All right, everybody. Welcome back to

the number one podcast in the world. Of

course, that's the All-In podcast. I'm

your host, Jason Caliganis. With me

again, your chairman, dictator, Chimath

Polyhapatia, and the Sultan of Science,

David Freeberg, David Saxs, will be

calling in from the skiff.

>> He's in some deep negotiations uh for

the United States of America. From the

skiff.

>> It's not there's no tea at the end. It's

just

>> tea. No tea.

>> Oh, skip to my l Okay. He's in a skiff

>> doing something with his Blackberry and

a bunch of generals. Nobody knows what's

going on in Sax's life, but he he'll

he'll crack in from the skiff any moment

now. But we'll start with

>> You guys see that Pete Hex have

announced a PT and fitness test for the

generals? Could you imagine if Sachs had

to pass a PT?

>> Oh my god. They should totally make it

for the administration. Sax, we need you

to do a one push-up. Sax,

>> what do they do if you don't pass? They

remove you from your You probably get a

cure period.

>> We should do a push-up contest. That

would be great. Winner take all. How

many push-ups can you do? Free birth.

You have to adjust for people's heights.

I'm I'm the tallest of all of you. I

have a much longer limb system.

>> What does that mean?

>> So 20 for me is much harder than 20 for

you, Jason.

>> I mean, 20 is easy for me at this point.

>> Yeah. You're like Bill Bull Baggins.

It'll take you like 8 seconds to put

>> a tank, man. Bill Baggins. How about

Thor? I'm like Thor at this. I'm going

to my Daniel Craig era.

>> Kell has a elbow to my Daniel Craig

>> weight to weight ratio. That's highly

advantaged.

>> All right, let's get started. Enough

shenanigans. EA is what is your arm

length, Jake? Do you have a good arm

length?

>> My wingspan, my wingspan uh technically

is enough to kick your ass with one hand

and tie behind my back. That's actually

let your winners ride.

>> Rainman David

and

>> we open sourced it to the fans and

they've just gone crazy with it. Love

you.

[Music]

Okay, EA is being taken private in the

largest takeprivate deal in history. $55

billion.

Man, that just stacks up to, let's see,

Texas Power Company in 2007, HCA

Healthcare, $ 33 billion. This is a

large deal. Investors in the take

private include Saudis PIF, Silverlake,

and Friend of the pod, Jared Kushner's

Affinity Partners. 210 bucks a share, 25

premium on the stock. Kushner's largest

LP at affinity as you know, SAP PIF as

well. The PIF has invested over $900

billion

when you know many of the things Lucid

Motors, Live Golf, the Softback Vision

Fund, Uber back in the day, Newcastle,

the Premier League, Electronic Arts

obviously is in the video game business.

They were founded at uh Sequoa's office

in 1982 in San Mateo. Shout out to our

guy Rudolph Botha who joined us for the

all-in summit. Their headquarters still

in Redwood City Madden NFL

the Sims. Oh, that's why you have the

background of the Sims this week. Need

for Speed. Pretty insane

deal here. Chimoth and this is a high

watermark for private equity. Anyway,

you look at it and the Pif loves games.

They are the biggest shareholder in

Nintendo, Savvy Games, Scopely. I mean,

they just keep buying games. Uh, what

are your thoughts here on this deal

happening right now?

>> I really like it. Let me give you the

bull case and then let me give you what

the bare case would have to believe. The

thing to remember is that video games is

the anchor pillar of usage across the

entire internet.

Last week at our poker game, we had Matt

Bramberg

join in just for dinner, who's the CEO

of Unity, and Alex Blum, who's the COO

of Unity. And one of the stats that they

shared with us at dinner was it's about

3 billion DAO play games

>> which is just an inc exactly it's an

incredible incredible stat. So in many

ways it's much bigger than social

networking and social media or as big

and in that EA is sort of this 800 lb

gorilla but I think the problem is is

that they've always been these

gatekeepers and I think that there's a

risk and a chance that these gatekeepers

get eroded away. Specifically who I'm

talking about are folks like Microsoft

and Xbox. And at the point that this

company is going private, there's some

really interesting things that are

happening. So Xbox, I think the day

after the EA deal got announced, decided

to hike prices 50% to their subscription

service. And what happened over the

subsequent few days is that so many

people tried to cancel that the site

went down. So what are you seeing

happening? You have distribution

gatekeepers

trying to raise prices and take share.

And then you have the original IP owners

who have not had a a wellfunded way of

fighting back in a category that is

basically as important and frankly more

important than social media. So I think

if you take an asset like this private,

it allows you to take your time to clean

up the opex model, right? figure out who

does what, be able to use the best of

all these nextgen tools,

and then be able to find ways of finding

distribution outside the scope of Xbox

and PlayStation so that you can take

more of your share. If you do those

things, this is a multiundred billion

dollar asset. And in that, I think it

could be just an enormous win. So, I

think it's very smart. What's the bare

case?

I think the bear case is extending a

theme that I've talked about here a few

times which is I think the value of

patents and by extension IP and

copyrights are going to go away

and in that there's going to be a

spectrum where certain content IP

holders lose and other ones win. I think

gaming is on the winning side to be

honest and I think content studios in

general like traditional content the

Disney's the Hulus the Netflixes are on

the losing side but the bare case

would be that these tool chains

allow the number of games to be built to

increase by two three four orders of

magnitude and that they are distributed

by other places like the social media

sites. I just think that that's a pretty

low probability. So on balance, I think

that Jared and Egon did a killer deal. I

really like it. And for people who don't

know, Unity makes the 3D software that

people build games in. It's a public

company, 16 billion, also backed by Ruof

and Sequoia back in the day. Incredible

company.

Freeberg, what are your thoughts on the

gaming industry versus say social media

versus traditional media? We're seeing

massive amounts of money being put into

each of these, but this is time and for

this next generation, let's say

millennials and younger, we're seeing a

big mix. Obviously, they don't have

cable TV, so that's been plummeting, but

they do play games. They do like the

YouTube, the Tik Tok, etc. And they do

love social social media. What what's

the future here as you see it?

>> One way to answer that question is to

think about how people spend their time.

Do you spend more minutes on social

media or on traditional media or playing

games and how is that trending? But

importantly,

which of those will acrue more benefit

and as a result drive more hours spent

from AI? Is AI going to create more

social media engagement? Is AI going to

create more traditional media engagement

or is AI going to create more video game

engagement? And I think that one way to

kind of think about this thesis is that

AI is going to ultimately acrew to video

game entertainment far more than social

media entertainment or traditional.

>> Why is that? Why? Explain to me.

>> Because I think you can create dynamic,

more engaging experiences that will

benefit from kind of a back and forth

sort of relationship than you can with

traditional content or with social

media. And what we see now in a lot of

gaming systems that didn't exist, call

it 12 years ago, is AIdriven players

embedded in the games that act and feel

a lot more like real human engagement.

