Warner Deal Drags, H200 Exports Resume, Meta AI Chafe Gate | Joe Weisenthal, Ben Smith, Matt Hicks, Stephen Schwartz, Saam Motamedi, Nicholas Kelez, Antoine Tessier, Filip Kaliszan

Summary

TBPN Podcast Summary – December 10, 2025

Episode: Warner Deal Drags, H200 Exports Resume, Meta AI Chafe Gate
Hosts: John Coogan & Jordi Hays
Location: TBPN Ultradome
Notable Guests: Joe Weisenthal, Ben Smith, Matt Hicks, Stephen Schwartz, Saam Motamedi, Nicholas Kelez, Antoine Tessier, Filip Kaliszan

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Overview

This packed edition of TBPN’s daily technology show navigates breakthrough business news, U.S-China tech policy, venture capital trends, and what’s roiling the streaming, AI, and security landscapes. The hosts dive deep with a suite of heavyweight guests, analyzing Nvidia’s reopening chip exports to China, the drama swirling around the Warner Bros. Discovery sale, the "Chafe Gate" at Meta’s AI division, and the impact of today's Fed interest rate cut. The show is a blend of real-time strategic thinking, industry gossip, hard-nosed financial analysis, and speculation about what’s next across AI, media, and startup sectors.

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Key Discussion Points & Highlights

1. Nvidia H200 Exports to China: Policy Reversal and Smuggling Crackdown

• [00:28–14:38]
  • Context: The U.S. now allows Nvidia to export H200 chips to China (with a 25% tariff), revising years of AI chip controls.
  • Hosts’ Take:
    • Debate on free trade versus national security. Many U.S. products (iPhones, soybeans) drive Chinese GDP—why single out AI chips unless one sees AI as “nuclear-level” tech?
    • Scepticism that H200 exports will dramatically shift the balance—question of whether China wants to avoid dependency on American chips anyway.
  • Operation Gatekeeper:
    • Recent bust: $160M in illegal Nvidia GPU smuggling through Brooklyn. Smugglers would relabel GPUs and ship to China/Hong Kong as generic parts.
    • John Coogan: “It’s one of the worst…he could have just done nothing and won, because today what he did is not illegal anymore.” [09:43]
  • Geopolitical Uncertainty:
    • Despite the export approval, the shadow economy and China’s own policy—preferring not to rely on U.S. tech—may limit the true impact.
    • Nvidia wins (“10% of their revenue will be China next year if they take the handcuffs off”), smugglers lose.

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2. Fed Rate Cut, Economic Outlook, and Inflation Analyses (w/ Joe Weisenthal)

• [14:38–34:00]
  • Fed Cut: The Fed reduced rates by 25 basis points amidst mixed economic signals (unemployment ticking up, but inflation not at target).
  • Difficult Balancing Act:
    • Joe Weisenthal: “From the Fed’s perspective…inflation is too warm...but it’d be really bad if we let employment snowball.” [23:25]
    • The risk: small unemployment increases can snowball and trigger deep recessions; the Fed’s priority is to get ahead of that.
  • Political Underpinnings:
    • Trump set to replace Powell; uncertainty about whether a new chair could get aggressive cuts through.
  • Inflation Disaggregation:
    • Joe: “If something is made in China, it’s getting cheaper… What China doesn’t make—childcare, housing—those costs keep rising.” [24:50]
    • AI/data centers: debate on whether their electricity consumption is pushing inflation. Conclusion: not a major inflator yet.
  • Tariff Fatigue:
    • The market wants fewer tariff headlines, not legal drama.
  • Consumer Confidence:
    • Spending is robust, but JP Morgan notes “cracks in the consumer”—evidence still inconclusive.

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3. Warner Bros. Discovery Sale Saga: Netflix vs. Paramount & Antitrust Battles

• [34:11–43:32], [59:14–80:55]
  • Deal Mechanics:
    • Netflix signs a merger deal with Warner Bros. Discovery (WBD) for $27/share (cash & stock), subject to lengthy shareholder and antitrust review.
    • Paramount launches a hostile tender at $30/share, hoping to preempt the Netflix vote—but its own deal also faces antitrust/board hurdles.
  • Matt Levine’s Take:
    • “Paramount’s offer is more pressure tactic than true tender; neither deal will close soon. A drawn-out affair is coming.” [39:43]
  • Ben Smith’s Insights (Semaphore):
    • “WarnerMedia is both a bunch of interesting but challenging to operate cable businesses…and a studio, a movie studio…Ellison isn’t really an economic actor, he’s a kid who wants to buy a studio.” [66:47]
    • Echoes that Netflix may be seeking to backfill its catalog with irreplaceable legacy assets.
  • Regulatory Concerns:
    • Both suitors face antitrust scrutiny, with plenty of speculation about how news business components affect political/regulatory risk (especially re: Trump).
  • Impact on Streaming/Media Landscape:
    • Returns the conversation to “rebundling”, content monopolies, and the challenge of keeping subscribers as deals potentially consolidate streaming content.

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4. Meta AI "Chafe Gate" and Internal Strife

• [43:32–55:10]
  • NYT’s Eli Tan reports:
    • Internal rift between Alex Wang (lead for Meta’s new TBD AI superteam) and product execs Chris Cox & Andrew Bosworth.
    • Wang wants to build a best-in-class foundation model before applying it directly to Instagram/Facebook features; Cox/Bosworth want the focus on immediate, core product improvements.
  • Host Commentary:
    • John: “I’d be very focused on what can be done in Instagram and Facebook…AI is such an obvious tailwind for Meta’s business.”
  • Meta’s Dilemma:
    • Investing heavily in R&D for frontier AI vs. leveraging advances directly in ad targeting/content recommendation.
    • Reference to Meta’s RayBan AR glasses—still niche, more time needed for a true consumer inflection.

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5. Venture Capital: Market Contraction & New Dynamics (w/ Saam Motamedi, Greylock)

• [146:05–160:54]
  • Fundraising Downturn:
    • Data shows lowest number of new funds, despite huge checks going to top AI companies (often from corporates, sovereigns, and SPVs outside traditional VC).
  • Saam Motamedi (Greylock):
    • “Power laws are always at work in VC. AI makes the power law more extreme—a smaller set of companies and firms will be bigger than ever before.” [154:09]
    • Greylock’s model: billion-dollar core fund, no SPVs, concentrated bets. “The only thing that really matters is leading that first or second round in the great companies.” [152:54]
    • Late-stage/public SaaS finds itself squeezed: to embrace AI, you must take a margin hit and bet on long-term value over short-term profitability. Many won’t.
  • Industry Implications:
    • “This is a reconcentration moment—fewer, bigger, more durable firms; founder-friendly capital for those who fit the power curve.”

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6. AI, Open Source, Startups, & Infrastructure (Matt Hicks, Red Hat & Others)

• [100:21–113:56]
  • Matt Hicks (CEO, Red Hat):
    • Red Hat focuses on smaller, open source models rather than racing for AGI or giant frontier models.
    • “We help enterprises with inference in the ‘normal’ data centers, with their own data and control.”
  • Open Source AI Global Trends:
    • Academia, not just industry, is now the engine for open source AI model innovation—China’s contributions are strong.
    • Open sourcing only works as a business if you “deliver unique value to customers that the community doesn't.”
  • Startups Encouraged:
    • “Know who your community is—whether contributors or users. Founders must authentically share control and value.”

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7. Generational Shifts in Media, Gambling, and Platforms (Stephen Schwartz, Dupont Registry, etc.)

• Next-Gen Earning Platforms (WAP):
  • Massive revenue flows through new platforms enabling small creators, entrepreneurs, and emerging income (from paid groups to agency services to physical goods).
  • Focus on infrastructure—moving beyond Stripe, building in payout flexibility, and expanding globally.
  • Legalized Gambling’s Next Wave:
    • Concerns about a backlash as sports betting and prediction markets become everyday activities. Ben Smith: “Brace for backlash…there’s probably a reason things used to be illegal.”

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8. Other Notable Industry Interviews

• ExLite (Nicholas Kellis) – Semicon/Photonics:
  • U.S. Commerce Department partnership to scale advanced laser technology for semiconductor manufacture.
• DuPont Registry – Auctions for High-End Autos:
  • Launches guaranteed-sell, return-policy-backed auctions, leveraging its luxury car ecosystem for trusted, higher-liquidity transactions.
• Verkada (Filip Kaliszan):
  • AI-powered integrated physical security systems scaling to tens of thousands of B2B customers; focus on cloud/edge hybrid AI inference, affordable for everything from schools to Fortune 500.

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Memorable Quotes & Moments

• Joe Weisenthal [18:46]: “Whoever the Fed chair is has to win the votes… it’s not clear how much a Powell replacement will have the credibility or political standing… it’s not guaranteed you’ll see a more dovish Fed.”
• John Coogan [09:43]: “Mr. Gong will unfortunately not be hitting any Gong soon because he might be going to jail. Very unfortunate, but it’s like one of the worst. It’s so stupid because today what he did is not illegal anymore. You can actually tell they were…”
• Ben Smith [64:54]: “It was an incredible bit of cable business magic… that then just immediately destroyed enormous amounts of value. As a pure financial story, it’s amazing.”
• Saam Motamedi [154:09]: “Power laws always dictated technology and venture; AI makes the power law more extreme.”
• John Coogan [55:10]: “I think people see Google as their workplace, Meta as entertainment. They just see them differently.”
• Matt Hicks [109:15]: “Just open sourcing things and assuming a business will happen I think is also pretty flawed… you have to do something different that customers value that the open source community doesn’t do.”
• Philip Kaliszan (Verkada) [183:03]: “If you think about physical security, it is a human problem. And I think humans are not going away from the problem of solving physical security for other humans. Technologies will make those humans into superhumans.”

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Timestamps for Key Segments

• 00:28 — Nvidia H200 exports & U.S.-China policy
• 05:48 — Operation Gatekeeper: chip smuggling busts
• 14:38 — Joe Weisenthal: rate cuts, inflation, politics
• 34:11 — Warner Bros. Discovery sale analysis (ft. Matt Levine, Ben Smith, later extended [59:14–80:55])
• 43:32 — Meta “AI Chafe Gate”, internal power struggles, product focus
• 100:21 — Matt Hicks (Red Hat): open source AI business strategies
• 121:06 — Stephen Schwartz (WAP): scaling digital creator commerce
• 146:05 — Saam Motamedi (Greylock): VC contraction, AI power law
• 161:19 — Nicholas Kellis (XLite): photonics & U.S. industrial policy
• 177:06 — Filip Kaliszan (Verkada): AI in security, business update

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Tone & Style

• Engaging, irreverent, often humorous with sharp technical and business insights.
• The hosts favor rapid-fire banter, deep dives, and friendly but direct questions.
• Guests are experts who share both strategic overviews and tactical details.
• Frequent use of ringing gongs when a notable milestone is covered, and playful ribbing between co-hosts and guests.

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Conclusion

This episode is a tour de force through the shifting terrain of tech, economics, and media. It’s essential listening for anyone interested in the high stakes of U.S.-China relations, the future of streaming, the realities behind AI company politics, the recalibration of venture funding, and how digital platforms are rewriting the rules for entrepreneurs, investors, and power players across industries.

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Notable Quote Recap:

“Power laws always dictated technology and venture; AI makes the power law more extreme—a smaller set of companies and firms will be bigger than ever before.”
— Saam Motamedi (Greylock) [154:09]

"From the Fed’s perspective, yes, inflation is too warm… but it’d be really bad if we let employment snowball."
— Joe Weisenthal [23:25]

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Disclaimer:
All ad reads, intros/outros, and non-content filler were omitted. For further context, seek the full episode audio or transcript.

Transcript

[A]

You're watching TBPN. Today is Wednesday, December 10, 2025. We are live from the TBPN Ultradome, the temple of technology, the fortress of.

[B]

Finance, the capital of capital.

[A]

Ramp time is money. Save both these corporate cars, bill pay, accounting and a whole lot more all in one place. The perfect Christmas gift for that special person in your life. Get them on ramp. Do them a favor.

[B]

Stocking stuffer. It can go under the tree. Yeah, it can go anywhere.

[A]

So Nvidia can sell H2 hundreds to China. Now, it's a big reversal from the chip controls of a few years ago, which actually started during the Biden admin. We were really pushing to not allow big, you know, the best and the best and most amazing chips to go to China. Well, all of that's changed with this H200 news. Now Nvidia can sell to China, but they got to pay 25% to Uncle.

[B]

Sam, the big man.

[A]

The big man, Uncle Sam. And so.

The estimate for you, the taxpayer, assuming you're an American taxpayer, is that you will be $5 billion richer because Nvidia is estimating that they will be able to sell $5 billion of chips to China every quarter.

[B]

That's right.

[A]

25% of that, of course, is 5 billion per year. But it's unclear where this will actually pan out. I'm not sure where it will land. It is interesting question because there's been a lot of. There's been a lot of diversion, there's been a lot of engineering that's happened in China to work around the frontier. But then also they might have gotten their hand on some Blackwell. There's a whole bunch of crazy headlines going back and forth.

One interesting story. So there's a bunch of good. There's a bunch of good arguments on both sides and there's a bunch of terrible arguments as well. But we should go through some of these. So the best argument that I have heard for allowing an American company, Nvidia, to sell H200s to Chinese companies is basically just free trade. Keep the government out of the boardroom. Nvidia is over 30 years old. They make computer parts. If you don't believe in nuclear level AI capabilities, then why would you be so worried about AI going to China? It's just autocomplete. It's just better SaaS. It's not, you know, yes, it might increase their GDP, but there are tons of things that we sell to China that does increase their gdp. We bring the business of manufacturing iPhones there, right?

[B]

We bring them quite a lot of business.

[A]

We sell soybeans, we sell all sorts of food, they sell us stuff. Like free trade has happened for decades. Like yes, there is a little bit of a decoupling but for the most part the modus operandi of the American geopolitical system has not been try and reduce GDP growth in all of our geopolitical rivals, full stop. Right? No, it's never been that way. And at the end of the day, if you're an American company you like. I am sympathetic to this idea that Jensen is just like look, I'm just trying to build a big company. I want to sell my stuff everywhere. I think my stuff's good. I don't think it's dangerous. I don't think I'm making nuclear weapons. I didn't get in the nuclear weapon business and now I'm being treated like I'm selling nuclear weapons. It doesn't quite make sense. I understand that there are other.

[B]

It's hard for him to go over there, go to Washington and argue. It's not, it's really not that important. It's just kind of like an extension of the existing software paradigm. It's just SaaS.

[A]

Well, yes, yes, yes, yes, you're right.

[B]

It'S hard because you can't do that. And then also, you know, continue to sell this.

[A]

Yes.

[B]

Did we just lose power? What's going on boys?

[A]

Yeah, what's going on with the lights? It's crazy.

[B]

Probably a nation state as usual. Who knows Trying to take us offline.

[A]

Indeed. Well, privy. Privy makes it easy to build on crypto rail securely spin up white label wallet sign transactions, integrate on infrastructure all through one simple API.

So there are other factors in the trade relationship. One sort of giga brain take is if you believe that AI slop will will one shot people it will reduce the birth rate because people will be so obsessed with AI avatars, romantic companions. Well then. And if you are anti China, maybe you should export as much as possible, right? I don't see anyone making those arguments today. But I do wonder if there's someone if you are doom pilled in that way where you think that AI is bad but you also think China is bad. Do you have to argue in favor of the export of the H200?

[B]

Maybe let them have.

[A]

I don't know. Anyway, everything there was something interesting because we also don't know exactly how big of a deal this H200 unbanning is because last time there was news on this front the CCP basically said like hey, we don't want Our Chinese companies buying these, even if they are available, we don't want them. We don't want them here. And the CCP kind of doesn't want Nvidia chips filling up Chinese data centers. It feels like China at the very least has been somewhat receptive to this idea that they don't want to become dependent on the American tech stack. Right. But clearly Chinese companies do want Nvidia. We saw this with the Deep Sea team figuring out how to get some Blackwell apparently. And it's actually going further than that. There's some Chinese nationals that have been recently risking legal consequences from the American justice system. This is very interesting. On Monday, the U.S. attorney's office in Houston revealed something called Operation Gatekeeper. Very exciting name.

[B]

The government is weirdly great at naming and coining some of these operations.

[A]

Interestingly, when you Google Operation Gatekeeper, you get something about building a border wall.

But from the presidency of Bill Clinton. So Operation Gatekeeper originally was a measure implemented during the presidency of Bill Clinton by the United States Border Patrol, then the INS aimed at halting illegal immigration to the United states at the U.S. mexico border near San Diego. And so I guess they constructed a wall on the beach in the 1990s. He literally built a wall, which is crazy to me because I thought that was like a Trump era thing. Anyway, the new Operation Gatekeeper operation for.

[B]

That Canadian snowboarder is called Operation Giant Slalom.

[A]

Giant Slalom, that's a good name too. So the new Operation Gatekeeper has nothing to do with the domestic immigration across the US Mexico border. It instead is focused on AI chip smuggling. And this particular operation has just uncovered $160 million worth of illegal AI chip smuggling. Very, very interesting. So a 43 year old Chinese citizen named Fan Yui Gong was living in. Yeah, his name's Gong, which, I mean, we love Gongs here, but I don't.

[B]

Before we figure out the bad stuff that he's doing, let's give a quick.

[A]

It's a fantastic name.

So this Guy's living in Brooklyn. 43 and also separately, a Canadian citizen from China. They independently conspired with employees of a Hong Kong based logistics company and a China based AI technology company to circumvent US export controls. Basically they bought a ton of Nvidia GPUs, then they would send them to a co packer or like a fulfillment center, remove the Nvidia labels, put new labels on the chips that would say Sandkyaan. Sand K Y A N. I'm not exactly sure how to pronounce it. Once the Chips were packaged back up. They would ship them. Oh, I said chip them. Need to change that. Probably already went out. They would ship them to China or Hong Kong under a generic classification of generic computer parts. And so everyone involved faces significant legal consequences. Now, I couldn't figure out exactly what. What the consequences are. I'm not sure if it's like years in prison, but it doesn't seem good. You know, you're responsible for diverting $160 million worth of chips. That's rough.

[B]

The question then becomes, how did it get in their hands initially?

[A]

Oh, because they were just like, hey, I'm a Brooklyn guy. I want to buy some Nvidia.

[B]

I know, but 160 million. It's a big company. They do a lot of revenue. But you would think, oh, what's this address that we just got this order from? You'd be like, brooklyn. Is that a.

[A]

It'd be like, yeah, I'm shipping it to a company in Brooklyn.

[B]

Oh, it's probably like a coffee shop or something like that.

[A]

Yeah, maybe it's like, you know, I want to have an accelerated design studio in Brooklyn. Something. I don't know.

[B]

I know, I know. But the. Seems like a KYC failure potentially.

[A]

Yeah. I mean, I don't know. There was one of the guys involved. It was technically a Canadian citizen who was from China. And so you stack these. All these up, and you have like, okay, well, I'm shipping it to Brooklyn, and the guy's a Canadian national. And, you know, at a certain point, you're like. And it could have been through some sort of reseller. I don't know. I'm sure we'll find out.

[B]

Last name is Gong.

[A]

His last name's Gong.

[B]

ESPN hits a Gong a lot. It's probably.

[A]

They probably got too excited, and they were just like, wait, we sold how? We sold 160 million boxes today. Let's ring the gong. They just got fired up, but.

Mr. Gong will unfortunately not be hitting any Gong soon because he might be going to jail. Very unfortunate, but it's, like, one of the worst. It's so stupid because he could have just done nothing in one, because today what he did is not illegal anymore. You can actually tell they were.

[B]

They were age two hundreds.

[A]

I don't know if they were age two hundreds. They haven't said exactly the mix of the GPUs, but in general, it's like this happened a year or two ago. So it's not like he was getting Blackwell.

[B]

It's not like he would have been buying H2 hundreds in Brooklyn, they would have been even more like, wait, you realize we have an American version of this?

[A]

No, no. So the H200 is the American version. You're thinking of the H20, the nerfed one.

[B]

Sorry.

[A]

So we initially were selling the nerfed one, then now, with this new Trump rule, you no longer have to sell the nerfed version. You can just sell the real American.

[B]

Version, which of course is like, actually.

[A]

Blackwells are shipping now. And so we're still, like, the US policy is still keeping China one iteration behind.

And maybe that will be the ongoing decision here, the ongoing strategy. I'm not exactly sure. It doesn't. Like, the administration hasn't really laid out a philosophy of this at all. I mean, originally, what was it Lutnick said, like, we're not giving them the best we have, we're not giving them the second best we have. We're not even giving them the third best we have, we're giving them the fourth best we have. Have, like the H20. It's like super nerfed, but now it's like we really are giving them the second best we have. So I don't know. That seems like a shift in policy, but we shall see. And so what's interesting is that now that Nvidia is approved for export, I'm interested to understand where will sales to China land. Like they've said, if there were no geopolitical considerations, we could sell 5 billion a quarter, 20 billion a year, which is. It's not a drop in the bucket, but it's not exactly half of their revenue. I think they did 60 billion last quarter or something like that. So you're looking at like a $200 billion company. This is like 10% of their revenue is going to be in China next year. If they really take the handcuffs off, take the gloves off. But the big question is how much smuggling was actually happening? We know 160 million was happening because we caught them, but was there a billion happening? Because you don't catch 100% of what's going on. Right. So in theory, there could be like a couple billion, maybe 10 billion that was happening. And so, you know, how much. What is demand actually for Nvidia GPUs in China? I would imagine it's higher. But then, of course, you have the dynamic of the ccp. There was also this debate about, yeah.

