All right, everybody. Welcome back to

the number one podcast in the world, the

Fantastic Four, the original.

>> Oh, the cast is back.

>> The cast is back.

>> Our brothers in arms.

>> Brothers in arms. Here we go, boys. We

got a big Newsweek. David Saxs is back

and he's in the great state of Texas.

How's it been, Sachs? How's Texas been

for you so far?

>> It's been great. Although, I just got

back from DC. I got like three hours

sleep last night. So, but we had a lot

of news this past week.

>> Yes. And we'll be talking about PCAST

and your role in the and da and your

role going forward in the Trump

administration. Big news that we'll be

talking about today also relates to you.

Oh, Sultan of Science David Freeberg

with your background

from the iconic film for those not

watching. Looks like the iconic Thelma

and Louise. I wonder if that has

something to do with the budget of

California, which you've been outspoken

about recently.

>> Great rant, which I retweeted.

>> Mega rant with I retweeted it, too.

>> If only if only you could be allowed the

time and space to do those kinds of

rants on this pod.

>> Thank you very much. If you kept

talking, here he is. He's going again.

He's going again.

>> There it is. Dr. Doom. Dr. Doom, your

mayor, your new governor. Are you would

you consider it freeberg after Ohalo

running for governor? There is no after

oh halo.

>> Oh please do it after.

>> Oh please do it.

>> Wow that'd be so great.

>> I'm tempted to buy a hollow for like

five or six billion. So he just politics

California politics is dirty man.

>> I don't even know what it does. I'll

just have somebody else deal with the

oppo research. But the amount of

>> No no no no. We'd get him elected. He

would do an incredible job. He would

save the fourth largest economy in the

world. It would be incredible.

>> It'd be amazing. I would love the

>> Here's the oppo resource act. David

Freeberg went to a rave in 1999

and stayed up until 10:00 a.m. We have

witnesses

>> once he he got tilted at the poker game,

stole a bunch of pistachios and lactate

and ran home.

>> He did.

>> Let your winners ride.

said,

>> "We open sourced it to the fans and

they've just gone crazy with it."

>> Anthropic on a generational run and open

AI crashing out a bit, boys. Let's chop

it up here. Just looking at Anthropic

pretty major heater this year. January,

they launched co-work for business

users. You know what that does? Cron

jobs. You can connect to your Gmail,

your notion, whatever it is. And then

opus 4.6 which consensus wise everybody

thought this is a major step function

Jensen Michael Dell everybody's called

it out Jensen actually called it back in

November an inflection point and the

first agentic model and uh opus 4.6

has basically Dell said hit a threshold

that we haven't seen before in terms of

real productivity in teams. February,

they dropped a bunch of claw code

plugins that caused the SAS apocalypse.

Not the SAS apocalypse, the SAS software

as a service.

>> It was a SAX apocalypse, too.

>> Yeah, there was a little bit of that

back and forth as well.

>> No, I mean, as a SAS investor, it was a

SAS.

>> It was a bit of a you you were the tip

of the spear there. We'll get into it.

>> My exit comps were affected, that's all.

>> Yes. It seems like you may have divested

at exactly the right time. All right. $6

billion in annual run rate was added in

February alone. Brad referenced a couple

of weeks ago here on the pod. Earlier

this week, they announced computer use.

A new agentic system for enterprisegrade

kind of openclaw functionality. Now you

can use the clawed app from your phone

to control your desktop computer. Really

slick feature. Here's the calendar

release over the past two months for the

team at Enthropic. Dario, come on the

pond anytime. Uh Sachs, you've had a

couple of flare-ups uh and obviously the

administration uh and the Department of

War had their kurluffle,

but just, you know, looking at it

objectively, what's your take on the the

surging anthropic

generational run as I've described it

here?

>> Well, I've never been a critic of

Anthropic's products. I've always been

an admirer of their products. I think

last year I gave him credit for MCP. I

agree that they seem to be performing

very well now. The company made a big

bet on coding as the kind of big

breakout use case. Whether that was done

for business reasons or ideological

reasons, I'm not sure. Anthropic is sort

of the most AGI pill of all the frontier

labs. And I think they made this bet on

coding as their way to get to recursive

self-improvement. As it turns out, it

was a very good business move as well

because code is the gateway into

enterprise and enterprise IT budgets.

And so they've been able to grow revenue

pretty quickly as a result of getting

into enterprise. Also, coding seems to

be the basis for these other product

extensions. So like you said, they went

from cloud code to cloud co-work. The

idea being that well if you can generate

code you can also generate powerpoints

or spreadsheets and you do that by

generating the code to create that

output. So that was the first extension.

Now they are extending into agents. This

computer use product is kind of like an

open claw knockoff. So it looks like the

generational run for Mac Mini is just

about over. Look, I think they're firing

on all cylinders. My issues with them in

the past were related to what I have

called the regulatory capture strategy.

They do want a permissioning regime in

Washington for chips and models, meaning

you have to go to Washington to get

permission to release new models or to

sell GPUs anywhere in the world. I think

that's excessively heavy-handed. Their

motives for doing that may be pure. It

may not be regulatory capture. It may be

ideologically motivated. Regardless, I

do think it is a form of regulatory

capture because it plays into the hands

of the big companies and creates moes

that new entrance will not be able to

overcome. So I have, let's say,

philosophical objection to that part of

it. But again, I'm not a detractor of

their products by any means with respect

to what happened between them and the

Pentagon. I'm not involved in that. I've

stayed out of military procurement in

general. I don't get involved in what

are called party matters. I just focus

on policy matters which affect

>> the whole space. I saw Emil Michael

making this point a couple weeks ago on

our podcast that if you as a company

don't want your products to be used in

war, don't sell to the Department of

War. It's in the name, but if you do,

you know, if if you do decide to sell to

the Department of War, you should expect

it to be used for all lawful uses. So, I

think that was a very pragmatic

observation. Again, I just have to

underscore this again. I'm not involved

in that dispute. It's the base of a

lawsuit right now and I don't want

someone trying to draw lines between

dots that aren't there. So

>> yeah, and in fairness,

>> I'm staying out of that one.

>> Objectively, they've been treated the

same as any other large language model.

Even though they're not fans of the

administration, they're not donators to

the administration. They have

specifically been critical of the

administration as a company perhaps

cynically Freeberg as a strategy to get

uh you know it's one of the conspiracy

theories here in Silicon Valley is

Daario is taking the position of being

anti- this administration anti-president

Trump in order to get all the PhDs you

know there's like three or four thousand

of these highly sought after PhDs and

it's a way to have them you know vote

with their presence to come work in

anthropic your thoughts on that and then

just generally their general

>> I think he actually believes it and I

think they've actually created and

fostered a culture of that since the

beginning and I think that they're

representing it as a branding exercise

at this point but I don't think it's

made up I think it's directly

representation of the people that work

there and what they believe

>> yeah and it's a strategic advantage

because probably of those 3,000 PhDs 90%

of them are left-leaning uh and wouldn't

want to work necess necessarily. I mean

like like most things we see in the

world today, in economics today, in

markets today, in business today,

everything seems to be politicized. And

you have a left and a right version of

everything. You have a left and a right

version of media. You have a left and a

right version of what food to buy. You

have a left and a right version of what

AI tool to use. So, you know, this

effectively may just be the natural

manifestation in the AI market of what's

going on elsewhere in society as we all

kind of fracture and hustle over to our

side.