That is very hard to kind of mimic from

traditional programming methods that

were used in gaming. And so that makes a

a big difference. Like for example, if

you're playing Fortnite, I don't know if

you guys play Fortnite or have played

Fortnite, but if you're a noob in

Fortnite, like you're early player in

Fortnite, you're mostly playing, even

though you go online and play against

what are supposed to be kind of other

players, you're mostly playing against

AI because what they do is they tune the

AI to be easier to beat so that you can

slowly develop your skills. Because what

was happening early was they were seeing

a high degree of churn in Fortnite

because kids would go on and play for

the first time and they'd get paired up

with kids that were better than them and

so they would never win and they would

get frustrated and they would quit the

game and stop. So the churn rate was

high. So AI unlocked higher engagement

and higher retention on the Fortnite

platform. And I think we're seeing that

in a lot of different gaming platforms

now. So AI can be used for example to

maximally increase time, engagement,

satisfaction, happiness. I think the the

Saudis saw this and if they're trying to

diversify away from their oil holdings,

entertainment, and how people spend

their free time, which by the way, I

think is a general macro bet that

everyone should consider making because

if you believe in AI and you believe in

the improvements in productivity,

generally speaking, people in the

industrialized world will generally have

more free time on their hands and be

able to support themselves with the

deflationary effects of AI over time. So

if there's more time on people's hands,

the general market for entertainment is

growing. And if the general market for

entertainment is growing, gaming is the

future of entertainment. And the future

of gaming is AI. Now the the Saudis own

10% of this prior this company prior to

the deal. And I don't know if you guys

have tracked the investments they've

made, but they've been extremely

aggressive with gaming. So they have

this like investment division called

Savvy Games. And within Savvy Games,

they bought Scopely for 4.9 billion in

2023. And then earlier this year, they

spent 3.5 billion to buy Niantic, the

company that makes Pokémon Go. And then

they also own 4% of Nintendo. They own

6% of Take 2. They own a sizable percent

of Activision, Blizzard. So they've put

quite a bit of capital in small

investments in other gaming platforms.

They own a few gaming platforms. So this

is clearly like a big thesis and a big

investment that they see as the future

of entertainment over time. Jared's

firm, Affinity, is going to own about 5%

of the company post transaction. the

Saudis are going to be the majority

owners. So, I think that this is going

to end up being the next big platform

play for them and and it allows them to

make the important long-term investment

in furthering the transition to AI and

not have to worry about quartertoquarter

earnings, but really making a 10-year

bet and they do talk a lot about this

2030 vision.

>> And if you look at across those three

categories we've been discussing here,

video game usage about 60% of US adults

do it every week. Social media about 75%

of Americans use it every week and uh

streaming, traditional media, the

Netflixes, Disney Pluses of the world,

that's still 83%. So these are the three

buckets of of people's time. Uh books

and going to the movies, those are

obviously the big losers.

>> You know mix the market was totally

getting this wrong because the Tik Tok

of the deal is super interesting. When

they were looking for the debt

financing, it was about 36 billion of

equity, 20 billion of debt. They called

Jamie Diamond and Jaime basically ripped

the 20 billion in on the same day

just because I think I think he also

could underwrite this pretty fast. I

mean, some of the biggest deals are

frankly so obvious that it just takes

the courage to put it together and then

everybody's like, "Oh, this just makes

so much sense." And then Andrew Wilson,

who's the CEO, is going to stay on. He's

a great guy. Super super compelling.

It's worth talking a little bit about

the impact I think of private equity. If

um you spend any time in the region, I'm

going to be in Saudi and Dubai in the

first week of November doing my founder

university and I'm I'm been out there

twice a year maybe for the last three

years. They will tell you whether you're

in DOA, Abu Dhabi or Riad, we've got six

or seven industries we really care

about. Technolog is at the top of the

list. Private equity is at the top of

the list. Live entertainment and sports

at the top of the list. And then

actually hospitality also at the top of

the list. Real estate building new

places for people to go. And if you look

at private equity, pull up that chart I

had there. This is just stunning how big

this industry is getting. You know, $5

trillion is what we're up to here. And

it just keeps growing.

>> I I think private equity is totally

screwed. I I don't think Silverlake or

Infinity or this deal

are screwed, but I think private equity

in general is totally owed.

>> All right. Right. Well, it's it's gotten

huge just since 2015 and tripling in

size. So, why is this I guess my

question for the gentleman here and for

the audience, why is private equity

becoming so large and what impact does

that have on society? If people can't

put EA into their retirement account,

they can't put Stripe into their

retirement account. If we take all the

great companies and we start to

privatize them, SpaceX, let's say never

goes public. What impact does that have

on people's retirement accounts?

>> Okay, look, I think I think the history

of this is important. There was a

long-standing belief that the best way

to generate the best risk adjusted

return, what does that mean? That means

to manage through periods where the

stock markets go down and to manage

through periods of volatility. The best

way to do that was to have what's called

a 60/40 allocation. 60% to bonds and 40%

to equities. Over many years, especially

when we artificially suppressed rates at

zero through Obama, a lot of people

started to move their allocations away

from 6040 and they started to make more

and more investments further out on the

risk curve. The biggest beneficiaries of

that were venture capital, private

equity, and hedge funds.

The thing with private equity is that

because rates were zero, they had an

infinite amount of borrowing capacity,

had very little downside to them, and so

they were able to manufacture returns

much faster than venture capital and

hedge funds could. So, as a result, you

had an initial group of people that were

defining the asset class, making a ton

of money, and then you had all these

fast followers that said, "Well, if

they're doing it, I can do it, too. So

far, so good." But then always what

happens is then you have this flood of

lagards that just flood the zone. And

it's these lagards that make it very

difficult to generate returns because

they start overpaying for assets. They

start mismanaging and undermanaging the

assets that they do own. And so where we

are is that private equity has seen a

very consistent way of returning money

to help improve that 60/40 portfolio. as

a result they got a lot of money but

then that created a lot of competition

and so that's why you see this hockey

stick graph Jason and when you see that

kind of graph

>> it doesn't matter what asset class it is

the returns go to zero

>> and so we've seen this in venture

capital

>> we've seen this in hedge funds

>> and we're now going to see this in

private equity

>> too much money going in to be clear what

you're saying means you kind of exit it

right there's there's no returns and so

again I've said in any of these

alternative asset classes, there's only

one thing you should always ask if you

had to have one critical question.

What are your distributions?

Don't show me your IRRa. What is your

DPI?

>> The distributions on your paidin

capital. And if the answer is zero,

then it is a very challenged asset

class. And what I will tell you in

private equity is that over the last

four or five years

distributions have been few and far

between.

So I think what's going to happen is

that the money is going to come out of

private equity and it's going to get

concentrated into the few companies that

know what they're doing of which

Silverlake has generated over you know

the last 15 20 years

tens and tens of billions of dollars of

distributions. They are just an

exceptionally well-run organization.

They've done these huge buyout deals

successfully before. So, we need to go

through that in PE. Where does the money

go? The money's already leaked into

private credit, which is the next big

bubble that's building. It looks like

this chart that you just showed,

which is loaning businesses money. You

know, it's super interesting because you

make such a good point. What we're

seeing in private equity is these

continuation funds. Now continuation

funds are coming chimoth to venture. So

I've been getting pitched on these

continuation funds where like hey take

all your assets sell it to a new group

of people and then reset the clock and

then there's never an exit. The good

news is I will say the last year we've

seen a lot more activity for shares of

our companies that are still private. So

the secondary market Freeberg is coming

back in a major way. But I do get

worried about these continuation funds

because now you're just moving an asset

from one class to the other and we need

to have a functioning IPO market. How

functioning is the IPO market today?

Would we say it's completely

dysfunctional?

>> How dysfunctional is the IPO market? Let

me say it another way. And and how do we

correct that? And this leads into your

new spec.

>> Look, there are three ways to go public.