[B]

It seems like netting at around 10% of global sales. Makes sense, given they're projecting 210 billion or that sort of consensus for next year and nearly 300 billion for 2027.

[A]

I would expect, you know, I would expect something more like 30, 40, 50% of China's really trying to like keep up and win the race. And this is like the best supplier. But, you know, I guess it does take time to build up a local industry that actually can support that level of investment in AI chips.

So there's a lot of debate over this particular deal, the decision to sell H2 hundreds to China for 25% tax.

There is, there's some debate over like, whether this should be some sort of like, you know, big picture trade deal where we sort out the rare earth element picture in Taiwan. And we also work through the soybean issue and we work through a whole bunch of different export things all at once instead of just doing like one off, one deal after another in isolation. I'm not that nervous about that. I don't really feel like I really need it all to be resolved once and for all. I feel like it's fine to have this happen and then watch the consequences of that and see how the chips stack up. And how valuable is this? Because does China really. Are they gonna be breathing a sigh of relief in six months? They're gonna be like, okay, well, if you gave us this, we really do like the chips. We're very thankful to that. And in exchange, we will be loosening export restrictions on rare earth elements, for example. I don't know that it has to all be done within one deal. But regardless of whether America wins from this or China wins from this, it's clear that Nvidia wins and also that smugglers lose because the smugglers are going to jail. So good luck to that. Don't break the law. Stay compliant. Get on Vanta Automate compliance and security AI that powers everything from evidence collection and continuous monitoring to security reviews and vendor risk.

[B]

Without further ado, I think we bring in our first guest. Fantastic brother Joe.

[A]

We have Joe Weizen.

[B]

Joe Weizen in the studio.

[A]

How you doing, Joe? Good to see you.

[B]

I'm good.

[C]

Thrilled to be here on this wonderful Fed Day.

[A]

Yes, well, and also, is it not the 10 year anniversary? Was that yesterday? When, when did the party.

[B]

The party was last.

[A]

Last night.

[C]

Yeah, the party was last night. I'm sorry it didn't align with one of your hopefully increasing number of trips to New York City.

[A]

I can't wait. I can't wait. Yeah, we're going to be there all the time.

[B]

2026 on the IPO front is looking.

[A]

Yeah, I'm shocked. I'M glad you were able to get out of bed, sober up by 2:00pm Eastern for this. For this press for the rate cut. For the rate cut.

[C]

It's very impressive that I'm here right now. Of course, yeah. Everyone should be very impressed that I'm coming on TVPN today, given the circumstances.

[A]

Yes, yes, I'm sure it was a lot of holiday cheer and a lot of revelry and it's a massive moment and again, just congratulations. We've said it before, but what a generational run with odd lots. Ten years, that's not easy. A lot of people give up and you've stayed the course and just built and built and built. It's fantastic. And everyone is clapping for you because we're all busy.

[B]

That's right. We love it.

[C]

That's right. Let's hear it.

[B]

Let's hear it.

[A]

Let's keep going.

[C]

No reason to stop.

[A]

Let's just do this for 10 minutes.

[B]

Anyway.

Did you see our post, Henry, on our team, hit the timeline. It's said Fed word scissorhands. The Fed just cut interest rates by 25 basis points. Anyways, breakdown.

[C]

How have we gone this long without anyone making that? I've heard a million Fed puns over the years. Inspiration comes from the first time I've heard that one. Genuine novelty.

[A]

I think it is the first. Really good novelty is important. But explain to us what happened. How are you processing the news? What does it mean?

[C]

It's very interesting to think about this cut in the context of some recent development. So I think I would start by saying that, you know, two or three weeks ago, the market didn't even think the Fed was going to cut. If you looked at implied odds from various instruments in which traders trade, the short end, it was below 50%. So I think that's an interesting place to start. The fact is it seems like Powell had probably had to do some politics to bring the Fed around and actually make the case because there are crosswinds. We know that the unemployment rate has been creeping up, but inflation is certainly not back to target. And I think actually if you look at the statement from the Fed, one of the things they noticed, they, they noted is that inflation has, has been elevated since the September meeting, that it's actually gone up. They're still not back to their 2% target. In fact, it's actually drifted higher. Now you could say, okay, well maybe this is a tariff effect. And so you look through that. But I still think it's quite notable that we've had basically five Years of the Fed not hitting its inflation target, it's still warm and yet they. Powell got through a cut. But you could. So one might look at this and say, you know what, the fed doesn't take 2% inflation as seriously as it used to. In fact, a lot of people on Wall street are saying this. Maybe there's a soft, you know, 2.8 inflation target right now, which maybe the tradeoff is worth it because you don't want employment to snowball, you don't want that to run away. So maybe you tolerate higher inflation. But look, I think fundamentally you could ask, does The Fed take 2% inflation as seriously as it used to? But there's something else, an important dynamic which is that as we know, you know, Trump is going to appoint or announce a replacement for Powell very soon. Trump would like to see more faster rate cuts than we've been getting. But you know, there were three dissents. And so the president of the Kansas City Fed, Schmidt, the president of the Chicago Fed, Goolsbee, they voted for no, no cut. The other dissent was Stephen Myron who voted for a 50 basis point cut. But this is really important because whoever, yeah, whoever.

[A]

Did, anyone, did anyone. Was anyone brave enough to call for a 200 basis point cut or maybe a 500 basis point cut. Let's go and come negative.

[C]

Let's just go straight back to zirp. I see it in one shot.

[A]

Yeah. Can we get a venture capitalist in there?

[D]

Is that possible?

[A]

Do you need, do you need credentials to be.

[C]

We need a venture capitalist and we need like the most over leveraged real estate developer that you've ever met.

[A]

Yeah.

[C]

And get them on the board. And they would slash it to zero.

[A]

Yes, but there's an important element.

[C]

No, no, no, not at all. There's an important element here though, which is that like, you know, we know that Trump is not thrilled with Powell, but Powell is good clearly at getting the votes on.

[B]

Sure, sure.

[C]

And so it raises some interesting questions which, let's say Trump were to appoint a real estate developer. He's like, you know what I want like that 500 basis point cut right away. It's not, I mean, let's do something less hyperbolic. Let's say, you know, let's say he appoints someone who wants a very aggressive sequence of cuts. That person has to win votes, that person has to win the credibility from the other FOMC members to get, to make that decision happen. And so what it's saying already, there's already a significant number of dissents. It's not clear how much a Powell replacement will have the credibility or the political standing within the FOMC to actually get that increasing pace of cuts. So I know that Trump is not thrilled with Powell. Whatever, that's his prerogative. But another way to look at this is he has a man in the chair position right now that could deliver cuts, period, when it's not obvious that most of the members of the FOMC are thrilled with further easing. And yeah, it raises some question about even if there is going to be a more dovish fed chair come 2026 to the degree that he'll be able to like, you know, get those cuts through. It's not guaranteed.

[A]

Yeah. Can you, can you help me like zoom out and, and understand the mindset of the, of the Fed with regard to understanding that trade off between unemployment and inflation? Because I, I could understand it if I'm a politician and just personally, it feels like inflation something that everyone feels. Unemployment is something that you either feel it or you don't.

[E]

Right.

[A]

Because you're either unemployed, if you're unemployed, you are upset with the government and if you're employed, you're like, it's not great that my, know, my brother doesn't have a job right now, but at least I do, whereas inflation, everyone feels it. And so if I was purely in, in politics mode, I could understand that trade off. But how does the Fed think about that trade off? Because it's a little bit different, right?

[C]

No, I mean the way you described it is, is absolutely perfect and it's interesting, you know, look like if you're just going back a few years to sort of the worst of the pandemic, you know, if you think back to like spring 2020, you know, people were thinking, oh, is this going to be another great financial crisis? Right? Are we going to have another period of like terrible unemployment, etc. Now, it turned out that the job, the labor market bounced back very quickly, almost much faster than almost anyone had anticipated. So we might sit here and say, look.

You know what we avoided? You know, we avoided sustained 10% unemployment, we avoided another great financial crisis. But I don't think like most people really like think about their life in terms of counterfactuals. And so to that like the main phenomenon of those times was significantly higher prices, higher prices that at least for some time was, were significantly outpacing wage growth, etc. And so we know that was like incredibly popular. You know, I think the thing to think about is that one of the phenomenons that recurs over and over again in the economy is they talk about unemployment increases, tends to increase in a nonlinear fashion by which you get these small increases. You go a little bit up every month, you get a little bit increase in the unemployment rate. And then suddenly it snowballs because it has the snowballing effect. I lose my job, I start spending less. The various stores and restaurants and services that I was consuming, they then have to cut workers because people are spending less at their establishments. So unemployment has this tendency to snowball, to go from modest being modestly worsening to rapidly worsen. And once it rapidly worsens, then it's very hard to reverse that. Then you have to ease massively. And it takes years potentially to get back to where you were.

[A]

Yeah.

[C]

So from the Fed's perspective, what they're thinking about right now is, yes, inflation is too warm. It's not at our target. People don't like it, but it'll be really bad if we let employment snowball. So the only way to avoid that is to sort of cut in advance to try to get ahead of it. And so that is, that is the balance. And it's a very difficult balance, obviously. And we know that very few people have like sort of called this cycle correctly. I mean, people have been predicting an imminent recession for a long time because you have all these signs. It's like, are we right there? Is it. Is it all sort of one day away from falling apart? And so they're trying to thread this very difficult path here where they're aware of warm up, warm inflation, but they really don't want that sort of. They want to get ahead of the employment collapse.

[A]

Yeah, I want to know more about inflation. Sager and Jetty did odd lots. Everyone should go listen to that episode. Just came out a week or two ago. He's coming on our show on Friday. I know he's going to try and pin the inflation on the AI data centers. Is there anything to that? Have you seen any data that helps understand what's going on at a lower level within the inflation numbers? Because, I mean, I was at Target last week and I feel like they were selling TVs for like 40 bucks. And so stuff's still getting cheaper in certain segments, but then other things are getting more expensive. What's actually happening within inflation? If you try and unpack it a.

[C]

Little bit, I basically, if something is made in China, it's getting cheaper. Like that is like the phenomenon of maybe the last 25 years, which is that you can break down things that China makes and things that China doesn't make. So China makes TVs. The prices have collapsed. Does China make your child's daycare center? No, unfortunately it doesn't. So child care costs, does China build your home?

[A]

Yes, unfortunately.

[C]

Cars and so the price have gone up.

[B]

Yeah, cars are a good example.

[A]

So once, once the tele operated robots, the humanoid robot is taking care of your kids and the telegram is in China, then it gets cheaper.

[C]

But that is the phenomenon of our time. Look, I think the data center story is very important. They're all kind, you know, I, you guys, I don't, I assume you guys talked about it yesterday. I thought the, the BOOM aerospace story was super interesting because all of these different aspects of the supply chain are being repurposed towards air. It's like this is worth more. Their, their technology at least at this point might be worth more in a data center to make natural gas turbines than in a plane that might or might not.

[A]

Yeah, I mean the narrative over the last with over, you know, Crusoe and Core Weave and so many of these Neo clouds, I mean they started out as bitcoin miners.

And then the highest and best use switched and very quickly these became AI factories. AI data.

[C]

Yes. So what I think is there are a lot of resources that are being, you know what, we could reallocate this better to AI and that means that that creates an element of tightness in the supply chains, certainly in key categories. I think by and large it would be hard at this point to actually draw a line however between what's happening in data centers to measured inflation and even electricity prices, which would be the most direct one because we know electricity prices have gone up quite a bit. The link between electricity prices and data center build out, it's pretty tenuous at that point. It's not really enough to be meaningfully moving the dial. There are other drivers of.

Higher electricity prices, including just maintenance on the wires which has gone up for just sort of garden variety inflation reasons.

[A]

Yeah, I feel like the boom supersonic. If boom did release a fleet of supersonic planes that should be deflationary to air travel in theory, even though it's going to come in at the super high end. Just having more planes is a supply and demand equation and you're going to see deflationary if they move over into focusing on AI and it pushes out their timely. Of course Blake at BOOM is arguing that this actually accelerate their timeline because they can. And I'm, and I'm sympathetic to that argument but, but it was, it Was fascinating to see that like, okay, there were, there are companies that I could see pivoting to. AI boom was pretty low on the list for me.

[C]

Didn't think that the airplane startup was.

[A]

Going to pivot to.

[C]

But it makes sense, right? Like if there's, I mean it's intuitive. This is one of the ironies about sort of talking about inflation on the big scale, which is that what do you. How do we get things more? How do we get things cheaper? Well, we need more supply side capacity, we need more planes, we need more wires, we need more. All this in the meantime. That all costs a lot of money and it absorbs a lot of resources, etc. So supply side expansion sounds really nice because that's ultimately how society moves forward and things become more affordable, etc. However, to get there, that is a resource intensive process. And so it's not the kind of thing that like a, none of that disinflation will happen tomorrow or the next week or the next year even. And in the meantime it creates tightness across the supply chain, which is potentially inflation.

[B]

Yeah, I mean the other thing, anecdotally I know a number of companies that were just like, oh, we have tariffs now. I'm going to pass this on to consumer. The consumer. And they just immediately raised prices. And so that, that factor is very real.

How is Wall street in general thinking about the tariffs just being determined to be unconstitutional? There feels like that.

[A]

Wait, do you mean the Nvidia 25% tax?

[B]

I'm not talking about export tax.

[C]

Yeah, the Supreme Court says the tariffs are nullified. You know what I think? I think Wall street would just love to not have any more headlines about tariffs because look, the stocks are, stocks are basically at all time highs even with the tariff announcement.

[B]

No more headlines, no more call them off moratorium.

[C]

It presumably if this 2% a day.

[B]

Forever, that's all we want.

[C]

Yeah, presumably if the Supreme Court strikes down these tariffs, the assumption is that the administration will come up with new tariffs under some different rule. Like they'll come up with some different argument that's not national security related tariff jiu jitsu. But then we have more tariff headlines. So it's like, I think that in theory, yes, maybe it's better for stocks in the market if the Supreme Court strikes down the tariffs. In reality, I think people are like, oh, we just let them be. They have the stock market's at all time highs, etc. The last thing we need to do is to have yet another liberation day where Trump will unveils a new reason to have tariffs under some other statute, some other technicality of the law. I think that's the last thing investors want to see right now.

[A]

Yeah, yeah.

[B]

How much are you paying attention to the, to the ten year.

Now? In the near, in the near term, it obviously dropped on the news and then it's just climbing, climbing back up.

[C]

I think this is actually very important. Again, thinking about who is. When we think about the Fed in the future under any chair. Right, because what is the 10 year yield? The 10 year yield is the average overnight yield for the next 10 years. That's how to think about it. The Fed directly controls the overnight yield. But let's just say, okay, let's say the Fed cuts aggressively. Let's say we get that 200 basis point cut of people's dreams, et cetera. Well, intuitively that would be inflationary, right. You set off another boom. You set off the animal spirits again. Suddenly you get more inflation and people are looking out, wow, there's going to be more inflation over the next 10 years. What does more inflation over the next 10 years equal? Well, it probably means rate hikes sometime down the road. So there is this tension where it's. So then the tenure goes up and so there is this tension where like cuts at the short end do not mechanically by any means do not mean lower rates at the long end and lower rates at the long end or what the Jews were. The Jews at lower rates at the long end are what affect mortgages and credit cards and corporate borrowing and all of this stuff. So this is another thing that I think the next Fed chair and the administration has to think about, which is that you could cut rates at the short end and not get any juice in terms of the actual lower rates from the parts of the, the curve that actually affect the real economy. And so even cuts don't necessarily lead to the kind of monetary easing that you would like to see.

[A]

Last question from my side. We'll let you get back to nursing your hangover.

[B]

I love how you just assume that Joe had like such a wild night.

[A]

I thought people, I imagine there was a lot of people surfing going on. Yeah, I like that. I like to imagine people surfing on all the, all the fans for tenure.

Do you read anything into consumer confidence from Black Friday? We were covering it a lot like with our friends who run E commerce stores and like there were a lot of good signals there. But it's hard because it's like one E commerce store that we know and they're doing well. It's not like the broader economy and.

[B]

It'S a broader trend of Black Friday just moving online.

[A]

Exactly.

[C]

It's hard to know. It's hard to get, you know, it's hard to get a read. You know, JP Morgan, actually they presented at a conference yesterday. They said they're starting to see a little bit of cracks in the consumer.

[A]

Okay.

[C]

I don't want to. I don't remember the exact term, but they did call out potential frailties there. So that was very notable. It's so hard to get a read on confidence because for the last five years we've been getting the most the surveys, we've been getting the most dismal consumer confidence measures in going back decades. Yeah, people still like spend like crazy.

[A]

It's the vibe session thing a little bit, the Kyla scan.

[C]

So it's so hard to get a read on confidence. But by and large, yeah, there was a. I think that you have to take those comments from JP Morgan seriously because they have like, you know, they have a great read on. They have just so much business everywhere that they could see into these things. But by and large, there isn't a ton of evidence yet that like, oh, there's a real deceleration happening in consumption.

[A]

Yeah, yeah. No, that makes sense. Jordan, anything else?

[B]

No.

[A]

Thank you so much for coming on. Merry Christmas. Can we play some Christmas overnight? Overnight success. Play some Christmas music to let Joe go about his day. Merry Christmas.

[B]

Have a good see you Joe weekend.

[A]

We'll talk to you soon. Turbo Puffer Serverless vector in full text search built from first principles on object storage. Fast 10x cheaper and extremely scalable.

[B]

The air horn over the Christmas music is not something I've ever heard before. Turbo Puffer.

Anyways, should we get into this post from Matt Levine?

[A]

Absolutely.

[B]

He says the Warner deal will take a while.

We said something similar last week. I'm sure he will have a Levine's.

[A]

Also coming on the show on Friday.

[B]

Very exciting.

[A]

But let's give everyone a taste of.

[B]

His new also M&AI data. Trillion dollar IPOs and good TV is bad for stocks.

[A]

We're really doing Bloomberg Day Warner Wars.

[B]

It's perhaps worth saying that Paramount offer for Warner Brothers Discovery Inc. Is not exactly a classic hostile tender offer. Warner has signed a merger agreement with Netflix in which Netflix would buy most of Warner for about $27 per share in cash and stock, leaving Warner shareholders with a bid of the company worth somewhere between $1 and $5 per share. That merger will take a long time to complete for one thing. Warner's shareholders have to vote on it. Which means that Netflix and Warner need to put together a proxy statement and prospectus for the deal, file it with the SEC, and hold a shareholder vote. That could take months. For another bigger thing, the U.S. department of justice will need to review the deal for antitrust concerns. Those concerns are significant, and Netflix and Warner have budgeted at least a year for that review.

That deal was announced last Friday and on Monday, Paramount jumped in with an all cash$30 per share offer to buy all of Warner, which we discussed on Monday. It took the offer directly to Warner shareholders. It launched a tender offer scheduled to expire on January 8th to buy those shares. The two deals operate on different timelines. Warner plans to ask its shareholders to vote on the Netflix deal, but that vote will happen long after Jan.8. And if Paramount buys all the shares before the vote, then the question is.

[A]

Moot because they'll own all the shares. They'll vote no. Yeah, Interesting.

[B]

If the shareholders all sell their shares to Paramount in January, they can't vote on the Netflix deal in March. And if 51% of the shareholders sell to Paramount, Paramount will control Warner, vote down the Netflix deal and acquire the company itself. That is the classic benefit of the hostile tender offer. It's fast. If Paramount's tender is more appealing than Netflix's merger, then Warner's shareholders will sell their shares to Paramount before the Netflix vote and Paramount will win. And if the deals are roughly equally appealing, if shareholders are more or less indifferent between the two bids, then the speed of the tender offer is a real advantage.

[A]

Shareholders, the headline here is that this deal is going to take a long time. And here he's saying it's fast.

[B]

Let's see where he gets.

[A]

This is interesting. I'm hooked.

[B]

Then the speed of the tender offers a real advantage. Shareholders think I don't care too much. Tender to Paramount, I'll get this done faster, so I might as well tender and Paramount wins. Or that is a classic theory, but it is hard to achieve in practice and it's not really true here. Paramount's offer says at the top that it expires on January 8, but it's not like it will buy it. But it's not like it will buy the shares on January 9, even if 51% or. Or for that matter, 100% of Warner shareholders tender to the Paramount's into Paramount's offer. The offer will not close until two other conditions are met. One, Paramount Steel also requires antitrust clearance. It is not legally allowed to buy the Warner shares until it gets that clearance. For a combination of fundamental and trumpy reasons, Paramount thinks it will have a much easier time getting antitrust clearance and Netflix would.

[A]

But I remember seeing that the Netflix team was arguing that from an antitrust perspective, you know, Paramount has a lot of watch time as well. And so Paramount plus, even though it's a much smaller streamer, you put everything together and they were like, it's really not that it might even be more total watch time across everything. I'm not sure that that pans out.

But.

It was an interesting point that just from creating the monopoly perspective, like, maybe it's the fourth biggest, the fourth most controlling stake, but there is an argument there. And so it does need to go through review. And so that will hold things up.

[B]

Yeah. Paramount's proposal expects to receive regulatory approvals likely within 12 months, faster than Netflix's expected timeline, but a lot slower than Jan.8. 2. Paramount's deal is, by its terms, conditional on becoming a friendly deal. Addition of its offer is that Warner Brothers shall have entered a definitive merger agreement with Paramount and the purchaser, substantially in the form of the merger agreement submitted by Paramount to Warner Bros. On December 4, 2025. That is, Paramount does not just want to buy a majority of Warner stock and block the Netflix deal that way. It wants Warner's board to abandon the Netflix deal, pay that $2.8 billion reverse termination fee and sign a deal with Paramount instead.

