So we start with anthropics monster

week.

>> We may be at the stage where we throw

the humans under the bus, not the AI

anymore, which I think at some level is

pretty terrifying.

>> We move to open AI killing Sora.

>> I think shooting in the head is even

more significant.

>> A big part of the whole strategic

direction of the company was flawed.

>> Agreed. You're seeing the economists,

the accountants have wandered into the

room and they said, "We have a scarce

resource here. Let's optimize it. Let's

devote this compute to the people who

can pay the most for it." And then we

finish on the man with the biggest balls

in tech, Massa. You haven't lived till

you've seen an 85% decline in an index.

>> This is one where it's just backass

barkwards. I I don't believe there's

right or wrong in money. There's just

money.

>> I just don't think raising it 5 or 8

billion when you're at 80 million or 100

million of suspect AR is the most

exciting accomplishment in the world.

>> Let me be direct. Get the over it. You

should conform your company around your

customers and your model, not your VCs.

Being mean to a billionaire is actually

a feature.

>> Ready to go?

Boys, welcome back. It is this week in

Anthropic, otherwise known as the SAS

OG's, which has been renamed. Um, I want

to start with, you guessed it,

Anthropic. unbelievable 28 day month of

February where they did 6 billion in

revenue which was more than data bricks

has done in their entire lifetime. You

know what I think was the most

interesting news out of anthropic this

week? It was actually the the accidental

leak of claude mythos uh essentially

3,000 unpublished assets leaked. Um it's

a 10 trillion parameter model apparently

that is this next level step changing

capabilities that they're not releasing

because of how powerful it is. This is

by far the most interesting to me.

Jason, how did you think about this

news?

>> Well, look, obviously it's embarrassing,

right? To anthropic to to to leak it. Um

I actually just think we're going to see

more and more of this accelerate. Um the

faster we vibe code, the faster we ship,

the more corners we cut in general on

application level security, it happens.

I mean so many folks are accidentally

uploading code to insecure GitHubs to to

database to to superbases that are by

default open. So this is this is

accelerating uh our data which is just

open on the internet and and you could

say god this shouldn't happen at the

entropic level and I'm sure someone will

get will get scolded, right? I'm sure it

will. But overall, this is accelerating

and it's going to accelerate even more

as we let our AI agents make decisions.

Our agents are going to decide where to

put code. They're going to decide what

level of security to use. And this is

going to become happen stance. And you

know, it's funny. I mean, people were

like, "Oh, how could Anthropic have a

new um security agent and have this

happen at the same time?" I think

they're they're I think it makes perfect

sense. the anthropic AI security agents

which I've basically used in Replet's

very very good and it also makes sense

as we rush we're going to leak source

code data PII right it was I don't know

whether it's happened it was reported

today all of Merur's data leak it's

being held hostage all of it every

single interview every single piece of

PII every single piece of humans and so

are you know we used to mock these I

think it's going to start happening

daily and weekly in the agentic era and

it doesn't excuse it but but it's Um, it

it's a reality. Agents agents are goal

seeking and agents are going to make not

only are they going to make the same

mistake as humans, they're going to work

a thousand times faster. So even if they

make the mistakes 10% as often, Rory,

help me with the math. If they do a

thousand times more productive, they're

still going to make a hundred times more

mistakes. So we're going to see it

everywhere. Again, just for perspective,

because there's two things going on

here. Entropic. Some data leaked from

Antropic about their new model mythos

which of itself is meant to be amazingly

powerful in dealing with cyber security

and there was a whole consequence that

we'll talk about in a second in terms of

how that impacted cyber security stocks.

But as Jason pointed out, the level of

irony here is acute because it was an

inadvertent leak. So you had the

situation where a a model that's meant

to be amazing for cyber security

actually leaks via cyber security leak.

So that's kind of so we're toggling

between the two on the cyber security

leak. It was noseworthy entropic quote

unquote blamed human error, right? We

may be at the stage where we throw the

humans under the bus, not the AI

anymore, which I think at some level is

pretty terrifying, but and and you know

exactly what happened. You see this I

mean not down in the weeds you often see

this where you know you're about to do a

big announcement you have your content

management system you stage all the

assets you know be it their Fed press

release or in the UK it happened on the

budget if you remember Harry the budget

you have the press release ready to hit

play the minute the budget is ended and

someone inadvertently forgets and put it

on the public side in advance. It's the

same thing here. So it probably was a

human error. with a whole bunch of

content ready for I don't know pick a

date the March the May 15th announcement

of Mythos they forget to secure it

correctly and out it goes so so that's

the first thing right so that's kind of

the that's the embarrassing part of it

and then the interesting part of it and

you really do have to do this not

without sniggering despite the fact that

it all leaked you also have to

separately talk about the fact there's

some big claims on mythos right and on

topic we're making via again via this

leaked memo reminder no one else has

seen seen it h the actual model um at

least not publicly available. Obviously

some people have seen it but not

publicly available and even I was trying

to get copies of the leaked memo.

There's just a few screenshots at this

stage. It's hard to track it down at

least quickly anyway. But the statement

is it's way more powerful. Second thing

is it's going to be way more expensive

for them to serve and therefore it's

going to be way more expensive for

customers to buy. And then the third

thing is a particular focus on cyber

security. It's meant to be quote unquote

extremely good at detecting cyber

issues. And the result of that and the

result of that was a four or 5% decline

in the average cyber security stock last

Friday when this leak happened.

>> Yeah, just two maybe just two other

things on the league just for for this

tradeoff. Um, you know, I'm dating

myself, but when I was at Adobe and we

were acquired, we were an early customer

of GitHub. Um, and so we were putting

source code in the cloud and that was

banned in Adobe at the time. It was

banned because the source code was their

crown jewel. It was pretty easy to to

make a crappy PDF reader or a crappy

image generator. But to do what

Photoshop or Adobe Acrobat did, all the

exceptions, all the corn the thous tens

of thousands of corner cases was the

crown jewel, right, of of the company.

And so everything we got the first

exemption to be able to use source code

in the cloud and pros and cons. But when

when they used this onrem source code

management tool, it took a month to do a

release. a month a month. Okay, now

we're doing 60 releases a day, right? Or

even Enthropic, fastest growing

enterprise company of all time, is still

doing massive releases every month or

two and dropping features every day,

right? So, we went to something that

took 30 days at a tech leader to

something that takes hours. There's tra

there's tradeoffs there and I I'll take

them, but we're going to see it explode

in terms of like the stuff that was

published today.

Going back a few threads on show number

50 to Rory. One of the things that I

thought was pretty cool in Chyros was

two things. Um, always on background

assistant that works constantly. Our AI

is working with us 24/7 and agents that

can sleep, wake, and self-resmpt.

The autonomous agents, which I've been

talking about how this is going to

consume orders of magnitude more tokens

and change our life. I I'm excited to

see more coming. And you know, Open Claw

was just this this brief thing that woke

us up to what Enthropic appears to be

all in on, right? Truly autonomous

agents running 24/7, hopefully safely,

hopefully not leaking all of our source

code, but it's coming soon, right? Not

these, you know, this whole idea that

we've been doing. When we started this

podcast, you went on to chat GPT or

Claude. No one had heard of Claude when

we started this. I was a quirky guy

using Claude. And you talk to it and go

back the next day. The next release,

it's gonna be on all the time. All the

time. Debating Harry's latest

investment. Was it big enough? Is he too

concentrated in the fund? Where should

he go? What was Rory thinking on that

deal? Right.

>> Why was Rory abusing Harry by email

again for the second time in a day?