There's the traditional way IPO,

there's the direct listing, and then

there's the reverse merger or the spa.

Up until I floated IPO A in 2018, I

think it was the first way was really

the only way.

I was involved in two direct listings,

Slack and Coinbase.

And in both of those, what I learned is

that, you know, it has the same vagaries

as the traditional IPO. So in the

traditional IPO, you go to a bank, they

underwrite you, they act as a

gatekeeper, and they take six, seven, 8%

fees as a result, and then they allocate

what is essentially underpriced stock to

their best customers. Then you see a

one-day pop, maybe a two or three day

pop. All of those customers tend to

unload and then the stock tends to drift

down. So the IPO is expensive and it

typically is mispriced.

The direct listing

you have a different dynamic which is

the first trade is always the highest

trade and then it just goes straight

down. That happened with Slack and it

happened with Coinbase. So

>> Spotify would be in that group as well.

Yeah.

>> Yeah. With Slack I remember like I I was

like offside a billion dollars and I was

like well I'm never letting this happen

again. And so when I had the Coinbase

thing, I sold it the first day. And I

texted Brian. I said, "This is not a

directional indication of your company.

It's the dynamics of the direct listing

because I learned it the hard way that

the time to sell is on day one." So

where does the spat come in, you know,

especially now in version two? Version

two being the the thing that I have been

tinkering and refining with and am

trying to push in in this new version.

I think that it's creating an incredibly

competitive vehicle where you can have a

ton of money go into these private

companies, take them public at a very,

very low cost of capital. And I think

that that's should be very enticing.

>> So, you closed your financing. Can you

just tell us what the capital raise was

like as you went out and met with folks?

What do you hear?

>> Yes. You know, Nick, maybe you can find

it. You know that image of the Raptor

engines?

>> Yes. super complex to being elegantly

simple.

>> Yeah. Nick, can you can you maybe just

throw that up? What I would say is like

Spack 1.0, of which I was, you know,

right in the front of the parade, had a

bunch of misfires and it was

complicated, but it worked. There were

some hot fires that worked, but then

there were some clear misfires. And the

whole point was to prove that you could

create a competitive alternative to the

IPO. The thing that I'm the most proud

of quite honestly is

for all intents and purposes I started

a normalization of this vehicle that's

now raised more than 1502 200 billion

dollars for American companies. I am

very proud of them. That's an important

thing for the American capital markets.

I think what we did in American

exceptionalism is Raptor 2. It's not yet

perfect, but I do think it tries to

improve on the things that I noticed was

not working in Raptor 1. And in that is

a lot of the compensation and

incentives. And so when I showed that to

investors, they were quite excited. I

think that they want a competitive IPO

market that brings many, many American

businesses to the public market so that

they can be owned by everybody. the

transparency they like and the fact that

the incentives are such now where

there's absolutely no compensation

unless this thing really works.

>> And historically they received warrants

in the company typically with a strike

price of 1150. So 15% above the issue

price of the stock

>> and founders shares that were basically

>> and there was founder shares but like

did you have a reaction from them saying

hey we want some warrants we we need a

little extra kicker here like there's

some sort of desire for that? No, in

fact it was the opposite. I think that

the institutional investors and you know

my investors in this 98.7 of the capital

was allocated to these guys are the best

of the best. You you know who they are.

So they're every single blue chip A+

institutional investor. And what they

wanted was great companies. They want

great companies to be public. And the

reason is the thing that Freeberg I

think you mentioned this before. When a

good company gets public, the amount of

money that they can raise in the publics

and then the amount of growth that they

have in the publics far outclasses what

they'll ever do as a private company.

And so they want the simplest and

cheapest way of great businesses to get

out. Jamat, do you think that the

transaction when you find a merger

partner, the traditional spa has been

announced as a merger concurrent with a

pipe being done where new investors are

underwriting the valuation of the deal

and saying we like this company at this

price cuz we are now going to write

money in in the form of a pipe and

historically the pipe was for common

shares. So it kind of was like this is a

good price and everyone felt good about

it. Number one, do you anticipate that

there'll still be a pipe being done in

concurrent with the merger in this

transaction? And then number two is do

you think it'll look like a common pipe?

Because after the spa frenzy died down,

in order to get deals done, the pipe

started to get done with convertible

preferred securities. So they were

senior to common and they almost were

like dead. How do you think this is

going to play out? because a clean deal

has not happened in quite some time

where a spa has announced a merger and

simply raised money via common in the

form of a pipe. It's a great question. I

think it comes down to the underlying

asset. But there are some incredible

companies that are private

that if they go public

will be able to demand

common pipe capital. I think that the

future maybe just prognosticating and

guessing what does Raptor 3 look like in

this back. I think the Raptor 3 will

look like where somebody a sponsor like

me rolls everything up into one thing so

that it's already pre-wired from the

beginning where I'll just speak to

a billion, two billion, three billion,

whatever it is, flexible capital that

can come in as common so that it's a

totally pre-baked IPO

>> at a very fair price. I think that I

think that that's what the Raptor 3

version of a spa will look like.

>> So more capital and then they they put

their full trust and faith in the

sponsor to run the deal.

>> Well, then meaning then there's no

conversion risk that all the money comes

over right from

>> it comes over, right? And so then you

have to fully commit in

>> you set your compensation to be a bit

Elonike in terms of your compensation as

the sponsor comes if I read it correctly

Chimath when it hits certain milestones

in terms of share price.

>> Yeah. Nothing can be earned unless the

stock is up 50%.

>> And then there's a tunch at 50. Then

when the stock is up 75% there's another

tunch and when the stock is there's no

founder warrants in the deal or there

are found there's no founder warrants.

>> Nothing.

>> I think this is great. You know I I was

asked by

>> way the reason the reason why this is

important is all of those things that

you guys mentioned increases the cost of

capital to the founder and to the

private company board and to the

employees. All that's unnecessary

dilution. So now we take it all off the

table.

>> Yeah. Smart. The thing I, you know, the

observation I had at the time, not just

for your collection of spaxs in the 1.0

era, but just all of them in general,

and I tried to explain this to our

syndicate members and investors as well

as the CEOs because a lot of my CEOs

were like, should we do a spack? And one

of them, Desktop Metal, did

this felt like venture investing. And

you know, if you look at Open Door,

Virgin Galactic, um, Joby, which I don't

think was one of yours, Sofi, MP

Materials, all of these companies, you h

you have to look at it if it is a

venture type investment, 80% of venture

goes to zero, 20% pays up for the other

80%. I think people were looking at this

like it was Netflix and they were not

thinking of these companies and the

stages they were at.

>> Well, can I just ask a question? Yeah.

And then I'll drop it to a question cuz

SoFi and MP Materials they did

extraordinary. So in this class of

companies you're going to be taking out

is it going to be the same early stage

or are you thinking more robust more

predictable revenue let's call it um

resilient revenue maybe rugged revenue?

>> I think it's the latter but I think it's

also important to note that this time

around I've tried to really minimize

retail exposure to this. I don't think

that retail is well suited right now

>> to have these things and what my my

honest advice is

>> avoid

maybe not all spaxs but definitely my

spack just avoid it. I think that there

is more than enough liquidity on the

institutional side for us to do an

interesting deal, but it fits in our

portfolio and our construction which is

a very different risk model. And so I

would hate that, you know, people are

out on the risk curve without really

understanding the risks because Jason,

you can't predict the market. You don't

know where these things are going to go.