Uh, Chimath, before I go to Open AI and

their recent moves, any thoughts on

Anthropic and Daario's positioning of

the company?

>> Look, I think both are incredible

businesses. We're in the part of the

cycle where

we're trying to create drama where I

don't think drama exists because they're

still fundamentally in very different

gotomarket motions. Now they may

converge and compete over time but I

think it's important to separate where

each of them are good from an enterprise

lens which is where I see most of the

action particularly through 8090 it's

all anthropic all the time and I agree

with Sachs my philosophical issues with

the management aside around their

ideology and sometimes how they use some

of the capital for things other than

tech and R&D. I have issues with those

things. But in terms of the quality of

that technical team and what they

create, it's head and shoulders above

anything else. It allows us to build a

vibrant business. Now, do I have issues

with how much it costs? Yes. Do I have

issues with how fast we're consuming

tokens? Also, yes. But I think those

will get sorted out. And those are

really tactical issues. So the reason

why I think we're all breathlessly

trying to pit open AI versus anthropic

is because we want some drama. But the

reality is these are very different

businesses. And Nick found this tweet

which I thought was really interesting.

And because even at the absolute highest

level, these things are sort of

presented in an apples to oranges way.

And there's like these very basic issues

of revreck that are fundamentally

different. And you may say, well, who

cares about revenue recognition? Well,

the people that are trying to write the

headlines that say one is overtaking the

other and this or that sort of miss the

fact that they're in completely

different businesses, which has guided

how they even think about growth. And

so, if you normalize these two

businesses, what you would see is OpenAI

is still the overwhelming revenue

generator in this space. And that over

time, Anthropic is catching up. And so

this is this little diagram

that tries to explain this. OpenAI is

3/4 consumer subscriptions

and a quarter API. Enthropic is almost

the exact opposite.

OpenAI is used by consumers

overwhelmingly. Antropic is used either

directly or through things like GitHub

and cursor.

OpenAI as a result has a very

conservative way of recognizing revenue.

Anthropics, they sort of recognize gross

tonnage as their revenue. And so when

you start to hear these things about

like, oh, this thing is at 20 billion

and OpenAI is at N billion, they're two

totally different conversations. And I

think right now it's more about the

press cycle of trying to create clicks

than it actually is about the underlying

quality of each business. Both are

incredible businesses, as this

demonstrates. And by the time it goes

public, both of these two businesses

will have a very clean and I suspect

normalized way of telling a story so

that you can actually compare. But what

I would tell people right now is

everybody is running with numbers to try

to create a narrative that I don't think

makes sense or applies to either.

>> Yeah. And there's been a lot of strategy

change. Open AI, some people are saying,

is crashing out in panic mode.

Obviously, they own the consumer with

chat GPT. they are the verb like you

know taking an Uber or googling

something people consumers always just

say hey did you check chat GPT but

obviously other large language models

are catching up here's

>> can we say something to that Jason cuz

like

>> you mentor tons of startups

>> sax has done it free has done it I do it

>> what is the one thing we tell folks

focus focus focus focus

>> 100%

>> do one maybe one and a half things, but

do it incredibly incredibly well and

everything else you start to bleed and

smear. What was that Brad Garlinghouse

term? Peanut butter. Peanut butter.

Yeah, you smear the peanut butter

>> too far out. And so this is a good

moment, by the way, if either of these

two companies are in the smearing phase

to recalibrate and reset because

>> yeah, you just can't do everything.

Speaking of smears, I couldn't help but

notice that Emil Michael was smeared by

an article. Was it in Lever or something

like that accusing him of of having a

conflict in the anthropic dispute?

>> Did you guys see that?

>> I didn't. No.

>> Yes. I saw the art. There was an article

that said that he was an investor in

perplexity and therefore he's conflicted

in his negotiation with Anthropic.

That's what the article said pretty

much.

>> Perplexity is LLM agnostic. That's a

stupid claim,

>> right? Well, it's obviously written by

people who don't understand anything

about AI really.

>> Okay.

>> Perplexity is a rapper. You're like

you're saying, it uses multiple AI

models.

>> And I don't think they sell to the

Pentagon. They're not a competitor to

Anthropic. And moreover, as I understand

it, Emil's ownership of shares in that

company was blessed by the Office of

Government Ethics. Nonetheless, I think

the timing of this is very suspicious.

And it reminds me of what happened to me

when I started opposing Anthropic and

all of a sudden there was that hit piece

in the New York Times accusing me of

having conflicts. And I'll just say that

Anthropic may pose as this company

that's on the side of the angels, but

they've hired a number of very seasoned

brass knuckle political operatives in

Washington. And you know, members of the

Biden administration, Laura Loomer,

actually just had a piece today on one

of them. I'm not going to rehash that.

But the bottom line is this is I think

frankly a political operation that's

willing to get down and dirty and

they're not always on the side of the

angels. I think they can be quite

ruthless.

>> Saxs, remember I told you you get one

Biden mention a month in 2026. So you

just used it up. So I don't want any

more Biden Biden Biden. He's retired.

>> That was not a Biden mention.

No, but the truth is

these [ __ ] whoever wrote this

story, the actual best feature or

amongst the best features of Perplexity,

which is actually got a really great

co-work competitor called Computer I've

been playing with. I'm not a shareholder

to be clear. There's no book being

pumped here. The model council is like

the greatest feature.

>> Yeah.

>> That they have. And what is really

brilliant about it is you ask it a

question sachs. It will go to all three

different major models and you can pick

which ones including open source. Then

it tells you where they differ and it

tries to figure out why they differ.

This is like one of the great features

of the product. I think perplexity is

like could be a a really great company

as well even without a language model.

But let's talk a little bit more about

OpenAI here

and their market share because I think

you're correct Chimoth, but they are

getting off their game. Here's what's

going on. Quick look at the consumer

market

and obviously they started with 100%

market share, right? They created the

category in 2023,

dropped down to 85% market share 2024,

75% market share 2025.

>> But by how much has the market grown

>> precisely? So uh the market is still

growing. So on terms of number of

searches and queries, they're obviously

growing tremendously, but they have

major major competitors and the market

share is going down. I had my team over

at This Week in AI do a more thoughtful

analysis of where this is going. And if

you take a look at this, um there's

three players, and I'd like to get your

guys' take on this who really haven't

shown up yet. Apple,

uh Meta, and obviously Windows. All

three of those underrepresented. If you

give them credit for just getting, you

know, a half point of market share here

and starting to intercept, which I think

those three players were here, will be

here, they're going to be well under 50%

market share. And I think CHPT is going

to have some big challenges there on the

consumer side. While they're doing this

stuff in consumer, uh they uh are

cutting back on all their side projects.

So, uh you probably heard about the Sora

video app that's been shut down. This is

kind of major news because Disney was

going to put a billion dollars into

opening as part of it and they had done

a licensing deal and they were going to

integrate Sora, this you know short

video product into Disney Plus. All of

that's now been cancelled.

>> The billion is not going in.