>> Laugh, but this is the future. I'm

excited to see it coming sooner when our

agents are 247. like they're literally

around us and we give up all of our

personal freedoms and autonomy as part

of it. I hear you on the embarrassment

of it being leaked and you know the the

human error element but while anthropic

has mythos which is supposedly as

powerful as it is you're juxtaposing

that with open AI [ __ ] around with

killing Sora kind of ads not really

working and people being unhappy with it

and it's seeming like this massive chasm

of the progression of force that is

Dario and anthropic continuing faster

and harder than ever with a fault

altering confused and dazed open AI

wandering around the product desert

trying to find some water.

>> You're just being mean. I mean, again,

as I said last, and I'm sorry to repeat,

>> is that not fair?

>> Yeah, but again, narrative is overdone

on both sides, right? So, um I think

some parts of it are true. Obviously,

you're true in a bunch of different

things. The decision to shoot Sora in

the head, right? Almost certainly a good

decision. Look, it's obviously

embarrassing to say something is going

to be amazing less than four or five

months ago and then shoot it in the

head. But if it's a mistake, give him

credit for at least saying it's a

mistake. Move on, right? And yeah, that

relationship with Disney again, I think

I I'm going to give I I it wasn't me. I

was sneering at it on real time when it

happened. I think someone else in this

podcast said it's really significant.

Just saying, right? It's clock.

>> I do I think it's massively significant.

>> I think shooting it in the head is even

more significant.

I think it's saying that the ent a big

part of the whole strategic direction of

the company was flawed.

>> Agreed.

>> The whole that we are going all in on

consumer that from what I read Sor made

singledigit millions of revenue, right?

And was consuming a million a week,

which actually sounds way too low,

right? It must it must have consumed

billions and made single digit millions.

It makes no sense as a product either in

the short term or the long term. But if

you want to own the whole consumer

experience with AI, you've they decided

we have to own image and video and

Anthropic never even attempted to do it

right. So it's a massive retreat. It

doesn't mean it's the right it's

probably the right decision to your

point. In fact, almost certainly is. But

man, that's a our strategy was wrong.

Like this is a huge own goal. Our

strategy was wrong.

>> Agreed. But I and I agree with that. But

I still think that, as I say, I still

think Harry's over kind of overeagering

it a little bit cuz look, you made a

comment about ads that I think is caught

effectively

implying that the ad strategy hasn't

worked. That's a bit of a a bigger leap.

I mean, Sora hasn't worked. They've

killed it. I think I'm with Jason. I

think that's smart because I think one

of the things you're seeing right now is

in a world of scarce compute and

astonishingly despite all the

investments that we've seen in terms of

actual available compute for people to

sell AI on we're in a scarcity mode. You

don't devote compute to things that are

highly compute intensive and low revenue

intensive. I mean and Sora was almost

the definition of that. video generation

is extraordinarily comput intensive

relatively speaking and the revenue is

almost minuscule conversely you know

codegen while it is comput intensive is

orders of magnitude less comput

intensive and there's real dollars

attached to it so you're literally

what's happening right now I actually

think at a at a higher level it's

actually very healthy you're seeing the

economists the accountants have wandered

into the room and they said we have a

scarce resource here let's optimize it

let's let's devote this compute to the

people who can pay the most for it. So

that's the Sora comment. On the ads

comment, Harry, it's early days for, you

know, JPT ads, but again, I cite that

quote that Brian Kim that I thought was

really good. Of course, they're going to

run damn ads because there's no other

way to build a mass consumer business

and they have no choice, right? because

you know their their consumer conversion

rates run roughly 5%. that gets them to

a I think a roughly 1015 billion dollar

consumer business, right? And you know,

out of their 500 million uniques or

whatever it is. So, one of two things

has to happen in the consumer business.

Again, I'm going to leave the enterprise

business out on the consumer business.

Either A, they take that conversion rate

to a number we've never seen before from

a typical consumer business. I think

that's unlikely. I don't think most

consumers are going to pay 20 bucks a

month for this. Or option B is you make

an ad business work. They got no choice

to make it work. And by working, I don't

mean a hundred million dollars. People

are kind of ragging on the hundred

million. It's in the noise. It's scale.

Big picture here. Facebook and Google

each do 200 billion plus or minus a year

in digital ads. If these guys aren't

doing 20 billion within a couple years,

they're not even in the game. And to get

to the market cap of I mean remember

Facebook has a 1.7 whatever it is

trillion market cap doing 200 billion.

Alphabet/G Google has a three trillion

market cap doing 260 billion plus thing.

If they're going to grow into the market

cap on the consumer side, 20 billion is

not enough. They have to do 50 billion

70 billion of ads. So unlike Sora, this

is not going to be a try the ads and

then fold. This is a there's only two

existential bets for this company. One

of them is ads to make the consumer

business work. And then the other is oh

my god, we should have done coding all

along. Let's get a competitive coding

and enterprise model out there and

compete with Antropic on that side. So,

those are the only two things they're

doing and they're the only two things

they should be doing. It's

straightforward. I mean, I actually see

this as good news. Like, at least

they've like we've gone from the let's

wander around the woods feeling cool

building [ __ ] to there's only two things

to do. Let's get them done. I It's net

net. It's a positive. Better late than

never,

>> man. Did they had the Wall Street

Journal this week, they had uh they had

a story of why Daario left uh OpenAI.

Did you

Yeah.

>> I mean,

>> yes, I did.

>> The amount of tension at OpenAI, the

fact that

>> Greg Brockman

>> recruited them and no one would work for

him. He and D and his sister would not

work for Greg Baku, would not talk to

him. They would not allow him to be part

of the LLM or GTP groups. Um, then Sam

had to constantly tell each of them that

they were in charge, right? Told Daario

he was the boss. then told Ilia and Greg

they could fire him at any time if they

wanted to fire Sam, right? Then begging

then Daario to come back. Then Dario

saying he would stay only if he directly

reported to the board and nobody else.

I mean the level and then and then

firing Sam and then bringing him back

and then Sora and D Sora and we're not

doing coding. It's just I mean I'm

exhausted. I I maybe I'm wrong. I have

to think at least someone like me would

feel much more comfortable in anthropic

where it appears there's a much more

consistent process in leadership, right?

Same founders, same things, same goals.

It just I have to think a company

organized like that's just going to ex

out execute someone with that level of

drama. I I I almost can't take it.

>> You're going to kill me for this, Rory.

It's the best thing for OpenAI not to

buy Sierra, incorporate that as its

customer support product and have Brett

Taylor come in as the day-to-day CEO and

Sam can be fundraiser. Sam can be master

of

>> I'm not in the boardroom. So, you know,

I I hear look at the end of the day,

>> at the end of the day, I think you're

right, Harry, and I would favor that as

a board member, but I'm not going to say

that publicly because I don't want Sam

to break my balls. I am too unimportant

for Sam to even give a [ __ ] about.

Right? So, I don't worry about that at

all. So, let me say this delicately.

That amount of board level and senior

team level turnover over an extended

period of time is probably the highest

warning signal that you could have as a

board member about how your CEO is

doing, right? And if if it was anything

other than a founder, let's put it this

if it was anything other than a founder

company and this level of drama was

going on, you'd probably be having you

probably sitting down with the CEO and

asking how's it going at least and what

are you thinking of doing about this? Um

I don't think you turn on people just

when things go to [ __ ] But you probably

want to cut down the drama from here,

build a team and try and call a shot and

play it for more than 20, you know, for

more than 6 months at a time. when

you've worked at or observed startups

where the CEO is spending so much of

their time load balancing talent that

can't work together versus when you've

worked at one or with one where the

talent's rowing in the same direction.