>> Yeah. I mean desktop metal 3D printing

this is like a very cutting edge nason

technology company should have stayed

private a couple more years or people

investing it need to understand you're

you're now acting like a venture

capitalist which means the return

profile and how the portfolio management

works is distinctly different than doing

Netflix and Nvidia and whatever other

publicly traded companies

>> I would just say do do not invest in

these things don't at least you know

just

>> I think you just inspire people to do it

I know that's not your intent but would

when You say don't do it. Stupid. I I'm

being very honest. Don't do it.

>> No, no, I know. Don't buy spaxs unless

it's like less than 1% of your portfolio

would be my advice.

>> Before we move on, can I just make one

comment and I'd like your guys

>> know about the private equity stuff

because Chimoth made a comment that

private equity is baked, but I think one

of the things to take note of in this

take private of EA and we talked about

it is the theme of AI empowering EA to

kind of transform the business. And

Jared's brother Josh has at Thrive been

executing a rollup of CPA accounting

firms that he's been applying AI to to

reinvent that business.

>> Oh, is he really?

>> Yeah.

>> Oh, I should talk to him because we have

an investment in a company called

taxjpt.com that is basically like

co-pilots with AI for accountants that's

doing spectacular. So what he's done is

he's bought these kind of traditional

accounting firms at some multiple of

IBITA and then he can transform the

business with AI and really create a new

opportunity. And I've said like I think

this is one of those few moments in

history where there really is an

opportunity to beat the market and make

money in the public markets if you can

be thoughtful and selective about the

companies that stand to benefit from an

AI execution strategy. Because in all of

these traditional kind of markets where

you have competition, everything's

commoditized and the market is mature.

It's very hard for any of these players

to differentiate product service and

obviously you know unit economics. But

with AI, it's completely transformative

and has transformative potential in

nearly every industry. So as a public

market investor, if you can identify

those opportunities, select them where

the management team has the right

leadership in place to execute against

this, you could make real money. The

problem is most of these companies are

not led by folks that understand AI or

software first.

>> And so I think there's an opportunity

for more buyouts. They're not going to

be of the $55 billion scale. It's worse

than that.

>> In what sense?

So we at 8090 have done the dance with

all the big major private equity firms.

And here's how it goes. It always goes

the same way. The partners love it

because they're looking at minimal

distributions,

companies that are like good but not

great in many cases

and they want to see improvements to

EBIT and performance so that they can

either sell them or move them out.

>> And you're sorry you're saying you've

looked at this you've looked at this

with their portfolio.

>> All of them. Yeah. All of them

>> with with their existing portfolio

companies. So the GPS are like this is

genius. We should do it. Then they're

like here's a handful of companies to go

talk to.

And I'll be really honest with you, what

you find in most private equity

portfolios are B and C companies run by

C and D folks.

>> Yes.

>> And so the ability for them to go and

embrace this is basically next to none.

So if I look at my customer distribution

and concentration

at 8090, okay, run rating into nine

figures already working on a three $400

million deal. Okay, about a single

dollar comes from a private equity firm.

Although we spent initially a lot of

time trying to sell it, trying to sell

our software factory and trying to sell

work into them. It's really hard and

it's what you said before Freeberg,

which is the people incentives at these

businesses are misaligned to the AI

outcome,

>> right?

>> And you can't fire these people and I

don't think the right answer is to fire

them. So I don't know what the right

answer is. This is why I think private

equity is very challenging. Do you think

there's a do you think there's a power

loss situation where perhaps a handful

of investors in the public markets and

perhaps a handful of investors in the

private markets can identify and then

put the right people in place and

execute against these strategies like

Josh is trying to do with his

>> I think Josh is smart so I think Josh

will figure it out no matter what. What

I'm saying is if I can show you

20, 30 customers, a ton of revenue, all

these white papers that show upside, and

I still can't get it done inside one of

these companies, I think it's not us,

it's them, right? So, it's not inherent

in traditional a private equity to do

this either, which maybe begs the

question, is there a new kind of private

equity that can execute this? Maybe

that's an opportunity like like Josh is

showing, right? like he's he's a venture

investor that's executing a private

equity strategy and maybe that becomes

the play.

>> I think if this works well, two of our

biggest customers are individual deca

billionaires who own businesses and

they're like you're doing this.

>> Mhm.

>> So to the extent that Josh looks more

like that, which is an owner of 100% of

the business where it's like you're

going to do it,

>> then I think it can work. So I think the

Saudis I think the owner operated model

is the only way the AI transformation

really works and then the the other end

of the spectrum it's the public market

CEO who realizes that they have to do

something real because they'll otherwise

lose their job or they'll be disrupted.

Those are the two cohorts that I feel

today

>> are on their forward foot. Everybody

else is like sticking their head in the

sand. Just on the EA front, I forgot to

ask you, Sir Demis, my Greek brother,

>> didn't he show a

>> It's just all the always the Greeks who

get these things done.

>> Yeah.

>> Didn't he show like the uh 3D engine

that would make like infinite games?

>> Yeah. So, it's not actually a 3D engine.

It's a class of these AI models that can

render what ex what the experience is

looks like and feels like a 3D world,

but it doesn't have an underlying kind

of traditional object um rendering

engine. It doesn't have a traditional 3D

physics engine. So, it's a new way of

experiencing these kind of world

interaction systems. And there's several

startups. I think um Fay is her name,

the Stanford AI one. Yeah.

>> And she has one of these. That's a

virtual worlds company that has the same

principle.

>> I asked Bramberg and Alex about exactly

this

>> at dinner.

>> What was their take?

>> Yeah.

>> He said it's just really, really hard to

get these things to actually be

legitimate engines at the scale of what

Unity offers for the quality of game

that needs to be made for it to work.

The interim step is going to be the

assets in it are created by AI. That's

what I've seen a lot of startups doing.

So you want to make a character you know

you dropping characters and they would

be done in real time.

>> I think I think your whole the whole

thing is Unify and Unity as the

rendering engine and the AI sits on top

and the AI basically can render objects

can render concepts can render structure

can render the direction that you as an

engineer would typically provide to the

to the Unity or Unified 3D engine and

that's going to unlock not just in video

games but also in film.

>> You're 100% right. Can I tell you an

example? Yesterday there was um you know

in our group chat a bunch of people sent

around the Sora

>> the sloth app. Yeah.

>> And I downloaded it just to play with

Sorl yesterday

>> and the first video that came up was

exactly this. It was like a ATP tennis

match.

>> Yeah.

>> Where it was a guy's face the guy like

imagine you and then playing against

like a federer. And then I thought well

what if he was playing against his

friend and that was the actual video

game. to your point, you you get away

from all this IP licensing, gatekeeping

stuff, and you can just get to good

games faster, good content faster. I

think

>> they're adaptive in terms of the

competition, so you're not playing

somebody who's going to just dominate

you. It just get 5% better every time

you play it. You'll get 4% better and

it'll just make it perfectly challenging

so you don't quit and you'll learn as

you go. It's it's really going to be an

interesting

>> and the same the same will exist in like

content J how like you'll make shorts

and films and then the ones that have

the most engagement the AI

prompting system will get better and

better and ultimately it will yield like

uh you know bits of content that people

>> see that happening with Star Wars or

Marvel. If all of a sudden Silver Surfer

is an interesting character to you or

Ashokano is interesting to you, it'll

sort of make that world or enhance that

character and tell you more of their

backstory. And that can be very

interesting as a

>> how you can sit in your seat and like

make fun of me, call me a nerd, and you

actually know the name of this Star Wars

character. I don't even know who you

are.