[A]

Interesting.

[B]

The deal is too big and the antitrust approvals and financing are too complicated to do as a purely hostile deal. Paramount will need Warner's help to close its deal. In some sense, then, the Paramount deal is not a real tender offer, one that depends only on the shareholders, one that shareholders can accept even over the board's objections. The Paramount deal is a pressure tactic, a way to get shareholders thinking, hey, I would rather get $30 in a year than $27.75 in 18 months. And telling the board that if the shareholders all would tender into the Paramount deal, then it's hard for the board to stick with the Netflix deal. A matter of fiduciary duties and shareholder pressure. But it's not like if those shareholders all do tender into the Paramount deal, it will just close. It's a jumping off point for negotiations. Bloomberg's Lucas Shaw reports that Paramount and Netflix are girding for a battle they predict will stretch well into 2026.

Lucas says, well, if you want to.

[A]

Follow along with Paramount or Netflix, go to public.com investing for those who take it seriously, Multi asset investing. You're trusted by millions of. And yes, Netflix is on there, Paramount's on there, Warner Brothers is on there. At least for now.

[B]

Lucas Shaw says Warner Brothers was given 10 business days to respond to Paramount's hostile $30 a share bid for the company on Monday. Since that offer was already rejected once, the Warner Brothers board isn't planning to cancel the merger agreement signed last week with Netflix. According to people familiar with the company's thinking, doing so would require Warner Brothers to pay Netflix a 2.8 billion termination fee. That puts the onus on Paramount to make the next move. In what everyone expects to be a drawn out affair lasting months. Paramount can follow through on its tender offer to buy Warner Brothers shares from investors at $30 each on January 8th. It can also extend the bid. Sue to stop the Netflix deal or increase the terms. Shareholders of Warner Brothers, one of Hollywood's biggest film and TV companies, are hoping for a bidding war that further boosts the price of the deal. Both companies have communicated that they have the ability to increase their offers.

And the Financial Times notes some WBD shareholders expect Paramount to lift its bid before the tender offer expires after Ellison's company said in a regulatory filing that $30 was not its best and final price.

[A]

Oh, going up. Well, you get another sovereign in or something, you know, spread that across everything.

[B]

How many more sovereigns do we got? We got the big. We got the big three. He's got to go to Norway.

[A]

Norway would be cool.

[B]

Paramount is privately weighing an increase or whether to instead add sweeteners intended to give WBD's board greater confidence in its regulatory prospects versus Netflix. And Matt goes, yeah, you don't go around saying on television as Paramount did, that your offer is not best and final. If you want shareholders to tender so you can close next month, they know there's a lot of negotiation to come. Yeah, it's.

This position that the Ellisons are in where feels like every other week they have to offer a higher price. It's like, how do you. It's kind of a vicious cycle.

[A]

Yeah, it's pretty crazy.

To have them going back and forth here. I feel like it's going to land with Netflix. I don't know. I mean, this is the first time I've tracked one of these this closely in my entire life. It's also just sort of an unprecedented deal because of the scale and all the political stakes and whatnot. But it just feels like the breakup fee is real, like the fact that there's a massive multi billion breakup fee on both sides. That's like material to their market cap. Material to their you have to pay essentially 1%, 2% of your market cap in the event of a breakup. That feels like Warner Brothers and Netflix were like, let's actually make this happen. Let's be really sure this is going to happen. Let's make sure it makes it through antitrust. Let's make sure. I don't know. Then again, the Adobe Figma thing, I was shocked when that broke up because that felt like a crazy breakup fee. But 1 billion was still lower than what Adobe was trading at at the point it was less than 1%. This is higher on a percentage of market cap breakup fee to market cap ratio. So I don't know.

It feels like Zaslav probably thought about it a lot. But we have some more folks coming on the show today to talk about this. We can answer a lot more questions. We have Ben Smith from Semaphore. He's the co founder and editor in chief at Semaphore. He's joining in just 15 minutes. While we move on to our next story, let's tell you about graphite.dev, code review for the AI Age. Graphite helps teams on GitHub ship higher quality software faster. So much clapping going on across the studio and the soundboard that should we.

[B]

Get into this piece on Meta?

[A]

Absolutely.

[B]

From Eli Tan over at the New York Times.

[A]

What does it say?

[B]

Meta's new AI superstars are chafing against the rest of the company? It's chafe gate. We've established this, eli writes. An us versus them mentality has emerged between Meta's top artificial intelligence team and longtime lieutenants to Mark Zuckerberg. Yes, Eli writes, when Mark Zuckerberg revamped Meta's AI operations this year, he recruited a new leader, former guest of the show, Alexander Wang.

[A]

Let's go.

[B]

A 28 year old entrepreneur to build a team of top researchers from rivals like OpenAI and Google. That team, called TBD Lab for to Be Determined, was placed in a siloed space next to Mr. Zuckerberg's office at the center of Meta's headquarters, surrounded by glass panels and sequoia trees. Mr. Zuckerberg wanted to separate the new AI group from the bureaucracy of the company, which owns Facebook, Instagram and WhatsApp, said to people familiar with the matter, I'm glad those people know that Facebook owns Instagram. I'm just kidding. Five months later, that divide has become more than physical meetings. This fall, Mr. Wang has privately told People that he disagreed with some of Mr. Zuckerberg's longtime lieutenants, including Chris Cox and Andrew Bosworth, Chief Product officer and cto, respectively. So, yeah, so this. You're gonna. You're gonna be interested in this, John. So in one case, Mr. Cox and Mr. Bosworth wanted Mr. Wang's team to concentrate on using Instagram and Facebook data to help train Meta's new foundation model to improve the company's social media feeds and advertising business.

[A]

Let's go.

[B]

Which is. You've been wanting this this whole time?

[F]

Yes.

[B]

It's like do this whole thing, personal superintelligence, and then just make this. Just deliver the product, make the ads better, you know, grow. Grow the business in that way.

[A]

So what did Mr. Wang say?

[B]

He argued that the goal should be to catch up to rival AI models from OpenAI and Google before focusing on products. The people said this makes sense, right? This makes sense for Wang. I don't know that it makes sense for the company. I would like. I would like from everything that we've seen so far, it feels like Meta could.

Add a trillion dollars to its market cap by just focusing all this incredible talent on just making the core business better. But Wang and the rest of the team are going to be a lot less motivated by that than having the biggest data centers doing the biggest training runs, having the best model competing on the global stage.

And so I can see why Wang is pushing the other direction.

[A]

Okay, so let me tell you about adeo, the AI native CRM. ADEO builds scales and grows your company to the next level.

But, you know, like, let's actually unpack this because, like, if, you know, Mr. Wang here, he says he's developing the model, he argues that the goal should be to catch up to rival AI models from OpenAI if they wind up having a model that is actually in the same league as Claude and Gemini and OpenAI and XAI, and it's this closed source, it's an API. It does well on MMLU, it does really well on the benchmarks. What value does that really bring?

[B]

Because that's what I'm saying.

[A]

Even on the benchmarks.

[B]

You could just go and get a model off the. If you want to compete in search, I agree. Knowledge retrieval, even agentic commerce, you can take models off the shelf.

In the same way that Apple's doing.

[G]

Yeah.

[A]

Oh, it's good enough for Apple, but not Meta. Interesting. Interesting.

[B]

Yeah. So I'm just trying to think you make the best model in the world. Are you going to go compete with. So we've seen this, we've run this with xai, right? They are trying to build the best model in the world. And it's now becoming clear that just having a great model does not automatically give you a meaningful amount of market share.

[A]

Yeah, no, no, you need to productize it. And OpenAI has productized very well with a viral. Like it is synonymous with AI, consumer AI. Everyone has the app mostly on their home row. They're using it a ton. They have a billion DAUs. It's growing, you know, doing great, or MAUs. But then you have Google, just so much surface area to actually stuff Knowledge retrieval AI in knowledge retrieval products. You're already trying to do that with Google Search. So you do AI searches. You do, you know, you stuff Gemini in sheets and docs and all the different products. Makes a ton of sense. Anthropic, super focused on code, super focused on B2B. Facebook doesn't have a B2B team. They're not like a hyperscaler. Like, that might make sense for Amazon to be like, hey, we want to get, you know, we want to take that approach. And then XAI is sort of the same thing. At least they have, you know, X to distribute through. But being the fifth, the fifth, like, hottest, even if the model is for this week, like the number one. Right. It's like no one can really tell. It's very hard to be like, definitively number one for seven months straight. Like, it just doesn't.

[B]

Yeah, I get excited to look at benchmarks and have people on to talk about them. Does it change my behavior?

[A]

And does it stick? And does it stick? It rarely sticks because it's like, you know, what did we see? Gemini 3 was at the top of all the benchmarks. Then Opus 4.5 comes out. That's at the top. Now we're seeing, you know, 5.2 from OpenAI, probably coming. Probably going to beat on a number of benchmarks, probably going to be better in a bunch of different ways. But is that going to radically change consumer behavior, even radically change business behavior? No. And so I don't know. I would be very focused on what can be done within Instagram and Facebook and WhatsApp to a lesser extent. The flip side, the other question is.

[B]

Just.

The reason to be excited about that as a Meta shareholder is that AI is such an obvious tailwind for Meta's business. Right.

Talk to Sean Frank from Ridge. He's having to create hundreds of new add assets a week. If AI, if Meta can help him create thousands, he will spend a Lot of incremental dollars on Meta, right?

[A]

Yeah.

[B]

He can get better at targeting, you can get better at serving content. Right. And that will ultimately over time provide even more resources for these sort of like moonshot style projects. Meta has been pushing this personal super intelligence narrative. The only problem with that is that I don't know what that means. Right. It sounds awesome but, and I'm happy to wait and see. But they've been having, you know, there's been a number of employees kind of churning out already and it's possible that they don't necessarily know exactly what that means themselves yet.

[A]

Right.

[B]

They're running it like a startup internally.

[A]

Let me tell you about Fin AI, the number one AI agent for customer service. Automate, the most complex customer service queries on every channel. So I agree with you. What does personal superintelligence mean? I feel like there is room for product led innovation in AI. New instantiations of the underlying, new ways to interact with the fundamental.

We're having this AI moment and then we get video models, we get image models, we get image editing, we get knowledge retrieval, we get agents, deep research, we get coding agents. Like we've had three or four or five like really cool instantiations of it. And not every lab is frontier at every single instantiation. Anthropic doesn't have an image generator. Right.

Other labs, like they're, you know, obviously OpenAI really thrives in consumer and has created just a great app that is reliable and answers your questions reliably. Other companies have struggled to, you know.

To hit that instantiation.

It would be very, very cool to watch the Facebook team figure out what is a way that they can bring AI to bear inside of Instagram in a cool way, in a new way. The problem is that.

Facebook and Instagram don't really have that DNA. They sort of tried it with the Vibes app, but also as soon there's very low like ROI on that because as soon as you, as soon as you like, let's say that they do come up with like the next stories and it's like, oh wow. Like you take AI and you stuff it in a social app and you do this one special thing and then everyone loves it. It's great.

[B]

It's not just like they didn't create that. No, I know, I know.

[A]

But let's say that they did. It's like it's gonna get copied everywhere anyway. So it's not really that much. Like they really should just wait around for everyone else to do their R and D. They should be Evan Spiegel. What are you doing? Come on, invent something for us.

And so I can actually see Alex Wang's pushback on like, hey, you want to use Instagram and Facebook, you want to do something more incremental? But.

How are we going to do something great in AI in those ecosystems? I don't know that there is that much because again, the actual feed ranking team, that's not the gen AI team, that's not msl, that's not TBD labs. That's core AI that team is cooking. They've been using GPU accelerated algorithms for a long time. They're doing fine. They're shipping ads and also all the advances in AI, they're showing up in the financial results over there. The ads are definitely getting better targeted. They're showing people. More ads.

[B]

They're showing people reels went like zero to 50 billion.

[A]

Yes. And a lot of that is an AI story. And they're not getting credit for that because it's. It's core AI. It's not, it's not gen AI. And Jenny is the cool one because it's like, wow, cat picture video, awesome music. Yeah.

[C]

Yeah.

[A]

What do you think, Tyler?

[B]

Yeah, I mean, I feel like a Nano Banana Pro product in Instagram is like very obvious. Or like Sora is also just like in Instagram.

[A]

Yeah.

[B]

If they just made that, it's like a killer product.

[A]

So I had this picture. Yeah. I had this pitch during the studio Ghibli moment. I was like, they should figure out how to Giblify every single person's profile picture in Instagram. So you just, the next time you open Instagram, it just says like, hey, we made a cool cartoon version of your profile picture. Do you want to share it on your story? Do you want to make it your profile? Do you want to share it to your grid or whatever? Let's just preload this because it's clearly very resource intensive. But they could have done it on some sort of cron job. It runs in the background, burns a bunch of GPUs, but it gives you a bunch of cool outputs and it just gets people into the. Oh, wow. Like AI filters are here. Clearly there's a lot of work to be done on the AI frontier. Like the actual developing the model doesn't seem like they have a Nano Banana quality image generator model. Also, I don't know if they have the GPUs to actually release that to a billion users. And then at the end of the day, I don't know if it makes any sense. Because it's like everyone opens Instagram and they're like, oh, cool, you did something nice for me. You spent.

[B]

Somebody's making great AI generated content elsewhere.

[A]

They'll just bring it up, they'll just.

[B]

Bring it over and host it.

[A]

Yeah. So it's a little bit, a little bit disappointing because it's like, oh, you want to do these things, but you can just. They're in the do nothing win scenario. What do you think?

[B]

I mean, it feels like Google is getting like a massive, like they've in the past, like what, two months? Like Google stock has gone crazy because of like, oh, they're actually are playing an AI. So it's like if Instagram basically takes all the people that started that got a Gemini subscription because of Nanoband Pro.

[H]

Which is like probably a fair amount.

[B]

If they just move them back to meta, you know, products.

[A]

I don't think people will think about it that way. Like, I think people see Google and Meta very differently. I think people see Google as like, it's Google for work. It's my workplace. It's where I do research, it's where I learn things, it's where I organize my life, my data, my files, my spreadsheets, my slides. And on Meta, it's like, that's the place where I look at reels. It's an entertainment platform.

[B]

Yeah. I think also for a while, I don't even know if they still have them, but Instagram had the companions and that seemed like extremely half baked.

[A]

Are you talking about stepmom?

[B]

Yes.

[H]

There was like a egg you could talk to.

[A]

Cow.

[B]

Yeah. It might have been on Facebook, but it was like extremely like, not.

[A]

Well, it was not dialed. But it was also not their team.

[C]

Right.

[A]

Wasn't it? Wasn't it like a.

[B]

No, that was not msl. That's what I'm saying.

[A]

No, not only was it not msl, it was like a feature that was released by a meta team that then anyone could go in and create a personality. So it wasn't like a Facebook employee was like, I bet people want to talk to a cow. It was like, it was like, I'm going to release into the wild the ability to talk to anything. And then someone was like, oh, I have an idea. I as a user will do ugc.

[B]

It was part of what maybe we haven't discussed so far is how TBD will tie into Reality Lab. Right. Is it possible that they need in order to fully realize the Reality Lab's vision of having a pair of glasses that see and process everything that you see and can provide you that personal super intelligence. So yeah, you're walking around, it's like, oh, I forget that person. You know, it just pops up like a name tag for somebody, right? You see an item in the real world and you're like, you know, you do this and you buy it, right? So it's very possible that they need to get, eventually get that on device in order to be fast enough, in order to be super valuable. And so they do need this internal competency. And so I would. There's of course stuff that we're missing here, but ultimately I can see why Boz and Chris Cox were like, hey, why don't we just figure out how to make an extra $50 billion a year by taking some of the best researchers in the world and applying them to the core business also.

[A]

I mean, I like that, I like that philosophy. They bought in on the Metaverse, the ar, the xr, all this stuff. But I mean, they do got to buy time. It just feels like they need to buy time because it feels like it's still not at some sort of inflection point where, oh yeah, this is going to be the iPhone moment. Everyone's going to be using these augmented reality glasses next year or the year after. It's like, it's still very niche. I was in a best Buy, I saw them at a the Meta Ray Ban displays I believe there and they were certainly not being swarmed. So I don't know if we'll ever get any data on how many pairs they sold, but.

I'm not seeing it on a lot of lists of the hottest tech items this year. I'm not seeing a lot of people buy them, gift them. It still feels like, okay, they've created something really cool which is technologically, it's a heads up display. It looks good, it's cool, but there's a lot of work to be done to actually educate people, create software for it, make it seamless.

[B]

I think it'll be a popular gift I'm planning to get. To what?

[A]

But to what degree? Like 10 million units or a million? I don't know, it's a big question. But I know people are going to be giving each other cognition.

[B]

That's right.

[A]

Time with the AI engineer. Devin, crush your backlog with your personal AI engineering team. Well, without further ado, we have Ben Smith from Semaphore joining. He's in the reach room waiting room. Ben Smith, good to finally have you on the show. Thank you so much for Joining us.

[D]

It's good to finally be on.

[B]

Yes, Overdue. Nice to be here.

[A]

Well, we were confused. We were confused because early, early in the show about a year ago you broke a story about a group chat, Chatham House. And we were very confused because we assumed that Ben Smith was a pseudonym because it sounds like the name that goes on every kid's fake id. If you don't want someone to know who you are, you make up a name. John Doe Ben Smith. This is just a name that you pull off the shelf, but it is in fact your real name, correct?

[D]

Wow, that's a really insightful observation. But yes, it is my real name.

[A]

Fantastic.

[D]

Well, maybe I should have used a pseudonym. A lot of people were mad about that pseudonym.

[A]

They were upset about that. But I thought it was an insightful. So that was a fun little peek behind the curtain of the Chatham House. But anyway, we are here to talk about the Warner Brothers Discovery News. First, can you actually introduce yourself? Since it's the first time on the show, we'd love to get up to speed on a little bit of the Semaphore journey.

[D]

Yeah, sure. I mean I've been a political and media reporter for my whole career. Was at Politico when we founded that and then ran BuzzFeed News for eight years. Oh yeah, was media columnist for the New York Times. And so I've had like a real front row seat on how ins the media is in all sorts of ways and also how frustrating it is for consumers right now. In particular how overwhelmed people feel and how hard it is to figure out who to trust. And that at Semaphore that was sort of the core impulse was to try to create a platform that thinks a lot about just sort of how you make yourself trustworthy by being really straightforward and transparent and then how you just try to cope with the fact that everybody's overwhelmed by incoming and there are great new outlets popping up all the time that you want to be across and there are garbage all over the place that you want to avoid. And how do you help an audience? And really like the most, the people who are most driven insane by this are the most sophisticated consumers. Like how do you help people navigate.

[A]

This and that problem?

[B]

Right now part of the chaos is on X specifically there's like thousands of accounts that are like headline accounts, right? They're just acting. All they do is post headlines. They do breaking just in all this stuff. And so now there's a whole new crop of accounts that are purely fake news. But they use the same Formatting. And so now I just never. I don't. Some of the stuff I'm like, I do think it's put media in an interesting position because in some ways, if you're like legacy media.

Think newspapers, cable networks, things like that seem to have their durable edge is they have monopolized the truth. I still, of course they put out fake stuff now and then by accident, or they just get the reporting wrong and they'll issue a correction. But it still seems like a lot of headlines happen online. And I'm just like, I'll wait till an account from a company that has existed for more than like 10 years posts it. Because until then I can't really verify it.

[D]

Yeah, I mean, Axe was this incredible machine, I thought for a long time for just figuring out like what is going on in the world and had lots of other problems and we got very politicized and. And you could have people tell you to kill yourself all day and stuff like that. But it was a decent place to know what is happening and it definitely kind of rewired my brain. I feel like there's nowhere. And honestly, to some degree, this is what we're trying to do in our newsletters. There's not somewhere you can log on and just be like, what is happening in the world.

[A]

Interesting.

[D]

And be confident that you're getting an accurate read on that.

[A]

Yeah. Do you think there's a difference between the opinion and the fact finding side? I feel like with a lot of the legacy media outlets, people maybe still believe that like that's a good source of truth, that's a good source of facts, but they might not agree with like the conclusions or the contextualization or the opinions that are wrapped around those facts. But most people still have faith in the traditional media actually following like fact finding guidance. But at the same time there has been an immense amount of pressure.

Maybe on the back of people's disagreements about their opinion section that has led to the questioning of their fact finding sections.

[D]

Yeah, I mean this is like truest in coverage of technology actually. Like you guys feel it most intensely because there's been this to me at this point, like kind of boring and repetitive war between journalists who particularly post Trump, saw everything bad they thought was happening in America as the fault of meta. And then on the other hand, technologists who felt that they were like just there trying to build companies and being persecuted by these psychotic journalists. And I don't know, but like I having been part of that on the journalism side, like there's a lot of truth to both sides of that. But I do think that we're also in a world where consumers, like, are just not going to take a single view, a single perspective, don't want that, want diverse perspectives. And so, like, just literally what we do at Semaphore is we, like, break the stories up into, here are the facts, and here's the journalist's opinion, which is transparently displayed, and here's somebody else's opinion instead of in the traditional way, trying to kind of weave those together. And I think people would rather disagree with you openly and disagree with your analysis than kind of feel like you're sneaking it in.