To say that it's night and day would be

an understatement, right? It's like the

the the backside of Pluto and the front

side of Mercury and it's just ex and I

think Sam we can criticize him actually

when I read the everything I've seen and

then when I read the Wall Street Journal

it's like my god this guy has spent so

much time load balancing the drama of

these extremely brilliant personalities

that just oh my god that that can

consume number most of your time as CEO

most of your time load balancing

>> you're exactly right it is the drama of

you know we're not dealing with a bunch

of people just trying to crank out some

B2B software and make a paycheck. We're

dealing with people who are angsting

about whether this is going to change

the world, who have fears about the

technology, who have yeah, desires to be

seen as credited for the technology

despite their fears about it. This is a

I mean, as is often the case,

extraordinary talented people come on an

extraordinarily high bandwidth,

a a demand on attention and care and

feeding. It's it's been a real slog, I'd

say.

>> Okay. The man with the most balls in

investing, Massa Sun. Soft Bank gets $40

billion bridge loan to buy Open AI

stock. How deep can Massa go? He'll go

as deep as they let him. I mean, that's

the one thing we know. If they give him

another 20, he'll borrow that, too,

right? I mean, look, this is a high I

checked the Soft Bank. You've got Soft

Bank holdings. Have to be careful.

There's the telco group which is you

reasonably levered at the Japan level

and then soft bank group is around it's

around 2x levered right one and a half

to 2x levered in terms of equity right

what that means is a 30 40% decline you

know wipes them out right it's a very

aggressive stance right it would be like

me taking our $800 million venture $900

million venture fund borrowing 1.8 8

billion and investing at all and if you

if it works I make you I really juice my

return but if it goes wrong by 30% I'm

done right and it's just it's it's super

aggressive I mean I suppose his lesson

is mass survived 2002 when I remind

everyone the NASDAQ went down 85%

you haven't lived till you've seen an

85% decline in an index right and

obviously if that happened or anything

like it

um you'd just be way on the water,

right? So, it's it's a it's a fairly

high amount of leverage for an

investment fund to say the least.

>> Yeah, I mean for for sure it's it's

dramatic. Having said that, you know,

real estate investment funds get the

maximum leverage they can by design,

right? That is how they work. I would

imagine if venture had access to more

debt, we we'd all we'd all load up on

it. if we all could if we all could do

the growth rounds in your hottest

company and uh may maybe we would and we

could get we could get all the carry

from it with uh and the worst thing is

we leave the keys to fund seven on the

table we might we might load up too I'm

not sure but certainly real estate funds

load up as much as they can

>> but just pushing back again because real

estate funds load up because the cash

flows are predictable right at the end

of the day I mean look in

>> well and they can but they can because

the cash flows are predictable they can

load up

>> agreed

>> right we don't we it's just harder for

my little fund to go to Silicon Valley

Bank and borrow 200 million against the

>> inium of risk. I would argue the Soft

Bank portfolio, not the telecom company

at the subsidiary level, but I would

argue the Soft Bank portfolio is more

like Jason fund than it is a real estate

fund. So, I think it's a high level of

risk.

>> Well, plusy, what did he lose on

Weiwork? 12 billion. He know he knows he

knows what it's like.

>> Yeah. The two big assets from memory are

um obviously the open AI position and I

think the ARM position which I still

think is in um the the the in the

holding company and yeah but I mean

amazing companies worldass companies

easily imaginable a border would decline

30%. So yeah it's a hell of a way to

live. Speaking of declining 30% and

being in the hole, we we touched on it

earlier, but obviously Mythos leak

hammered cyber stocks. Uh, Crowdstrike,

PaloAlto, Zcaler all down 6%, Octton,

Netcope down 7%, Tanimal down 9%. Was

this a justified dip or is this an

unjust reaction to anthropic news? was

listening carefully to the name because

I was listening carefully to the names

and there's different aspects of

security and some of them I can say yeah

maybe that overlaps and then some I go

that's just a different thing right and

when you listen to all the names been

thrown out you say that's just you know

baby with the bath water cuz step back

how does how does entropic you know make

security better at the code development

stage they can look at code and find

security flaws so there are companies

that upfront

um do something like that and you know

application security companies and you

could argue that this is a different way

of doing that maybe some of those guys

will be impacted right what they're not

doing for example is real time perimeter

defense they're not in a run in a real

time basis you know blocking people like

a firewall right nor are they doing what

for example octa does right which is

single sign on and authentication that's

simply not what they do it's a different

thing and the fact that both of those

kind of stocks sold off says it's just a

kind of knee-jerk reaction rather than

anything thought true. It will have an

impact. If you were doing application

security or code review for secure

security code review, you're probably

going to have to either incorporate how

this works in your analysis or you'll be

redundant just as the the coding

companies anyone kind of just as GitHub

had to roll in complete models and

figure out how to adopt it. Right? So

for some of them this is really going to

matter and then for others it's like

it's just a different thing. Stepping

back, I think we're in the panicky

stage, right? I think we're in the stage

of because these companies are doing so

well, because they're private, no one

sees the numbers, because AI is so sexy

and so potentially amazing. We're at the

stage now where everything, anything can

cause a panic.

>> Robin Hood was down like 10% because

Elon didn't potentially give them the

tender and was going straight through

Erades. And that alone was like a

massive hit for them.

>> Obviously, there's a panic in the

market. And the question is, is the

panic justified, right? The panic is

that this revenue is not durable, right?

That's the panic. The cyber security

one's really interesting in my in my

experience and opinion. This is one

where it's just backass barkwards. Um

because if you're in the agentic world,

this is the golden age of security. The

number of security threats and issues is

going up orders of magnitude. Claude

leaking its source code, it doesn't

matter. the number of of apps exploding.

The number of like there's so many

mobile apps that app store is like it's

like a month to get your app reviewed

versus a week. It is everything is

exploding. These apps are being built by

agents. They're being built in

unpredictable ways. Folks aren't looking

at the code. The pace of features being

shipped, products being shipped, corners

being cut. This is a golden age of

taking any mature category and

acknowledging good news for us. There's

more threats. Good. whether I don't care

whether it's application level perimeter

and like the good news is threats are

exploding and that the whole shtick of

cyber I'm not a real cyber security

expert although I'm doing another

investment right now for just this

reason the whole shtick in my whole

lifetime has been look you've got to

constantly buy new products because new

threats keep emerging like this is

there's been a golden goose of cyber

security that has allowed new entrance

to come into a conservative category

someone like whiz will show up and say

guys we know how to do this on the web

And people are so terrified of new

threats, they'll take the meeting.

Right? This should be the golden age for

new and existing investors because the

threats are terrifying. And you can't

stop the rogue engineers that vibe coded

something that accessed your data. This

this should benefit everybody. Like

everyone should be a rocket ship. Like

everybody built like everybody

monetizing GPUs is a rocket ship. We

have and the fact that the market

doesn't see it shows we're in a in my

opinion we're in a true panic which is

hard to predict a bottom. But I don't

get it. Everyone should be benefiting

when you see an explosion in application

production and a change in the paradigm.

The change in the paradigm is good for

everybody except you know Windows

Defender from 1996. Like it probably

doesn't help that product or whatever

the hell they have but anyone everyone

with engineers should benefit.