>> The billion's not going in. The

licensing deal, all of that. And then in

addition, there's supposedly at OpenAI a

newfound focus on chasing Anthropic down

the enterprise path. So getting off

their game, getting a little

discombobulated perhaps or maybe getting

focused on what matters, which is

enterprise apparently in terms of

revenue. OpenAI also offered private

equity investors a guaranteed minimum

return of 17.5%

of as part of a joint venture that would

help PE firms deploy AI and ease the

high upfront cost of that. So, lots of

questions here. Chimov, I don't know if

you've tracked this PE uh model, but

obviously a lot of people are doing

rollups in services, uh, accounting,

legal, uh, Josh Kushner's got a big

effort here, a bunch of private equity

firms trying to essentially, I guess,

endrun the transition process and

arguably what you're doing with the

software factory at 8090. So, your

thoughts on Open AI and this pivot and

this private equity I think it makes a

lot of sense for Open AI to focus on a

few things and do them exceptionally

well.

>> I disagree slightly with your first

part, which is I think that people like

to make new decisions about new

experiences and I think that OpenAI has

incredible consumer mind share. I just

see like how my kids use it. They

started there and it's very hard to get

them to switch. Even when I say, "Hey,

have you tried Gemini?" They use Gemini.

And to your point, the reason is because

they stumble into it more.

>> Yeah. Yeah,

>> but if you give them a cold navigation

experience, they rely on chat GPT

and it's the same by the way on the

other side in the enterprise. If you

give us a cold,

my default reaction would be to use

anthropic. Now, I actually think that

that's quite healthy because you're

going to segregate the market. And I

think look if you go into the way back

machine when we first started talking

about this thing this is sort of how we

all postulated this would work where

even if open AI just won the consumer

business it is a multi- trillion dollar

company with enormous scale in value and

I think that that's okay. So I think

that what they probably need to do is

say where are we the strongest? Where is

there the most obvious traction?

Can traction in another market like an

enterprise bleed into consumer usage?

If it's true, then you have to win the

enterprise. I think winning the

enterprise though is a very different

game than winning consumer. Very

different set of features, very

different set of expectations. So, I

think people either have to decide

you're going to compete everywhere or

pick one thing and just nail it. And if

I was open AI and you had to pick one

thing, you would pick consumer because

they're the juggernaut and they're the

clear leader and they have an enormous

brand. Freeberg, let me pull you into

this because my base case here is that

all consumer queries are going to be

free. Apple's going to make them free.

They're already free for Google. I think

Meta is going to make them free and

actually have a decent product soon. And

Microsoft, same thing. Chat GBT has

decided to push off advertising. They

were going to put advertising in it. You

remember they got mocked by Anthropic

with their Super Bowl ads. So, what do

you think is going to happen on the

consumer side? Consumers generally don't

pay for services. That's usually five to

20% of the market is paid services and

everything else is free and ad

supported. But it looks like Apple and

and Google are going to just let it rip.

So that could take the revenue oxygen

away from Chat GPT. So what is your

thought here on who wins consumer?

>> I don't think that it's going to be

free. I think there's 290 million

subscribers

for Spotify. They're paying what are

they paying 20 bucks a month or

something?

>> Probably less than average because it's

global number, but yeah,

>> Netflix has 325 million paid

subscribers.

and AI that can book your travel, answer

questions for you, track your calendar,

do your email, etc., etc., etc., etc.,

is likely going to be the most valuable,

call it meta service that consumers have

ever seen.

>> And I think it's very likely that we're

going to end up seeing many more

consumers subscribe to a consumer AI

service than we've seen even with cable

television. I mean, think about your

cell phone. Everyone's paying 50, 60

bucks a month for a cell phone. Why not

pay 80 bucks a month? More bucks. you

pay 100 bucks and by the way in the

pandemic remember what we saw the two

things that people refused to cancel

>> was not your mortgage payment or any car

payment you were willing to go into aars

and into default the two things that

people would would always keep was the

cell phone number one and then

electricity number two chat GPT will be

there

>> so I think that's going to be the case

with these consumerized JL I think that

they're all going to be like ultra

valuable and they're going to layer in

services on top of them like for example

do you want to watch video embedded

in your consumer app. Do you want your

consumer AI app, you know, do your

finances for you? And it could be that

the consumer AI apps

much like the iPhone was for the app

economy. There could almost be whether

it's through kind of connectors or

embedded tools, an incredible ecosystem

that where traditionally advertisers

actually pay to be embedded and show up

inside of the AI app and the consumer

can either pay for it or the advertiser

can pay for it. So I think there's going

to be um a very different economic model

and still very early days. Sachs the

numbers

right now would uh be more in my

estimation about 50 million people

subscribe to chat GPT. They got a

billion users or they're they're trended

to a billion. I think they probably hit

it in the next month or two. Certainly

they had 900 million two or three months

ago. So it's about 5%. Where where do

you think this winds up? Do you think it

becomes, you know, 300, 400, 500 million

consumers are willing to pay 20 bucks a

month for this or do you think it's more

free and the data and the ad

supportedness of it? Go the meta and the

Google route.

>> I think it's possible that you could get

a few hundred million subscribers for

the premium tier. Look, I think most

consumers will take the free service in

exchange for advertising, right? Some

adup supported model, which by the way,

I think could be quite successful. when

chat GBT started displacing Google for

search, a lot of people were predicting

the death of of Google's model because

who'd want to look at 10 blue links. I

think that's true, but I think you can

do something much more compelling in AI

chat compared to just a list of links.

So, in any event, I think adup supported

models might make a comeback here in

addition to premium models. All that

being said though, you know, as an

investor, I always liked B2B businesses

better than B TOC because it is hard to

monetize consumers. Their willingness to

pay is not that high and they tend to

have high churn rates. Whereas

businesses tend to be very sticky and

you can upsell them and you can get more

than 100% net dollar retention

year-over-year. So, if you can make an

enterprise business work, it's always

been a model I've I've liked. But you

know that being said obviously some of

the most valuable companies in the world

are consumer companies. Meta, Google,

Apple, these are all consumer first

companies. And look I think ultimately

both models can work.

>> Obviously both can work. Question is

which one? I guess it really comes down

to how motivated do we think Google and

Facebook will be to build that bridge

from their ad networks to their AI

offerings. Obviously Facebook is kind of

MIA in all of this but Google is not and

I think that will be the determinant

here is

>> well Google is going to compete very

vigorously for the consumer because it

is existential to them I mean it's very

clear that search and AI chat are kind

of merging into one space that means

that ad links will kind of merge into

being in chat advertising so they have

to adapt with that and compete for the

consumer I also think that Google is in

an outstanding position to do the whole

claw thing because they already have

access to your calendar, your documents,

your email.

>> So, the agent doesn't really have to

earn your trust because you already

trust Google with all of your stuff,

>> right?

>> So, I'm kind of waiting for the Google

version of Open Claw because I don't

really want to share all my documents

with some new service.

>> They're the only one that has so much

free cash flow that they can almost view

it as two separate companies, which it

effectively is. you know, GCP over here

runs the enterprise play and then Google

consumer over here runs the consumer

chatbot play and they can keep them

segregated. That's so much harder for a

startup to do because on top of just

keeping everybody organized, you have

the financing problem of constantly

having to raise more money because you

don't yet have a profit engine that

spits out cash. They're probably the

only one. And you can see it in the

valuations actually which I'm going to

get to in a second but people believe

the durability of Google more than they

believe the durability of anything else.

>> And uh Sax I think you weren't on the

pod last week or maybe two or three

weeks ago but Google has announced

Google workspace

studio to do AI automation and it's uh

yeah it's online and people are playing

with it already. So they have joined the

open claw party. By the way, Jay Kcal,

you asked a different question earlier

as well, which is around the PE story.