>> Very important character. Ashoka is

Anakin Skywalker's Padawan. She is a

very important character. If you watch

the Clone Wars, you would know this. the

animated series that threads through the

>> watch.

Actually,

>> oh, look who dropped in. Oh, David Sax

is here. Did you get out of your uh Were

you in a skiff or something? What's

going on? Zar,

>> I was in some meetings, but actually,

no, I was just uh buying some domain

names.

>> Oh, you are? Did you get mahalo.com?

>> I got I got mahalo for the bargain price

of $1 million. That's what it's worth.

Go to mahalo.com. I'm selling it for a

million. I mean, it's it's in the

dictionary.

>> Yeah, I have some old assets. Somebody

else should use them. I just I have

Begin.com and I'm going to be working on

that

>> in partnership probably with one of the

large. I might give you an equity squad

for that. I'll give you a

>> mahalo is the second most important name

in the second most important word after

aloha in the um Hawaiian language.

I'm surprised Beni off hasn't tried to

ask you for I was just texting with Beni

off.

>> Give it to him as a gift, dude. He's a

great guy. Just give it to

>> I will give him the I will give benny

off mahalo.com if he gives me four weeks

in one of his Hawaii resorts per year.

>> He would do that.

>> Oh, for the next 20. Oh my god. Imagine

Jake for 80 weeks. Oh my god. As a house

for 80 weeks as a house guest. He could

be there. He could be there.

>> It doesn't matter. I'll give him the

money so he buys it. Don't worry, donate

it to his nonprofit foundation. Then you

can take a tax write off.

>> Look at everybody's When I have

something to sell, the guy with the

lowest net worth on the program when I'm

trying to pay off my jet, you guys all

have criticism. How come I can't wet my

beak? I got

>> Let me ask you a serious question. So

you had investors in Mahalo, right?

>> Yes.

>> And I assume

>> this is their domain. This is their

domain. It will go to them.

>> Oh, so it will. Oh, okay.

>> It will go to those investors. You're

paying off liquidation preference,

>> correct?

>> Okay. Just sitting there.

>> So now instead of losing 100% I'll lose

99.

>> Something like that.

>> Uh it's just startups are hard folks.

>> But I have the begin.com and I've been

talking to folks. I you know I mahalo

was originally a human powered search

engine like Wikipedia which we're about

to get to and my concept was to do

comprehensive search like neighbor.com

or dam in Korea had seen those services.

Yeah. And it turned out to be exactly

like perplexity, but at the time we we

tested machine learning, which is what

everybody called AI back then, and it

just didn't work. So, we were trying to

hand roll search results and then back

them up with, you know, computerenerated

ones, algorithmically generated ones,

but the tech wasn't there now. Um, but I

want to do something again with

begin.com. I'm really excited about that

domain name. All right, listen. We

brought up Slop. Let's get into it. Two

slop apps in a Fortnite here. Uh, no pun

intended. Zuck and Sammy the Bull have

both released uh

>> the bull

pull. What a deep pull. Sammy the bull.

Gravana.

>> There it is. And uh here's a look at

Sora. It's objectively extremely

impressive. Here's Sam Alman. People

don't know this. Early in his career

when he was starting OpenAI didn't have

the money from Elon.

And here's Sam Alman stealing an H100.

Here's Sam Alman. Also, this is when he

was um storming the capital on January

6th. Here he is at when he was working

at Google. Yeah, lots of but it's really

good and they are basically taking a ton

of risk and solving some problems with

IP. As we all know, the IP outputs is

where people think you're going to have

to be really thoughtful or get a bunch

of lawsuits. On this app, you can opt in

and make your persona like Sam did

available to everybody to use. So that

whole concept of notable persons

allowing their image to be used, you opt

into that and that's pretty clever. So

you can let your and you can make it so

your friends can, you know, basically

make videos of you but nobody else can.

It's it's a thoughtful way of doing it.

However, very controversially, this

thing had everybody's IP in it and you

have to opt out if you don't want your

IP used. That's going to get him another

whole collection of lawsuits to go with

the New York Times and Z Davis ones. And

there have obviously been a bunch of

settlements now, uh, Anthropic settling

their book thing for 1.5 billion. So,

anybody play with these tools yet? And

what do you think, folks? And what's the

point of these? Do we think this is like

a Tik Tok competitor

>> tomorrow? Do you think it's just back

door to training data? What do you

think?

>> The closest thing is a Tik Tok

competitor, but I I use it. I thought it

was okay. But again, the thing that I

have that I keep in mind whenever I try

these apps for the first time is

>> today is the worst it'll ever be.

>> Sure.

>> It it only gets better from here. And so

if you look at the starting point, it

won't take but a year where this thing I

think or maybe two years where this

thing is legitimately excellent. It has

to get the scripting right. It has to

get the prompting right. It has to be a

little bit easier for you to use. There

was a bunch of prompts that I used that

were rejected by so or by the IP, right?

>> Well, it just said use me, but I

couldn't validate that I was me. And so,

you have to take a picture of yourself.

It's a it's a little clunky the app

right now, but you're right. It's going

to get better in each version. The one

by

>> Zuckerberg is called Vibes. I you know,

I was looking at these sacks and I don't

know that this is intended to be like

the next great social media app as much

as it's a data play to get folks to

train data. when you see them, what are

any thoughts on them other than

interesting? Yeah,

>> I haven't played with it yet, so Oh,

>> sorry for me to say.

>> Freeberg, you got any thoughts on it?

Just

>> uh No, I I don't have like thoughts. I I

think, you know, we're kind of early

innings. I do think there's like new

categories of media that none of us are

really considering today. Like

traditional media, as I've mentioned in

the past, is like centrally produced and

then broadly consumed. And I think that

there's models of media that are going

to emerge that are going to create new

business categories or new business

models and and also new media categories

that are all about kind of distributed

production and not necessarily like

central production, distributed

consumption. So that that kind of

changes things quite a bit and I think

maybe this is going to start to open

that door a bit. One of the things I

because I thought about this and I I

mentioned this in the past where I'm

like everyone's going to make their own

movie, their own video game, their own

music, but there is this notion of like

shared cultural context. Like everyone

wants to talk about, you know, how did

the 49ers do this weekend or did you

guys see that show adolescence? Did you

guys like we want to have a conversation

about some shared stories that's the the

basis of kind of societal interaction

and mimetics. So I think like there are

elements of this being the beginning of

the enabling tools, but I don't think

we've actually seen what's going to

happen, which is how do you take one

story and then create a distributed way

of consuming that story where everyone

experiences and consumes it differently.

So I do think like this notion it's like

hey everyone's making fun of Sam or does

some like maybe there's some cultural

context about Sam Alman that we all

share and then we're all like engaging

with Sam Alman in different ways you

know. So, so I think like there's we're

very early and we don't yet know kind of

how it's all going to play out, but I

think that's really critical to

>> bring it is something is lost because we

used to all talk about the latest

Tarantino movie or the latest, you know,

Sopranos episode. We don't do it

anymore.