>> I broadly agree with Jason. I mean there

might there are more than Windows

Defender 2006 that might be impacted. As

I say some of the application security

code review stuff could be but big

picture Jason's right. Instead of having

people trying to get into your firewall,

we everyone's now downloading an agent,

giving it full root access to their

computer and telling it have a go. And

as Jason just pointed out, work

overnight. It's going to I mean no one

yet it's funny we my colleague Aar who

does a lot on the security we've been

looking at a lot of these companies no

one yet knows the exact approach that

we're going to have to take to defend

against agents running within the

organization but everyone 100%

understands that this is this is a

emerging mega threat because of the

velocity adoption times the power of the

solution so I I agree with Jason it it

mightn't be the old guard that takes

advantage of it But there's no but they

tend to be I mean one of the things I

admire about the security companies is

the crowd strikes the PaloAlto networks

of this world is they know damn fine

that when a new thread emerges and a new

solution emerges for that threat when

when an earlier winner comes out you

better spend your 300 million bucks your

500 million bucks and just swoop up the

winner and add it to your product right

so I think there'll be a ton of fast

acquisitions

as agent security solutions emerge you

know and and people will be doing if

they're smart And I think those two

companies are extraordinary smart.

They'll be doing acquisitions long

before it's quote certain because you're

going to have CIOS come and talking to

you, right? One thing worth mentioning

on that is it was interesting again I

and somebody leaked information from

Anthropic. They're masters at selling

fear. One of the things they're doing is

they're releasing the mythos model first

to sis within companies. It's kind of

like, oh, it's so scary. we're going to

give you this model and give you time to

figure out how to use it. Of course,

part of that time will involve giving a

million bucks to Anthropic for um so

it's just great marketing. So, they're

actually leaning into that and saying to

the sisos, you're going to have to

figure this out. This is the new

terrifying weapon we've invented. Please

give us a million dollars and we'll let

you defend yourself with it. also great

marketing and but it speaks to the

perceived to Jason's point it speaks to

how correctly afraid every security for

um SISO should be given the pace of

agentic AI adoption in the enterprise

>> the golden age of cyber

>> I mean it's just it's just how hard is

it to get a meeting whoever you are if

you have any established brand we we

we've got a new agentic product we're

going to help protect you from this

you're going to get a meeting that

afternoon,

right? Wish I bought them over Figma.

That's a depressing chart that I'm

looking at. Um,

>> you need to let go, Harry. You need to

let go.

>> Down 30% in a month, Rory. It's hard to

let it go after 30% in a month.

>> Okay, no crying in the casino. Move on.

>> We we I do want to discuss revenue kind

of questionability. Uh, we've got

anthropic recognizing revenue in a very

different way to open AI. And then you

also have questionability around

emergent labses um and is it okay if

error is kind of

questionable in sorts of how it's

accounted for. Um how do we think about

that? You can choose which one you want

to take.

>> Let me just can I just maybe Rory can

dig into it but I'll I'll tell you

there's one startup I invested in that's

over 100 million ARR and I get them I I

I own just enough to get the investor

updates. It's not I'm not on the board.

And I get three numbers every month.

Three revenue numbers. I don't know what

the hell they are over 100 million, but

the smallest one is ARR.

Now, I invested at seed. I don't really

care. I'm in the money. I don't I don't

have a choice. But I I can't understand.

This company's doing great, but I can't

I for the life of me, I cannot

understand these three numbers. And

there's asterisk and daggers, and

there's charts that go every, but they

keep going up and to the right, which I

think was on this emerging thing. We

could talk about our next. I think

that's what some of the investors said.

Who cares? But I can't tell the hell the

difference what a what an ARR is in

2026.

>> Well, what I always get is like pipe,

which is complete [ __ ] the

contracted and then there's live. So,

first of all, stepping back to be fair

to both Entropic and OpenAI, they have a

very clear and sensible

>> way they define AR. What they take is

they take the last the average of the

last four weeks to smooth out times 13

because there are 13 four-week periods

in a year which is more sensible than

monthly because you have these varying

months. So they're basically what

they're saying is realized revenue for

the last four weeks averaged you know

the average of the last four weeks times

30 that sorry obviously if it's the

average is times 52 but basically it's

actual gap revenue. what did we bill for

the last four

the average across the calculated across

the last four weeks to take into account

how it is that's their run rate right so

it's actually pretty it's not commit to

be fair to them it's not committed or

any of the [ __ ] kind of higher level

stuff it's actual money flowing through

the system and traffic is roughly at 19

billion according based on that kind of

trailing four month four week metric and

open AI is around 25 but now let's talk

about your thing there was this kind of

whole meme of OpenAI reports net on

their partner revenue and Entropic

reports gross. And what they're saying

there is if OpenAI sells through

Microsoft and Microsoft takes some money

off the top, OpenAI only reports the net

amount. If Antropic sells through AWS

and they sell $100 worth of revenue,

they report the gross amount and then

they give 20 GR $20 back to Amazon as a

cost of sales. So there's two different

methods for what looked like the same

revenue kind of nicks or same revenue

approach.

>> I thought you were going to extend that.

I thought part of where you're going was

to Michael Canon Brook's point on the

show was that a lot of this revenue is

getting double or triple counted because

it's being recognized and not only does

this happen then cursor is selling it

again and recognizing the revenue right

the same to people keep reselling these

tokens again and again and recognizing

them as their own ARR. Um how many times

do we get to resell these these poor

little tokens? I think that's actually a

great point, Jason. I hadn't got, but

you're exactly right. No, it's like the

everyone's got amazing revenue growth

because it's the same little token going

to this little token.

>> I mean, if we all agree to have

essentially 0% gross margins, an

infinite number of us can keep reselling

tokens to each other, can't we?

>> This is our new 20 VC scale faster demo

day. We all resell a million tokens to

each other on the first week. So

everyone in batch O001 has a million ARR

its first week because we just resold

our tokens to each other. So it's

completely fair. The VCs don't mind. And

>> and you're exactly right. And the

sentence that you added in passing is

the key one. Until we all have to get

profitable, all this, you know, can

continue. And then at some point, that's

why I said I think you're starting to

see it. Someone's going to have to say,

assuming we want to have a net present

value and a cash flow, what's going on

here? And then

and then all this becomes more clear. I

I didn't comment on the um emergent labs

fastest to 100 million.

>> Jason, you actually tried You tried it,

didn't you? You thought it was good.

>> I did. I thought I mean listen, it's

hard for me to know the criticism,

right? You know, some folks in the press

in the India B2B environment tried to

make this some sort of scandal, right?

Because and in a sense, fair enough. If

you go to emergent labs and emergent

labs is sort of an Indian competitor

replet and lovable, which I'll show you

what I learned in a minute, right? And

if you go right now to the homepage,

they say 0 to 100 million I think in 8

months. It's right there. It's the

biggest banner. So, in all fairness, if

you're going to put yourself out there,

not not just as a tweet, but if it's

going to be right there on your website,

one would expect 70 to 80% accuracy in

that number, ideally higher, right? So,

if it's lower than that, I think it's

fair that some daggers came out. But I

was curious. Um, but I don't actually

know what happened. Is it triple

counting to I I can tell you one thing

that I learned which I don't love, which

is that what a and a lot of AI startups

do this. So this is not unique to

Emerant. They kind of hot instead of

getting you use the free version, they

try to get you to immediately do a free

trial instantly that says it's $0 and

$20 a month thereafter. Now so many

folks do this. It is not unique to them.

It's probably best practice in most

accelerators. But I'm pretty sure that

means they recognize all $240 in ARR

that first month when you're paying

zero. and and they trick you because you

don't even Yeah, you do have to click on

the Stripe link, but you almost think

you're just using the free product. So,

is that if I do a $0 a month product um

that's discounted as a marketing cost

and I churn after 30 days, does that

count as $240 of ARR? I think for a lot

of startups it does. Okay, so that's a

fair criticism. I'm not saying this is

what emerges, but a lot of startups will

instantly recognize that as $240 in AR,

which is how they rock it if you're

self-s served. That's how you otherwise

you can't get there that quickly, right?

