings about funding for, for American indigenous supply chains there. Eventually that becomes at least a stalking horse, if not a poker chip on the table, on the bargaining table. But where are we on the rare earth stalemate? That became an important bargaining chip somewhat recently, as you put it in the intro.
- [111:01]
Jordan Schneider
I mean, it's a really interesting question. I've read reports saying that even five years from now, the leverage is going to still exist. And I think there's a sort of broader question of like, this is the second largest country in the world and largest economy in the world, and it's going to stay that way for a really long time. And the sort of ambition to fully decouple such that China does not have leverage over the US Economy and can kind of squeeze it coercively seems to me to be a very tricky thing. Now, you can spend lots of money to sort of make that less acute or sort of turn it down over time or protect the particular things. If you're worried about specialized inputs into fighter jets or something, that would be really catastrophic, like inside and getting cut off or something. But it is, you know, this is like a, this is like a, a generational challenge of shoring this up. And B, there's also an offensive side, right, of, you know, escalation, dominance in deterring an adversary from, from squeezing on. Stuff like this also requires you to be able to sort of credibly sudden signals that you, you can take pain and cause pain in a way that would require the other party to back down and not necessarily use these tools. So we're at this awkward equilibrium. I think there's a lot of hard thinking that still needs to be done to really conceptualize what's the right way to spend money and the right way to think about this relationship. We actually just ran an essay contest on China, talk about economic security. We're going to be. I have, at 4pm we're doing a mega pod with three of the winners. So maybe I'll have a better answer for you after that. But it's a hard one.
- [113:10]
John
Does Xi Day trade prolifically?
- [113:15]
Jordy
Who's the best day trader in the
- [113:17]
John
global power in China?
- [113:19]
Jordan Schneider
Here's the thing. I got a piece coming out about comparing American and Chinese corruption. And the difference is that in China, they still feel like they have to hide it.
- [113:34]
Jordy
Okay, well, we'll be an interesting piece. Shifting gears. Shifting gears, both literally and figuratively. Cars. Have you driven any Chinese vehicles? Have you been outside in the byd, Are you. You planning on doing car reviews on Chinatalk? I would love to see one. Have you been in a Zeeker? I keep seeing these. They look amazing. Zeekers.
- [113:55]
Jordan Schneider
I watch a lot of YouTuber. I watch a lot of YouTube and Bilibili reviews.
- [113:59]
Alex Tabarrok
Okay.
- [114:00]
Jordan Schneider
I have been in a BYD in Norway, of all places. They had, like, in the main, like, like park, they had a giant setup, you know, it's really impressive. Yeah, I. You should get some. You should get some American car manufacturers on. Yell at them. It's pretty embarrassing. You know, one of the more interesting developments, I don't know if you guys have been tracking this, the Waymo using a Zeekr body.
- [114:26]
Jordy
Yeah. Crazy.
- [114:28]
Jordan Schneider
And I would have thought there were
- [114:29]
Jordy
import restrictions, because if Zeekr is not here, BYD is not here. You would think that, like, the supply chain would be restricted. But they must have found a way around.
- [114:37]
Jordan Schneider
So the trick is that it's there. It's the chassis and the battery and literally nothing else.
- [114:43]
Jordy
Yeah.
- [114:44]
Jordan Schneider
So they are saving money on that. But, like, the rules right now are just on all of the sort of, like, electronics and connected anything. So Waymo is filling up the entire car with stuff that is not interesting.
- [115:01]
Jordy
Okay. Yeah. Well, that's probably, like, more reassuring that Xi Jinping won't be teleoperating. You'll have a Waymo employee beaming in if you see a traffic cone out of place.
- [115:13]
John
How much attention do you pay to their humanoid antics? I feel like they're just leaking out videos of just all this silly stuff to kind of just get us a little bit comfortable with it. But if you actually go there on the ground, it's like droid army. They've got 100,000 human humanoids marching in unison. And then they just put out the video of it, like, dancing to Michael Jackson, like, collapsing and getting dragged off stage.
- [115:38]
Jordan Schneider
You know, it's interesting because there isn't a market yet, right? Like, these are not. These are toys and these are like, things you sell to universities for research. But at some point there will be. And then there's going to be a really interesting challenge of, like, whether or not. I think there's like, some level of consensus now that the Western makers have, like, smarter software. But if you can, like, you know, it's one thing to fast follow
- [116:11]
Bill
the
- [116:11]
Jordan Schneider
models themselves, but, like, if you can, only if you can apply them, like at 100x scale, right. Then, yeah, it could be really dramatic. I mean, you know, I don't. I'm not doing, like the. The episode, you know, Star Wars Episode 1, like, droid army, like, well, that might take a, that might take a few more cycles.