And I think the PE story is a window

into the rest of the broader market. The

real open question is what are these

companies worth? There's like a very

threshold question. It's sort of like a

very important fork in the road right at

the outset, which is do you believe that

we're on a path to super intelligence

where everything is incredible, where

there's infinite abundance, where you

can magically describe things and

beautiful things appear? complex things

appear, groundbreaking things appear, or

do you believe that it's good next

generational software? And the answer to

that question is really important

because we're financing things like it's

the former

>> and uh GC has a big move in this. Hamont

was on the program in January when we

did the interview show and he's got GC

buying up

and rolling up accounting firms, etc.,

healthc care firms, hospitals, etc. This

seems to be part of the future of

venture capital is taking AI sacks and

actually buying out or I should say big

VC kind of starting to look like private

equity buying out hospitals accounting

firms business processing firms in India

putting them all together and then

running them with AI. So any any final

thoughts on that Sax as a business

strategy? Well, I think it's

interesting. They're kind of betting on

the idea that they can own the change

management around AI. And this is the

thing is everyone just kind of assumes

that you throw AI over a wall and a

business just automatically knows how to

use it and drive efficiency from it.

>> And what we're seeing is it's pretty

difficult. Chimath, you've seen that.

There's McKenzie studies showing that

like 95% of enterprise pilots aren't

successful. There's tremendous value,

latent value in AI, but it's hard to

know exactly how to deploy it at this

point in time. So, I guess what these

private equity firms are saying is that

we know how to drive value from this and

if we own the business and then own the

change management, then we'll be able

to, you know, create value that way.

>> Their business model makes solving this

problem existential.

And this is sort of along the lines of

this essay that I wrote. Let me just

give you the thought exercise and you

guys react. Today we live in a world

where the whole market is trying to

debate what is the PE ratio that you'd

be willing to pay. So Facebook is

incredibly durable. I'm willing to pay

30 times. Nvidia is really durable. I'm

willing to pay 40 times. Tesla is

incredibly asymmetric to the upside. I'm

willing to pay 200 times. And then

Caterpillar or John Deere, I'm willing

to pay 15 times. I'm just using these as

an example. And what it's effectively

signaling to you is how durable all of

these cash flows are. And all we do in

the public markets when we make an

investment is we're just guessing when

do the cash flows run out and we try to

say, well, here's how much it's worth

and here's how much I'd be willing to

pay for today.

But if you go back to this example and

you say, well, what if there's this

super intelligence on the horizon?

I think it's fair to ask the question,

what is anything worth?

And what is anything worth in year 10 or

year 15 or year 20? Because if you have

infinite abundance and you have all this

creativity,

won't all companies be disrupted? And

won't we be in this constant churn of

everything getting disrupted all the

time? And if you were faced with that

problem in the public markets, how would

you react?

And I think the canary in the coal mine

are the SAS talks. Yes, we jokingly call

it the SAS apocalypse, but I think it's

much more important. I think it's a big

societal question. How do you view

capital markets? How do you view the

health of a company in a world where

we've been told there's a super

intelligence on the horizon that makes

everything much more fragile than it was

before? And the market reaction is to

put all these companies on a spectrum

and they started here in software and

they're rerating everything down

and they're changing the way that things

are being framed from price to equity to

a multiple of the cash that you have on

hand. And I think that has huge

implications mostly to Silicon Valley

and largely to employees because we all

sell the dream. we start a company and

we're like okay small salary big equity

upside but that's implicitly saying in

15 or 20 years this thing is going to be

worth some gigantic number but if

instead every business gets disrupted

every 5 or 6 years all you're going to

end up with is just the cash and so what

should employees do the rational

reaction from employees will say you

know what I don't want your equity give

me more money

>> and if all of a sudden you do that the

valuation multiples and the complexity

changes again so I had my team put this

chart together. Okay, what is this? Took

a handful of SAS companies and took the

mag six

and I just said, okay, if you take the

market cap and you divide it by the

annual free cash flow, what that tells

you is how many years does it take to

get back? If you bought a share of

stock, how many years does it take from

the free cash flow to come back so that

you've earned back the cost of one

share?

Snowflake in 2023, it would have taken

you almost a hundred years.

And where is it now? It's been cut in

half. Service Now, it's last year.

Workday. You see it.

And I think what this speaks to is the

beginning of this rerationalization in

the public markets of saying if super

intelligence is coming, we have to be

very careful about what we're willing to

pay for these things. But if you look on

the right hand side and the Mag 7,

what's so interesting is Apple,

Microsoft, Meta, and Alphabet, the

market is completely ripped the other

way. And what they're saying is, we

believe that these cash flows are

essentially monopolistically durable

forever.

That's the only reason why you would

walk them up like this. except Nvidia,

which is the most unbelievably

accreative, well-run company, highest

margins, you know, making $200 billion,

and they're treating it like they're

treating Service Now and Snowflake. I

just think it's so interesting what's

happening. I can't explain this, but

here, this data sort of shows this reset

that we're going through, a very

complicated reset in the capital.

>> Free, what's your take on this reset as

Chimath describes it? You'd think this

is just a flight to the quality of the

free cash flow of the Mac 6 and just how

much cash they print and then maybe the

other ones are smaller footprints and

they're just more disruptable. We had

this discussion many years that Google

and Apple, Microsoft, they would all be

disrupted at some point, Facebook, and

that just simply hasn't happened.

They've gotten much more nimble at

copying products or incorporating, you

know, features and products into their

core offering. So, your thoughts? It's

probably generally correct that there

will be a decline, but there's also the

selective opportunity. Did you guys see

the LP slides that went on the internet

from Toma Brava's LP conference?

>> Yeah, those are great.

>> Nick, maybe you could find that. They

kind of highlight that within the broad

marketscape, there are companies that

are not just going to sit idly by and

let AI kind of delete their business

value, but they're integrating AI

themselves and they've got highquality

people to do so and they're reinventing

their product themselves. So, they've

already got a beach head, they've

already got customer access, they've

already got enterprise users. And in

fact, if they can integrate AI into

their products and into their tools,

there's almost this like selective

dispersion that happens in the market.

And so the winners are going to win I

think truly in every market not just in

software but across every market

including in industrial supply chains on

who is going to implement and utilize AI

tools and agents uh to do work and it's

going to expand the work uh productivity

of that organization not just create new

features which is what we focus on when

we talk about software companies but

really imagine a complex business being

able to do 10 times the output it can do

today with the same capital equipment

and the same labor force. What do you

pay for in a world of super intelligence

versus in a world of nons super

intelligence in terms of the durability

of a business?

>> Yeah, it's hard to say, man. I mean, we

don't know, right? And that's why all

the discount rates are going through the

roof and that's why the valuations are

collapsing because we just don't know

what multiple or what discount rate you

apply or what terminal growth rate or

which which effectively implies.

>> What do you do in your PA? Like do you

say I don't think Disneyland is going

anywhere? You know, I think there's some

stuff that you could say is the counter

AI portfolio. And the counter AI

portfolio, I think, is like physical

experiences.

>> Halo. They call it halo. High asset low

obsolescence.