So, so they clearly did that. I will say

what was interesting is I overall I

think the criticism is probably

unfounded because I thought the product

was pretty good, much better than make,

like an order of magnitude better than

the disaster of make. Um, because I I do

a five-part test, a six-part test. The

first part is awareness test. So, I ask

it to redo the saster.ai homepage. Uh,

actually, of all the platforms, it did

the best job. It it beat it beat it beat

all of them all of the leaders because I

redid this recently. I redid it and and

they're all good at it. Repetit lovable

vzero they're all good at they all pass

the test but it actually it actually was

probably the best and it and it passed a

bunch of the other tests. So I'm not

going to switch to emergent labs, but I

would say it's in the top 10% of vibe

coding apps. That's pretty good. So that

tells me it's a legit business. like

they did they did the work and a lot of

these they're just the the truth is if

you play with a lot of these even from

leaders like Nick's not the only one

that's crappy okay because they're

basically relying on the fact that

claude code does 90% of the work for you

right they're just putting the the

simplest wrapper around this and so they

did a good job but is I really didn't

like the the way they do the billing but

we'd probably have to to shoot half our

portfolio companies that that do like

PLG AI because I think it's a sus

practice I just don't like tricking you

with this $0 for the first month when

you think you're using a free trial,

right? That's the sus part. I I don't

love that kind of gray art. Um, but the

product's pretty good.

>> You know what I don't like when it comes

to confusing? I was wondering whether to

go off on one in this show and then I

thought, "Fuck it. Let's go off on one.

It's been a long day." I'm pissed off by

these tranched rounds. I see them all

the freaking time. The amount of Sequoia

rounds where it's like, oh, you know, X

raises money from score at 5 billion.

Trust me, Sequoia got in at one, but

they just club it together and then

announce the sum and then the latest

valuation and it's just very misleading.

The tier ones get in early, a tier 2,

tier three instantly marks it up saying

>> same as crypto, isn't it? For years,

what's the difference?

>> Well, I think the Andre crypto fund uh

the you know, essentially 80% off the

the token. What's the It's the same

thing, isn't it? This you're paying for

the paying for the signal. I think if

you break it down

first of all just so everyone's on the

same page because interestingly neither

Claude nor GPT was on the same page and

didn't know what a tranch round was and

they gave the old conventional venture

trunch round based on performance

milestones you know BS from back in the

day when we actually ran businesses

right so didn't have a clue about this

so let's be clear on the practice here

the practice here is when a a company a

hot company raises a round where there

are effectively two different prices per

share. A first, let's call it a first

close and a second close even if they're

at or near contemporaneous where the

first one might be at 250 and the pre

and the second one is at a billion pre

and you know the highlight and the

headline is the always at a billion pre.

There's two imp impacts of this. First,

let's do the simple one where there's

just a single participant in the round,

right? That's where, you know, if I'm

the new investor, I want to pay 600.

The company wants a headline of a

billion.

And to win the deal, someone says,

"Okay, let me put some money in at 250,

some money in at a billion. I can do

math because I'm paid to do math because

I'm an investor. So, I know my overall

basis is a billion, sorry, 600 million.

So, I'm getting what I want and the

company's getting what it want, which is

a headline number of a billion, right?

It's silly, but that's all that's

happening in that case. That's the

single participant tunch deal, right?

And it's and for some if a company wants

a headline, that's what they get, right?

Generally those things come back to bite

you because by definition, if you are

the company, just as the investor can

do, Matt, presumably you can do Matt. If

you accept that combined deal, you're

implicitly saying, "I know I'm only

worth 600, but I'd like the optics of a

billion." You better be damn sure that

your next round you're at one half

billion. Otherwise, you'll have the

optics of a down round. And if you're an

optics believer, that's probably worse

than the uptick. Right? So that's kind

of the single participant version. The

much more annoying version that Harry

clearly was getting on his high horse

about is when you have the same

structure,

but access to those rounds where the the

lead investor maybe does all of the 250

pre- round and only half of the billion

round and then some new investors just

get to do the billion round. So

literally at the same time the lead

investor is investing at 600 billion and

the follower investor ne le marquee

investor is investing in the same asset

at a billion and there's I don't believe

there's right or wrong in money there's

just money right that's where at the

minimum you have to look yourself in the

mirror as the other investor and saying

wow that's the price of being cool right

that's the price of access I'm paying

50% more because I just can't access

that deal, right? And that feels like

pretty invidious thing to I mean again

going back to the comment the the prof

you got to remember if you think about

and again trying to avoid morality and

saying oh because it would feel shitty.

I mean you really would feel like a

loser if you did that but let's play it

out. This is a situation where the the

the lead investor let's say it's sequoia

because everything good and strong

should be sequoia. They're admitting

it's only worth 600 on average and

they're just doing this fakey

transaction. The company is admitting

it's only worth 600 on average because

they're taking the money at a blended

cost of 600. So what you're saying doing

at a billion is you're either saying

either I have a lower cost of capital

and I'm willing to take a lower return

than everyone else or the only positive

spin you can come up with is the company

thinks it's worth 600. Sequoia thinks

it's worth 600. But I am smart enough

even though I don't have access. I am

smart enough and clever enough to know

that it's really worth a billion and I

should do it at a billion even though I

can't get to 600 and I'm willing to put

up with the upfront tax and foolishness

look because I think 6 12 months from

now it'll be obvious that I bought at a

great price and maybe I look like a

genius.

>> Yeah, but we've well we've entered an

era though the I think the meta thing

maybe this wasn't exactly what you were

queuing up Harry but it is tough. We've

entered an era where so many founders

are obsessed about headline prices.

Obsessed. They're obsessed coming out of

demo day. They're obsessed. They're

obsessed once they cross a billion,

which I think should be a moment to take

a pause because of M&A options. They're

obsessed about driving to 11 billion and

9 billion and one uping their

competition. And the numbers have become

a joke to many founders, right? They

just don't joke the wrong term. They

don't think through the any of the

ramifications of the valuation they're

hid and they don't care. And I'm not

even saying that's bad. I mean, I think

burning the bridges is a good way to

have a big outcome, but it's become

utterly gamified on many levels, right?

It's just become gamified. And so this

11 trunch isn't around is just part of

gamifying it, right? It's been true of

YC since I started investing there.

There was always a cheaper price before

demo day if you're reasonably hot, a

higher price at demo day, and then a 20%

or 30% after demo day. So that version

has just become institutionalized and so

be it. If it's what the founders want,

if they want to gify it, so be it,

right? I I just don't think raising it

five or eight billion when you're at 80

million or 100 million of suspect AR is

the most exciting accomplishment in the

world. Like I'm not going to like I'm

I'm going to send a few thumb emojis on

the email, but that's about it.

>> That's about it. They're all They're all

fake anyway. They're all just bets,

right? These are not public companies.

It goes back to your point though on

emergent labs and the graph doing the

eight months to 100 million. The

gamification of like the race to 100

million. I'm not choosing emergent labs

but

>> they listen I think they built a good

product. I think I'm sure they've been

overly lamb cuz whether it's 100 or 80

or 60 I don't care. It's pretty damn

good, right? Whatever it is, but if

you're going to if you're going to if

you're going to do that, you deserve the

the daggers to come out when it's not

100%. Right. One that I thought was

fantastic, exciting. I always like to

see a potential IPO or to IPO shortly.

Um I thought this was fascinating. It's

been an incredible journey actually from

like you know Scandinavia these founders

building this business. It's had a

couple of CEO changes. Um the business

is actually in incredible shape both

actually and Whoop announced today that

they raised I think it was 500 million

at 10 billion fitness and health data.