- [116:30]
Jordy
But just from imagine, can you imagine a Chinese humanoid company trying to distill Tesla Optimus after they have a fantastic data breakthrough and they're just having all the optimists work in cubes, like, trying to farm the data out of it. Like, they just feel like it's brilliant because you have to physically distill the data. So you buy a million Tesla Optimus robots and lock them in a warehouse so they can move boxes for you. So then you can distill it into your own robots or something.
- [117:01]
Jordan Schneider
This is a company, this is an RL environment. I love it.
- [117:06]
Jordy
I should start this in China.
- [117:09]
Christina Lee Storm
Oh, no.
- [117:10]
Jordy
I mean, they're just like RESELL in the U.S. yeah, yeah, yeah. You need a hairdryer to remove the Optimus sticker and slap on some other sticker. That's where the money is being made these days. But you got to hide that corruption.
- [117:24]
John
It's really great that we have a software advantage and they have a hardware advantage on this. That's really bullish for us.
- [117:30]
Jordy
Yeah.
- [117:31]
John
Because software, they would never be able to copy like software off of a hard drive and put it on their hardware.
- [117:38]
Jordan Schneider
Well, and that's the thing is, this is the difference with AI, right. Is at least America has way more chips and way more compute as long as Taiwan still exists. Hardware advantage. But that will not be the case for the like, you know, humanoid embodied AI takeoff is like the thing you need to actually use. The fancy model is almost certainly going to be manufactured in China and manufactured at a scale that could be like, you know, multiple orders of magnitude bigger than in the West. Now this may change, like, once this becomes economic. Yeah, right.
- [118:15]
Jordy
So America can, I mean, like, you look at, you look at space, like, like we have multiple companies that land rockets. Very capital intensive. It's an industrial process. You would assume that China would win that, but they are. But we have a lead in, in NAS to orbit still. And so it's not impossible, but we do tend to let our leads languish like we have in the car industry seemingly.
- [118:39]
Jordan Schneider
And it'll be interesting because there'll be this lag where China like, because they already have all these humanoid companies that like, have the ability to scale, Will scale faster once the kind of like economic utility of these things turns on.
- [118:53]
Jordy
Yeah, definitely.
- [118:54]
John
If you, if you believe in AI progress, do you have to believe in a Taiwan invasion? Because assuming, assuming, you know, we keep making progress or we have Accelerating progress. Doesn't that just increase the prize for.
- [119:10]
Jordy
Yeah, but it might increase the defensive capabilities.
- [119:13]
John
Sure.
- [119:14]
Jordy
Yeah. And I think there's.
- [119:15]
Jordan Schneider
There's like plenty of other things you can do to be obnoxious. And there's so much. There's. Look, this is, this is why Chamath is wrong about everything. Thing is, because it's not all about technology. Like, there are other risks and incentives and like, institutional dynamics and historical dynamics at play. And there are a whole lot of downsides to starting something that you don't know how. Like, you don't know how it's going to end. Which is a lesson that Xi has now got to relearn from Putin over the past five years.
- [119:49]
John
So what? Last thing, we touch on it briefly and then I know we're over time. What happens with Manus? What's your prediction? Are they going to buy the company back from Meta and just head home? Is there any precedent for something like this?
- [120:07]
Jordan Schneider
I don't really understand. I mean, like, all of the employees, do they have to give the tech back? They weren't really buying the tech. They were buying the. It was like an acqui hire. Everyone's in Singapore except for the two founders. So, like, maybe the founders just get screwed out of all this money and, you know, the employees continue on their merry way in Singapore. I think it's. It's a messy one and I don't know, like, Matti eats a loss.
- [120:36]
Jordy
Yeah.
- [120:37]
Jordan Schneider
Something I hope.
- [120:38]
Jordy
Bill Gurley, before you go, we have an answer to the question of telephone poll camouflage. Tyler, do you want to. Do you want to give us a little update on this? Can we. Can we do. Yeah, let's cut.
- [120:49]
John
Yeah.
- [120:49]
Tyler Cosgrove
Telephone pole camouflage basically began after the 1996 Telecommunications Act. So it basically, like, restricted the ability of local communities to regulate, like, the actual placement of the telephone pole.
- [121:01]
Jordy
So a city can't say, you can't put a telephone pole there. You can't put a cell phone tower there. But they respond.