>> Okay, that's a great Yeah, I'm not a big

investor trader like you guys, but that

makes a lot of sense. I mean, I think

that's like intuitively to me that seems

to be an area where people are going to

be spending a lot of time and they're

going to they're going to have

durability in those businesses. I I

think businesses like Nack Gas

Production, you know, I just bought LNG

that Shener company

>> I bought Shener given um all the

craziness in the Middle East and you

know I visited there with Doug Bergam so

it was the first time I'd ever been

exposed to this business and I checked

out a great business. It's a great

business really well business.

>> So I think that's got durability

obviously unless it gets blown up by

some enemy. Uh that that would be a

problem. So the Adams thesis that TK

>> shared Adams real life mining is a great

one. Obviously I think the space

industry is going to be a lot bigger

than we recognize. I actually think

there's probably a 15 to 30 trillion

dollar a year economic opportunity on

the moon. That kind of a business like

you're going to see with SpaceX's IPO is

going to have an insane multiple. So I

think to your point Jimat, there's a lot

of stuff getting steamrolled here with

crazy high discount rates where you just

don't know. And there's a bunch of stuff

where the pathway over the next 15 to 30

years is maybe independent or unlocked

because of AI. And then there's a bunch

of stuff that's just unaffected that and

that that starts to get a higher

multiple because that's where capital

starts to flow.

>> Sax there are probably three things that

we would agree are great modes for

businesses brands network effects and

the management team. Those come into

play here as well. Yeah.

>> I don't know if I would consider

management team to be a moat. I mean,

it's like Warren Buffett says that you

want businesses that are so strong that

they could be run by a bunch of monkeys

because one day they probably will be.

>> Well, I was thinking more like obviously

Elon and Tesla is going to just

relentlessly innovate.

>> It's a great point by the way and it's

true especially in the age of agentic

AI.

>> Yeah. I mean look I think though that

just upleveling a bit I think you are

right that the key question is moes

because I do think that there are still

strong moes in a lot of different kinds

of businesses and a lot of them are very

subtle like you said some are network

effects some of them are the the

difficulty of producing physical world

products things like that so there's a

lot of different types of modes out

there and that is the key question as we

enter a world of let's call it digital

abundance

>> yeah the the network effect of Apple's

ecosystem and they have hardware, right?

And they've been just on that path of

making their own silicon that's

incredibly defensive and they have

brand, right? So that that is pretty

strong for Apple. And then you take

Tesla, the same thing. You got Elon

relentlessly innovating and it's hard

hardware stuff.

>> And then if you look at Meta and Google,

these are incredible brands with great

management teams.

>> My assumption and constantly innovating.

>> If I had to bet, I'm gonna bet that

brands go to zero.

>> Really?

>> Yeah. Because I think that when you can

make things that are as good or better

and you can make them in a cheaper,

faster, better way, people want that

abundance more than they want an

affiliation to a brand.

>> Example.

>> So the perfect example is actually what

Tesla did to BMW.

You know what Tesla did to Mercedes,

what Tesla did to Porsche, what BYD and

Gily have done to the car manufacturing

cycle in China. This is a fundamentally

cheaper, faster, better product. Yes,

it's got a great brand, but nobody's

going to pay a premium for these

products. The reason why Y has outsold

everything else is because the Model Y

is priced better and it's superior on

every operational dimension of

comparison. That's also true for the

cars in China. So, I think it's the

opposite. I think that brands and the

pricing power of brands other than maybe

premium luxury goods but even that's

eroding like look at the stock like I

don't know Nick show the stock chart of

LVMH or Ferrari this is not

a commentary on the quality of the

actual product but what this shows an

erosion of pricing power all of these

things are being eroded away

>> yeah this would be the value prop most

people in brands would just say value

propositioning So JetBlue is a value

brand, a Tesla Model Y, perfect example

of a value brand. And if you look at

Apple's recent cohort, what did they

focus on? The Apple MacBook

Neo, which is a value laptop, 600 bucks,

700 bucks. So they're even going down

market to try to capture that value. And

to your point, maybe the right word is

abundance. Like the brands that bring

abundance, that bring more to the table

than their competitors, and they are

able to bring more at the same unit cost

or less.

capture share. That's probably true.

>> You know what's interesting about that,

Shama, as we open up the aperture of

this, if you the one of the thesis we

talked about here a couple years ago, I

say, "Hey, what happens with AI

disruption, job disruption, etc. costs

coming down on cars with Model Y getting

cheaper, Cyber Cab coming in, BYD,

obviously if you go to any foreign

country, BYDs are everywhere and they

cost 15 grand. Then you look at Apple

making the Neo, that's a $600 laptop.

Everything getting cheaper seems to be

happening.

>> I just think it's very hard to know

which of these companies going to be

disrupted. A year ago on this pod, we

were saying that Google was going to be

toast or some of us were saying it

because it looked like,

>> okay, fine. But, you know, it looked to

us like Chad GBT was taking a massive

share from Google search and the Adwords

model was becoming obsolete. Now,

because of the success of Gemini and the

potential for personal digital

assistants, personal agents, I think

we're probably pretty bullish on that

company. And look at their stock chart.

It's reflects that. I mean, I think it's

doubled in the last year. Now, you take

something like Apple on the other hand,

and I'm not saying this is going to

happen, but I'll just throw out a

counterfactual, which is what if your

personal digital assistant or a personal

agent gets so good that you don't need

to check your phone, you just tell it

what to do, and you don't need the wall

of apps anymore. I mean, the way that

you call an Uber won't be to punch a few

buttons. You'll just tell it what to do.

So, you could imagine the phone

operating system getting disrupted if

the agents are good enough. you're on to

something huge because what you're

saying is I can confirm this to you

89 we sell enterprise software I'll tell

you three conversations with huge

enterprises asked exactly what you just

said and we jokingly called it

strangulation as a service which is they

all say the same thing what you just

said okay look get all this complicated

UI out of the way get all of these

products out of the way find a way to

create a shim where I can just write

what I need tell it what I need it to do

it deals with all this complexity in the

background I never want to see these

things ever again. And that's what

people want to your point. They want

they want to be able to like say, "Okay,

pay this with my Venmo or use my MX in

this situation or get me that flight in

some way and have all these wonderfully

smart agents do all the work behind the

scenes."

>> And that's actually tracks with exactly

what I've seen with Open Claw,

Perplexity Computer, Clawed Co-work.

instead of going to your notion, instead

of going into your Gmail, instead of

pulling up your calendar, you ask it,

"Hey, what's on my schedule this week?"

It brings it to you. So, you could you

could have a dumb, you know, flat

terminal, you know, chat interface on

the $100 device and it would do just as

good. Just to make the counterargument

against myself, I mean, yeah, even

though I think that you'll just

increasingly tell your agent what to do

instead of be clicking around or, you

know, touching the screen, you still

need a a dashboard or a user interface

to like check on it and just see

readouts of information. You still need

to be able to visualize it. Where is the

Uber that I've asked to be sent to me?

How far away is it? Still want to see it

on a map. So, I could imagine that even

if let's say, you know, Siri++ becomes

the dominant way of interacting with

your iPhone, you'll still want that

Apple user interface. Hard to say. I

mean, I see a lot of people out there

tweeting that Apple is brilliant for

kind of missing the whole AI wave and

not spending a lot of money on data

centers or capex.

And then there's other people who say,

well, wait a second, they're they're

missing critical capabilities.

Then there's a question of will they be

able to make deals for you know an AI

powered Siri? I don't know. I think this

is very hard to know at this point in

time.