Do you know what actually Rory Jason's

annoyingly right again? I don't know if

you remember his predictions, but he

predicted, if I'm not wrong, that 2027

would be the year for like human

healthcare data and longevity.

>> Yes. And it looks like it might even be

2026.

And Yeah. Know and you know, the great

thing about both stories is very defend.

I mean, you know, Johnny Iverside very

defendable from this is not an AI envy

story. This is I mean they use AI and

what they do but these are fundamentally

standalone products with a clear

consumer value proposition and they're

you know they're not going to be clawed

coded on Friday. I totally see it and

they clearly have had critical mass in

terms of revenues. I think it's awesome.

I think the question listen the

interesting thing for for these products

uh obviously it's exploded is they are

they are recurring you know going back

to the topic of a arr

these are recurring revenue products

right um for the most part right fairly

expensive subscriptions um and they're

exciting until like Pelatin when they

aren't right now it's not there's not a

$2,000 cost here um but um and I'm not

being critical I I think that they're

exciting but there's also a fattishness

ISM people can switch. So the RR the ARR

the pirate R um uh what multiples do

these companies deserve what it is I I'm

not smart enough to know but the but the

acceleration is a force of nature right

I'd love I'd love to be a seed investor

don't get me wrong

>> do you think there's a foolishness in

the same way I think we as

>> I think you can switch from v Harry

you're into fitness I I'm I'm not so

much but I run 360 days a year 5 miles a

day for 10 years so if there were a

better treadmill a better device a

better thing I would switch and and

whatever you're you're fairly fit Harry

like if you're if you wear or and you

love it but Whoop is is better and you

care you're going to switch. So it's not

it's not service now RR right it's not

you will you're loyal you're loyal but

but but there's just some disruption ri

like look at Pelatin when Pelatin blew

up but actually as the world changed

even though people love Pelatin right

super high MPS they you remember the

Pelatin addicts of 2020 on Zoom they

they loved it but when the world changed

they just the simple answer to Pelin is

they just switched they they just

switched and uh Whoop is different an

aura and there could be a whoop or woop

woop whoop aura and uh maybe one is your

ankle and it has your AI rock from

Johnny IV in it and we'll switch to two

comments on this one disclosure we are

lucky enough to have a small investment

or true the acquisition of one our

companies so I don't have a ton of

information so I'm not going to breach

any confidentialities but just an

abundance of caution I'm not going to

comment on numbers at all right great

products right but to your point Jason

on Um,

you know, it's not AR like service. Now,

let me be direct. Get the [ __ ] over it.

Right. Not every business on the planet,

Hang on. Not every business on the

planet has five year designed in. If

you're running a bar down the street,

every night I can go drink at a

different bar. If you're selling

Coca-Cola every day, I can switch to

Pepsi, right? If you're selling on If

you're running Amazon consumer, every

every day I can go search and go on

Walmart, right? Not every business is

going to have enduring kind of long-term

lock in. And that's obviously you'd

prefer to have lock in, right? But there

are lots of business that have been

around for 50 years where every day they

have to earn the right for the consumer

to go to them, right? And I think

there's no doubt in my mind that any

kind of consumer hardware software

combination product has some residual

asset from the subscription. But then

yeah, that every new device has to be

awesome. You're in competition with

other awesome products. It turns out

capitalism is hard. You know, if you

want to make 10 billion in value, you

got to deliver value for your consumers.

And I think for for what it's worth on

Pelaton, I actually think what really

happened to them, it's a little like the

Zoom story is demand that should would

have been wonderful. It would have been

the greatest stock ever had that demand

been spread out over five or six years

increasing at 20% a year. We'd be

talking about the Pelaton compounding

machine. Instead, everyone bought the

damn thing at the same time. They

staffed up to kind of meet that demand.

the market was wildly saturated and then

the stock went down and it broke the

narrative. So I I do agree, you know, I

yeah, there's nothing you can do to make

a market bigger than what it is. But I I

I think they got whiplash by virtue of

the co demand spike followed by demand

fall off.

>> No, I the question I think the meta

question listen aura I I I as Harry said

I guess I called it these are great

markets. They're large markets.

markets where people will pay actually

relatively high subscription fees for

data right a lot of attractance the the

meta question for venture is you know

the classic Peter Teal 0ero to one only

competition's for losers is what Dr.

Teal said competition's for losers.

Competition destroys pro profits.

Monopolies drive innovation. You want to

invest in monopolies. And so that's just

my meta anxiety is if these are

unmonopizable markets, are they good

ones for venture or not? And I I I

obviously there's two sides to it, but

we hope to we hope I I would feel more

comfortable investing in things that

become monopolies. I mean it's a it's a

better landing place um than uh than uh

con than investing in bars

>> and you can't and you can't ascribe the

same durability of revenue to this as

you can what like as much as I love

>> but on the other hand you can't ascribe

super high growth and you can't ascribe

big Tam you right just it look if there

were enough monopolies to do even one

good monopoly a year I'd be in right and

you know speaking if the founders are

about to get the all-time prize because

they invested in the space monopoly and

20 years later they're going to cash in

their chips, right? Monopolies are

better businesses than competitive

markets. But I do think you can still

build dollars of value from a high good

consumer product, right? And there are

lots of prior examples of that, you

know, and yet we all understand the

dynamics of I think it's much less comp.

I mean, actually, for what it's worth, I

think if you look at consumer products

that flame out, like the GoPro, it's

much less, and I'm doing this on the

fly, but it's much less a competition

issue. It's not like GoPro died because

the competitor to GoPro emerged, right?

It's that saturation is as big a problem

as anything else.

>> Well, DG DJI might disagree with you. I

mean, there was a whole step function in

the industry that they got they got left

behind, right?

>> Yeah. Would you prefer $2 billion in

consumer hardware revenue, $2 billion

worth of five-year contracts? Um, like

Palunteer. Yeah, I'll take the contracts

with the 90% gross margin of the 5-year

lock in, please. You're a starter for

10. But you got to give a lot of

respect.

>> I think maybe the more interesting

question, Rory, that you brought up. Um,

because so much has changed. This is our

50th show. So much has changed, right?

When we started the show, uh, uh, public

durable public company revenue despite

slowdown in the top line was the gold

standard, right? it was the best revenue

out there. Fast forward to today, do we

or going public, do we give a crap what

type of R it is? Because the the durable

software stuff is trading lower than the

S&P 500. Maybe I'd rather have ring

revenue and I'm with with a somewhat

suspect uh customer lifetime value

because this the software value is so

low. Maybe I don't care where my R comes

from, right? It used to matter. It used

to matter, right? We were so we'd be in

board meetings where you would torture

companies so that they would have more

ARR and that they would have less

variable revenue. I mean that seems like

archaic today.

>> Yeah. And and I remember doing that. I

remember telling people not to do that

because I'm a big believer is you can't

make you should sell your product the

way the customer wants to buy it. And I

agree one of the things I hated about

venture was when people would say oh

make it all recurring revenue. But then

the fun one that's actually really

relevant right now is you remember

everyone would say oh you know it's a

hardware product but all the values in

the software so we're really like a

software company and now hilariously

everyone's going oh thank god I've got

hardware because hardware is defensible

not software right and I think it's a

big picture comment is you should

conform your company around your

customers and your model not your VCs

because I agree with you this kind of

pretend it's AR but then next year we

hate it's just a total waste of time for

entrepreneurs things are what they are

and you do best in business if you

actually say what they are and just live

and die by that. Most consumer products

have high volatility associated with

them. You better have a damn good R&D

function and continue to build great

products.