- [121:08]
Christina Lee Storm
But, but they basically made it. So they made it so the local governments would say, you have to camouflage it. Right.
- [121:16]
Tyler Cosgrove
So now we see there's all different forms of these.
- [121:18]
Eric
There's.
- [121:19]
Tyler Cosgrove
There's trees, there's cacti, there's like church steeples.
- [121:23]
Jordy
Yeah, yeah, yeah, Bigger.
- [121:25]
Jordan Schneider
A lot of chipmunks run up and down those.
- [121:28]
Jordy
Those poles too. Right. And camouflage can add over a hundred thousand to tower construction prices, which is still cheaper than losing the sight. Tree towers can cost up to double. Hey, two can play this game. Two can play this you have a soundboard too?
- [121:43]
Jordan Schneider
I got my buttons.
- [121:46]
Jordy
We have a guest with buttons. Let's see. Can you get it to work? Uh.
- [121:50]
John
Oh, yeah.
- [121:50]
Jordan Schneider
Oh, no.
- [121:51]
Jordy
Oh, no.
- [121:52]
Alex Tabarrok
Another one.
- [121:53]
Jordy
That's a narrative violation. Will it work? Let's find out. Your buttons aren't working anyway.
- [122:02]
John
But bring him next time.
- [122:04]
Jordy
Bring him next time. It's been too long. We'll talk to you soon, Jordan. Have a great day. Hey, there we go. Very well done. Thank you so much for taking the time. Have a great rest of your day. We'll talk to you soon. We went over time, so we will bring in our next guest immediately. We have Christina Lee Storm from Secret Level. Welcome to the show. Sorry, what's happening? Delay.
- [122:27]
John
Hey, what's happening?
- [122:28]
Christina Lee Storm
Hey, how's it going?
- [122:30]
John
We're having a little too much fun with our sound.
- [122:32]
Jordy
Fun with a Red Bull.
- [122:33]
Christina Lee Storm
I love it.
- [122:34]
Jordy
Playing sound cues, all sorts of stuff. But since it is your first time on the show, please introduce yourself a little bit.
- [122:40]
Christina Lee Storm
Hi, I'm Christina Lee Storm. I am head of studio over at Secret Level, which is an AI native studio. And I also am co founder over at Playbook plbk. I identify myself as a producer. Like an film. Independent film producer.
- [122:56]
Jordy
Yeah. How are you thinking about the blurry line of how AI Works its way into productions these days? You have Toy Story with cgi. You also have a little set extension and maybe even a little CGI creeps into a Nolan movie every once in a while. But AI Is very different. People are thinking maybe it'll generate the whole movie. Maybe it'll just sort of make a green screen movie a little bit sharper. How are you thinking about the opportunities and the trailers?
- [123:24]
Bill
Yeah.
- [123:24]
Christina Lee Storm
I mean, it's interesting because we've had technology in the entertainment industry for a while. I was a consulting producer on a film called Jurassic Punk, which was about the birth of computer graphics. It was about a gentleman who was from Canada. His name was Spaz Steve Williams. And he actually created the first walk cycle, T. Rex for Jurassic park. And he was a total rebel. And in the documentary, we talk about how he just felt like, you know, we could do this with computer graphics. At the time, Jurassic park was like, hey, we're going to do it Animatronics. We're going to do old school. We'll do on set. And there was an ability to actually now, like, wait, hold on a second. We could create this. And so when Spielberg and Kathleen Kennedy saw the first walk cycle as he was playing on his computer screen, you know, just sort of he knew when they were going to walk by, it changed everything. And that was the birth of computer graphics. So we know that technology has always been a part of that story. And so I think, you know, it is quite a lot of people like to use the headlines like disruptive, but I think it's just an ongoing process of how things should sort of evolve. And me being my background's traditional production producer, I've been an independent producer for a while. I think it's just, it's part of the process. And I think before, I think a lot of producers would just offline, you know, any kind of technology or any specialty to different departments or groups. And today, I think anyone who's going to really survive and thrive into the new world order of this, you know, everything sort of shifting and changing, we have to actually lean in and there's this interesting, like, technology, storytelling, you know, convergence entertainment. That is exciting. And I think, you know, that's. Yeah.
- [125:24]
Jordy
On the topic of Jurassic park, grade this, grade this prediction. Jurassic park, massive success. The franchise is grossed, I think, billions, maybe over a billion dollars. It's, it's a fantastic financial success. But interestingly, Jurassic park, of course, is owned by Universal. But dinosaurs are not particular intellectual property. It's not like Superman. The T. Rex is not something that a studio can own. Oddly, no other studio has created like the Superman to Spider Man. There's not the Marvel Universe to the DC Universe. I would have expected a reaction series to Jurassic park and that IP library at some point, never, never really developed. But in the age of AI, where it's increasingly easy to generate imagery of dinosaurs and you don't have any intellectual property concerns because you're not recreating a particular actor. I predict that there will be a massive surge in dinosaur themed movies.