>> And I I do share stuff. We do talk about

tweets and stuff and you know there's

other forms of groups but it's it's not

like it used to be where 30 40 million

people would see Raiders of the Lost Arc

and it would be the discussion of the

summer or whatever it is. And so I I

literally bought 20 tickets to the new

Paul Thomas Anderson one battle after

another just so I could have a

conversation with 20 friends about the

new PTA. And so people really are

longing for this shared experience.

>> Paul Thomas Anderson he did the master

there. just there will be one of the

greatest ever he is top five director of

all time but I know you don't care about

culture um but is he like is he like

Michael Bay

>> it would no opposite of that actually

Michael Bay makes things that go boom

Paul Thomas Anderson's that make makes

things that make you go

>> Michael Bay super cool fun to hang out

with fun to party with

>> right okay well way to bring it back to

you um okay hold on you dropped a name

here is

>> I don't know Paul Tom Sandra but it was

a heck of a film

as Sax. Sax is actually very cultured

when it comes to cinema. Did you see it

yet, Sax?

>> I have not seen it yet. No,

>> it's it's of the moment

>> and it's heard it was anti-

conservative. So, it doesn't have some

leftwing take.

>> No, it kind of mocks the left and the

right. It's kind of mocking both

extremes. You'd love it.

>> I think you very much appreciate it.

>> All right, I'll check it out.

>> Yeah, I would check it out. Uh,

>> hey, I have an idea. Why don't we find a

topic that's interesting to talk about?

>> Yeah. Okay, great. Yeah. Well, that's a

well, if you contributed to the docket

or showed up on time, maybe we could do

that. Um, so unbelievable. Just so you

know, the inner workings right now,

there's a little resentment in the group

because one of us decides to change the

time of the pod for four weeks in a row

and then show up half an hour late. I

won't say which person that is, Sax. Uh,

Sax, but here's an interesting topic

from Red Meat for you. Deepseek, the

Chinese LLM, just dropped their latest

model 3.2

EXP. It's faster, it's cheaper, and it

has a new feature called DSA,

Deepseek sparse attention, which makes

it faster to do uh training and

inference at larger tasks. The key

takeaway is it can reduce API cost by up

to 50%. The new model charges 28 cents

per million inputs, 42 cents per million

outputs. Claude, which is a leading

model from Anthropic that a lot of

developers use, a lot of startups use,

is like $3.15, so 10 times 35 times more

expensive. Obviously, people are cutting

their prices pretty quick. But, uh, Sax,

this is your wheelhouse as our ZAR of

crypto and AI for the United States of

America. What are your thoughts here on

the continued execution of the Chinese

government with Deep Seek?

>> Well, I want you to hear Freeberg's

thoughts on this because he was paying

attention to this, weren't you?

Yeah, I mean I think there's a total

rearchitecture underway and we're at the

earlier stages of cost per token in

terms of dollar and energy. My

understanding is there's actually a lot

of work going on with US labs right now

in a similar kind of track that's going

to result in similar results. Maybe

they're a little bit ahead of the curve,

but we should really pay attention to

the curve. I think you know what do the

models say in terms of energy demand in

terms of cost per token if these

architectural changes really do drive

down 10x 100x a 1000x 10,000x um over

the coming months

>> and this is open source so just so

everybody understands it's available on

AWS it's available on GCP at least 3.1

is I don't know if 3.2 too is available

there now, but I'm hearing from a lot of

startups, I don't know if you're hearing

this in the field, Chimoff, that they're

testing it and playing with it in some

cases using it because it's uh so much

cheaper. Are you seeing that?

>> We are a top 20 consumer of Bedrock. So,

let me tell you what it looks like on

the ground. We redirected a ton of our

workloads to Kimmy K2 on Grock

because it was really way more

performant and frankly just a ton

cheaper than OpenAI and Anthropic. The

problem is that when we use our coding

tools, they route through Anthropic,

which is fine because Enthropic is

excellent, but it's really expensive.

The difficulty that you have is that

when you have all this leaprogging, it's

not easy to all of a sudden just like,

you know, decide to pass all of these

prompts to different LLMs because they

need to be fine-tuned and engineered to

kind of work in one system. And so, like

the things that we do to perfect codegen

or to perfect back propagation on Kimmy

or on Enthropic,

you can't just hot swap it to deep

speed. All of a sudden, it comes out and

it's that much cheaper. It takes some

weeks. It takes some months.

So, it's a it's a complicated dance and

we're always struggling as a consumer.

What do we do? Do we just make the

change and go through the pain? Do we

wait on the assumption that these other

models will catch up?

>> So,

>> it's people are making tools now

>> that and by the way, I can't just make

it easier to switch between them.

>> No. And like you know this weekend a

different company with a huge model came

to us and gave us the preview of their

nextg model. Okay and it's incredible

but then when I sit on Monday morning

with my team and I'm like okay what do

we do? We don't know what to do. Do we

cut it? Do we move over and say great

we'll refactor all these workloads to

run on on this new model? It's a it's a

really hard problem and it's getting

worse the more complicated tasks that we

undertake. Okay. And just for people who

don't know, Kimmy is made by Moonshot

AI. That's another Chinese startup in

the space. Sack, your thoughts.

>> Well, I think this is actually a really

interesting topic. This topic of open

source. I'm a big fan of open source

software because it's a it's a check on

the power of big tech in a way. What

we've seen in the past in the history of

technology is that these major

categories end up getting dominated by

one or two big tech companies and they

have all the power and control. And open

source provides an alternate path,

right? Because the community of open

source developers just puts things out

there and then you can take it and run

it on your own hardware and you're not

dependent, right? It's a path to sort of

software freedom, if you will. So, so

far so good. I think the thing that is

now tricky about this is that all the

leading open-source models are from

China these days. China has made a

really big push on open source.

Obviously, DeepSeek is an open source

Chinese model. That was the first big

one. Kimmy is one. Quen from Alibaba.

And so I think that if you want the US

to win the AI race, then we're all kind

of two minds about this. On the one

hand, it's good that there are open-

source alternatives to the closed source

proprietary models. On the other hand,

they're all coming from China. Now,

there were some American efforts that

have been important. So, Meta most

notably has invested billions of

billions of dollars in llama. But the

release of Llama 4, I think, was

considered disappointing by a lot of

people. And now there's statements by

Meta that they might be backing away

from open source and just going

proprietary. OpenAI released an open

source model, but it's nowhere near

their frontier.

And there are some startups that are

trying. So there's one called Reflection

that looks promising is developing an

open- source American model. But so far,

this is maybe the one area in AI where

the US is behind China. as this sort of

open source models. I'd say every other

part of the stack, closed models, chip

design, chip manufacturing,

semiconductor manufacturing equipment,

every other part of the stack, even data

centers, I would say we're we're ahead,

but this one area of open source is a

little bit concerning.

>> Interestingly, Saxs, the two things of

note is OpenAI. The open was originally

that they were supposed to do open

source. So, that's kind of hilarious.

But the second is that Apple, which is

the furthest furthest behind of

everybody, they have a really

interesting open source model. So when

you're behind like Apple is or the

Chinese were, you're open. You're you do

open source and when you're ahead like

OpenAI became with ChatgBT, you close it

down. But

>> that uh

>> can I tell you open Elm Open ELM? Yeah.

Efficient language models from Apple.

Keep an eye on that one.

>> Can I tell you what's going to make this

open source closed source battle even

worse? Because effectively what this is

is the US versus China. the US is closed

and China is open at least at the scaled

models that work.