>> We looked today this week they also

talked about how I think all birds was

was it was it acquired for less than 30?

>> It was acquire Yeah, I was literally

about to bring this up Jason. It was

acquired by AMX for $39 million. So my

question is if a company like Ora goes

public and you see weakness in a

quarter, should you dump this thing

instantly like Allirds um versus forgive

a little bit of weakness in a in a

Salesforce or service?

>> Yeah, I I I'm going to avoid any

specifics genuine comment here, right?

Because it's not appropriate. But I

would say something unlike the other two

guys. I've run a textile manufacturing

company 30 years ago. The technology

required to make an all birds or a shoe

is not the same as the technology

required to make a modular electronic

device that sits on the human finger and

measures blood. Either of these kind of

consumer electronic products, they're

not a monopoly in the same way Nvidia

is. But they're pretty it's pretty rare

number of companies that can do that.

They're not go down. Put it this way,

Jason. I'll name a wearable, you'll name

a wearable, and then I'll name a

sneaker, and you'll name a sneaker.

We'll be done with wearables long before

we're done with sneakers cuz there's a

lot of different sneaker companies. And

yeah, turns out sneakers are easier to

make than wearables, which are easier to

make than Nvidia GPU chips.

>> Speaking of like, do we care? What do we

actually care about? There were two that

I I don't know if you guys know this,

but I have wonderful partners, and one

of my partners is much more intelligent

than me, which Rory, you're going to

make some form of gag about, but he

helps me put together some of the

schedules, too. And he was like, "Whoa,

I had no idea about this." He was like,

"Whoa, Epic Games laid off 25%."

I didn't even hear about that.

>> Yeah. And then I then I had had Mark

Andre on your last pod sort of laughing

about how we all overhired in 2021.

>> Well, Mark Andre was was very clear. He

thought that we were all using AI as an

excuse and that we were all over staffed

by 50 or at least 75%.

>> Did any of his portfolio companies do

that over hiring?

>> No, Harry. Logically, it's it would be

75 or at least 50% over staff by 50 or

at least 75. This doesn't make any

logical sense, but keep going. Just

picking up on the arrows here.

>> Rory,

>> he's pissed now. He's pissed.

>> I would love to see you do a day of my

life.

>> I would love

I now you've been cranking.

>> I will give you two hours sleep for 6

hours a day running two companies at

once and then you come.

>> Now I'm feeling guilty. Move on. But no,

>> don't worry. But but point being like

went completely under the radar.

>> They didn't try and do an AI [ __ ]

story. They basically said, you know, um

active daily active use of their

Fortnite game and their games is down,

so your revenue is down, so you take

your expenses down. It was struck me as

a no [ __ ] layoff announcement. It's

like, you know, we sell less stuff, we

have less people. It sucks, you And

again, I really do try never to be

cavalier about people losing their jobs

because every one of those has to put

food on the table. They're not earning

the kind of money we're earning and now

they got to go out and find another job

in a shitty job market. It sucks. But

the lesson is and that's why I respect

them. It's like we're selling less so we

got to do what we got to do to keep the

company profitable.

>> Guys, we keep talking about these

layoffs and these big numbers. I mean,

it was over a thousand people laid off

in this layoff. A thousand. numbers are

relatively meaningless and we've had so

many of these conversations.

What happens to the labor markets?

>> Well, one thing on on the epic thing if

you um and the Wall Street Journal did a

good article on this one too this week

on the a permanent decline of Hollywood

employment. It's permanently in decline.

It's it's not there there it it's on

it's in decline because fewer uh movies

and TV shows are being made. Tik Toks

and YouTubetubes are doing it. And it's

in permanent decline because every other

country provides larger subsidies,

right? And so there's this permanent

decline in Hollywood labor. I think

entertainment is is sort of a shows us

the future. EP Epic Games is

entertainment too, right? And uh they

will absorb as much AI and technology as

they can to address the to to adapt. And

it's just early. It's just early.

They've had to adapt to YouTube. They've

had to adapt to social gaming. And I

think uh we talk about these you know

thousand people at lasting or whatever

but I think Epic Games is just it's I

think it's a more interesting view of

the future than block. We talk about

folks might vibe code a B2B app but

content's already being massively

disrupted

>> and some part of that is as you pointed

out to me when I got it wrong a few

episodes back AI related in terms of

recommendation engines. But I think a

lot of it is just you a very competitive

attention economy. You're right.

Fortnite was the was the game everyone

talked about. Now it's not. It's the

nature of the gaming industry. So yes,

what what does that mean?

>> It's the Fortnite circle coming for

everybody at the end of the game for

everybody. Even Fortnite the Fortnite

circle has come to Fortnite itself is

surrounded itself. Poor Epic Games is in

the middle of its of its end game of

Fortnite.

>> It's just hidden content creators

shooting it out at the very end. It's

coming for all of the the Fortnite

circle is coming for all of us.

The the other one that kind of

relatively was I think maybe a little

bit overlooked is reports of Manis

founders. Manis obviously for context

being bought by Meta recently. Um Manis

founders trapped or kept in China.

>> So just again give people context and

then put out one question mark there.

Manis was a company originally based in

China had some Chinese investors then

redomicized to Singapore benchmark

invested effectively refounded as a US

Singapore company meta acquired it I

want to say and I use the word past

tense acquired because my understanding

is the transactions closed and the

money's moved though interestingly not a

chachi panropic were clear on that but

my understanding is that's what happened

but then now the latest thing is two of

the the Chinese government has a takes a

dim view of this because they don't want

Chinese talent leeching overseas and

going to the US and effectively not

being Chinese anymore and they they they

feel it as a brain drain. So they did

something that was pretty coercive in

the sense of two of the key founders of

Manis I think were either in China or

summoned to China and they're no longer

able to leave. So that's those are the

facts and yeah of course you care. I

mean I think that well starting from

scratch I mean that sucks. I wish him

the best because that's not a pleasant

place to be. I mean, I think you've had

the Jack Mah thing of, you know, at

Alibaba of effectively going, as it

were, under the radar for a few years

when you kind of incurred the

displeasure of the administration. You

also have people who've had

significantly worse consequences than

that. So, let's start with the basic.

You wish them all the best, right? Um,

but

>> I don't think another deal like this

would happen to you. I think this whole

Singapore washing thing is over. It's

over.

>> I I totally agree. That's where I was

going to go with that long preamble.

I'll tell you who did notice. Maybe no

one in America spent any time thinking

about it, but every Chinese founder who

was thinking about doing this is going,

"Hm

h I don't know how I feel about this. I

don't know if I can do this deal. I do

know if I do this deal, I am never going

home again." But I'm with you, Jason. I

think all these other China washing

deals, they're put on pause or they're

put on re-evaluation or next thing is

going to sound harsh. It's a fairly

coercive regime. If your family's not

out of the country, do you have exposure

there? Right. I think it puts it it just

shows I mean authoritarian governments

can take pretty dramat drastic steps to

impact our citizenry if they want to.

And I agree, Jason, it makes it really

hard to imagine doing another one of

these deals without being worried about

this consequence. But hopefully they'll

kind of go naughty you pay 50% like you

know California makes it hard to leave

too but if you pay them 13% they'll let

you go to Nevada right? Yeah, hopefully

it turns out to something like that. And

please God, it's not something more, you

know, coercive. But I I agree, Jason.

Wouldn't do another one.

>> You know, in venture, you take risk,

right? It's part of the job. So, we've

all had deals where there's some rule,

some corner that was cut and we talked

ourselves into it's okay, right? This

this is this is companies something

weird about this company, but and we

convince ourselves as as as talking to

some mediocre lawyer or asking an LLM

today that it's okay. So like the

Singapore washing must work, right?