- [126:27]
John
You to create the Dino Prize. The Coogan Dino Prize.
- [126:30]
Christina Lee Storm
The Dino Prize.
- [126:31]
Jordy
Is there anything here? Am I thinking about it correctly?
- [126:34]
Christina Lee Storm
I think that you're on the right track in terms of, like, dinosaurs are not, you know, there's not a particular ip, but here's the thing, and this is sort of where it does fall back to traditional methods. It's like the storytelling is everything like you could have. There's a lot, there's a lot of different ways, you know, that you can tell and share stories, but it's really, what is the specific, you know, what are the specific things with the character? What's happening with the world? And so, yeah, someone could come up with a dinosaur type movie, but what is it? Why, why is that special? Why Is that undeniable for someone to say, yes, I want to watch that and I want to. And I want to engage in that. So I think the concept of that is good.
- [127:18]
Jordy
I think potentially half baked, but we'll get.
- [127:22]
Christina Lee Storm
Well, that's the difference between really great. No matter what the technology is, you have to still be a really good storyteller.
- [127:30]
Jordy
Yeah. Please.
- [127:32]
John
Article in the Wall Street Journal this morning about a new film called Hellgrind that's I guess premiering at Cannes. They're saying that it cost half a million dollars to make and around 400,000 of that was computer. Yeah, I'm sure there were. You know, with all these things there ends up being costs that aren't kind of captured on maybe a napkin.
- [127:54]
Jordy
Sort of a deep seat moment.
- [127:56]
John
Yes. But is this the beginning of like, do you expect hundreds of these over the next year? I imagine you're hearing and seeing a lot that are in the works and working on some yourself.
- [128:10]
Christina Lee Storm
But yeah, so I mean I think there are, you know, can. I actually didn't go this year. I usually go every year. I knew that there was going to be a lot of announcements about different projects and things. And at secret level, you know, we actually will have an announcement next week. I was like, should I come on the show today? Because next week there's going to be, you know, so I, at the. I'm happy to come back but at the end of the day, I think, you know, let's just be real. Let me just be real. There's a lot of things that are being pioneered, like what are the costs? What's happening here? How do we align with even like guild related things that are issues. How can we. It's not just like, let me just get this out. I think there's something even bigger to that degree. I think people, a lot of people could say yeah, I can make a movie. But I think it's really. Again, I'm going to go full fall back on story. I'm going to fall back on what is the process in which that's going to happen. Like at secret level we do. We have our own proprietary workflow pipeline that really, really allows us to scale. And I think those costs, when those get flagged, it's like, yeah, what's the total costs in it? There's. There are a lot of costs. And so I don't think, I think it's really. I think when people talk about like the, the budget and they're just focused on the budget, I think they've worked, missed the Mark on the bigger.
- [129:35]
John
So what is your. Maybe it's too early to say, but what do you think is going to be the winning formula? Obviously, it's still an experimental time, but you said story matters a lot. Obviously technology matters a lot, what models you're using. But where are you thinking of taking traditional filmmaking approaches versus reinventing your approach?
- [129:58]
Christina Lee Storm
Yeah, I think there's. Okay, there's a couple things here. Great question. Ready? I think that there will, you know, there was a time where, like, independent film was like, on the rise. It was awesome. We saw really great filmmakers come out of that, like, you know, going to Sundance and whatnot. And I think that that's really important to feed and bring about, like, creativity. Really great story. So I do believe that with the tools, we have more of an opportunity for independence to sort of bring that to the forefront. But again, story. It's about the story. Like, is it going to be a really great story? I think the other piece is Will we see this? I kind of share with this because I've been a former student, surviving studio executive and also a producer, and I think that what's. Is the chasm going to widen? Like, how do we sort of bring that? Do we want to bring the chasm closer together so it's not just traditional studio fare, or do we want to really see these independent voices come out and we can see those play out and I think as time tells and how people will refine their storytelling abilities, I think that's really important. I think there's also, to be honest, the. There's a way in which filmmakers who use AI tools are using it at the best abilities. Is it almost a slight variation than maybe a traditional approach from, let's just say like a studio pipeline type film? I think. And that reminds me of like when George Lucas came out, like, you know, he was breaking new ground in technology. He was like, this doesn't exist. So how do we create something that doesn't exist? And I think we have to allow for that creativity to birth.