[A]

Yeah.

[B]

Yeah, that's a good approach.

[A]

How have you been processing the Warner Brothers story? Like, how long have you been covering this? Have you been covering Zaslav, like, the entire time? Because there's been, like, the writing on the wall that this was being packaged for years, correct?

[D]

Yes. I mean, I think that, you know, this is incredibly. I mean, Warner is obviously this kind of cursed company that has been acquired and sold, and each acquirer regrets the whole thing. You know, Warner.

[B]

The brothers were never split up, though.

[D]

The brothers. But it is also the. You know, it's the great Hollywood studio. Right. And when Zaslav, in this sort of unbelievably audacious acquisition of this Hollywood gem by this kind of garbage reality TV cable conglomerate of discovery, Dr. Pimple Popper, was buying, HBO was this incredible bit of cable business magic and financial engineering that then just immediately destroyed enormous amounts of value, and the stock went down to, like, what, seven or eight dollars?

I mean, as a pure financial story, it's amazing, right? Like, the value destroyed and now created in this bidding war that Zaslav has created, but also, obviously, a story about movies and politics and power and all the other stuff wrapped up in it.

[A]

Did you think that the bidding war was fake or that were you expecting the bidding war to materialize in a way that felt real?

[I]

Yeah.

[B]

We were talking about a friend who has had an incredible career in media, who I won't name, but he was like, I don't think there's gonna be. I don't. I don't think there's a war here. I think a deal will get done, but I think there's only one person who's a real or one group here that's a legitimate buyer. This was, again, maybe six weeks ago at this point. Certainly hasn't come.

[D]

I would have said exactly the same thing. I think Netflix did either, like, a very convincing head fake or changed their mind. And I think no one thought they'd. At least I didn't think they would seriously bid. I thought, you know.

WarnerMedia is both a bunch of interesting but quite challenging to operate cable businesses. CNN being the most culturally important.

And then a studio, a movie studio. And there were a lot of people who really wanted the movie studios. Asloff was gonna spin out the cable assets and then sell the movie studio. And that seemed on track. And so when Ellison came in and just said, I'll take the whole thing. Yeah, I definitely assumed. And no one else really wants that.

And Ellison isn't really. He's sort of a non economic actor here. He's fundamentally like a kid who wants to buy a movie studio. And so how do you bid against that? And the history of the house is being bought by people whose motives aren't economic.

[A]

Yeah. Kind of like sports themes, right?

[D]

Yeah, totally. How do you think about it? That's a great analogy.

[A]

How do you think about this from Netflix's perspective? Like obviously as a tech company, Netflix has been like such an incredibly performing stock. Became so big, was at one point Fang, which was basically Mag 7 before there was Mag 7. But from my perspective, I've been a subscriber of Netflix forever. I don't really see myself ever churning. But there's only a few things that have really broken through. Like I know Squid Game, I know Stranger Things. There's like a few moments and it's hard for me to picture the staying power. There's not as much FOMO TV as I look over the last decade of my entertainment watching career. It's like, oh, I couldn't have missed Game of Thrones. I couldn't have missed Succession. There's all these important moments that only came from hbo, they only came from Warner Properties. And so from my perspective, maybe it's expensive, but it felt like this was a way to backfill some really like legacy assets that you just can't create overnight for no amount of money because it just takes 50 years to create Porky Pig. I guess.

[D]

That'S an amazing assertion. But yeah, you're basically totally right. There's something about the staying power and the cult. Even just sort of like internal creative culture at HBO that has had this string of high impact things and then also write a library that includes Harry Potter, that includes like north by Northwest, Three Days, the Condor, Lord of. But like just, you know, decades and decades of amazing TV and cinema. Columbo I think is in there. Right.

[A]

Like that all my are in there. Rambo.

[D]

Sometimes you want to watch that, sometimes you want to watch. Yeah. And so there's a logic to, there's a logic to that. Netflix already also spends, I think, hundreds of millions of dollars licensing stuff from Warner. And so there's some logic too. I mean, there's some actual synergies there.

[A]

Yeah.

[B]

Does cable end up with, does the cable business end up with Paramount, Skydance? Either way, Netflix doesn't want it. Clearly the Ellison's really would like the whole thing.

[A]

I was sort of confused.

[B]

But if the cable business just stays out in the ether, is it just going to.

[A]

Doesn't Nelson just pick that up?

[B]

Do they not. Do they really only care about.

What'S your read?

[D]

So, you know, I don't know. I mean, I think my, the basic thing that people would always say at Paramount is CBS News is 5% of the company, 5% of the revenue and 80% of the headaches. And the way in which the news business has gotten swept up into this is that that's what Donald Trump cares most about. I mean, he also wants a remake of Rush Hour 4. By the way, that was a, a scoop one of my colleagues had recently. Oh, 100%. He. Has this been confirmed? He told Larry Ellison, that's crazy. I want rush hour four. There's only been three. I want four. Jackie Chan is like 71. So it's challenging these days. They shoot his fight scenes like in the Dark. But, but no, that's. Brett Ratner is making that movie because Donald Trump wants it. And, but, but mostly what Donald Trump wants is favorable coverage of Donald Trump. And by the way, however favorable it is, however favorable you're making it, that is not favorable enough. He wants it more favorable than that, as the Ellisons are now finding like they've I think softened CBS's approach a bit. And all Donald Trump is going to do is yell at them about negative coverage of Donald Trump. So it's like a bit of a slippery slope there among. And also a disturbing thing that the President is interfering in regulatory matters to affect coverage of Trump.

[B]

Does the President get a report every day of like, here's the different takes. Because I'm assuming he's watching Fox.

I'm assuming he's dailying Fox. So is he getting like a deep research report? Do you think he's running like a query in ChatGPT? It's like, tell me what's.

[D]

No, he's watching a lot of tv. He's got a bunch of screens up. He's switching between them and then he has an aide who has an iPad who brings him things that are of particular significance.

[A]

Sure.

[D]

That he then watches.

[A]

If something happens on a different screen, you can see.

[D]

Yeah. He's watching a lot of television.

[B]

Don't worry what happens.

[D]

The CNN part of this. And I think the Ellisons do care about news, particularly. They're very, very pro Israel. And they were disturbed. They felt CNN got. CBS got too anti Israel. But. And I think they would, like. I do think they are sort of ambitious about cnn. And there's always been a thought that CBS and CNN would make a good combination. But the driving force here is the movie business. And the news business is implicated as a way to make Donald Trump happy.

[A]

Yeah. And is that just David Ellison's, like, passion for movies? I mean, he did. I think something that's getting lost here is like. Like, he founded a movie studio 20 years ago. Like, he's not, like, new. This isn't like a pet project that he picked up today because Oracle stock popped. Like, this has been his life's work now. He's had a massive advantage with his dad. But, like, it's not like he was. It's not like he was doing a basketball thing last month, and now he's doing movies. He's been doing movies the whole time.

[D]

Yeah, no, totally. And in fact, like, lots of rich people dabble in the studio business, and he's built something totally real and made a lot of movies. We've all seen Top Gun. I mean, like, really, like, big stuff. And. And Skydance has been, like, a successful, important part of Hollywood. And he's also, I think, importantly, kind of, like, learned a lot. Like, he's not a newcomer to this weird business.

[A]

Totally. Yeah. What did you read into the text message? He says he sends this message to Netflix to say.

We had dinner, and you will find out that we are who we were at that dinner. If he's buying the company.

Is that setting the expectation that they'll be continuing to work together for 5 years, 10 years? Or is it just like, in the course of this sale process, we'll be good people?

[D]

I mean, I have no idea what that text message was. It was sent, I think, hours after his lawyers had sent some kind of flaming letter to the board saying, you guys are screwing us and aren't negotiating in good faith and giving it a sweetheart deal to Netflix, and then sent a kind of. To me, like, kind of hapless and plaintive message to Zaslav saying, really, I love you.

[B]

It's good cop, bad cop. Just A classic strategy.

[D]

Yeah, I guess. So.

[A]

What do you think are some of the.

Like, the outsider interpretation of the deal? A lot of people are worried about, you know, just Warner Brothers getting sold. It feels like some people are anti Warner Brothers getting sold to anyone because they're like, no matter where it goes, they're going to cut jobs or they're going to pull back from movie theaters. How are you interpreting?

[B]

And I do think the people that are like, oh, well, you probably subscribe to Max and Netflix and you'll be able to cut one of them, but I just don't buy that Netflix wouldn't just. They might give you like a sweetheart deal for a couple years until everyone forgets. And then it's like, hey, we have by far the best portfolio of content in the world. And we're might even call it a bundle. We're bundle maxing. We're back to the bundle. And as a consumer, I am annoyed enough at having different accounts and bopping around. I'd be happy for just one. I'd be happy for re Bundling. But I just don't buy that it's a win for consumers, even in the medium term and probably not at all in the long run.

[D]

You know, I don't know if it's not a win for consumers because that thing you said, like, it's so annoying. This landscape is so annoying for consumers. You realize, oh, my God, I signed up for MGM two months ago to watch something and it's still billing me. And everybody is living in this world of like two or three streamers. You feel like you have to have three or four others that you forgot you signed up for. And it's not a tenable situation. And I think that that kind of consumer push is pretty real. And is the kind of, like, the obvious in the media's a boring, straightforward business. We're not like, trading credit default swaps here. And I think that just obvious consumer sense that it's time to bundle Max again is what's driving this to have the number. The notion that you solve it by basically having the number one and number two merge with each other is not the obvious solution to that. I think, and I totally agree with you, obviously means prices grow up. I mean, the people who are most freaked out, though, are the sellers, right? The issue of, like, is this a monopsony? Or like, the, you know, are the movie makers the actors gonna take a haircut? Because there's only one buyer left and they're very. And Hollywood is obviously very concerned about that.

[B]

Yeah, if you have one buyer, you have. You're a price taker.

[A]

Yes, yes. Yeah, it's funny. I was on the consumer side. I agree with you. I was looking for posts about the deal potentially being a monopoly and I found multiple posts that were like, I miss when Netflix was a monopoly and they had everything in one place. Now I have to go to six different streamers and I was like, that's funny. But yes, on the buyer side, that is obviously more of the risk. I wonder, how are you interpreting the rest of the big tech companies playing.

In Hollywood right now? Because it feels like Apple has a lot of money to spend on buying media assets and buying movies and producing stuff. Amazon as well, who knows, maybe Mark Zuckerberg buys the rights to the UFC for VR, then eventually starts getting into movies. It feels like there's a lot of money chasing media generally. Do you think that we're going to see more of like a pullback from the other big tech companies or do you think they'll go harder than ever? How are you interpreting the rest of big tech's role in Hollywood changing?

[D]

You know, it's a great question. I mean, Amazon and Apple in particular both spend a lot of money. Neither have quite.

I would say almost the creative culture that Netflix did manage to and that HBO is really the best at, which is a willingness to take these cultural risks. It's not a tech business. It is a business of taste and of relationships and of all this stuff that's hard to scale.

Apple's made a lot of obviously wonderful stuff that has some cultural impact, but they're also incredibly careful about their own brand in a way that I think ultimately makes it really hard to do the things that really cut through culturally.

[A]

I talked to a filmmaker years ago right as Apple TV was getting spun up and Apple was starting to take it more seriously. And he said like, no way, it's not going to work because Hollywood is a hits driven business. It's a venture capital style business. You have a lot of F minus movies for that one. A movie. It's all about this high risk. And Apple does not like having egg on their face for a bad result. And so Apple, everything has to be an A minus level basically to get out the door. And if you have that brought to Hollywood, he was saying that wasn't really the cultural thing then. I think what he was missing was the fact that Apple probably wants to distract from the services monopoly. And so there's a whole extra incentive to continue saying like App Store revenue. What are you talking about when we say services, we mean Ted Lasso. We have this. I don't know if you buy that.

[B]

You mean Brad Pitt.

[A]

But I've always enjoyed that conspiracy theory cropping up over this year. Just this idea. Apple. But how have you interpreted it?

[D]

I love the idea that movies are venture capital, except without the returns.

[A]

Yeah.

[D]

It's like you get the risk, but you don't get the outsize. But, like, at best, you don't get the outsized return.

[A]

Yeah, maybe that'll be Roloff Boto's next business. Yeah, he wanted venture capital return, free.

[D]

Risk, but, you know. Yeah, I mean, the risks are also. You mentioned Ted Lasso, for instance. One thing that you will never see in an Apple TV production is anybody throwing or damaging an iPhone.

[A]

Yeah.

[D]

It's just like you're living in their world and there's smooth edges to it.

[A]

The smooth edges are crazy. I saw this whole conspiracy theory about how the lighting in Ted Lasso and Severance are both very high key, very flat, not a lot of contrast. And that that would potentially, like, prepare you for this metaverse where you're in the Apple Vision Pro. Cause the Apple Vision Pro looks like this. And it's all like. It's like the Apple brand brought to cinematography within their, like, media assets. And it was like, maybe it's just their culture bleeding over there, but also maybe it's something more about, like, their view on the world and like their. Their opinions. It was very, very interesting.

[D]

But at least the shows are beautiful.

[A]

They are beautiful.

[D]

The shows are beautiful, but they are.

[A]

A little, I think.

[D]

Yeah. They're not grungy. They're not divisive.

[A]

They're not divisive.

[D]

It's really good culture. Good art is always divisive in some people.

[A]

Totally. I mean, even Game of Thrones, I remember, like, watching season one and being like, oh, this is like, maybe going too far. Like, this is like, can this be on tv? It's like edgy. It's like. It's like there's a lot of, like, you know, the adult content, the violence, like, it definitely pushed boundaries. Even though it was R rated, I guess it was aggressive. And you just don't expect that from Apple. So, yeah, maybe you're back to monopsony. If you're selling something that's going to be for mature audiences, where are you going other than Warner Brothers, Discovery, Netflix, this conglomerate.

[D]

Yeah. And so I think Hollywood in some ways, very torn because they really hate Trump and they hate the idea that Trump's friends are Jamming this thing through with threats of kind of illicit regulatory pressure. And on the other hand, they hate Netflix, so it's like a tough choice.

[A]

Yeah, rocking a hard place for sure.

[B]

Let's switch gears to something.

They hate even more, which is AI. I'm curious like how you guys have been trying to focus your coverage, how you personally feel about it. If you could snap your fingers and make it disappear, would you or do you enjoy it? Personally, I'm curious, like just kind of. Yeah, I'm curious on your kind of semaphores kind of view and how you've even been approaching coverage. Because a lot of our coverage is obviously positive. We use AI a lot, we work, we get a lot of value from it. But at the same time we're well aware that most, it feels like most of the world at this moment is using it, but even sort of like hate using it, which has happened quite quickly.

[D]

Yeah, I mean I guess I mostly see it as just the greatest story. Like it's just, you know, it's an incredible story right now of politics, of economics, of end of technology and you know, we're just covering it obsessively. Reid Albergatti, our tech reporter, broke the story two days ago that Nvidia is going to be selling, you know, allowed to sell H2 hundreds to the Chinese. I mean it's just, it's a story that is pulling everything in. You have this American economy that is limping along except for AI, which is driving all the growth.

Yesterday I interviewed Governor Shapiro, Pennsylvania. That's all he wants to talk about. I mean it's just a fascinating political moment. I mean I use it and we use it, I think probably, I bet the way you guys do in like for the most boring stuff, it's like incredible for video production, transcription and essentially I think the way a lot of companies are using it, which is just to take out costs on extremely boring things that you're happy to have software do.

But yeah, but I think, yeah, we're mostly thinking about, I think the story that I'm obsessing about now is really the coming political backlash. Like I was just talking to a Republican consultant here in Washington who's essentially shopping for a candidate to lead. The anti AI president basically sees, thinks there's this big lane. I kind of buy this against J.D. vance. Like he's the front running Republican nominee and the attack on him will be this guy is a tool of the tech industry. He's a tool of these AI guys who want to take your jobs Poison your children's brains and build, like, these weird boxes in your neighborhoods, and it's just not. It's not a popular. It's like, not popular. And one of the strange things is that, you know, Trump is just unbelievably pro AI. It's probably the most important decision this administration made is that David Sacks really persuaded him. Came in day one, he's with Sam Altman, he's with Elon, all in for AI, but he didn't campaign on it, and he hasn't really bothered explaining it or selling it at all. And so I think we're just set up for a huge backlash that you're going to see in the midterms.

[A]

Yeah, it's a fascinating story. I mean, I agree with you about AI Touching. Just like everything you can look at it, from what is it doing to your kids to you can be sci fi and say, in a thousand years, the robots are going to control everything. You can talk about jobs, you can talk about taxes and all this stuff.

[B]

But, yeah, for consumers that aren't working in tech, they're like, it's cool to make a video of a cat surfing, but I'd rather just keep my job and keep the cat surfing videos.

[A]

It's just fascinating how much tech missed this. They didn't. Even with social media, like, you pointed out this whole thing about, you know, the war between media and tech around Facebook maybe stealing the election, that type of stuff. Right. It's like, well, at least everyone kind of enjoyed social media for like a decade. Like from 2016.

[D]

It was so nice.

[A]

2016? Yes. People were like, there's some. I saw a bad picture or like, oh, you know, I found out some bad information or something, but it was mostly like, oh, cool, Instagram. I saw a photo that my aunt posted. This is nice. People had a pretty good time with it for years. Years, years, years. And then eventually it turned and now we've grappled with it. We talk about the pros and cons, but we all kind of use it and we're all, like, okay with it. With AI, it was like on day one. I hate this. I hate everything about it. Looks ugly. I don't like it. I don't trust it. And, oh, by the way, go do some research. The people who are making the AI, they've been talking about how it's gonna kill everyone for, like, a decade. They've been writing books about this for, like, a decade.

[B]

Yeah, I mean, it's rough.

[A]

I mean, well, what do they think in Silicon Valley?

[C]

About this.

[B]

Yeah, we kind of created the crisis because yeah, some of these videos pop up and you're like, wait, this was four years ago? And they said there's a, you know, someone at a lab is on record saying it's very likely that AI on a long enough time horizon will kill all of them. And it's like no one was saying.

[A]

That on social media. You go back and no matter what you think of Mark Zuckerberg, you go back and you find the scandalous video of him before he was so powerful. It's like, yeah, he's drinking a beer out of a solo cup with a journalist in an interview. It's like, it's pretty harmless. It's pretty harmless. It's like a little sloppy, but it's not him saying like, yes, I believe this will definitely swing the election in 10 years. Mark my words. And then it does. It's ridiculous.

[D]

Yeah, we skip straight to the apocalypse. And it is also totally Sam Altman's fault. Slash an incredible feat of marketing that you say, like, I have this new product so incredible that it's going to kill everyone. Definitely got people's attention.

[A]

Yeah. I mean there is a long lineage of technology, millenarian technologies actually being like, it's easy to marshal resources around them. I mean, in many ways SpaceX is of the same cloth in the sense that the, you know, Elon Musk was out there saying like, like if we don't go multi planetary, all of humanity could be wiped out. So there is this existential crisis that if an asteroid comes and hits Earth, it's over for humanity. But if we build my company SpaceX and we get to Mars and we put a Mars colony there, then we have a backup plan. And if the asteroid comes and destroys one of those planets, well, the other one's still got some people on it, we can rebuild. And so it was an apocalyptic scenario in some ways. It wasn't the backbone of the business, but it was a piece of his rhetoric. But it's still more positive because it's not the rockets that are going to destroy us, it's the rockets that will save us. But it's still conjuring the idea of an apocalyptic scenario in some ways. So I always found that interesting.

[C]

Yeah.

[D]

And I mean, I do think that by the end of the social media era, all these CEOs, and it's still true, were so beaten down by being grilled by Congress and hated the media and felt like everyone was out to get them. They're still.

They don't Want, like talking to the media. You guys all live in your signal group chats and like feel that everyone is out to get them. But actually the successful CEOs of this moment now talk to everybody are back to being these kind of mad visionary prophet types who, as you say, like millenarian figures. And I think if you look at like, you know, Dario or Altman or any of these guys, it's sort of a throwback to an earlier style of maybe overselling, but of being very, very interesting when they talk about their products not being sort of embedded in the culture wars.

[A]

Yeah, I mean like, you just, you go back through the story of like Amazon and Jeff Bezos and it was like finance guy delivering packages, then he's hosting some web servers. Like there was never really this like world consequential thesis that bubbled out. He's done some great interviews, he's been inspiring in many ways, but he's never brought that world historic consequences to bear in his rhetoric. I don't know, maybe that's benefited the company. The company's certainly done well, so maybe it didn't hurt. It would be funny. Be like, if we don't deliver this package in two days, everyone dies. We need to do process. We have to. The entire fate of humanity rests on you getting diapers in two days.

[D]

Yeah, well, that's how I feel about the podcast industry.

[A]

Yes, yes. How do you see the podcast industry evolving? What's your take? I mean, you mentioned the consumers being unhappy with media, and I think I could think about a bunch of different instantiations of that. But the fragmenting media landscape, how are you thinking about what it means to be like, independent, like the micro nimcell community?

Do you think that there's like a pendulum swinging and we'll see reconsolidation, rebundling, or do you think it's just going to diffuse and be smaller and smaller operations forever? How are you thinking about, like the new media landscape?

[D]

Yeah, I mean, you know, it's been like new media as long as any of us can remember.

[A]

Someone was calling the Verge new media or legacy media and I'm like, yeah, they felt very new. It was very funny. Anyway, sorry.

[D]

Yeah, like I sort of was a blogger when that was new media.