They've moved to Singapore. It's got to

work. And you convince yourself. You

talk to a few people and you take the

risk and it it bounced. It appears to

have bounced the right way for Benchmark

and Friends, right? It appears they've

gotten their money, but you don't do the

next one, right? And there's 242

millionaires in Singapore. The majority

of the inflow is Chinese. You don't do

the next deal. Maybe other capital does

the deal, and that's fine, right?

Capital is funible. But you just

inventually just don't you just can't do

the next one like this. It's too risky.

What do you do if you're Meta? Part of

the asset you're requiring is the team.

>> Two billion is not a lot for Meta and

they have the product.

>> Yeah. What are you going to do, Harry?

What would you recommend? Getting angry

at the Chinese. That'll work well for

them, right? I mean, I think it'll be,

you know, yet another acquisition that

looked clever, but in retrospect wasn't

amazing.

>> Well, listen, for Meta, I'll just say

one thing. I I I only have a tiny bit of

information, but I I it appears to me

Manis is running mostly and smoothly as

as an application and a company. Now, I

don't know if the founders are working

out, you know, I I certainly feel

strongly when you lose your founders,

you lose your heart and soul of your

company, but in the short term, I I

don't think it's a big deal for Meta

outside of the founders because it's

running smoothly, right? That that's my

in the short term, it's not down. the

team's functioning, they're running and

um but it's crazy

>> and at the risk of being Polyiana but

also wanting to assume the best of

people, I would hope that the Meta

management team and board to the extent

they do have any influence can help

these guys come to an amicable end. And

if it requires a tax settlement or

whatever, you know, just you you don't

want to leave you don't want to leave

people you just acquired in limbo. at

some zoom out level when you listen to

the rhetoric on both capitals you just

have to realize that trying to tread

between those two these two countries is

pretty hard right now right you know you

know we have China hawks and the US

government they obviously have a whole

ton of US hawks or whatever the

equivalent is there's a real perception

of competition you know we don't let

them buy the Nvidia chips etc etc you're

playing with fire in that thing and

sometimes it bites you

>> I just think overall it's natural in

given the outcomes in AI and given the

growth that I think it's tied to taking

the highest levels of risk we've also

taken because the payoff seem to be

there and when this deal happened folks

kind of thought this was aggressive

Benchmark's never done a deal like this

why are they doing a deal like this it's

not even very cheap right it seems a

little crazy and they're like well we've

never seen anything grow like this and

the team's incredibly talented right so

they took a little bit of risk and um

and they made their they made their

profit we're all taking more and more

risk folks that you know now now it's a

week of revenue at a demo day. I did a

million dollars my first week, it's

amazing. What about the second week? I

don't know. Like it but it as long as it

all works out in the aggregate. Um and I

think this is why nobody cares to

Harry's point. I cared about I cared

about Madness. I added to the to the

list. I don't think anybody cares. We're

all focused on getting a million dollars

our first week.

>> Just good realization that the worst

thing that can happen is not just oh you

lose your money. There are there are

worse than that.

>> I mean speaking about cooling their shot

and making billions of dollars. Steve

Jervson. He's tied his career to Elon

very smartly. So that's not in any

negative way in terms of the investments

that he has. Plowed, tripled, double,

quadrupled, everything in between. Um

leaves California, buys most expensive

home in incline village and and these

were Jason's notes. Will anyone with

liquidity be left in California? What if

California is structurally bankrupt?

>> Well, I mean, yeah,

>> it's not a great sign when they keep

leaving, is it? It's not a It's not a

positive

>> Rory staying Jason.

>> I mean, look, all first of all, you were

exactly right. All credit to Steve and

all more power to him. I've known him

intermittently for 30 years. He made a

brilliant call to align with SpaceX,

been on the board of Tesla and SpaceX

Tesla for a while and then came off

obviously for those back in the day. But

SpaceX too, yeah, he's he's put his

money in a compounding machine and now

he's clearly hit the DPI moment, right?

But yeah, going back to the thing, yes,

capital, I mean, the truth is this,

that's why we said last week, high ultra

high net worth people have a high degree

of mobility. And unfortunately, if you

put the hammer up too high, they can

leave and choose to go across the border

to Incline Village and save 13% on um

any realized gains. Plus, as we pointed

out, 5% on all gains if this wealth tax

passes, you know, at the margin, why

wouldn't you? You know, it's not like

you need to be in California to be a

Tesla board member or a SpaceX board

member given they're down in Texas. So

yeah, actions of consequences.

>> Well, it's interesting also this week um

Washington state did pass their 9.9%

state income tax for millionaires and

the governor said the reason the

governor said to sign it because there's

a lot of folks who said don't do it,

right? It's I mean already Howard

Schultz left. He said today he said well

they just deserve to pay more. And that

may well be true. It it may well be

true. Like I don't want to debate that.

This is not political, right? I'm I'm

more concerned about the tipping point

when uh we kill golden geese. You know,

there've been Washington and California

and to a lesser extent New York have

been the gold golden geese. It's uh you

know, Washington said they're going to

lose money. They're not going to make

money on this. It it appears that mo

most folks that are neutral or right

have said California will lose money on

the billionaire tax. Everyone's left and

and the tax itself assumed massive

amounts from Larry Ellison who's been

gone a half decade, right? So, no one's

It's just I do I I do worry they're all

they're all they're all leaving.

Everyone that doesn't work at Open

Anthropic uh you know on this show we've

done it 50 and I said in the beginning

of this that you'll leave after the

series B and and I now I see that used

again and again by these folks who are

on the right on it. They say all the

founders will leave after the series B.

But it may happen by show 100. And one

of the arguments I make is because you

know the truth is this articulating the

argument to the to you know the activist

on the other side as being you're being

mean to the billionaires is of genuinely

no interest and being mean to a

billionaire is actually a feature right

but I think the real articulation is

this

if you you actually are losing revenue

that won't be available to California

and the marginal dollar in California

probably goes into you know payment for

homelessness business, payment for young

your kids, payment for foster homes,

payment for marginal social welfare

services that are easy to defund when

times are tough, right? And by choosing

to obtely tax without any attention to

ability to collect that money, you've

actually reduced the revenue that's

available to you, right? And that's the

argument you have to make to the to

someone on the other side of the table.

you have literally chosen something

instead of getting you know 200 50 I

don't pick a number of 50 million from

the Larry and Sergeys and the Jervsons

of this world you went for 200 million

and now you're going to get zero and

what that means in real terms is

somewhere down the line long after all

these changes have been made somewhere

in Sacramento someone will zero out a

line item on the budget and let me give

you a clue it won't be payments to the

teachers it won't be payments to firemen

it'll be marginal services to marginal

people that your craft stupidity and

desire to make a political point has

ended up costing them money and that's

the only argument that moves the needle

because it because it's true and you're

right this you're saying is that it will

have a net negative return how now do

you feel good Rory if you were Steve

would you have left

>> I think from my perspective I'm just so

glad to be in California it's so

wonderful I moved around a lot early in

my life I have my friends here have my

life here at the margin the whole point

of having money is to be able to do what

you want and for three or four or five

or even 15% of your income. Do you

really want to leave? Now, I will say

that's why you can tax income income

relatively highly because it comes all

the time and you can't control timing

and therefore you have to uproot your

whole life for the rest of your life to

avoid it and I don't think it's worth

it. So, I wouldn't move to avoid income

tax. Conversely, if you have this

pending capital event where literally in

one year you're going to sell quote all

your SpaceX stock and realize a $2

billion gain and you're going to pay an