- [132:01]
Jordy
Totally. I want to take a question from the chat. What is your favorite movie?
- [132:06]
Christina Lee Storm
Oh, gosh.
- [132:07]
Jordan Schneider
Woo.
- [132:08]
Jordy
I have a lot or maybe something just with a great story that you think is the reception.
- [132:13]
Alex Tabarrok
Inception.
- [132:14]
Jordy
That's a great movie. Have you seen that?
- [132:16]
John
I have, yeah.
- [132:17]
Jordy
There we go.
- [132:18]
Christina Lee Storm
I like to say, and I'm going to embarrass him, our founder, Jason Zada from Secret Level. I call him like the. He's like the. Like the blossoming Chris Nolan. And he's just really creative the way he approaches story.
- [132:36]
Jordy
Does he use a phone? Christopher Nolan, famously no phone.
- [132:40]
John
So no phone guy.
- [132:40]
Jordy
This week he did an interview with. He does no email either. Printed out emails if somebody needs to email him. No phone. Also doesn't like maps because they reorient you. They don't always face north. And he doesn't consider that a map. Very interesting lifestyle.
- [132:55]
Christina Lee Storm
Yeah. Anyway, I would say Inception. I would say, like, let's go really old school. It's a Wonderful Life.
- [133:01]
Jordy
Ooh. Yeah.
- [133:02]
Christina Lee Storm
And then if I get my like, like, just real old school. I love, like, great character based When Harriet Met Sally. I'm all over the place. Yeah, I'm all over the place. I like being that way. So people can't say, oh, like sci fi or she, you know.
- [133:19]
Jordy
Sure, sure, sure.
- [133:19]
Christina Lee Storm
Godfather, Godfather.
- [133:21]
Jordy
I saw When Harry Met Sally at an outdoor movie theater. At one of the screenings, you buy tickets to seeing an old movie outside with a bunch of people. Tons of fun.
- [133:29]
John
Last question from the chat. What is your single favorite piece of fully AI generated content? It could be like 30 seconds long, a minute long. I can't really expect it. Anything else? I think for us it's like Harry Potter Balenciaga, which, funny enough, was like Pope in the coat a year and a half ago, maybe, at this point.
- [133:53]
Christina Lee Storm
So if you haven't seen it. Yes. You know, there's a secret level, the Heist.
- [134:01]
Jordy
Okay.
- [134:02]
Christina Lee Storm
Watch the Heist. When Jason shared his first 30 seconds, I was like, okay, okay, we got something. We're approaching some really interesting things. So you can see a lot of things at secret level.
- [134:16]
Jordy
Yeah. I love it at co. Amazing. Well, thank you so much for taking the time.
- [134:20]
John
Really great to meet you.
- [134:21]
Jordy
Great to meet you.
- [134:22]
John
Make sure to share your announcement next week with us and cover it on the show. Can't wait.
- [134:27]
Jordy
Have a great rest of your day.
- [134:28]
John
Cheers.
- [134:28]
Jordy
Goodbye.
- [134:29]
John
Bye.
- [134:30]
Jordy
Up next, our last guest, Eric from Modal Labs with some big.
- [134:35]
John
It's been a minute. It's been a minute.
- [134:36]
Jordy
I'm excited to catch up. How you been?
- [134:39]
John
Good.
- [134:39]
Jordy
You've been busy. What you doing?
- [134:40]
John
Cooking. Cooking.
- [134:42]
Jordy
What happened?
- [134:43]
Eric
We just announced a C round today, which is very exciting.
- [134:47]
Jordy
How much?
- [134:48]
John
How much?
- [134:49]
Eric
How much? 4.6 65 post value racing. 355 million. So general catalyst led together with Redpoint.
- [135:02]
Jordy
Fantastic.
- [135:02]
John
What was the specific catalyst that led to this round?
- [135:07]
Eric
There's been a lot of stuff that's been going on. I think one particular exciting moment in the last 12 months, or really the last six months has been. We now have a product called Sandboxes that's just growing insanely fast. Almost 2x every month for the last 6 months. So sandboxes, if you don't know, basically the idea is you can take typically LLM generated code and execute it in a safe environment. So it powers a lot of reinforcement learning, powers a lot of vibe coding apps, a lot of background agents. But yeah, I mean, in general we've seen tremendous growth. Also with Inference, Modal has always been kind of. We started a company five years ago with the idea of building pretty general purpose infrastructure. We felt that a lot of infrastructure wasn't really built for AI. And so when you look at all these companies out there building sort of AI applications, they all need different things. Some of them need sandboxes, inference training, batch jobs, like all kinds of stuff. And our goal is to provide all of that and really kind of build a new, sort of almost like a new cloud in a way that supports all these types of very cool applications.