>> All right. And we will be discussing all

these hard topics at liquidity

May 31st through June 3rd. Chimath some

big announcements here from you. You

have taken control. This is what happens

in the game of thrones known as the

allin

>> corporation LLC. the partnership. If we

partnership,

>> the chaotic partnership,

>> no mids there, it literally is chaos.

>> Wait, wait, wait. Why are we doing this

in California? I don't even think I can

I can go back to the state at this point

in time.

>> You can come for 48 hours make an

appearance.

>> Zero days in state at this point in

time.

>> I love it. I love it. You can do 48

hours. It's okay. Well, Gavin Newsome

might meet you at the airport. You could

get up at the airport.

>> The By the way, the airport is about 10

minutes from the venue. You could fly in

and fly out same day and you don't have

an overnight.

>> No overnight.

>> Is that how it's counted?

>> That's how it's counted as an overnight

in California.

>> Head on pillow. Yeah. You can come in on

Monday,

>> then fly, fly out to incline, sleep at,

you know, at our friend's house and then

fly back in on Tuesday and then fly back

out. You'll be fine.

>> Or you could fly to Vegas, do a

blackjack run overnight blackjack run,

and then you come back in the morning.

We just freshen up. Just

>> get your fresh shirt,

>> nice and rested.

>> Let me announce the next two speakers.

>> Oh my god, I'm so excited. But just for

background, Chimath comes into this

thing. Liquidity was this little

conference I did. It's now part of Allin

and I start setting up all the speakers.

And then Chimath goes, "Not good enough.

I'm not showing up unless I pick all

speakers." And you know what Freeberg

and I did? Well, finally this melon

farmer is going to actually do some

work. Great.

>> What did you call me? What did you call

>> melon farmer? It's a when um they play a

Quinton Tarantino movie on like TV.

Instead of saying Mother Effer, Samuel

Jackson says Melon Farmer.

>> Oh, I see. So this Melon Farmer took

unilateral control of the 10 speakers.

10 speaker slots. Very coveted.

>> Okay. So we've announced Dan Loe.

>> We've announced Sarah Frier.

>> Incredible.

>> And I'm very very very honored and

excited to announce that Bill Aman

and Andre Carpathy will also be speaking

at liquidity.

>> Four heavy hitters, six to go.

>> Two more goats on the roster of goats.

>> So goatated.

>> And we have a handful of other

>> Yeah, there might be some surprise

guests and unannounced guests show up.

>> Can't can't say DVD.

>> TB.

>> More announced soon, but we're making

>> Let's get Daario to show up. Daio, come

to the show. Come hang out with the

All-In Boys.

>> I'm really excited. I You know what

Andre is gonna do? What Andre agreed to

do is he's going to do like uh five or

10 minutes of slides on like the future

of the world with AI and then we'll do a

fireside.

>> Love it. That's going to be tremendous.

And you know, he's uh he's been on a

heater himself with his recursive uh

GitHub.

>> Oh, dude. Auto research is incredible.

And Bill Aman has a ton of points of

view on all of this stuff. So, we'll get

a lot of his thoughts. I want to give a

shout out to Freebrook because when we

did the interview with Jensen, he's

like, "Guys," I was like, I like had a

glass of wine on a Sunday. I like coded

a replacement to my HR system. I asked

all my team to do and I was like, "Oh my

god, this is incredible." So I asked our

folks, I'm like, "Hey, I don't like the

website. This is 8090." And the next day

they're like, "Yeah, we vibe coded a new

one. We'll have it up." And then I'm

like, "Well, do you like the CTAs and

how it's doing?" They're like, "No, no,

no. We put it into auto research and we

doubled the click-through rate. And I

was like,

to Freeberg's point, this was this would

have been many man months, tens of

people,

and instead all these recipes, by the

way, in these playbooks, you know, like

the person that runs growth at OpenAI

publishes his recipes.

>> Yeah. You've been clawed. That's it.

You've been oneshotted.

>> It's really incredible. This is why like

I I mean, you commented on my post

yesterday. I wake up every day and my

head spins. I'm like, what is what is

going on in the world?

>> It's crazy. Like, every day feels like a

new era right now.

>> Yeah.

>> And

>> it's it's disoriented

>> because because I I think what's really

interesting is you pull what would have

normally been something that's call it a

period of time out, like a year out or

two years out, and you can pull it in

and say, I can get that done in 3 days,

and I don't need to hire people. All the

sequencing and staging that would

normally go into accomplishing something

has been reduced, and then the time

rushes in. So all your ideas rush into

you and they're all like immediately

accessible and that's why it's like so

every day it's like oh my god like

that is I I have I bought the domain

name annotated.com like 15 years ago for

four grand and I wanted to create a

service like a bookmark service where

you like highlight a paragraph from the

New York Times and then you write your

comments on it saves it and you

basically have this service and I was

talking to some developer about making

it and I literally vibecoded it and the

Chrome extension this past week and I

was like, "Okay, I've been sitting on

this domain and project for like 15

years and I did it in a weekend."

>> Isn't it crazy?

>> Weird. It's like very weird.

>> This makes it feel like a simulation to

me that everything can just manifest

itself. It's the Star Trek version of

the world. Like remember the replicator

sacks where you just say Earl Grey tea

at this temperature? That's happening in

business now. You're like CRM system,

buildan annotated.com, build this new

website for 8090. Boop. and it's a

replicator just gives it to you. It's

very strange.

>> I've only felt this

feeling twice. Once I was on the outside

looking in. I was a derivatives trader

in Toronto. I was looking at the first

dot

wave and I was like, I got to be a part

of this. How do I get to be a part of

this? And I got a job in at Win Amp and

kind of the rest was history. Win him

the original iTunes.

>> But I missed the wave financially. It

didn't do anything for me. But I was in

the right place. You got to the beach

with a surfboard. That's all that

matters.

>> Then the second wave I crushed and the

move to mobile and social. But this wave

feels like a hundred times bigger than

that.

>> It's a tsunami by comparison. I I I had

three of these.

>> It's probably what it's like to be at

Nazareth in Portugal. You guys ever see

those clips of like that crazy place

where like there's like 100 foot waves,

>> 100 foot waves or whatever and you're

just towed in and you're like, "Okay,

let's just

>> Here we go. This could end one of two

ways.

>> Let it go. Glory

>> or goodbye."

>> No, I It was like literally when I first

saw a PC,

when I first got on the internet, and

then saw Mosaic. Like those two moments

in the early 90s and then seeing the

iPhone. I think that like those three

moment

>> was very special.

>> All right, rough week for Zach. Two

verdicts went against Meta in two days.

They were first found liable for

allowing child predators to access

minors on Facebook and Instagram. New

Mexico jury ordered Meta to pay 375

million in damages. The AG's office

there ran an undercover investigation.

They created fake child profiles.

Facebook, Instagram, these accounts were

contacted by predators. People showed

up, yada yada yada. A whistleblower and

former Meta engineer testified that his

own 14-year-old daughter received sexual

solicitations on Instagram. Then on

Wednesday, an LA jury found Meta and

YouTube negligent for designing

addictive platforms that harmed a young

user's mental health. Basically, the

plaintiff in this case, Saxs, said they

started using YouTube at age six and

Instagram at age nine. and she testified

that features like notifications,

algorithms made the app so addictive

that it caused depression and anxiety

through that compulsive use.

You have some thoughts on this and we we

had um Jonathan hate, right? Didn't we

do an interview together? Wasn't that

one of the first joint interviews? Free

>> you and I did. You and I did. Yeah.