[H]

Right.

[D]

So I feel like I've seen. But you know, the core, I do think there's like still a nostalgia for a 20th century media that's like not coming back because that was because you needed a broadcast tower or a printing press to reach a lot of people. And that was. And there's been a tech. And I think when people, people in my business and in the east coast media often try to figure out like what went wrong, you know, was it when the CBS news got something wrong about Bush in 2004? Was it when the New York Times put up its paywall too soon or too late or something? And like, no, there was a huge technological shift around distribution that kind of swept away a lot of this old stuff. And it wasn't something they could have tactically really avoided. It was just a huge technological change. And so they'll never be that kind of for. Not in our lifetimes unless the government imposes it reconsolidation around a very limited number of news sources. Like you gotta go to North Korea for that.

But that said, I think we are because it's driving consumers crazy. The pendulum has swung out. They say media only bundles and unbundles and we're out at the unbundled moment. And you can just see it swimming back. Fox is rolling up right wing podcasts. MSNBC is about to roll up a bunch of left wing podcasts. By the way, we're still calling these things podcasts. Like it's TV.

And everything is converging on this very familiar but kind of boring television format that will start to get juiced up and become a game show with 19 boxes and whatever. And we're all gonna have to start spending.

[A]

I can't tell if you're talking about.

[D]

No, you know what I mean. By the way, we also produce a podcast that I think looks fine, but I can feel the pressure to raise the production values. Whereas like two years ago we could all been like in our pajamas in our basements and it would have been fine. And so I think there is this, this convergence and the audience is going to expect it is going to be competitive. It'll have to look better, it'll have to be tight, more tightly edited. I suspect people are going to want that. And it won't look, it won't look like old tv. But I do think you're going to see consolidation around all the advantages you get when you're consolidated. You have a central guy selling all the ads. You can build subscription technology, you can cross promote. There's all these again, media business is so unlike the tech business and unlike the finance business and how uncomplicated it is. And I think like you're going to just see consolidation for all these really dumb and obvious reasons that have to do with. And also it's sort of exhausting to Run a small business for a long time and people who start them will. I don't know, how are you guys. Actually I'm curious because you're in this. How are you feeling about it? Do you want to stay independent? Do you want to be consolidated?

[B]

Well, I would say that the best way to think about it is we like being the talent side. We're not in this to run a. We don't have any interest in running a multi hundred person organization. We don't really even care that much about scale. We're very okay with our niche. We think it's like a couple hundred thousand people in the world that are really gonna enjoy this content and millions more will see the content in different forms. But knowing our audience, it's a friendly environment.

[A]

Like just earlier on the show we had Joe Wiesenthal from Bloomberg. Like we're not trying to poach him to do the Joe Weisenthal show on the TVPN network. Cause like the whole, not a terrible idea.

It'S just a show. And so I'd much rather, you know, Joe just does odd lots, which is a fantastic show, and then comes on our show when he feels like it and it makes sense.

[B]

And we, yeah, the question going back to like saying, you know, msnbc, what MSNBC is doing with podcasters and what the cable networks are doing with podcasters. My.

When you look at the revenue that these cable networks, basically the revenue streams that they built up over time, getting a dollar from every home that is subscribed, et cetera, per channel.

Depends on the network. But it's so hard to rebuild that with independent creators and get back to the scale. Right. It basically shifted to the streaming. You know, you need a website. Like a website or an app is now the distribution. And so I think that, you know, we just, we understand like this huge bifurcation between the platforms and then the individual creators that can command attention, right?

[D]

But if somebody came to you and said like, you know, I heard you guys say on TV just the other day with Ben that you wanted to be talented and like, you know what? Like we'll just, just like, we'll take all this off your hands. We'll pay you a salary, we'll commission you in some way on the. But you don't have to worry about anything else. We'll get you hair and makeup, like whatever, you know, fly business class, whatever you want, you know, and treat you as talent and you just don't have to run a company and worry about all that stuff. Like I think that's going to be the pitch to people who are getting exhausted, who are super successful creators but are sick of running a small business. Don't really aren't. I mean you guys are actually entrepreneurs so it's a little different.

[A]

It's weird because we've been anywhere.

[B]

Yeah. So we've built out, you know, we hired.

[A]

But I understand that from a lot of perspectives. For sure.

[B]

We hired somebody I've worked with in the past. Dylan, who started his career back at cnbc, worked at HQ Trivia, like understands media really well. We've built out a team around us that allow us to do that and allow us to work on the stuff that we really enjoy. I think one thing that's been interesting is how many, how many traditional journalists have gone independent. But historically they were in the scoop business and then they go independent and they realize like when you're part of a bigger media company, you can get one crazy scoop every three months and you're like, from my view, like you're killing it. Like you're adding a lot of value to the organization. But when you go independent and you're like getting three a scoop every few months, is that enough? Are you creating enough value to justify having people give you a lot of money every single month? I think yes to some degree. But I think you'll see a rebundling in certain niches around, let's say a bunch of scoop driven technology journalists that say like, hey, we all went independent but we should actually kind of rebundle together because it'll just create more incentive for somebody to subscribe because they know on an ongoing basis I'm going to be getting. And that's what obviously you're doing.

[D]

Like a TVPN roll up of Alex Heath and Casey New Newton.

[B]

We wouldn't want to do that. But I.

[D]

No, I'm joking.

[B]

But I could, but I could.

[D]

I totally see what you're saying. I mean in a way, the way.

[B]

We come from kind of what you're doing.

[D]

Totally. There's a kind of scoopy aggressive reporter which basically what I am. Who wants that, who I think I want. People want that kind of direct connection with an audience and authenticity and transparency that you get with substack. But also there are features of that kind of reporting that it makes more sense to be part of a newsroom. And we've tried to create a space that is the best of both of those worlds for journalists.

[B]

Yeah. And I think when a journalist goes from being able to spend all their time obsessing over a company or an industry or getting scoops to then, okay, I have to do all of that still to put food on my plate. But then I also have to develop an ad sales business and I have to figure out. And I have to manage a podcast editor and I have to hire another editor and.

[G]

And.

[B]

I gotta do my taxes and things. It just really adds up. And then are you gonna be as elite of a journalist if you're doing all those things? And there's a very real scenario where someone else just takes your job that you had previously and ends up out competing with you on scoops because they don't have to worry about any of that stuff. So I think that's something that a lot of people will have to figure out.

[D]

You know, a lot about newsrooms. That is so much about like the way we were thinking about founding Semaphore.

[A]

That's hilarious, because I don't think. Have you ever been in a room?

[B]

I've never been in a newsroom, but I just. But I mean, yes. So much of. Part of a lot of the success of. The reason that we've been able to break through this year is we're not trying to do anything else besides media. Right? I mean, you've seen. How many people have you seen build a tech media company and become a venture capitalist as soon as they have have any amount of. I gotta get out of this thing. I gotta get out of this. I just enjoy. There's very few things on earth that I love more than advertising. So I love media. There's very few things on earth I love more than talking with John about business and technology. So.

We know our line.

[A]

Anyway, final light round. What's the biggest fish you've ever caught?

[D]

The biggest. Like fish. Fish?

[A]

Yes.

[B]

Not a scoop.

[D]

I went out with my uncle. I got fishing for stripers with my uncle. Middle of the Hudson River.

[A]

Cool.

[D]

I think we got like a 45 pound striper. I'm probably. It's probably 40. I'm like, obviously it's grown since I caught it.

[B]

Nice. We're hit. We're hitting the gong for you.

[D]

All right, thank you.

[B]

Thank you. Last. Last question.

[D]

I only gong for scoops, but I'll take it.

[B]

We love to hit the gong for scoops, but I'm curious if you think that kind of blowback against widespread gambling will be at all a part of. Of the next election cycle. Do you think it'll be something that certain politicians kind of like latch onto and realize that there's a large number.

[A]

The AI thing Feels obvious right now. But the gambling thing, it feels like maybe that's coming soon.

[D]

Yeah. I think whenever there's something where you're like, it's crazy that this was ever illegal. Why did the idiots of the past, why were they ever against this? We should obviously just legalize it, then, like, brace for backlash. There was probably a reason.

[A]

Yeah.

[D]

And totally. Yeah. I mean, I think lots and lots of people, lots of religious people, lots of non religious people are like gonna get pretty. Are getting pretty upset about this. And there's gonna be. There have been these sort of small scale B list athlete corruption scandals, but we're gonna have our Chicago Whites, Black Sox moment. Right.

[A]

For sure.

[D]

And that'll be the thing that drives it, I bet.

[A]

Yeah. Yeah, yeah, yeah, yeah, that makes sense. That would definitely be like more of a national story. Nothing's really broken out and been like the current national story for like a full week.

[D]

But I mean, imagine how much money you could make fixing the Super Bowl.

[A]

Exactly. Yeah, that'd be crazy. And that would really. Yeah, that'd be really depressing to a lot of fans, but not me, because I don't watch the Super Bowl.

[D]

And actually it could just be like a parley where like you fixed like a piece, you know, how many your shoelaces were tied in the second half or whatever and maybe the.

[A]

Anyway, thank you so much for coming on the show.

[B]

Great to meet you. Yeah, thanks.

[D]

Yeah, nice to meet you guys. Thanks for. Thanks for having me on.

[A]

This is a lot of fun.

[B]

Cheers, Ben.

[A]

Bye. Let me tell you about numero.com compliance. Handled numero worries about sales tax and VAT compliance so you can focus on growth. Our next guest is Matt Hicks, the CEO and president of Red Hat. We've been keeping him waiting too long in the Restream waiting room. So let's bring in Matt Hicks to the TVPN ultradome. Why don't we have a second? I'm sure he's been tuned out because we had him.

[B]

There he is.

[A]

I'm sorry for keeping you waiting, but thank you so much for joining the show today. How are you doing?

[I]

Hey, I'm doing great. Great. Thanks for having me.

[A]

Yeah. Really happy to have you here. Would love an introduction on yourself a little bit. I know that you became the CEO in July of 2022, but I'm more interested in understanding the landscape of the business today, how you describe the shape of Red Hat and all the different business lines that have developed over your tenure to become what the company is today.

[I]

Yeah, I've been at Red Hat for a long time, actually over 20 years now. And so I started at Red Hat actually in IT when it was just rail at the time. And if you fast forward to today, we have have RHEL, we have OpenShift, we have Ansible, we have Red Hat AI. I like to describe as like when I started in open source, you really only had an operating system that was there and today you have any software that you could create, any company idea to help you do that. And we try to cover that gamut, everything from operating systems to clustered capabilities with kubernetes to AI capabilities in smaller models.

[C]

So.

[I]

So it's been a fun ride for a couple decades here.

[A]

Yeah, I would love to just jump into the AI side of the business. How are you thinking about bringing a Red Hat appropriate product to bear in AI? It sounds like you're not training your own huge model trying to compete with the big foundation models, but I'm sure there's a bunch of ways that you can plug into your client base. How are you thinking about the shape of the AI business over the next few years?

[I]

Yeah, I think for us, and this is how we use things internally, we think you're going to end up using frontier models and the capabilities there in addition to smaller open source models. I often describe if you go back to when Google Search was invented, you had this feeling like it was going to change everything in business. But you didn't apply a Google Search appliance to everything you did. Like you still had relational databases, you still had specialized applications because you needed that control. Frontier models to me are sort of like Google Search. They're going to change everything. It's going to be pretty incredible. We don't know what will happen there, but they show possibilities. Small models for us are the things that you can train, you can specialize, you can run them in a factory or space station, or you can run them as a mere mortal yourself in your own data center. And that combination is really powerful. That's what we use internally. So our business is squarely in that smaller open source models. When I say small, they're still pretty large compared to traditional computing. But compared to those frontier models, they're just a very different tool.

[A]

So yeah, walk me through what a customer might experience if I come to you and I say I have a business problem. I have a whole bunch of.

Data flowing in images that I need to OCR and transform into JSON or something. I have a defined business problem that transformer based large language models will be good for. But I want something that's five nines of reliability that that's I control the ownership of the code. It's economical. What do you bring to bear to help the customer achieve their goals?

[I]

Yeah, so I think if you have that use case and I often talk about them as like the three Ps we use Frontier models to understand what's possible. Once you know it's possible with frontier models, if it's not possible with frontier models, it's like, like just stop there. It's not going to translate that well. But if it is, then your second P is production and your third P is profit with it. The models we look at are about 100 times smaller just in size. And so generally you could say if you can run them well, they're going to be 100 times cheaper to answer those questions you're going to ask it. And so we work with customers to really find that use case. It doesn't always fit every aspect, but how many of those pieces can you move to something that is 100 times cheaper with it? And it requires some. You're competing with the Googles of the world or Microsoft's in terms of operational discipline. So you have to be able to run these things well. This is word you hear inference that pops up. We help enterprises with inference, just normal mere mortal data centers, GPUs, Nvidia, AMD. And running these models efficiently so you can start to decompose that problem into what are the areas we can optimize and really control ourselves. So that's one of the use cases we have a lot, but that's a popular one.

[B]

So yeah, getting more specific company comes to you and they're saying like I'm spending $2 million a month with this on these frontier models. And where do you go from there? Are you like breaking down exactly how they're exactly what those tokens are being used on and then basically saying like hey, we can actually break out this spend and reduce the cost by this amount. Obviously Red Hat has a margin, but how did those conversations go specifically and how much spend today on frontier models really shouldn't even be going to frontier models and should be going to some of these smaller, more.

Specific models.

[I]

Yeah, I think if you look at overly simplified, but we sort of live in the world of text on it. So if you said hey, my use case is.

Video generation on all of these capabilities, that's not really our wheelhouse. That often isn't in that space where a lot of your business is going to Operate understanding policies, understanding numbers on it, that's the first thing we look for. Does this fall into that classic enterprise use case? Because there are things you'll keep on frontier models. The second part for us is where do you want to run these? You can rent space at a core weave, for example to get GPU capacity or it might be data sensitive, you want to host it yourself and then you're in a hardware purchase.

But for us then it's about going one by one. Sometimes it requires changing the data a little bit, but it's making those use cases run efficiently on it. When I look at what's that mix of what we use these big models for that we just don't need to, I think it's going to be really similar to cloud spend in my role. They're really powerful. I love the learning experience people are going through and using them. But I'm going to bet there's a 70, 30, 80, 20 split of where we could take things that we're paying more than we need to and be able to optimize them. And it's just in that balance. Cloud was really good at learning a new operational mechanism and skill set. We're going through that same phase but I think we'll be able to optimize a lot, the majority to smaller models. Even if you start in what's easiest and shows you what it can do in the larger ones.

[A]

How have your thoughts on the relationship between building a for profit business in and around open source technology changed over your career?

[I]

So I started at Red Hat as I loved the open source model. I was actually a consultant at the time and, and I had worked with Linux in college and my first experience, I couldn't be stopped when I was working with Linux because if it wasn't working for a customer I could change it. I could figure anything out. I didn't have to be dependent on someone and I loved that feeling, that power that came with it.

Just open sourcing things and assuming a business will happen I think is also pretty flawed with it. Like you, you have to do something different that customers value that the open source community doesn't do. And in, in our case Open source communities is a great innovation model. They move really fast. We help customers that they can't keep that pace and speed of open source. They want the innovation model but once they've built their app they need someone that's going to help support it for 10 years and that's that value. We do that communities just don't care about. They're on to the next feature. And so it's been a really nice balance of we work with the community, we complement it, but we provide enterprise value. I think that's what's going to shake out in this world with AI of how do you find that symbiotic relationship where you can leverage open source? You can use innovation models or other areas but you still provide a concrete value to customers where they know what they're paying you for.

[A]

How have you been processing the fact that it feels like Meta is pulling back from large scale open source AI efforts? China seems to be running away with it. Is there any other nuance to is it just like a business model problem that we haven't seen the red hat of AI kind of crop up or stick around in the case of OpenAI as they've kind of evolved their business model, although they do of course have GPT OSS and you know Metalama is still a real product. But it does feel like China has just taken open source AI way more seriously and I'm wondering if you have any read on like was that always the way it needed to happen? Were there alternatives? How did you interpret the open source AI LLC war play out?

[I]

I put it in two buckets. There's a race to AGI. Personally I'm not a big believer in that, but it's going to produce some incredible things on that journey. We'll see if we get there. But I think a lot of the big players when they talk about these billions of dollars that go into training models, they're in the race for AGI at that point and that's a new and exciting domain for them. Shades of and I think Meta is in a similar boat there. What they're investing, I love the fact that they open sourced it, but they're in that AGI ish camp and race. The number one innovator in open source models I would say is academia at this point. China has always been strong in open source. The US is very strong, Europe is very strong. But if you go look on hugging face at the sheer number of specialized tools we have out there, it's more than you're going to understand how to use well today. So I often the coaching I give customers is I don't think we necessarily need a lot more, it's just that stability in a few. So I worry less about.

China's created some pretty impressive innovations like in the Quinn model on training, but as long as those are shared in academia we'll see the next miss Draw pop up with options there, but that's how I separate the two. There's an AGI race. I don't think the financial mechanics are going to work out for open sourcing there. But then there's an academia led ecosystem that already exists that's incredibly vibrant, that is not chasing AGI. That'll fit really, really well with the boring enterprise use cases in my system. Like how do you run a company a bit more efficiently? How do you chase the next engineering innovation more efficiently? That doesn't necessarily have to be those big guys.

[A]

Last question from my side and then we'll let Jordy ask anything he has. But I'm interested in advice for we talk to a lot of founders, a lot of startups that are kind of building the red hat of X, they're thinking about open sourcing a great piece of of technology, building an open source community. We often talk to Y Combinator founders that come on and tell us I have 5000 GitHub stars already, I'm raising money, I'm going to build the next thing. And they're not going after Red hat directly, they're just they want to learn as much as possible from you. So do you have any advice for founders who are earlier in the journey? They might have built something great, a useful tool, a piece of software and they really want to get the red hot model correct. They want to have an open source community and then they also want to build a great for profit business on top of it.

[I]

You know, I think the mistake I see the most is.

I want to use it for a marketing tool and then keep all the control myself. Almost always those fade out. You can do that. You can get a lot of eyeballs with open source, but if you don't know who your community is, it could be a user community, it could be a contributor community, but if you don't know the value you provide them and they provide you, that marketing effort of stars only will fizzle. And it is very tough to give up some control and product roadmap to your competitors to build a contributor community. But it's what you have to do. We work with our biggest competitors side by side in kubernetes. So I think for founders really knowing is it the right time for them to give up that control and being authentic of their model, it'll give them staying power in open source. It's a savvy ecosystem. No one's going to get tricked into like a star count and then you build a durable forever business off that. But a lot of options down it But I think, I think knowing those and putting some thought into that is a really important first step.

[A]

Makes a ton of sense. Jordy Anything.

[B]

Do you think working for one company for 20 years is underrated? Feels like company, man. Maybe some of the people that are coming on the show will end up.

[A]

Satya Nadella yeah, we're example of this.

[B]

Satya but kind of what are some unexpected sort of, of positive elements of being deeply embedded with a company for as long as you have?

[I]

I think when I walked into Red Hat as joining the IT team to port Perl applications to Java, I didn't really see myself in this seat.

15Ish years later, I didn't, you know, I was lucky enough to be involved in OpenShift in the early days. I didn't really see that. But the tenure, especially working in it, seeing every part of the company, working in a startup in red hat with OpenShift and just the pain and struggle that goes into bootstrapping something in a pretty successful company. It's what lets me do the job that I'm doing now because I have the depth and breadth to push on things in a different way than if you were an outsider. And I think it's really powerful. People bounce around. There's a lot of learning to be gained with that. But for me, I certainly use every day my 20 years of all the challenges and benefits, things that have worked, things that haven't, to guide my decisions day to day. So that's, I still pinch myself every day. I'm like, I'm surprised I'm sitting in this seat. But it's been, it's been a great run up to it and I don't think I could do a good job without that depth of experience.

[B]

Yeah, how do you help?

A lot of people are impatient for the raise, impatient around the new title. What kind of framework do you give to somebody that comes to you maybe at a different company and says, matt, I'm at this company, I've been here for three years, I just got an offer that I'll immediately make more money, I'll have a more senior title. Maybe the company happens to be the company making the offer is growing faster. Maybe it has more capital. There can be a lot of reasons to jump ship. But what's your framework for helping people make that decision?

[I]

One I always warn them, it's a personal framework. I'm like, it's worth what you paid for it. Which is nothing on it. But for me, my driver has been, am I learning something new in this space? If I'm learning things, I can be patient for the right opportunity to leverage it. And I also tell them like you have to be accepting there's some luck in the game as well. Just being in the right place at the right time with the right skills. You can't always manufacture that. But for me I always look at opportunities of they're going to come with some pain and challenges but if you learn a tremendous amount, you're going to leave that being more valuable than you came in to it. And you know, I take that into this role. It's why I, you know, in limited hours I'm still learning AI myself to not just delegate it down the org but to really build that hands on experience. But that learning dimension has always been the most important dimension for me.

[A]

Well, thank you so much for taking the time to come on the show.

[B]

Great to meet you.

[A]

Great to meet you.

[B]

Open source champion of the world.

[A]

Merry Christmas. Have a great rest of your day. We'll talk to you soon.

[I]

Love the show. Appreciate you all having me on.

[B]

Thanks so much.

[A]

We'll talk to you soon.

[B]

Cheers Matt.

[A]

Goodbye. Let me tell you about figma. Think bigger, build faster. Figma helps design and development teams build great products together.

Gyms are coming to airports.

[B]

This is big.