>> But that doesn't have to be the case,

right? Because we could release open

models too.

>> No, no, you're right. I'm just saying

today if you look at the conditions on

the field, the closed source, highly

performant models are American. The

open- source highly performant models

are Chinese. And you would say, okay,

well, what is the next downstream thing?

It's what Freeberg mentioned, which is

the energy and the cost of generating

these output tokens. And I talked to

somebody yesterday who runs a huge

energy business

and I have to tell you it's not in a

good place. Meaning you saw I think this

week where the residents of Indianapolis

were able to reject or get their city to

reject a billion dollar data center that

Google was going to build near

Indianapolis largely because of concerns

of price inflation around electricity.

And what this energy CEO told me is,

look, the next five years are baked. And

if we don't find some compelling solves,

and I'll tell you what the two ideas

were, but if we don't find some

compelling solves, electricity rates

will double in the next 5 years. Now if

you think about how then consumers will

view the use of AI

and then if you think about companies

like us and others trying to use the

cheapest version so that we are

minimally impacting the downstream cost

of these things because it will become

an energy problem. This is a very

complicated thing. Now his idea and it's

a huge PR crisis because if you want to

take big tech which is already viewed

negatively and make their perception

even worse. If you start to finger point

to them and say these guys are the

reason my electricity costs have doubled

in the last 5 years that is no bueno for

them and they need to find an offramp

asap.

>> It's a bad look

doubling this could take your jobs

right.

>> Yeah it's terrible. Whether you believe

that's true or not, that is the

perception.

>> There are two offramps. There are two

offramps that he suggested which I think

are worth considering.

>> Offramp number one is what's called a

cross subsidy which is essentially to

say that they pay a rate card which they

can absorb with all their free cash flow

materially higher than what other rate

payers would pay in that geographic

area. So the homeowner his or her

electricity costs stay flat to down. The

data center costs are higher and it's

the Metas, the Googles, the Apples, the

Amazons who have hundreds of billions of

free cash. They absorb it. That's that

was idea number one. And idea number two

is to start to set up some mechanism so

that they can install things like

batteries at every single home in and

around these data centers to allow those

homes to have a better chance of

actually um absorbing some of this

inflation without having to pay it.

>> That's a really good idea and this is

playing out sachs in Virginia in a major

way because that's where data center

alley is and 40% of the energy in

Virginia now is going to data centers.

This is becoming acute. So what what are

your thoughts here, Zar?

>> Well, Chris Wright spoke to this pretty

well at the all-in summit in terms of

what we have to do. I mean, there's no

question that AI is going to create a

huge need for power over the next 5 or

10 years. I think on a 5 to 10 year time

frame, the answer is probably nuclear or

at least that's a big part of it. But

nuclear takes at least 5 years. Within

the next 5 years is probably gas, you

know, natural gas. But the issue there

is there's a huge backlog for gas

turbines. basically the engines that

burn the gas to create power and there's

like a two to three year backlog for

those to spin those up. So the question

is what do you do in the next few years

and I think Chris Wright talked to this

and I've heard this from other energy

executives which is we just need to

squeeze more out of the grid. If we were

to shed just 40 hours a year of peak to

say backup generators, diesels, things

like that, you could get an extra 80

gawatt out of the grid. This is what one

energy executive told me. The reason is

because they build the grid and they

have regulations on it based on the

peak, right? Which is basically the

coldest day in winter or the hottest day

in summer. And the same way that you you

know you build your church for Easter

Sunday, the rest of the year it runs at

50%. Same thing with the grid. And so if

they could just reduce the the peak 40

hours, if they could shed that load to

backup to generators, to diesel, things

like that, then they could run the grid

to squeeze an extra 80 gawatt out of it.

And I think that's the bridge over the

next few years that we need to then get

a lot more gas and then eventually some

nuclear as well. But unless you want to

keep talking about electricity, I think

there's some other things to talk about

on the open source cuz I think it's a

pretty interesting topic actually. And

if can we just go back there? Yeah.

Yeah. Yeah. I was I was just trying to

paint the case that my economic model

for going to open source is better

because I can't pay $3 an output token

>> and then also pay for all this

>> actually I want to I want to ask you

when you're running like Kimmy or

something like that. So I think it would

be good just to explain to the audience

how this works because I think there's a

lot of confusion about what it means to

be an opensource model. A lot of people

think that when a Chinese company

publishes one of these models it's still

somehow theirs.

>> No. But the reality is once it's

published, it's no longer theirs. It

belongs to anyone who wants to take that

code and you're not running that on a

Chinese cloud or something like that.

The data is not going back to China.

>> You're taking that model and you're

running it on your own infrastructure.

>> Can you just explain this?

>> Yeah. So when I first started 8090, my

only solution was uh Bedrock, which is a

service that Amazon provides that allows

you to essentially get inference as a

service. Right? So as we are building

our product and we need inference and we

need inference tokens, bedrock basically

handles everything. So it's it's what

AWS is but for this vertical of AI,

right? So they have the servers. These

are in American data centers. They're

managed by Americans and what they do is

they take a handful of models and they

make sure that they can support usage of

those models. That was how we started.

But as with everything, we have to

manage our costs and our operating

profile. And so we're always looking

for, are there other models and other

places other than Amazon that can

service our needs? Because in fairness,

Amazon is very expensive. So, a

different company that I helped get off

the ground, Grock with the Q, they have

a cloud and what they've been doing is

they've been working with initially

Llama, then they work with OpenAI to

bring their open source model, but they

also brought online a couple of these

Chinese models. And what they do exactly

as you said, Sax, is they take the

source code, they basically implement

that, fork it, they fork it, they fork

it, and and now it's implemented

domestically.

on American soil by Americans inside of

an American data center. So there's

China gave us kind of the the way the

road map if you will the architectural

plans but we as in you know the American

company in this case Grock built the

house and then launched it and so now we

as 8090 basically made a cost decision

to move to this open source model

because it was just materially cheaper

>> right and what Grock with a queue will

give you at you're the application

company 8090

>> they're like Amazon for us they're

>> they'll give you an API

>> exactly

>> so the same way if you want to use a

closed model like open AI or you know

chat GBT They'll give you an API. You

submit prompts. They give you answers.

Basically, tokens in, tokens out.

>> What what Grock does is they will take

this open source model, run it on its

own infrastructure, and then give you

the API so that you can then get tokens

in, tokens out through their API.

>> Well, for me, as a consumer, it reduces

us to a pure economic decision. Where is

it cheaper? And you know, it's not

dissimilar to the last generation of the

internet. You'd run on AWS, but then

you'd bid it against GCP. You'd bring in

Azure. you'd say who is cheaper because

ultimately you're running a database,

you know, you're running, I don't know,

pick pick your service, Snowflake,

>> right?

>> It didn't really matter where it was.

You were just really trying to find the

cheapest vendor.

>> Right. Now, here here's here's what's

compelling about it. So, first of all,

like you said, it's cheaper to just run

it on your own infrastructure if you

know what you're doing. Also,

enterprises like it because it's more

customizable and there's going to be a

lot of fine-tuning of these open source

models for specific applications

>> 100%. And enterprises frequently want to

run these models on prem in their own

data centers because they want to keep

their own data on their own

infrastructure. But now the challenge is

you've got these models that they're no

longer Chinese. They've been forked.

It's an American company but they

originated in China.

>> That's right.