- [136:08]
John
Very cool. I feel like it's been almost a year since you were on, which feels, which is like, you know, 15 years, 15 years back in October. October. Well, there we go. Feels like, feels like it feels like a year ago. Even though it's maybe, maybe less.
- [136:25]
Tyler Cosgrove
What?
- [136:25]
Eric
Yeah.
- [136:25]
John
What have been the key kind of inflection points since then? Sandboxes sounds like, sounds like one, but I imagine a lot of this is the space is moving so quickly. If you get a signal from two or three customers, hey, we have this problem, can you build a solution? And then you can just see tremendous growth in like a very short period of time. And so in some ways, like you have an existing portfolio of products that are all growing, but are you trying to constantly be making new bets based on customer needs? Or is that maybe not even the approach?
- [137:02]
Eric
I think one of the benefits of building infrastructure is like you can sort of look at customers, of course, and see what they're doing. But I think with infrastructure you can also argue a little bit more from first principles. What are the building blocks that people are going to need in terms of compute? Sandboxes was actually something we launched three years ago and it really started taking off like nuts in the summer last year. Similarly, I think Inference is similar. We launched it almost four years ago working on some other really cool stuff, stuff around training and some other products. And I think one of the benefits of infrastructure is you can have a little bit more sort of a first principle, like let's build the right building blocks and then let our customers sort of figure out what to use them.
- [137:43]
John
For how do you think about planning? Like planning, planning demand.
- [137:51]
Jordy
Add a zero to last year, add
- [137:53]
John
two zeros to everything. Yeah, but yeah, it just feels like the best. This is the hardest like demand planning challenge that really any set of businesses have ever faced in history.
- [138:07]
Eric
Yeah, it's rough. I mean for us, it's like we basically look at like the last couple of months, figure out, you know, we're growing 30, 40% every month. You just take the power of three, that's how much you're going to need in three months. That's how many GPUs to go out and get those GPUs. You can typically get GPUs with like about three years of. Sorry, three months in advance.
- [138:29]
Jordy
Sure.
- [138:30]
Eric
But yeah, that's a big part of how we think about the business today. It's like we need to get the GPUs now that we're going to need in three to six months, which is a lot.
- [138:36]
John
Yeah, yeah. In some ways it's like not too dissimilar to the challenges that consumer packaged goods founders facing. You're growing super quickly, but if you want to stay on that growth curve, it means you need to be committing to things, you know, now and committing capital.
- [138:53]
Jordy
But what's exciting to you across the.
- [138:56]
Eric
Luckily we have capital now.
- [138:57]
Jordy
Yeah. Well, what's exciting to you across the like semiconductor ecosystem? There's a whole bunch of ASIC startups that have been on the show, cerebras, IPO'd, every hyperscaler is working on different chips at this point. What's most interesting, what's under discussed, what's on your roadmap or, or what have you already sort of sunk your teeth into?
- [139:21]
Eric
Yeah, I mean there's some like really cool alternative accelerators. I'm quite bullish on tpu, amd, Trainium, all of these things.
- [139:29]
Jordy
Yeah.
- [139:30]
Eric
We see zero demand from our customers for, for any of those things to
- [139:34]
Jordy
be clear because only the really big labs, anthropic can actually go and, and figure out how to run it. Is that. Exactly.
- [139:40]
Eric
Yeah. I think the cost today of rewriting his software to run on those stacks is just like very high.
- [139:45]
Jordy
Sure.
- [139:46]
Eric
So while I remain like very bullish on this sort of 2, 3 horizon, I do also want to temper the expectation a little bit.
- [139:53]
Jordy
It sort of has a fixed cost to rewriting for that chip stack. And if you're not doing billions a month in revenue, it's hard to amortize that cost.
- [140:01]
Eric
That's exactly right. It's just not worth it unless you're operating at a very large scale but I think that cost is going to go down over time. You're going to have software that basically lets you take existing CUDA compatible stuff and run it on other alternative accelerators. So yeah, I think it would be good for everyone to have a little bit more competition in the space. But we also love Nvidia and that's what our customers want today.