[A]

This is big. Will you work out on your next.

[B]

Consumers have been saying the other passengers aren't sweaty enough. Yeah.

[A]

So this is for.

[B]

We gotta have Jim in right next to the gate.

[A]

We have another guest joining in just a minute. But I want to riff on this for like 10 minutes. This is hilarious because it seems to be a collab between the.

Secretary Kennedy who's the Health and Human Services secretary. So there's HHS crossing over with DOT somehow and they're like let's make the airports healthier. Which is like a funny thing.

I feel like these labs don't happen before but they're happening now. I don't know. The idea of working on an airport, it's kind of crazy because if you are all sweaty and then you have to. And they also said like you should dress up when you go to the airport and if you're dressed up and then you are all sweaty that seems pretty rough. But I don't know, I like the idea of doing something new in airports. I think it's cool. I think it's good that there's some opportunity for some sort of grant program.

[B]

I guess the question is the $1 billion grant program with how much it costs to make like is this like 10 gyms?

[A]

Well, so I Don't know because there's a world where you build a proper gym in the 10 most premier airports that has like a sauna, showers, like full laundry, you're good to go. You can spend a couple hours in there, really get a serious workout in. Or it could just be like a couple pull out bars and you put one in every, every terminal in America. I don't know, it depends on how can you imagine if it's just like, okay, yeah, turns out JFK put in an awesome, awesome application.

[B]

They got all 1 billion little calisthenics sound.

[A]

They got it all. I don't know. It's a very funny story. Anyway, let me tell you about Fall, the generative media platform for developers. Develop and fine tune models with serverless GPUs and on demand clusters. And we have our next guest in the Restream waiting room, Stephen Schwartz from wop.

[B]

There he is. Stephen, what's going on?

[G]

What's up guys?

[F]

How are you?

[B]

We are great. It's great to have you back on the show. You and the team have been insanely, insanely busy, it seems. Give us the update from the last few months.

[E]

Yeah, so I think we talked in March and since then things have been really crazy. I think the best way to put it is that at this point in time in our company, in order to even grow the business by 50%, we have to add more than a billion dollars in earnings on our platform each year. And I guess just to put in perspective what that looks like, if we were to onboard 1,000 businesses that do a million dollars a year, year, which those are not small businesses, that would only grow our business under 50%, which is pretty bad. So I think the story of our, of our recent months has been how are we going to really connect this thing? And that requires us to think a lot bigger. So we've been expanding pretty aggressively internationally. We, we have been partnering with really amazing platforms. We had an announcement earlier today and I think that, I mean there's a lot of stuff that breaks when, when we, when we grow. But, but the year's been pretty nuts. There's a lot of stuff coming out soon and I'm really excited.

[B]

And how big is the team today? The core team, people? W2 by WAP. Because I know, I imagine part of the benefit is everyone on the platform has some incentive to grow the platform and support. But I'm curious what the core team looks like.

[E]

It's about 75 people, so it's actually a pretty similar size. I think that everyone's going at a really high rpm. We like to have our team really lean and everyone has a lot of autonomy and almost no bloat anywhere. So I think we're definitely underwater right now. And there's about 75 people total.

[B]

Wow. So talk about the shape of the business.

You guys had a post going viral this week. Somebody was saying, team talking about grinding. The team's grinding because you guys are generating billions. There's billions of dollars flowing through the platform and only 75 people working on the team. But the common criticism would be like, WAP is a course platform. And obviously some of these partnerships you're announcing, the bigger, broader vision I think is certainly starting to crystallize for me. But talk about the shape of the business and really like where this is all going.

[E]

Yeah, well, I think it's really funny how many people get offended when there's teams that are hard at work. I think it's obviously like results are the most important and I think that is not really the intention is nothing about trying to rage, bait anybody, or even to seek necessary attention. I don't even think Cameron expected that to go that viral. But I think at the end of the day, when our team is excited about something, people are going to be working hard. And given the nature of our team, we have a lot of former founders and a lot of former entrepreneurs that are really driving huge parts of our business forward. And I think that the common people know wat for so many different things, right. We started in sneakerbots and then that naturally progressed into more broader variety of different desktop software. And then people are like, hey, can we sell chats with the software? And we're like, yeah, that sounds like a good idea. Let's make sure you can do that. And then people are like, hey, can we drop the software entirely and just sell chats? And we're like, that sounds pretty cool. Paid chats, let's do it. And then people start to do that and then they're like, can we also add long form video? And that made sense. People used to make the long form video as a way to explain how to use the software. And pretty quickly people are like, wait, we don't even need to sell software or chats. We can just sell long form video. And that's where the course is. And I don't think that we ever set out to be a course platform at all. We really focus hard on the primitives that are necessary for the future of work and for the future of commerce generally. And I think that the one of the Lowest lift ways to start a business is making a course. And I think that when you look at our business today, I mean, I think we probably do more than a billion dollars a year in paid groups and educational programs. We probably do almost a billion dollars in agency services that are sold on the platform. What we'll do, maybe do 300, $400 million pure software sales. And on the emerging side, I think we even have more than $50 million of physical product sales each year now. So I think that when you go to our homepage, we do a pretty poor job showcasing a lot of the supply that's not been a huge priority of ours today. We are very focused on our infrastructure for the sellers and for the platforms now that are integrating with our product. So I think that there's a. The core sellers are generally the loudest because they're very good marketers and they typically, I think a lot of the other stuff in the platform people know as well for clipping and things like that, which are also really awesome ways to make money. But yeah, the core stuff is funny totally.

[B]

What's going on on the actual infrastructure side. You guys used to work with Stripe on the back end. You killed that part. You moved on from that partnership at some point. How are you guys processing payments today on all these different verticals? And I'm assuming that's like a core part of the offering for these individuals, businesses that are coming onto the platform and you're giving them a variety of ways to monetize.

[A]

Yeah.

[E]

So you can kind of think about the core value prop of WAP to be payments and distribution all out of the box. And I think that we never really set out to be a payments platform. I think that's pretty boring and I think there's a lot more that we can do. I'd say that today money is much more commoditized than it was 10 years ago. And especially on the payments front, we don't think that that's a real long term way to create value. And I think that when we look at our ecosystem as a whole, the mentality is like, how can we bring all these parts of the Internet together in a way that makes it really easy for retail and for general consumers to actually get what they need to start a business.

[D]

Right.

[E]

You have, when people think of payments today, they really only generally know Stripe. And after that is a huge fall off. No one really can generally name even another company that's similar to stripe. You may have Shopify in the picture, but they're very, very focused on physical and larger shops now. So for us, it's really, really important that everything is extremely tightly integrated. And when you're asking about infrastructure, the way that we look at it is, is we have people earning about $200 million a month on the platform today. So part of our infrastructure is dedicated to thinking about how can we get more functionality delivered to those merchants so they can do a lot more with their money. Today, just for reference, the process is almost universal. Across every merchant, they'll make money and then they'll withdraw to their bank and then they'll go invest on Meta and TikTok ads or whichever ads platform of their choice and they'll invest in crypto. And I think that it's really exciting right now on the infrastructure side because we're about to let merchants do a lot more with their money. So you can imagine, you make money, go invest it into ads, you go invest it into bitcoin, you go place prediction bets on polymarket, you go and do a lot more with your money. So we're doing a lot to bring a lot of our activity on chain and to tap into the broader financial application layer that exists today. So that's one part of our infrastructure side and the other part of our infrastructure side is on the advertising front. I think it's distribution is critical. And we've recently partnered up with a number of different, for example, games on Discord or publishers writing blogs that will actually render products that are listed on wap. And that means that anybody selling on our platform gets to take advantage of pretty immediate distribution. So those are the things I think I'm pretty excited about on the infrastructure side, the move away from Stripe, I think. I mean, I've been building on Stripe since I was 12 years old and I love Stripe so much. And I think that we're still partnered with Stripe and we still use Stripe. And I have nothing but great things to say about Stripe. I think that when you're looking at our mission, which is to deliver everyone a sustainable income, there's certain primitives that need to be available and those are simply not available on Stripe. So, I mean, getting paid out in Venmo, getting paid out in crypto, in other words, emerging markets throughout Africa is very, very important to our mission.

[A]

Interesting.

[B]

So talk more about the partnership with Micro One that you guys announced today.

I'm curious, maybe break down micro1 in their business for people that aren't familiar and then how you guys are integrating.

[E]

Yeah, so Micro One is a really cool business. They basically partner with AI labs to offer general public access to prerecorded videos and situations that the general public can weigh in on and say, what would they interpret the most likely solution to any set of visual problems to be? And the AI labs will use that as fuel for their training data. And Micro One is essentially aggregating all those opportunities and delivering payouts at scale to the general public that's paid for by the AI labs. So when we're thinking about WAP and what the partnership means to us, there are so many ways that people can earn income on the Internet today, and it's only going to get crazier and crazier. So we've invested a lot over the last few months in our public SDK, in our developer infrastructure, so that platforms can tap into our network. And that's exactly what micro1 is doing.

[A]

That's pretty interesting. Did you think about getting into data labeling earlier and in a direct way?

Yeah. I mean, did you ever think about, like just offering data labeling tasks to the current community of people on WAP?

Didn't DoorDash or Uber was going to launch, like, the ability to do data labeling tasks while you wait for your next thing or something? Like, anyone with a pool of huge human capital is looking at this right now or.

[B]

Yeah, I mean, like, how do you think about the different eras even? It felt like the 2000 and tens where if you had a cell phone, you could make money in the real world. And now it's kind of the continuation of that is like if you have an Internet connection, you guys are trying to just enable somebody to open an app and make. Maybe they're not going to immediately make some incredible income, but it's most of the apps, you open them, they suck your attention and money and all that. You guys are trying to have an app that you can open and have the opposite effect.

[E]

Yeah. I think I grew up on Facebook all day, every day and Skype. And I think that there's two ways you could have gone on the social media platforms. You could have maybe sat there and just read, watched videos, and what the kids call brain rot today. I think the other way is to try to get as much productivity and value out of the network as you can. Meeting people and maybe finding customers and whatnot. And for me and the people that I met early on in the Internet, we focused on the latter. And I think that the goal of BOP is to bring together all of the pieces of the Internet that are super scattered right now and hopefully make it a place that's a Lot more worth your time to spend. And I think that the money is one part of it. But I'd say it's also like the idea and dream of starting your own business is very much aspiration to a lot of people. And we think that you open the app and you can start a business. You can find ways to make money by providing value to other peers on the network. You can meet people in chats, and it's a very much expansive application that I think it makes it difficult for people to understand what we do.

[A]

Yeah. So with Micro One, are you. You're just providing the payment back end. They're actually gonna source the experts to do the data labeling, is that right? And then they're also handling the relationship with whatever lab they're selling the data to.

[E]

Yeah. So to answer your question, have we thought about going into that type of market? Yeah, I think for us, we really try to stay on what we're good at. And I think what we're good at is and how we handle payments, how we handle payouts, how we handle what else you can do with your money, as well as distribution. And, and we don't know as anywhere near the amount of industry expertise that Micro One knows. And I think that that's why we wanted to partner with them. And we don't have any. We don't have. That's not our forte. So I don't think we really have thought much about going into that. We did the clipping stuff and the content reward stuff, and now, I mean, there's actually a lot of other platforms that are starting to implement our SDK as well on that front. Because again, like, like we built that app in two days as a test case to show what you could do with the WAP ecosystem and it obviously blew up. I think we still pay out millions of dollars a month to people all over the world that are clipping. But there's also other platforms now that are integrating that stack and are able to focus really, really hard on making sure that's an amazing product.

[A]

Yeah, I feel like you sort of live in the future because you're so tapped into young entrepreneurship broadly and such a wide swath of individuals. Can you help me get up to speed on how the next generation is thinking about sports betting and gambling? Because I feel like there was like the drop shipping wave, there was the course wave, the clipping wave. Is sports betting in a. Is it going through a boom right now? Because in tech, with the prediction markets, I think everyone's starting to be a little Bit more top of mind, but they might forget that, that we had the CEO of DraftKings on the show yesterday and I think Google invested in that company in 2017. And so it's not new, but it does seem like it's growing a little bit. But I'd love to know, how are you?

[B]

Capital G invests, I think in Flutter or fanduel.

[A]

Oh, that's right. Okay. Sorry. Yeah. So obviously sports betting is not a new invention, but it does feel like maybe it's going through a renaissance. How are you seeing, like the trend within that industry? Like, what are the trends that you'd even describe?

[E]

Yeah, it's a good question. I mean, sports betting has been around since Coliseum days and even before that. So I think that it's just, it's a really good way for people to be literally bought into what they're watching. And I think that what's happening now is you're seeing a lot of entertainment, a lot of social, and a lot of integration between all of that on top of sports betting, which makes it.

[H]

A lot more fun.

[E]

And I think when you, when you imagine somebody to be watching a football game betting alone, it's a lot less fun than betting with your friends. I think that when, when people think of sports betting and wap, a lot of, a lot of that notion is around the communities that are on the platform talking about sports betting and participating in sports betting, but they're not really participating. They're not really betting on our platform. And I think that the, I mean, people very much love to bet and I don't think that's going to change. I think that the types of bets will evolve. And I mean, I'd say that sports betting in the 2000s was probably more popular for retail than investing in stocks, which is definitely changing now with Robinhood and all of the other more retail friendly applications. So I think that people like to invest in things and to put their money where their mouth is. And I'd say that that trend is going to continue on and we're seeing during the sports season. So right now it's definitely popular.

[A]

Yeah, I mean, there has been a long history of folks doing financial education teaching you how to trade stocks. Trading Forex has been a big thing that there's been a lot of courses around. Are there courses around sports betting? Are they like roughly the. Is that the same size business or is that like more niche? Because it's like more random.

[E]

Yeah, well, I think asking what kind of categories are on WAP is kind of like Asking what categorical content exists on social media. It's just everything ephemeral and it involves that maybe somebody will launch a sports betting community and they'll add a course to it. But it's not necessarily the core part of the product that somebody talking to other users.

[A]

Sure, sure, sure. Yeah. I'm just, I'm fascinated because I feel like a lot of tech people are like, oh, there's like this crazy breakout moment. And I think a lot of people, if you zoom out, they see it as much more of like a smooth curve that's been happening for decades.

[B]

How much do you and the team try to predict these sort of like future trends? Like what is the next sort of trend like clipping? Is it more like reactionary to the current moment and saying like let's build the best possible infrastructure for what's happening today or are you trying to looking in corners of the Internet, you know, maybe some subreddit that's gaining popularity or things like that to try to predict these things and actually be ahead of them?

[E]

I think that we lean on our existing customers a lot to build around them and to make sure that if they're onto something early that our platform can support what they want to do. I'd say that every shift in what the predominant form of way to start a business and way to earn income on our platform has been trailblazed by a few subset of merchants and then we've quickly built the product to better support that. So I actually don't think it's worth time to try to predict it because it's getting really crazy. I don't think we're very tapped into what the people are doing, I think in the trenches across the Internet. But it's very, very, very hard to predict and rather really focus on the primitives that we know are going to be true throughout all these different trends.

[B]

That makes a lot of sense. What are you most excited for for next year?

[E]

Yeah, I think MOP is very under invested in AI right now and I think that we're. That's about to change and the platform is very complicated still. There's a lot of components we've created. We're a very engineering heavy, heavy team that's created a lot of infrastructure, but I think that we're now flattening a lot of that, simplifying a lot of it and riddling AI throughout the entire platform. So I think that's going to be pretty crazy. And that's probably what I'm most excited about for next year is just making sure that you guys are actually on the app starting businesses and find it worth your time to do so. So that's what I'd say.

[A]

Amazing. Well, thank you so much for taking the time to come chat with us.

[B]

Great to get the update and congrats to the whole team on a wild year. I remember.

We have.

A mutual friend. Won't name him because he's anonymous, but I think.

He told us at the end of last year Q4 of last year, the company that he was most and this is like an institutional investor, he was like the company I'm most bullish on that is most under the radar, most under hyped is wap. And you guys have certainly delivered this year. So well done.

[E]

Really appreciate it. Long way to go.

[A]

Fantastic. Job's not finished. Love to hear it.

[B]

Cheers.

[A]

We'll talk to you soon. Have a good one. Let me tell you about profound get your brand mentioned in ChatGPT. Reach millions of consumers.

Who use AI to discover new products and brands.

[B]

Gavin Baker says, deeply amused by all the confident commentary that data centers in space do not work from a physics or engineering perspective. Elon operates two of the largest coherent GPU clusters in the world. SpaceX is responsible for over 90% of mass to orbit in SpaceX. SpaceX operates the largest satellite constellation in the solar system. More than 10 years later, no other company or country can consistently land and reuse orbital rockets. He publicly states that the lowest cost way to do AI compute will be with solar powered satellites. Maybe, just maybe, his pencil and paper analysis of the physics or the economics at play is superior to yours. There might have even been more than just a pencil and paper analysis of the subject done by some of the best engineers in the world. Perhaps they have thought of a cooling solution that has not occurred to the Galaxy brain accounts here, even after they took several minutes to carefully think about the problem. The CEO of Google also agrees that data centers in space will be normal within a decade. If you're not currently operating a large AI data center, a large satellite cluster, and have not landed a rocket that takes most of the accounts on X, maybe a little less quick to confidently assume that Elon and Google are are both wrong on this topic, especially when they are working, albeit very small, data center in space today, Star Cloud's orbital setup just successfully trained in LLM. Great name by the way. Yes, I'm biased on these topics and as ever time will tell. Yeah.

I think a lot of the reaction was just like hey, like three to four years feels super aggressive.

[A]

10 at the same time, I don't know, I was trying to put it in, in like.

How would I quantify my position? And I would probably say like, there will be under 1 gigawatt of capacity in space by the end of 2027. And by the end of 2027 I expect to see several gigawatts of AI data centers online and terrestrial based. But maybe that's too conservative and maybe that's not even what Gavin's saying. Maybe Gavin is targeting something more like, like 2029, maybe 2030, something like that. But if you were to try and say there will be a significant amount of compute, like 10% of overall compute or something like that in space in a year or two, that feels maybe more aggressive. But in 20 years, I don't think anyone disagrees with that. In two years, I think everyone agrees it's not there. So. So it really feels like we're talking about timelines here more than if it's more when. But I'm not sure. I don't know.

[B]

Elon responded and said fools are determined to be fools. Trying to stop them from being so is futile.

[A]

Hey, optimists get rich. Pessimists sound smart. Easy to be pessimistic. On this.

[B]

Should we pull up this clip?

[A]

I am optimistic about Julius AI, the AI data analyst that works. Works for you. Join millions who use Julius to connect their data and ask questions and get insights in seconds. I'd love to pull up a clip.

[B]

This clip from Sea of Netflix. We go from 8% of view hours today in the United States to 9%. So we're still behind YouTube at 13%. And potentially worth noting that we would be behind what would be if paramount combined with WBD them at 14%. So we think that there's a really strong fundamentals based case here for why regulators should approve this deal. Yeah, this is 8% of view hours today in the United States.

[A]

So. So yeah, View hours. Is that, is that like a good metric? There's something. He's definitely including YouTube in there and using view hours at the same time. I think that's, that's valuable. I don't know, it's hard to kind of grapple with as a consumer. It doesn't seem like it's, oh no. All of a sudden there's only one place to get content. That's not what people are the most worried about. They're maybe worried about a one buyer scenario for the movies that they make anyway. You can always just make a movie and put it on Restream. One livestream, 30 plus destinations. You want to multistream, go to restream.com Restream is going to stay independent.

[B]

There's a post here from Julian. He says if you thought paying for your kid's college tuition was nice. Larry Ellison is writing a $40 billion check for his son to acquire a movie studio and a television network.

[A]

Yes.

[B]

That, my friends, is father of the year. Totally agree. We should all aspire to one day write a $40 billion check for our children, 100% each of them. Actually, I can't.

[A]

I can't. It's hard to think of a better use of what, 20% of the net worth than picking up a movie studio.

[B]

Doing a deal with your son.

[A]

It seems fun. It seems like Larry is definitely in the conversation. He's at the dinner, you know, he's hanging out. He's part of this. Even though David's obviously driving the story, Larry's very much there. Right in the show, but also participating.

[B]

Joe commenting on.

[A]

We already talked about that on the show. Let's skip ahead. Let's go to this data on a quiet year for venture capital. Bryce Roberts posted. It looks like it's from the information, but the source is Pitchbook. So there's a couple things going on here, but. Terrible, terrible. I thought we were so back with the AI boom. I am shocked by this data. Are you shocked by this data? I'm shocked.

[B]

It certainly hasn't felt like that.

[A]

I thought it was going to be higher than ever. It feels like, like there's so many new funds. There's so many new massive funding rounds. But are we still working through the 2022 glut of capital or something? Like, what's going on?

[B]

Yeah, I mean, sentiment was that I saved private markets. Venture capital.

[A]

Yes.

[B]

Because it was a. We, we were on a crazy Sugar High in 2021 and we've had so.

[A]

Many folks come on the show that just yesterday, Yeah, I raised $500 million succeed. It's like that's got to come from somewhere. But apparently only $50 billion flowed into venture in 2025.

[B]

Well, yeah. So these funds are deploying capital. Some of them might still be deploying. Hopefully there's still some, not all of obviously the funds that were raised in 2022, it's not like they just were like, I'm going to deploy this all this year. It's like it trickles out. The other thing, the reason that this is surprising is that.

Some of these big headline deals that the industry has been focused on this Year are sovereigns going direct? They're hyperscalers, making these big equity investments in labs, circular deals. Yeah, that's kind of Nvidia, I think we've had.