>> Incredible.

>> Uh these things are obvious. He he had a

very important point which is to try and

keep kids off

>> cell phones and social media until

they're 16. and he was kind of

cheerleading this this verdict. But, you

know, I'll take a little bit of a

contrarian to the popular kind of

sentiment on this and I'll just talk

broadly about this idea of tort

litigation. Tort litigation, you know,

costs our economy $900 billion a year in

the United States. 900 billion a year.

That's how much is spent on the

litigation costs, the settlements, the

judgments. It's 3% of GDP and it's

growing roughly 10% per year. And these

civil penalties decided by juries like

they're, you know, going against big

companies like Meta and YouTube, but

it's also food companies, restaurants,

everything. Anytime there's a window to

sue someone and and extract uh value

from them, tort firms are all over them.

You know, it's called the tort tax now

in America. It's not just losses paid by

the companies because fundamentally when

a big company pays out these tort taxes,

they're going to invest less. There's

less R&D, less product development.

Costs stay high. there's new fewer new

product launches and there's all these

crazy restrictions on stuff. So, you

know, look, I I agree. Social media

causes immense harm, particularly causes

harm for kids. Kids should not be on

social media until they're 16.

Absolutely agree. Maybe adults shouldn't

either be on, you know, as adults. But

fundamentally, I think there's an

important question that we often ignore,

which is who is fundamentally

responsible for that harm? You know,

should the sugar beat and sugarcane

farmers be responsible for diabetes in

America? Should the soda companies be

responsible? The retailers selling the

soda, the FDA for not stopping it all?

And fundamentally, I think we have to

ask the question, what role does

individual choice play and individual

responsibility play in this equation? If

everything is a liability, if anything

any I I think we have to take personal

responsibility. I think the parents that

are absent taking care of their children

are responsible for harm to their kids.

You shouldn't let your kid play with a

gun. You shouldn't let your kid go to

some sketchy neighborhood after hours by

themselves. You shouldn't let your kid

play video games 100 hours a week. You

shouldn't let your kids eat nothing but

soda and potato chips. You have

responsibility as a parent. And I think

parents should keep kids off screens and

keep kids off social media. Once the

harms are known of excess use or the

harms are known of exposure to this sort

of thing, I think there's responsibility

that sits with the parents.

>> What about things like tobacco or

processed food or

>> Yeah, this is the key.

Look, I mean the same the same is true

of alcohol. I mean dude, like alcohol is

terrible for you. There's nothing good

about alcohol. But I think I should have

a choice on whether or not I want to

consume alcohol. Whether or not I

consume tobacco, whether or not I

consume processed goods and the

recognition that it's bad for you should

be publicized by the government should

be publicized by the government.

>> Right. So if I had to summarize what you

would say is product liability law makes

no sense. There should be human

liability and human responsibility

expectations in a society.

>> We never talk about responsibility. We

always talk about where the government

failed us and where these companies us

and we never talk about what did we

individually do wrong. How did I

individually choose to eat a hundred

[ __ ] sodas a week? How did I

individually choose to get my kids

addicted to social media? Where the was

I as a parent? Like we don't talk about

our responsibility. And by the way, this

fundamentally addresses this point about

human agency which I think is more

critical in this era than ever because

AI is going to flood us with everything

all the time non-stop. What we choose to

do in a world where we're already

getting everything and how we choose to

not take everything that's being offered

to us, I think is a critical part of

what's going to distinguish human

success from human failure. And it's

going to become more apparent in the

future. And not everything is about

liability and not everything is about

the government failing us. It's about

people making choices. And we don't talk

about it.

>> On the counter, I I I agree. Personal

choice super important. What you're

probably leaving out here, uh, which

you're definitely leaving out here, is

when these companies know they're doing

something damaging and they do it

anyway. That was the key to the RJR

whiskey. What about what about a a

whiskey company selling whiskey to an

alcoholic?

>> So, what about a potato chip company

selling potato chips to an obese person?

>> I'll put those two aside because I don't

think we've seen major cases about that.

But I will say the auto industry knew

for a long time about seat belts. You

remember that? And they didn't deploy

them. RJR Nabiscoco, they knew that

these were addictive and they designed

the cigarettes to become more addictive

and they didn't tell people about the

health risks. Asbestos, same thing. Lead

paint, same thing. This has happened

over and over again where corporations

subvert the release of information to

make additional profits. So the question

here with Facebook is did they know how

addicted these were? Did they know kids

were being assaulted sexually and and

they could have done something about it

or didn't they? And so agree that

there's

>> that's absolutely true. The kids being

assaulted absolutely true. Not not

releasing information about the level of

addiction if they had it. That's

certainly bad. Should the product be

legal? Number one. And if the product is

legal, who's responsible for using it?

>> You know, and and where do we draw the

line? And if we don't want people to

make choice, then we shouldn't put it

out there.

>> But if you as a corporation know it's

dangerous and then you lean into that,

>> if you know, as is the case with

Facebook, that this is super addicting,

super damaging to young girls, and then

you lean into making it more addictive

and you don't put safeguards in place

and you can prove that like RJR, like as

like on whiskey. What's the What

safeguards does a whiskey company put?

What safe What safeg guards does a

casino put?

>> Hold on. you asked the question age is

one

second after age which is what we're

really talking about with kids and

Jonathan hate would agree that they

shouldn't be using this until the 16 so

I think that's a perfect analogy uh age

gating and then labeling and then if

they know of something that's really

damaging releasing that. So there was a

whole thing about alcohol in pregnancy

and they covered up in the alcohol

industry or didn't disclose exactly how

damaging it was to drink alcohol on a on

a fetus on a developing fetus and then

remember all those signs went up in bars

in the 70s and 80s that was directly

because of that. So labeling information

and agegating would be the logical

things to do for social media and that's

what's happened the best. So that that's

the answer to your question. I don't

know about age gating, but I think

informing parents about the risks is

fine. Like that should be a

responsibility, but you know that the

tort lawyers are one of the largest

donors in political elections in the

United States. They donate largely to

Democrats in local elections and

Republicans in national elections and

then they are the largest donor class to

elections of judges. And it's it's a

business and I think we don't talk

enough about the business of court law

um the business of litigation in this

country and we often ignore this

question about choice and I don't want

to live in a world JL where the

government and companies are telling me

what to do and what not to do to live my

life etc.

>> Exactly. Jump in here personal freedom

and personal um responsibility versus

hey corporations maybe knowingly

>> parental responsibility Jal

responsibility in there as well. Yeah.

What do you think's next?

>> Well, look, there's no question that the

trial lawyers want to turn Meta into RJR

and Nabiscoco and the cigarette

companies and try to fit their fact

pattern around that. I just think that

the activity is fundamentally different

than smoking. I mean, smoking is

manifestally harmful to you regardless

of what your age is. And the only reason

we allow it is because of assumption of

risk. It's a free country. I think in

the case of social networking, it's much

more unclear what the harms are and what

the benefits are. And I think it's much

more subjective and it's much more of a

personal choice for adults and also for

parents. Freeberg, I mean, one area

where I disagree with you a little bit

is you said the harms of this are

immense and well known and understood.