- [140:20]
Jordy
That's great. Do you have a view or any opinions or predictions about the compute futures market that's been talked about? Any. I've seen like these price charts of like B200 is going up and down. Everyone is trying to read the tea leaves, understand where we are in the various AI cycles based on it, but is that something that's relevant or important at all? Do you, do you look at that data? Do you have your own internal data set that's more relevant to you? We look at it a lot.
- [140:49]
Eric
I mean also I feel like we're very plugged into the market. We talk to Neoclass all the time, we get capacity all over the place. So we have a very good pulse of the market. I think the market is going to remain quite tight. Yeah, I think fundamentally like also like that's a big part of what we do is like we offer, you know, that as a product, like don't think about capacity, come to us instead.
- [141:07]
Jordy
Yeah.
- [141:08]
Eric
And so that becomes now our problem is like managing that capacity for thousands of companies at the same time. Like we built a multi tenant product that sort of aggregates all that demand. So if you need a thousand GPUs you can come to us and we'll give you to that, give you those GPUs like often within minutes because we have like a very big pool we can sort of tap from. Yeah, but Yeah, I think GPUs are going to be tight. When you look at the prices, they keep going up. At some point obviously I think it's going to normalize like most markets do, but it might remain tight for the next year or two.
- [141:36]
Jordy
When I think about the big applications of a big pool of compute, I think training and inference of LLMs, coding models, agentic workflows, I think image, video, audio generation. What's next? What do you think the next big driver of demand is? Is it world models? Do those fit in? Are those structurally different? Is there something else that you're tracking where you're seeing customers come to you with sort of like a different product, but it fits in the same shape so you can work with them. As a business partner, yeah, we have
- [142:09]
Eric
a very wide range of customers. So we have everything from Suno which generates music using AI. Cognition is training coding models using reinforcement learning. Ramp uses us for background agents. We have a lot of vibe coding platforms like Lovable. We also have drug discovery companies like CHAI using us to simulate molecular dynamics and weather forecasting companies. Robotics, we have very general, we look at across a lot of different verticals. Obviously the big application in the last couple of years has been LM inference and that keeps growing a lot lot. But we've also seen some really cool applications with diffusion models. In terms of what I look forward to, I think that probably personally the coolest thing I expect to happen in the next couple of years is speech to speech. Imagine just talking to a computer. In order to figure that out, we need to get the latency down for all the three components of speech to speech. Doing the LM and text to speech and stuff like that. That's something very cool, but also really cool about. I think it's incredibly cool if we can, I don't know, cure cancer or something like that.
- [143:16]
Jordy
Yeah, it's interesting because I'm with you on that timeline. Speech to speech being somewhat impressive, but you're often not actually hitting a real reasoning model. There's so much speed up, we probably need to be 100x faster, 1000x faster on the response time to really have a breakout moment. And then you watch Google I O this week and you see with Omni a glimpse of. Okay, it's more like a FaceTime call with the AI and it's generating a video in real time and you know how long it takes to crank on video models to get an 8 second clip? It's minutes and minutes and they still have errors and stuff and we're still not even at the superhuman element. So lots to do, lots of stuff, servers to rack, lots of GPUs to set on fire, I'm sure.
- [144:07]
John
Yeah.
- [144:08]
Jordy
NCPUs. Yeah.
- [144:11]
John
Any plans to actually go full stack, get your own land powered shells, et cetera. Is that not the highest and best use of your guys talents?
- [144:25]
Eric
We think of our values like adding a big software layer on top of the underlying computer on the underlying compute. So we think of ourselves as almost like a cloud, like one layer up from the existing clouds. The existing clouds are very good at running computers in the cloud and offering that through an API. We would love to keep tapping that as much as we can. If we can't get the capacity we need, we might have to build it Ourselves. Ultimately, it's a kind of economics question or practical question. I wouldn't rule out any sort of move. The idea of racking computers and plugging in cables and dealing with fires and data centers and whatnot, to me that's not super appealing. But at the end of the day, we'll do it if we have to. Absolutely. Yeah.
- [145:07]
John
Makes sense.
- [145:08]
Jordy
Well, congratulations.
- [145:09]
John
Yeah, congrats to the whole team on an awesome milestone and incredible progress. It felt like a year. It's definitely been since October.
- [145:16]
Jordy
Only a couple months.
- [145:17]
Eric
Yeah, it's like 10 AI years.
- [145:19]
Jordy
I love it. Congratulations. We'll talk to you soon.
- [145:21]
Eric
Thank you so much.
- [145:22]
John
Cheers.