A couple guests today say Nvidia.

Throwing me off. But anyways, it certainly doesn't feel like this. The question then is.

I mean, you're also just seeing way less venture funds being formed. Maybe that's healthy. Right?

[A]

So Katie Roof, who broke the story, says venture fundraising is the worst it's been in at least a decade. And I don't mean for startups which are seeing an AI boom bubble. The firms themselves are often struggling. We are seeing the lowest number of venture funds raised in at least 10 years. I'm fascinated by this. I wonder if we're going to see venture funds close down or is this just a function of the everyone gets a fund phenomenon sort of pulling back? Because maybe it's really that 2021, 2022 were just complete deviations from the norm because, I mean, it really was a time when everyone got fun. It was crazy. Anyway, let me tell you about Linear Meet the System for modern software development. Linear streamlines work across the entire development cycle from roadmap to release. We also have a venture capitalist joining the show. Sam can break it down for us and I'd love to know his thoughts on this. This bombshell report from the station that says you're cooked. It says if your inventor pivot to.

Toiletry. Toiletry, plumbing.

[F]

Become an electrician.

[A]

Become an electrician. Because it's all over. Do you think it's over? Do you think venture capital. The game's over, guys.

[H]

The game is. It's never been better, I think.

[A]

Let's go.

[H]

Thanks for having me on.

[A]

Venture capital capitalist. It's never been better. Put the headlight up. I love it.

[H]

Raylock turned 60 years old this year. So this firm started investing before the Internet. The original partners would find companies.

[A]

How many years old?

[B]

60.

[H]

66.

[A]

060.

[H]

Yes.

[C]

What?

[A]

That's so old. I had no idea. I thought it was like 10 years old. That's crazy.

[C]

No.

[H]

I'm the oldest firm in the us.

[A]

Overnight success. I love it.

[H]

Yeah, Overnight success, success. And we're in our 17th fund. I would tell you our. The company quality we see right now, we've never seen anything like it. I mean, there's, of course, there's a lot of things that are crazy going on, but if you just look at the overall secularity of what's happening.

[A]

Yeah, I think.

[H]

I really think the game's Never been better.

[A]

Yeah, but you're in a unique position. You have a name brand.

[B]

Does it not seem insane that we raised there was more money raised in 21, 22?

[A]

Yeah. So help me understand it because Greylock is in a great position. It's a great brand. It's a name that everyone knows, been around for 60 years. It's crazy. You can get into the companies that are doing really well. If we are witnessing more monopolistic markets, more winner take all bets, more. Okay, the champions being crowned in this category. Everyone's just gotta get in. You're going to be one of the funds to get in. A lot of people are not going to get in. Do you think that's what's driving the lower amount of new funds that are being raised? Is that what's going on? How are you interpreting the fact that the number of funds seems to be going down year over year for the past four years?

[H]

I think we had, and you guys were talking a little bit about this, but there was almost this one time anomaly in the market structure in the 21 period where you saw an explosion of new funds. And on the one hand it was like super exciting. All these solo gps, new funds, new guard, et cetera. And then I think like once you hit an air pocket and you realize like life is not just straight and up to the right, but these cycles have ups and downs and even the best companies have ups and downs. I mean, I think about the companies we've been a part of from when they got started, the most recent success case being figma. Like it took figma several years to get the product right and start accelerating sales and then became one of the fastest growing companies of all time. Entrepreneurs want firms that are in this for the very, very long run. And so what you're going to see is a reconcentration to a small set of firms that are like venture capital is 100% of what they do. They don't have any other jobs. It's not a side gig. And those firms are going to raise more capital and be stronger partners to the best companies. It wouldn't surprise me if like the net number of firms goes down because most firms don't perform. But, but, but I think if you think about it on an aggregate basis and like what lies ahead for venture.

There'S good reason to be extremely optimistic.

[A]

Let's talk about SPVs, because I think that might be a piece of what's going on here. Does Greylock historically have a policy around when to pull the spv? Off the shelf. I know some firms, they never use them. They never have in their history. Other firms, they use them as much as they want.

[B]

Other, they're not even that special.

[A]

Every day I just call them purpose vehicles. I don't call them special purpose vehicles, just regular purpose vehicles. Just internally walk me through greylock's thesis on SPVs.

[H]

Our business model is very simple, which is we want to partner with a small set of founders and be their most meaningful partner. We, we keep everything else really simple. We have a single fund. It's a billion dollar vehicle. We've raised billion dollar vehicles consistently over the last 15 to 20 years. That billion dollars goes into a really concentrated set of core positions. Something like 25 companies. And then if we do our job right and we partner with the right teams, some subset of those go on to become iconic public businesses. And the founders do really well, our investors do well, we do well. We're not trying to like optimize at the margin and spin up an SPV here and spin up an SPV there. We think it like takes the eye off the ball. Like the only thing that really matters is leading that first or second round in the great companies.

[A]

Okay, love that. Do you think that the fact that there are other firms spinning up a lot of SPVs for bigger and bigger deals could be just. I'm trying to resolve the cognitive dissonance of like I'm looking at a chart going down, down, down in terms of money. And then every day I'm hearing bigger and bigger numbers around the AI boom and the AI bubble potentially. And it just feels like maybe some of the dollars that are flowing into just tech and growth investments and high growth companies is maybe not being captured by traditional venture capital firms. It might be sitting outside of the normal system. Do you think that's possible?

[H]

Yeah, I think, I think it is. So maybe two part answer. One is power laws always dictated. Technology and venture AI makes the power law more extreme. So as we're saying there's going to be a smaller set of companies, but also a smaller set of firms and capital pools that are involved with those companies and supporting those companies. And they will become larger than ever before. And I just saw the news about the most recent Space X tender. It's just the latest example of that. But then the second is, you're right, like a lot of the capital, especially at the very late stages, may not look like traditional venture. I mean, a lot of it is actually corporate capital. If you look at the role that in video, just in video alone, Plays in financings, that's a big portion of dollars. SPV are for sure a piece other capital pools that we wouldn't view as traditional venture capital firms.

[A]

Crossovers, credit debt. I mean there are, there are companies where they're hard tech and they'll see, you'll see a big headline number 100 million, 200 million random raised and actually 80% of that's debt because yeah, they're going to be buying a building and you don't want to pay for that in equity. And so yeah, that's another maybe distortion to the financing story.

[H]

And as a founder, like you want to pick the most capitally optimal way to finance the business at any junction in time, it's not always going to be traditional venture capital. If there's a debt provider or strategic capital provider who doesn't think about ROI on the capital the same way a traditional venture investor would, that could be a lot more attractive for you at a certain, certain point in the company's life. So I think it's probably overall healthy for the ecosystem and honestly great for founders. But that could explain what you're seeing in the report that you're referencing.

[A]

Talk to me about Greylock Edge. How, like what's the pitch to founders? There's so many different ways to start a new business. I'm interested in how you carved out a unique product there.

[H]

So one thing I love about Greylock is our history is defined by helping founders get started from scratch in our own offices. If you rewind the clock 20 years, there are two companies that got started at adjacent desks in our San Mateo office. One is a company called Palo Alto Networks, which is a ballpark $150 billion cyber company today. And the second is a company called Workday. Since then we've started other.

[A]

We've helped start. Sorry, we're going to be celebrating here. Yeah, keep them going, keep them going.

They got two Vegas hanger companies. Let's go.

[B]

And do you still have, do you still have those desks? Like, do you, do you keep them in like a glass box and pull them, pull them out?

[A]

We have, we have a variety of.

[H]

Good luck charms from that office. I don't think we. We've now elevated to the modern standing desks, which I don't think were used back then, but, but, and then I'd say since 2005 we've had another eight or nine companies get started that way, including, you know, Abnormal, which is late stage private. Another. So, so with Greylock Edge, we took all of that and we Said, hey, let's go take that to the market. So entrepreneurs understand when they get started they can work with us before there's an idea. And we will work with them to help identify the right idea. We have nine senior recruiters on our team. They place an engineer at a portfolio company every other day. So we'll help build out their initial engineering team. And then we have a large customer development arm that sources like somewhere between 40 to 70% of the first two years of pipeline. So kind of the way I look at it is worn Iron man suit. You plug into the Ironman suit, we accelerate you out of the gate and then once you're on your own, you kind of get rid of the Ironman suit.

[A]

Do you think it's particularly good for B2B enterprise companies? I mean that sounds like where. Because if I'm like, yeah, I'm starting a, like a consumer company for, you know, Midwestern moms or something, I'm gonna be like, how are you gonna help me go to market necessarily?

[H]

Exactly. I'd say our focus is, is horizontal enterprise software.

[A]

Okay.

[H]

And what I mean by that is, by the way, like there's 20,000, 21,000 companies in the world that do north of a billion a year in revenue. They control like most of it spend in the world. So very simplistically, if you're an enterprise software entrepreneur and you can build something that can sell to those 20,000, you can build not just a public company, but a company of the scale of what I just spoke about. And for those we have an understanding and ability to accelerate. It's not going to apply to everything, but for that shape of company, it's very, very successful.

[A]

That's amazing. Cool. Jordy, Anything else? This is great.

[B]

Yeah. Do you guys have any kind of thesis around what's been happening to SaaS in public markets? I was listening to the new Invest like the best episode yesterday with Sorry, I'm blanking on his name. He talked about space data centers.

[I]

Gavin.

[B]

Gavin Baker. Gavin Baker. Sorry, sorry. Gavin Baker was on and talking about how he thinks there's a lot of these enterprise SaaS, companies that are not really willing to.

Cut into their margins and lean heavily enough into AI. What's your guys general. Clearly you're bullish on the enterprise for these companies that are getting off the ground and then maybe even late stage companies. What is your general framework for how to think about how SaaS is evolving?

[H]

I think in order to see a new rise in software, you need three things to be true. You need A new pricing model, you need a new underlying software interface and you need a new data model. Last time that Happened was in 2005 with Cloud and the rise of those companies. That's happening again now. And in our view it creates an opportunity. It creates the first opportunity by the way, investors have been looking for this for a long time, like eight years ago is mobile and people like mobile CRM, mobile HR software. But that was just a new interface, it wasn't fundamentally disruptive. I think the confluence now with sort of this agentic era is fundamentally disruptive. And we are going to see like let's say late stage and public software companies at threat from new startups that come in with an outcome oriented model and agentic based interface and operating directly on the unstructured raw data versus a structured schema. And it's very disruptive. Right. And like, you know, for example, we're investors in a company called Resolve AI which automates software operations on top of observability tools. But now when you have agents doing all that work instead of users and humans, you have to ask yourself, okay, well if I'm a large public Sasko in that space, all of a sudden I've been disintermediated from my end user. What does that really mean for my long term durability? And so we take a very constructive view on it, which is really good for new startups and new companies. I think Gavin was making the comment that these late stage and also public companies, they're in a bit of a a stuck between a rock and a hard place because they worry about short term margins. In order to really lean into AI you have to be willing to take down your margins with the belief that over time you're going to drive value and margins will come back up as the unit cost drops. A lot of companies are not willing to make that long term investment and in that dilemma creates the opportunity for startups.

[B]

Makes a lot of sense. Well, thank you, thank you for joining, Great to meet you and we'll be back on soon.

[H]

Thanks for having me guys.

[A]

We'll talk to you soon. Have a good day and Merry Christmas.

[B]

Merry Christmas.

[A]

Gemini 3 Pro. Google's most intelligent model yet. It's state of the art reasoning, next level vibe coding and deep multimodal understanding. We have our next guest in the restream waiting room, Nicholas Kellis from XLite. He's the CEO and the CTO pulling double duty. Some people work 996.

[B]

What's going on?

[A]

Two jobs at the same company. Is that Right.

[J]

That is correct.

[B]

Somebody's got to do it.

[A]

What does your day look like? What do you do? What are you building? But also walk me through the life of a CEO and a CTO all in the same one body.

[J]

All right, so a lot to unpack there. So I'll first start with what we're building.

[A]

Yes.

[J]

In order to do that, let me start with some context. So I think it's valuable to step back and first recognize semiconductors are an essential part of modern society. They're critical to our economic, national infrastructure in terms of AI, hpc, data quantum, and they span all the way to virtually everything that's under the Christmas tree. This year is going to have semiconductors integrated. So they truly are probably our most important commodity to this nation. And so what Excelite is doing is we're building the world's most powerful lasers to transform the manufacturing of those semiconductors. So we make them better, we make them faster, we make them cheaper, and we make them require less energy to produce. So that's what we're doing in XLite.

[G]

Yeah.

[J]

As far as my role, it's like, I think anybody in a startup, it is wearing a bunch of hats. I actually get credit for a couple hats. Hats, but most people don't. So, yeah, we've been focused on building out the technology. And now, of course, with this loi, which we're getting a lot of press around, that's really ramping up our efforts to build our prototype and advance to our first commercial products.

[A]

How'd you meet Pat Gelsinger? We had him on the show a couple months ago, a couple weeks ago, and it was amazing. A huge fan, but I would love to know about your relationship and how it's developed.

[J]

Yeah. So met Pat through xlight. So he was, I'm sure, as he described to you, outlooking, trying to figure out what his next thing was going to be. Exploring the world of venture capital. Happened to come to Playground, but it was already aware of xlight and what we're doing with light and its applications. Lithography. That is something that is near and dear to Pat. Pat is a technical person at heart. He believes very strongly in the need for this type of capability to drive the innovation that's going to bring leading edge semiconductor manufacturing back to the U.S. he sought us out to some extent and then from there it just became an incredible relationship. Pat has had a profound impact on the company from just adding that gravitas and cachet and recognition of what we're doing through to being he's taken on the undesirable role of trying to make me a better CEO. So he does everything in between. So I am eternally grateful to him and I can't give him a high enough regard.

[A]

And can you take me through the U.S. department of Commerce announcement, the deal? And I mean, I want to know, like, how the deal came together, but how I should think about it from the perspective of is it more of like a venture capital style investment or like a contract to deliver specific things? Walk me through exactly what your relationship with the Department of Commerce will be over the next few years. Sure.

[J]

And hopefully it extends beyond a few years. First and foremost, I want to recognize that this administration really did approach this with an incredible urgency and creativity. And I'll just kind of give a sidelight that. That I really believe that is has to be an essential part of our industrial policy going forward. We cannot continue to believe that the status quo is going to keep us competitive. So I'm really grateful for that. But I have to emphasize that that urgency and that ability to move quickly was premised on lots of incredibly diligent work that has done by the Department of Commerce. We've been engaged with them for over two years.

[A]

Years.

[J]

So there's over two years of tech diligence, of commercial diligence, of financial diligence, diligence that they were able to leverage. So they move quickly, they have a sense of urgency, they're acting creatively, but it's really rationally founded.

[B]

So what is getting to the first commercial product look like, you know, more tangibly so?

[J]

It definitely goes through our prototype. So one of the key things that XLITE is doing is we're leveraging very mature technologies that have been developed in the national labs over decades. And so we take these mature technologies that have been, you know, operating in light sources for science, and we're commercializing them for semiconductor manufacturing. So we have the advantage of their mature and proven. We've, you know, taken the opportunity to apply some unique IP and how we bring that system together and how we apply it for semiconductor manufacturing. And so we're now in the process of building our first prototype. And this is not a proof of concept prototype. This is a basically kind of, for lack of a better term, a show me the money prototype. The semiconductor industry wants to see that. You connect this to a scanner, you expose wafers, it works as it should. So that's the starting point. And then along that path, we're continuing to work very closely with our customers. Our customers are the fabs and building that value proposition so that as soon as we have that first prototype done, we're already going to be building our first commercial system.

[A]

Yeah. How much of your business is capital intensive? Actually just dollars out the door. Facilities, equipment versus human capital intensive over the next few years. How do you expect to balance the different costs in the business?

[J]

Yeah, so it's a. You have to be kind of calibrated when you talk about capital. So I came from quantum computing before this and spent a long time building these types of facilities. So compared to quantum fusion, it's not capital intensive, but compared to SAS or something like that, it's very capital intensive. So it's to build the facilities in the few hundreds of millions of dollars.

And just, you know, kind of getting back to my previous response, because we're leveraging mature technologies, it's, you know, we are able to, you know, kind of stand on the shoulders of a lot of work that's already been done. So from a personnel perspective, we're quite lean. But from, you know, a capital expenditure, it's all going in, you know, for the most part in the hardware and infrastructure to build these facilities out.

[A]

Yeah. That is amazing. Congratulations. I want to ring the gong for.

[B]

We have to, we have to.

Very, very cool. Yeah, Congrats again to the whole team on the grant and yeah, we're excited to follow the journey.

[A]

We will talk to you soon.

[B]

Loop.

[A]

Have a good rest of your day. Goodbye.

[J]

You too.

[A]

Thanks. Let me tell you about getbezel.com shop over 26,500 luxury watches fully authenticated in house by Bezel's team of experts. Our next guest is the CEO of dupont Registry Group.

I believe he's in the Restream waiting room now. We will bring him into the TV pin ultradome. Welcome back. Back in the garage. Thank you so much for joining the show.

[G]

How are you?

[B]

Great to have you back.

[A]

Fantastic. What are you in front of today?

[G]

It's a 575M from Ferrari.

[A]

Very nice little roof scoop on there. I love that. What else is new in your world? Give us the latest update. What news is going on in your world?

[G]

So the big news that we've been working on for a while is that we launched DuPont Registry Live which is the DuPont Registry Online Auction platform. Completely different value proposition. We are the only online auction platform offering 100% sell through. So if you come and you want to sell your car with us, we guarantee that the car will sell at the price that you decide. The second thing is that for the buyers, we are giving 14 day return policy. It removes buyers remorse. You can buy that car, you can drive it, you can return it, we'll take it back.

[A]

That's crazy. Is that extremely capital intensive? Do you have to raise a bunch of money to make sure that you're guaranteeing liquidity?

[G]

Yeah, we did raise capital. We have a bank partner at the moment. We raised $34 million in working capital. We're working on extending that line by the end of the year and allows us to acquire the cars. Most of the cars today are on inventory, but we believe that a lot of dealers are going to sign up as well as private sellers.

[A]

So I mean, I imagine that there has to be a rigorous vetting process on the way in in that case. Right. You don't, you can't just take any, any old Nissan Murano Cross Cabriolet and throw it on the site. There's a bar. How do you think about setting that bar for what can make it onto the dupont register?

[G]

Yeah, so we do have a big location in Nashville. We're actually moving into the location next week. It's a bigger location, 65,000 square foot. So we take ownership of the car, we're going to ship the car to that locations, we're going to do an inspection that will bring the DuPont registry certification to the car. And then we are taking nice picture of the car, we're pushing it online and then we make sure that our.

[B]

So have you guys been specifically acquiring inventory in order to launch the platform or were you historically holding inventory? Because I always have leveraged the platform just as a buyer and enthusiast to just browse cars and know that you guys are sourcing from a ton of different dealerships.

[G]

Yeah, we're sourcing from our dealership partners, we're sourcing from private sellers. This has been going on for the past 18 months. Month. We're now transacting close to 1,000 cars every month. And part of those cars is omnichannel strategy to be able to sell those cars to the potential buyers. We do have dealers today on our platform that are bidding for cars. We do have clients as well. This is the power of the DuPont Registry Group ecosystem.

[A]

What's the most underrated car on DuPont Registry today?

[G]

Right now, the only one that I would bid on for me personally, I have my eyes on that targa. Singer by Singer.

[A]

That's the one.

[G]

Beautiful gown.

[B]

Olive green.

[G]

It's targa. It's just amazing.

[A]

Yeah, yeah. It looks remarkable.

[B]

Stunning. What are you like, how is the. I can understand, you know Having the, having the guarantees, having that return policy, having the certification, that all makes a lot of sense. It's nicely counter positioned against other auction platforms, both, both new and old, that are kind of relying on, you know, kind of winging it. But what are, am I missing anything around like the other ways in which the platform is opinionated or differentiated?

[G]

No, it's exactly that. Those are the two main differentiator. This is our secret ingredients. This is how we are differentiating from platforms that are also doing online auction. It's very disruptive. A lot of people are asking us, how do you do it? This is our secret sauce. We have the platform and we have the ecosystem to making us able to do these kind of things.

[A]

Yeah, yeah. I mean it's a great, great value prop. Makes a lot of sense.

[B]

What are you most excited about for 2026 in the industry broadly? How did you react to some of the regulatory changes here in the us? Are you expecting to be selling a bunch of mini Toyota trucks? I don't know if those will meet the bar, but yeah. What's most exciting to you broadly?

[G]

Yes, for me, the most exciting things. There is a report coming on Friday.

It's a report done by Boston Consulting Group and they used our data and our audience to run the report. It's estimating the luxury car market in the US to be $110 billion. And it's a market that in the next tenure is going to double. We actually see that in the transaction we run now. There is a lot of potential older tariffs, etc. Are actually fueling the luxury used car market at the moment. There is a lot of demand for those cars and our buyers are really, really looking to have convenience to be able to transact online. And this is what we are building. Over the next 18 months you will see a massive technology transformation into Pawn Registry Group and we will start enabling transactions online with the capacity for any buyer to buy the car from your phone, get it delivered.

[A]

Love it. Question from the chat. How are you thinking about Chinese electric vehicles? We've talked about BYD on the show and Xiaomi. Do you think that there's promise there, opportunity there? Do you understand how your business might integrate with them? Because they're not being sold in the US yet. But do you have any predictions for where that market might go?