If that's the case, then let's just ban

it for under 13 or under 16 or whatever

it is. But I don't think that's the

case. And because it's unclear, I think

it's up to parents to decide what's

appropriate for their families. And at

the end of the day, I think the right

way to deal with this is parental

empowerment. You give parents the

controls to set screen time limits or to

decide what apps their kids install.

Now, the debate has now moved over to AI

apps. And there's a lot of parents

groups that want to ban kids or

teenagers from be able to use AI chat

apps because there was a couple of cases

of self harm. Now, my reaction to that

is, look, I've got a 10-year-old and if

he starts using Chat GBT to get answers

to questions, I would consider that to

be a good thing. I mean, I'll keep an

eye on the usage, but I want him to be

an AI native. I want him to be able to

do research, you know, I want him to be

able to know how to use these tools. I

want him to get the right skills to be

successful in the 21st century. In

China, they're incorporating AI into K

through2 education. Are we going to ban

it for our kids and teenagers? I think

that'd be a terrible mistake. So, I

think when it comes to AI and AI chat

apps, it has to be up to the parents

because there's too much manifest good

that can come out of kids learning how

to use these apps. Maybe social

networking is in a different category.

But I got to say, I do think that the

harms have been exaggerated because the

trial lawyers have an incentive. And

just to give you some facts about that

LA case, so just so you understand,

in this LA case, they were sued by a

20-year-old woman who claimed that she

became depressed

because of using social media, and she

apparently suffered body image issues

because of social media, and she was

able to win this judgment for millions

of dollars. Look, I think there's big

causation problems with that case. In in

the case of that pliff, the evidence

showed that she came from an abusive

home. Her father had abandoned her. Her

own mother had body shamed her. So, it

was very unclear where her body image

issues were coming from. I think it's

possible that social media contributes

to them. Or it could just be that social

media was a scapegoat. I also got to say

that I do think it's it's a dangerous

precedent. I mean, are we going to allow

plaintiffs, lawyers to sue Spotify

because you created a playlist of sad

music

>> and that music contributed to your

emotional distress? I mean, that's kind

of what we're saying. You got to

remember these are free services that

people have a choice whether to use them

or not. And if social media is making

you feel bad, if listening to the wrong

playlist is making you feel bad, then

stop doing it. But what's going on here,

I think, is the trial lawyers are trying

to create the next big tobacco and their

goal is to try and sue these companies

into oblivion. And I don't think that's

the right answer either.

>> The consensus, Chimoth, is kids who use

this two or three hours a day. this has

been across many um survey uh many

research studies is that it's massively

correlated with depression and anxiety

um and eating disorders specifically in

young girls like if you get to two or

three hours a day of this. So that

correlation's I think pretty well

established. you pretty famously said,

"Hey," and you worked at Facebook, so

you saw this coming, but I think at

Stanford 27 2018 time frame, you

actually had some comments on this. We

could either play the clip or you could

just describe it, I guess.

>> I said what was obvious to me then. I

lost a lot of friends at Facebook when I

said it, unfortunately. But essentially

what I said was, I don't let my kids use

it, and I don't think that this is a

constructive part of a developing

child's diet.

I do think that Sax is right that I view

AI chat differently. There are different

guard rails that are required so that if

you go down some sort of you know dark

corner

but that's possible to understand and

the product is architected in a way to

create culde-sacs. So if that if you're

thinking about self harm or you're

thinking about these other things,

social media is very different. It's an

incredibly fast twitch algorithm and

that's the optimization and until the

incentive for that optimization changes,

these outcomes will continue to

compound. I think the interesting thing

is that the LA lawsuit was an individual

lawsuit. The young woman I think was

awarded three or $6 million.

>> Yeah. The other one though that they

lost this week was in New Mexico and

that was for $375 million

and that was more around I think child

exploitation.

>> Yeah.

>> The thing that I'll note is that these

trial lawyers which I'm not a fan of

either have been trying as Sax said and

as Freebrook said to make these folks a

target because there's so much money on

the line and they've been batted back

pretty successfully. But this was the

first time where they were able to

navigate the section 230 protections

that Facebook and Google have typically

used to protect themselves because

Google was a part of the LA lawsuit

and they were able to go down the

pathway of product liability language.

Now to Freeberg's point, I think he's

generally right. I think it's my

responsibility as a parent to take care

of myself and my children.

But to the extent we don't change these

product liability laws that are on the

books, I think the door has been opened

and a map has been drawn, which is this

is how you navigate around section 230

and you can get a decisive lawsuit in

your favor against these large companies

with enormous cash flows. And so I

expect that this will be a death by a

thousand cuts kind of scenario where

folks are just going to rally around

this. I don't think it's right, but I do

think that that's the rational reaction

to what just happened. I mean, look, $6

million to an individual 20-year-old

girl or $375 million. These are huge

numbers. And the reality is that I think

we've opened the floodgates. I do think

there should be a better response and I

do think that parents should take a lot

more responsibility. But I do hope that

these products allow us a kill switch

for when our kids are under the ages of

16. Frankly, I would love a kill switch

under the age of 18. And there has to be

simpler ways to age validate. You know,

we used to work around this thing called

Kappa compliance. Kappa's [ __ ] It's

a nothing burger. Like a six-year-old

can vibe code their way around Kappa. So

it doesn't do anything then. So age

verification is completely broken. It's

harder to get age verified for a porn

site than it is to get unageverified for

Facebook.

>> Say more Chamoth. How did you get around

it?

>> Yeah. How do you know that? How do you

know that?

>> That's just for uploading. You were

uploading at the time. This is not your

only proof of proof of a

>> we actually deal with this in our new AI

framework that the administration

released last week because the number

one issue is around online child safety

which I think again is mostly about

social networking but it touches on AI

and so it's kind of gotten lumped

together and I think we're I mean I'm

referring now to the White House has

said it's willing to support some form

of age assurance technology and parental

controls. So, look, I think there needs

to be a conversation around how true it

is that social networking is just a

fountain of ills for young people. If

that's true, then why wouldn't you just

disallow it, right? But if if it's

unclear, and I think it's more on the

side of unclear, that's just me.

>> Uh then it's up to the parents and what

you want to do is again have the age

assurance technology and the parental

controls and let the parents decide. I

don't think that social media is net

badly

speaking, but I will tell you that if my

child uses it for two or three hours a

day for multiple days in a row, they

become [ __ ]

>> Yes, they act weird.

>> And so I don't know what to tell you

except I would love a kill switch until

these kids turn 18 on all these

products.

>> This has to do with dopamine, by the

way. these. What I do instead is I use

Apple's Family Sharing, but it's hard.

And I'll tell you how why it's hard. Our

schools give our kids Chromebooks and

say, "Use these Chromebooks because

that's the way you're going to access

your LMS, your information, your

content, your homework." And you know

what's an integral part of that?

YouTube. And then now it becomes a back

door. So even when we take the devices,

I take my devices, we lock them down.

You can't bring them to your room. the

whole thing.

But if they need to do homework and I

catch them in a little break, I'm like,

"What are you doing on YouTube?" They're

looking at shorts,

>> of course.

>> That's what they do.

>> Yes.

>> And so it is a whack-a-mole problem for

parents.

>> I think uh I'll I'll just give myself

the final word here on behalf of the

group. It's obviously addicting.

It's obviously the industry has not

policed itself, nor would they police

themselves because they want to get

people addicted now. Also, they're

addicted when they're adults. The rest

of the world has realized this.

Australia now has 16 enforced. Malaysia

16. Other countries are right behind