- [145:22]
Jordy
Have a great rest of your day. So let's click through the timeline, see if there's anything that we missed before we jump off. DJ Kauss has an idea here. Found a $10 bill. It took five seconds to pick it up. That's $63 million in annualized ARR. This is the thinking you need to be deploying if you're going to be raising money. Potentially. No, don't do that.
- [145:53]
John
Messi the football player had a prime copycat called Moss.
- [145:58]
Jordy
Moss.
- [145:59]
John
And it's shutting down after 23 months in business.
- [146:02]
Jordy
I wonder if that has to do with the logistics of shipping internationally, because he is an international icon. But setting up distribution and retail presence across many countries very quickly, it's not quite as easy as dropping it on Amazon and flying off the shelves. A lot of those are sort of one country by country, and I wonder if that has a piece of what happened. So this is shutting down fully. MAS plus. Interesting. Well, Mitchell Baldrige recommends setting up a Vanguard account. Not Fidelity, not Schwab. Vanguard. Smart advice. You might think they do have the lowest fees. If you want to get up to speed on Vanguard, listen to the latest episode of the acquired FM podcast. But he says wrong. It's not because they have the lowest fees. It's because their interface is so awful you will never trade. It has made his clients millions.
- [146:55]
John
Let's close it out with this video.
- [146:58]
Jordy
What you got?
- [146:58]
John
Playing catan with a billionaire.
- [147:01]
Jordy
Yes,
- [147:03]
John
I think you'll like.
- [147:04]
Jordy
What is this face? Is this a face filter or a background replacement? Or both? Something funny is going on here.
- [147:09]
John
Face filter.
- [147:10]
Jordy
Okay, Face filter.
- [147:11]
Bill
My turn.
- [147:11]
Jordy
I'm going to put down a data center.
- [147:16]
Jordan Schneider
That's against the rules.
- [147:18]
Jordy
How else am I supposed to AI
- [147:19]
Jordan Schneider
generate my Christmas card?
- [147:22]
Jordy
Not popular. I'm not joking.
- [147:24]
John
The way you walk, the way you understand me.
- [147:28]
Jordy
Do you like it? No.
- [147:29]
John
It's blocking all the land.
- [147:31]
Jordy
Wait a minute. Are you one of those paid protesters? Next turn, I'm gonna use 7 water on my data center. That's not how that works.
- [147:41]
Jordan Schneider
That's not a resource.
- [147:42]
Jordy
7 Water. How else am I supposed to power it? The water stuff is really. It's so interesting that no one has moved to energy like natural gas. There are natural gas turbines that would be opposed and yet people are focused
- [147:57]
Tyler Cosgrove
on stop giving them ideas.
- [147:58]
Jordy
I know I'm doing their job for them, I suppose, but it's like, I don't know why the water. I think it's just because like water's delicious and electricity is vague and abstract and you don't think about it. You can visualize a glass of water. It's hard to visualize a battery in the same way. But yeah, what is it? It's like dozens of LLM queries every day for a full year is a equivalent to eating a single almond. Something like that, but. Matthew Ball is back at Xbox. Congratulations on the move. He announced it yesterday. We're going to try and get him on the show because he's one of my favorite people, favorite authors. If you haven't read his book or his blog, he has a fantastic mind for future of technology and I could not be more optimistic about the future of Xbox with him on the team. Tae Kim says this hire is a literal game changer. Matthew Ball knows gaming and what needs to be done. This news makes me the most bullish. I've been on Xbox in seven years and I completely agree.
- [149:02]
John
And to close it out, the White House is awarding two billion in grants.
- [149:06]
Jordy
Oh yeah.
- [149:07]
John
One billion Quantum computing. To IBM to nine quantum computing companies. And taking an equity stake, their grants overtaking an equity stake.
- [149:17]
Jordy
It's an investment.
- [149:18]
John
It's an investment.
- [149:19]
Jordy
It's an investment. And you American taxpayer will now own a basket of quantum computing companies.
- [149:27]
John
Spaghetti computing is up.
- [149:29]
Jordy
That's not spaghetti computing. It's Riggetti computing.
- [149:31]
John
Spaghetti computing is up 30%.
- [149:34]
Jordy
Who came up with that? That seems like a trump, like something he would say.
- [149:38]
John
I created that.
- [149:39]
Jordy
You created that? Okay.
- [149:40]
John
Just now. I'm sure I'm not the first person to think of it, but anyways folks,
- [149:46]
Jordy
thanks for watching Leave us five stars on Apple podcasts and Spotify. Sign up for our newsletter tbpn.com and we will see you tomorrow Friday. Goodbye. We'll smoke.
- [149:57]
John
Have a wonderful evening.