[G]

I mean, electric cars, some of them are amazing electric cars and we've seen one of them beat the world record for the fastest cars on the road. To me, 30 years from now, everyone is in a robotaxi no one is driving for their day to day daily driver and they're going to drive on weekends to have fun.

[A]

Yep.

[G]

Would you drive.

Chinese electric car? Would you drive Ferrari? Right. So our business, the business we're in, I think we're fine.

[A]

You think we're fine? I love it.

[B]

Do you think, do you think there'll actually be a resurgence in kind of like track and racing culture? I know there's some change of. I don't know if this is public but there's a, a.

Real estate developer that's currently buying a racetrack here in California. I think there could be some renewed and if people no longer have to drive on their commute, I think there will be more excitement around track days and things like that. But does that align?

[G]

Of course, it's completely aligned with our strategy. We have a lot of experiences today where we get people on the road where we are making sure that they can drive their cars in a very safe condition but in the best condition. It includes track days, it includes rallies in the best places around the world. And I do believe that there will be more and more of that in the future.

[A]

Yeah, makes a lot of sense. Maybe that's the next filter that you add. I'm looking at Dupont registry and I see you can filter by price, mileage year, transmission, drivetrain, track only. You gotta give us a track only a filter but hopefully soon. The product's continually iterating but thank you so much for taking the time to come chat with us.

[B]

Yeah, great to get the update. Congrats on all the progress.

[A]

Always a great time.

[B]

Excited to start bidding myself.

[A]

We'll talk to you soon.

[B]

Great to see you.

[G]

Thank you everyone.

[A]

Have a good one. Goodbye. Let me tell you about eight sleep.com exceptional sleep without exception. Fall asleep faster, sleep deeper. Wake up energized.

[B]

How'd you do last night?

[A]

I think I've been picking it back up while I pull out my. Oh, I don't even know if my phone's around here. So you pull up your number. I'm going to tell you about adquick.com out of home advertising made easy and measurable. Say goodbye to the headaches of out of home advertising. Play and buy and measure out of home with precision with Adquick and. Oh, there's more.

[B]

My phone.

[A]

Let's see how I did. Well, we have our next guest here live in the in in the not the Restream waiting room, the Real Stream waiting room, the TVP and ultradome waiting room. We have Philip from Verkata welcome to the show. I want to here introduce yourself but then get ready. Just go hit that gun right now.

[F]

Let's do it.

[B]

Let's hit that gun right now.

[A]

You don't know, you don't know anything about, about him or his company yet.

[B]

But you know, you know he's here.

[A]

For a good reason because the company has of course raised money. But please introduce yourself, introduce the company and then we'll get into the news.

[F]

Sure. Yeah. So excited to be here. I'm Philip, I'm one of the founders and CEO of a company called Verkada.

[A]

Yeah.

[F]

And Verkada is solving a super important problem in the world, which is the problem of safety in the physical world. And we solved that problem with AI, we solved that problem with software and we delivered a through devices like cameras, like door access controllers, alarm systems and so on.

[A]

Yeah. So I mean Anduril in some ways is physical security for the military. You have flock safety at the municipal level. Are you at the B2B level? The B2C level? Who are your customers?

[F]

Yeah. So think of enterprises, think of schools, think of government buildings, think of anyone and everyone in the world. Places you probably interact with every day.

[A]

Sure.

[F]

Airports, hospitals. If you go to the gym, gyms.

[A]

Airports in the gym, the gym's gonna be in the airport.

[F]

So you get two for one there. But, but let me make it real for you of like an example. So you know we do like 100 of the Fortune 500 use us today.

[A]

Okay, wow.

[F]

But to give you a sense.

[A]

And, and, and that's in their office buildings, on their campuses.

[F]

Office buildings, campuses.

[B]

What are the other 400 doing?

[F]

We're getting after them. Yeah. So we'll get them all. But, but yeah, to give, to put it in perspective, I think you know, it's sort of like an example. Makes sense. So just in LA recently we got a customer which is terawatt. Right. They are a commercial vehicle charging station. So they charge their self driving cars the waymos of the world, you name it. And their challenge is they've got, you know, kind of premises outdoors, parking lots where all expensive vehicles come in and they need to secure that. Right. And they don't want to guard on every parking lot. And so what's their best next alternative? Well, up to this point it was you can put cameras and then you can hire people watching their cameras. Very expensive. And if you know anything about people, they're really bad at watching video.

[A]

Oh yeah.

[B]

Especially because you could watch 300 hours and there's only 30 seconds yeah, exactly.

[A]

And so you take out your phone one time to watch that one TikTok.

[B]

And then it was a really good meme. It was a really good meme. You missed.

[F]

And you miss exactly what's going on. You miss the guy jumping the fence, you miss the guy stealing the cable or doing whatever. And so that's what we're able to do in real time.

[A]

I imagine itself, because if you don't have security, your salespeople can just go straight to the CEO's office, break right in.

[B]

Okay, so you raised new money from Capital G, Google, $5.8 billion valuation. You are. It sounds like some, some or a good amount of it was used for, was secondary. When did you start the company?

I think.

[A]

What were the first products?

[B]

Yeah, what were the first products?

[F]

Yeah, look, so let me just give you like a brief on the business and how it's grown. Right. So the business is about nine years old, almost 10 years old, you know, in its history. We started in 2016.

[B]

Sorry, you can't, you can't hear this.

[A]

This is the overnight success one.

[F]

But yeah, it's been 10 years. We're at 30,000 customers globally, 17 offices around the world. Like I said, 100 of the Fortune 500. So that's kind of the journey of the business. We started in video security initially. So that was the first idea. And then from there we expanded to.

[A]

A platform of physical security. And that product, video security, was that a white labeled video camera? And then you were doing the SAS production, the software around it, or were you building hardware on day one? How did that all.

[F]

Yeah, so think of it like an end to end solution.

[B]

Right?

[F]

Like think of it almost like the iPhone of the video security industry. You buy it from us, we guarantee it, it works. You know, we do the hardware, we do the software that runs on the hardware, we do the cloud software and we seamlessly integrate it all together. And that was the magic that our customers fell in love with from the beginning. That's where we started. So that's 2016, 2017, we launched the camera that goes really well. I mean, the market, you know, really loved the product. When we launched it a few years.

[B]

Ago, was there any doubt or was it just up and to the right immediately?

[F]

Well, you know, it's interesting, like there was doubt at the very, very beginning. Right. Like in 2016, we were starting the company and people said, philip, why are you doing hardware? Why not just do software? Just build, you know, just build back then, computer vision. It wasn't even AI back then.

[C]

Right.

[A]

There were so many hardware failures around that.

[F]

Hardware is hard. Right. So I get why people were scared, skeptical. But then once we got the product to market, people got it and it just worked well. The customer reception was phenomenal. And it was one of those stories where it just took off. And from there, you know, two, three years into the business, we realized that the opportunity is much larger than that. Right. It's not just video security. It's actually this broader world of physical security. The customer base has a dream of an integrated system that solves broader problems. So we started looking at access control. Think of of all the Badger readers, how you get into buildings. We started looking at alarms. Massive market. Every building that closes at night has an alarm system. You know, all of those send you false alarms. They've been invented years and years ago. All it takes is a truck drives by, a sensor shakes and you're getting a call at 2am what is that about? Right. Police stopped going to alarms because they get so many false alarms. Let's solve that.

[A]

It's the same thing with car alarms on the street.

[F]

Exactly.

[A]

Cars going off. No one even just psychologically in our society really stops everything if they hear a car alarm going out. Exactly. You're at a restaurant, you're not going to be like, I got to go check on that. Something serious is happening. You're like, yeah.

[F]

So, you know, so that's where it evolved to. We, you know, we now have the full suite, full platform. I'm super stoked. Like one of the cool things is, you know, we. It's only been like four years, five years really, since we expanded beyond physical security. 77% of my core customers now use two or more of our products, 50% use three or more, and so on and so forth. So this platform story is really resonating. It's playing out really nicely.

[B]

Will we see robots integrated into your platform? I've had this thesis that.

Not the most original thought, but this idea that security guards are primarily there to just be a human, that is at least a human shaped thing that is, is on the premises, providing this sort of deterrent effect. And I can see humanoid robots getting traction faster and just standing in places that need to be secured and being like having a physical presence, sort of looking intimidating. Looking intimidating before. They're really good at like actually adding value. In my home.

[A]

Yeah.

[B]

And I don't know, I'm sure you've like.

[A]

Yeah. How do you think about humanizing?

[F]

I mean, look, I think you might have some of that. I mean, I Don't know how close that future is. Right. But I think fundamentally, if you think about physical security, it is a human problem. And I think humans are not going away from the problem of solving physical security for other humans. So, yes, we might have robots, yes, we might have sensors, but ultimately, at the end of the day, I think security personnel is going to exist and it's going to address those human problems. It's just the technologies that we're building, technologies like human, humanoid robots will make that security personal, have a superpower in a way.

[A]

Right.

[F]

It'll make them more aware, it'll make them do more useful things. It will save them hours of time watching mindless video or missing things and focus them on actually resolving the emergency at hand.

[A]

Yeah. It's interesting thinking about the role of the human security guard. You can almost think about it as like a bundle of tasks or jobs to be done. One is basically a camera that you can move. A security guard can go look behind that gong and see if there's something going on there. But at the same time, you can just put a lot of cameras and get coverage. But a security guard can also go and ask for more context, say, oh, hey, are you supposed to be here? Let's have a conversation about this. And that's something that we're not quite there with, the humanoid robot. And so are there any other formats that you're excited about, like the four wheeled robots or the drones? I mean, I saw, doesn't Amazon sell a drone camera on your house, inside your house, which I thought was very odd. I don't know if that product's doing well. But how do you think about the other form factors that might be a little bit more economical, a little bit more tractable before we get to the full humanoid?

[F]

I think, look, the reality of it is, I think the cost of sensors and the cost of being able to be aware of what's going on is just going down.

[A]

Sure.

[F]

It's not a new idea. Right. We've had sensors in the world for decades. Really, we've had it. Right. And so my sense is the ease of deployment of cameras, the form factors of cameras, it's going to get easier, it's going to get simpler, it's going to be easier for the customer to use. And it will take all sorts of form factors. It might be a camera that's drilled into the ceiling. It might be a camera that's running on solar power. It might be a camera that's on a drone. And by the way, it might not just Be cameras, right. It might be radar, it might be microphone, it might be other sensors. I think the challenge becomes what do you do with that information and how do you effectively process that information, ideally in real time so that you can mitigate the situations. Right. Like you don't want to, you don't want to just be a historic.

[B]

This happens.

[A]

We have great footage of you getting robbed. It's amazing.

[B]

Do you work with museums?

[F]

Yeah, so we work with, you know, all forms of customers all around the world. I mean, you bring up museums, which pops to my mind immediately.

[A]

The Louvre.

[J]

Yeah.

[A]

What happened there?

[F]

Which is crazy, right? I mean, in broad daylight, you know, people came with a, you know, with a lift and got in there. But it's actually a very difficult problem to solve.

[E]

Right?

[F]

Because if you think about it, they have to secure the perimeter of that building. And if you've ever been to that building, it's a massive structure. If you literally had humans or even robots roaming around that building, that would be a lot of humans and a lot of robots, right? And so one of the things we're excited about is, you know, camera technology paired with AI is now getting to the point where monitoring for things like that is more reliable than humans doing it. It's faster than humans doing it. And so in a situation like that, we could totally alert the physical security response and be like, hey, something suspicious. Suspicious is going on right here.

[G]

Right.

[F]

And we could do that in real time with very high accuracy without missing events. Right. So those type of situations we think we can solve.

[A]

Yeah. Help me walk through how AI actually impacts, like decision making on top of a sensor platform. Because I imagine, you know, the first version was probably just some business logic. If movement send push notification or email or something, then you get to some sort of heuristic based linear regression or something. But now you actually could take a video and upload it to an LLM and ask it, does this look suspicious? And it would just tell you like, yeah, that does look suspicious or not. Are we there yet? Are we using generative AI? Are we using transformer based models for this stuff? Like, what's the state of the art?

[F]

Yeah, look, so the state of the art, frankly, is it's amazing. And the amount of, the amount of progress in the market in the last two years has been just phenomenal.

[B]

Right?

[F]

Like if you take a video clip and, I don't know, take it and upload into Gemini, Gemini will know everything that happened in that video clip and it just blows your mind, right? Like five years ago, that was science fiction. Today that's a reality. So, you know, we rely on some of that. Right? And I think the way we think about that is, you know, we, you know, we try to understand what's going on in all of these scenes in real time with particular sensitivity to things that might be security incident related. And so if you think about that, you know, kind of premise, like what is common to all security incidents, or most of them, while they mostly involve humans, they mostly involve vehicles.

[A]

There's at least some motion in the.

[F]

There's some motion going on. That was the basis.

[A]

Right.

[F]

And so 10 years ago, you don't.

[A]

Need to just be uploading, oh, there's 10 seconds of video where nothing happens. Upload it to Gemini, pay the token. No way.

[B]

Yeah, exactly.

[F]

And so you're onto something. Right? So I think that's kind of the crux of it, which is like processing all of the video from all sensors and all cameras today is still prohibitively expensive. And so you can think of almost as like a layered filtering approach. Right. We use different heuristics and different mechanisms, some on the edge on the processor that's on the camera, some then in the cloud, and some of like heavier models that we offload to. But with that full stack, we're able to discern things that really matter. And that might be something like a person climbing a fence, or a person carrying an object, or an object left behind, or soon enough a person pulling a weapon.

[A]

Yeah, yeah. Interesting. Is there a demand for sort of on premise inference for any security stuff like this? Do you feel the pull?

[F]

Yeah, I mean, I think. Look at the. As I said, I mean, the whole thing is, how do you deliver this inference at scale in a region? Reasonable cost. That makes sense to kind of the broad base of customers. And I think the only way to do that, frankly, is to do some of that inference on premise. The way we think about that is we do that on the edge on our device. The two reasons for it, one is purely the inference cost. The second is actually, if you think about it, most of the world is actually not connected with fast enough bandwidth to push all the high quality, quality, high resolution data in real time to the cloud to do the processing in the cloud. And so that's yet another reason that we take this kind of hybrid cloud approach, as we call it, where we do some processing on the edge. And that's been phenomenal for our devices.

[A]

How do you think about pricing for nonprofits, for more sympathetic audiences? When I think about security for a big tech Company, I'm like, they can pay the full price, but for a local school who might be worried about an intruder or some sort of disastrous situation that could happen at a public school, you don't want them. It would just feel so bad if it was like they almost said yes to the contract, but it was just out of reach. How do you think about making sure that you're delivering the contract?

[F]

Yeah, so look, we try to be flexible and understand our clients and their needs and some product categories. We actually even have kind of special pricing for that. But you bring up a good point. Right? Schools are a big customer segment for us, particularly in the US K12 education. And some of it stems from the very scary security issues. But what we're finding, which is really interesting, is the school might invest in our system to prepare for these dramatic scenarios, but then they're finding so many more daily uses because we had made the software intuitive. So we're solving problems like, like kids vaping on campus or kids bullying each other. Right. Or, you know, I love the cases where like, the principal sends us some.

[A]

Video of like, you know, these two.

[F]

Kids got into a fight. And I was able to pull it up on my phone and figure it out. Oh, and by the way, I could, like, on my phone, you know, quickly obscure the faces of other kids in the scene and share the two kids.

[A]

That were in trouble with the parents.

[C]

Right.

[F]

So things like that are, you know, in my mind, it's positive outcome. You're building it up because you're, you know, you're going after the very scary problems. But there are so many more positive.

[A]

Externalities, completely different lifestyle. Used to be able to, you should.

[B]

Be able to say, you should be.

[A]

Able to throw down and get away with it.

[F]

Well, let's be real. Kids are creative, right? So they will do fun stuff no matter what.

[A]

That's amazing.

[B]

What's next? You'll get the rest of the Fortune 500, the other 400.

Are you going to go public at some point? You want to stay private forever?

[F]

Yeah, look, I mean, I think we're a business that is definitely going to be a public company. If you think about it, we've got a market that supports it, you know, $55 billion a year in spend in the categories that we operate in today. That's six product categories. We're chasing other adjacencies. Massive customer adoption. Our customers are buying more from us every year. So a customer who buys Verkada, 12 months later, they double their spend. 24 months later, they triple and so on and so forth. So it's, you know, it's the kind of business that has the profile to be a public company. We're not ready to make that announcement today, but stay tuned and. Yeah, we'll keep posted.

[B]

Yeah.

[A]

What about like the supply chain? I mean, if you're building physical hardware, I imagine that the tariff, like Liberation day was probably stressful to you. How are you thinking about what? And also security is important, right? This is like potentially critical depending on who you're selling to. How do you think about building out your supply chain for manufacturing?

[F]

Yeah, look, so lots of change in geopolitics, obviously. We have a kind of Asia heavy supply chain. We started in Taiwan. We diversified away from Taiwan. So we've got multiple regions in Asia where we manufacture our products.

[A]

And there's also just different pieces. Like a plastic housing coming from China is different than a semiconductor coming from China, right?

[F]

Yeah, yeah, exactly. And then the chips and the ram, all the different components. But. But look, I would say over the last couple of years we've diversified our supply chain quite a bit. So we feel like we're in a good spot as it comes to that.

[A]

That's cool. Is there anything that you plan on reassuring or you're thinking about or looking about making in America? Is that an interesting opportunity? Not yet.

[F]

Not at the moment. Yeah, not at the moment.

Maybe.

[A]

Maybe in the future. I don't know.

[F]

Yeah, maybe.

[A]

Anyway, thank you. Do you have anything else, Jordy?

[B]

No. Great to see you.

[A]

This is fantastic.

[F]

Congrats on the whole team so much.

[A]

Thanks for having me.

[F]

It was fun to be here.

[A]

This is great.

[B]

We need ricotta.

[A]

We do, we do.

[F]

Let's get you.

[A]

Yeah. Thank you so much for hopping on the show. I'm gonna tell you about wander.com book a wander with inspiring reviews, hotel grade amenities, dreamy beds, top tier cleaning and 247 concierge service. It's a vacation home, but better. I wanted to close up the show by just reading this post because I just thought of Tyler immediately when this post came out from Jonah Katz. He says, great job on that project, man. I really like the way you prompted Claude and did nothing else at all.

[B]

Claude is a great model.

[D]

Claude.

[A]

It's a good model.

[B]

It's a good model, sir.

[A]

It's a good slop app that barely works.

[B]

Well, we have to actually close.

[A]

I couldn't do the show without you, Todd. We actually really appreciate you have to.

[B]

Actually close on this post from Charlie Puth.

[A]

Oh, yeah.

[B]

He says, hi, Elon. These sonic Booms have gotten progressively louder since they started launching the rockets in Santa Barbara. He's talking about Vandenberg Air Force Base. This one at 3am today felt like 150 to 160 decibels. Violently shook our whole house and really frightened my pregnant wife. I hope they do not get louder. Anyways.

I was far enough away, didn't hear anything. But.

Given the pace at which I think the number of launches you see.

[A]

This poses, you may want to reconsider living near Vandenberg. Launch Cadence is about to hit 100 per year from two complexes. So you're just going to have Sonic booms every 24 hours eventually. Bizarre. There is a community note on this. People are kind of going back, back and forth. Says SpaceX does not launch rockets from Santa Barbara. They launch it from Vandenberg, which is 68 miles north. But he might be saying Santa Barbara county, or it might be going past Santa Barbara. But I mean, the outrage from the Santa Barbara crew, if this is a real thing, is going to be intense. You got.

[B]

I mean, Ellen DeGeneres is hanging out. It's the Montecito crew that will really come down Santa Barbara.

[A]

So it's the. It's the Montecito of California. I don't know.

[B]

You mean it's the Connecticut?

[A]

Yeah. No, no, it's not the Connecticut. I don't know. I haven't mapped it. I actually don't know. It's the Catskills, right? Isn't the Catskills upstate? It's kind of upstate New York. Coated.

[B]

Yeah, right. I'd say so.

[A]

Something like that. I don't know. We'll have to get some resident New Yorker to break it down for us. But yeah, people are going back and forth. I was digging into, like, is this even possible? Can it really get up that high? I feel like we need Brian Johnson to weigh in on this since he is. He's both. You know, I believe he's like a big Elon Bull, but he's also extremely sensitive to loud noises. And so I'm sure he'd get up there.

[B]

Final post. We'll start with a black pill and then a white pill.

[A]

Okay.

[B]

On the topic of Southern California, this person Sam says it's actually kind of crazy how washed LA is as a city right now. Lots and lots of closed, failing restaurants. The wages here are shockingly low compared to cost of living. Film industry still hasn't recovered from that double strike two years ago. I've been saying it's been kind of like Detroit energy lately.

[A]

Don't come at me with that negativity.

[B]

Brother Trevor says things are definitely changing and will be painful for a bit. But the glass half full take is that all the boomers who held onto power for far too long are being shaken out. New blood pumping into every corner of the city. Next 20 years is going to be magic.

[A]

What is this picture he's attached to? This is hilarious. I like this.

[B]

It's Randy Newman. I love la. Okay, the music video.

[A]

Yeah, well, this is. This is a great way to play it out. I love la. I love that song. Anyway, thank you for tuning in today. We will see you tomorrow at 11am Pacific Sharp. Leave us five stars on Apple podcasts and Spotify and have a great day. Merry, merry Christmas. Merry Christmas to you. The holiday season is upon us and we love you. We'll see you tomorrow. Goodbye.

[B]

Cheers.