>> And they could be running on some

critical infrastructure and that you

that that does raise issues. I mean, do

what is Grock doing, I guess, to like

test whether these models are safe,

whether they could be backdoored. I

mean, how do they think about that?

>> They they have an entire pipeline of

stuff that they do, the details of which

I I don't exactly know because I've not

asked exactly what they run through, but

>> yeah, they're big rub in this.

>> They go through an incredibly rigorous

>> they basically do like safety testing to

make sure. Absolutely. So, I mean,

because a lot of people think that if

you run a Chinese model, the data must

be going back to China, but it's not if

it's being run on your own

infrastructure. I think the issue is

more theoretical that like could a

Chinese model somehow be backdoored with

an exploit or vulnerability somehow.

>> Well, if you take a compiled version,

sure, but if you just take the open

source and you do it yourself, no.

>> Right. Well, that's the thing. So, I

mean, and if someone did discover a

vulnerability, it would get widely

shared in the community very very

quickly.

I think you can I think I think at this

point you can expect that every single

major company that is in security that

is in a cloud vendor and also every

single major model maker is trying to

prove and invalidate how the other

models are inferior or bad in some way

and so that's where the competitive

cycle I think is really valuable because

you do have the best and the brightest

computer scientists like you know

yesterday a certain person he's Italian

that's I

a leading security guy at one of these

model makers just talking to him. He's

in charge of this security stuff.

They're hammering everything to try to

figure out whether there's a there's a

vulnerability because it slows these

other folks down. So that made me feel

quite positive that we haven't seen

anything yet on any of these models

which is to say that generally everybody

is actually been a pretty good actor so

far.

>> The other piece to this puzzle sachs is

there's a lot of crypto distributed

projects. The one I've been working on

is Bit Tensor and Tao. I think you've

also done a deep dive on this Chimath

and I'm a partner in a you know an

emerging

crypto fund called Still Core Cap and

we're buying Tao and we're looking at

Bit Tensor and all of these subnets that

are being made to do distributed

computing and this is a big push for

Apple as well. A lot of these M4 Mac

minis you've seen out there. Their plan

is to put all of this uh all these LLM

sacks on people's personal computers and

then distribute them and have this like

SETI at home and an incentive layer. And

I think that's going to be a big part of

this. People are not going to want their

AI jobs to go to the cloud necessarily.

They might want to do it locally and I

think that's where the phones and all

this silicon is going with um you know

Apple's big focus on it. It's going to

be

>> Yeah. Well, brave new world.

>> Yeah. You bring up an interesting point.

You know, in the early years of this AI

revolution, I'm talking about like 2023,

2024. I mean, this started in the last

three years. There was this analogy that

AI was like nuclear weapons. I mean, you

hear the the doomer crowd, the safety

advocates saying this that like AI was

this really threatening technology.

And they would even say things like GPUs

are like plutonium, you know, things

like that. And I think that model of the

world is just wrong, right? Because what

we're seeing is um and Justin actually

had a pretty good line about this. He

says nobody needs nuclear weapons.

Everyone needs AI. And it's true like

every consumer, every business is going

to want to run AI. A lot of them are

going to want to run it on their own

infrastructure. Consumers are going to

want to run it on their own phone.

You're going to have an AI that's highly

personalized to you. And so everyone's

going to have AI. It's not like a

nuclear weapon where we want to stop all

proliferation.

AI is a consu first and foremost a

consumer product that is going to

proliferate and so the question is

bearing that in mind how do you then

create an appropriate response for the

national security risk but this idea

that we're just going to stop AI and

only have two or three companies who who

have it which I think was the view a few

years ago among policy makers ridiculous

even now yeah they they were thinking in

very centralized terms and I think what

we're seeing now is regardless of what

certain policy makers might want. It

it's already highly decentralized,

right? You've got five major American

disclosed source companies. You've got

eight major Chinese models and then

you've got everything that's happening

with startups. So, this is going to be

highly decentralized and

>> and verticalized, right? All the hugging

face models, there specific ones on

images, specific ones for video. Like,

it's it's going to be super fragmented.

>> The vast majority of this activity is

benign. I mean, that's the thing. These

are business solutions. These are

consumer products. These are viral

videos. Most of the stuff does not rise

to the level of a nuclear weapon or

something like that.

>> This is a good chance for us maybe to

talk about AI regulation. There is uh a

lot of and and maybe we'll get to

Wikipedia as well, but there's a lot of

states that are starting to look into

regulating

AI. California SB53,

the Transparency in Frontier Artificial

Intelligence Act, is working through the

system. It's going to serve as a

template possibly for other states. It

was introduced in January as an

alternative to the more sweeping bill,

the SB 1047. This would require AI

developers to conduct extensive safety

tests before rolling out the models. It

got a lot of push back from tech

obviously and Newsome ultimately vetoed

it. But this new law focuses only on the

most advanced large frontier models that

we just talked about. And it requires

companies to release a framework for

knowing how they're approaching safety

issues, including standards and best

practices, whatever that means, and

however safety is defined.

These are models, I guess, in this

definition, that have half a billion in

annual revenue. I don't know how they

pick that out, but it requires these

companies to release transparency

reports before deploying. So they're

going to be like the app store, I guess,

if this gets through to approve frontier

models with updates. Oh, that sounds

great. You got to go to the government

to release a new model. Your thoughts,

David Sachs,

>> of AI,

>> I think it's very concerning. There's a

a regulatory frenzy happening at the

states right now. Just to be very clear

about what happened in California, there

was a original bill SB was it 1047 that

was incredibly obtrusive that Newsome

vetoed that, but now they've passed a

new one which is called SB53.

And like you said, it's not as

burdensome and intrusive as the previous

version. It focuses on making frontier

AI models report safety risks.

They're supposed to report if they have

>> Can I stop you there for a sec? What is

the safety risk they're going to be

required to report? That's it's such a

nebulous term. What safety? What? That

it's going to jump out of the computer

and murder me? Safety that it's going to

give me the wrong answer.

>> They're supposed to they're supposed to

report on potential catastrophic harms

related to cyber attacks, bio threats,

model autonomy, which is the Terminator

scenario. And they're supposed to

>> okay

>> let the government know if there's a

safety incident. I mean look all these

things are quite nebulous.

>> It's almost like a nuclear power plant

having to report if there was an

incident. Are any of these in your mind

thoughtful?

>> Let me just let me just let me just

interrupt for a second. I think it's the

equivalent

>> of saying I need any factory to report

to me on the risk of something of a

nuclear explosion. Even though the

factory might not be working with

nuclear material, you see it like it it

uses a

>> trying to get out here. I'm confused.

>> I mean, it it effectively uses

terminology that makes everyone nod

their head and say, "Oh, yeah, that

makes sense. That's a good idea." When

the reality is that the legislators have

actually no concept of what they're

talking about. They have no concept of

how these models are built. They have no

concept of how they're deployed. and

they're using language that they think

is inevitably going to result in giving

them ultimately tools and control over a

private market system. And that's

fundamentally what I think a lot of this

comes down to. Think about this issue

that's going on with free speech in

California. this hate speech bill SB771

that's sitting on the governor's desk to

be signed right now where effectively

the state of California's administrators

have the ultimate say of what is deemed

hate speech and not which if you think

about it if they had this bill in

Alabama during the civil rights era

there would have never been the ability

to have the protest and realize the

equal rights that arose from the civil

rights movement because the government

would have said those are inappropriate

hate speech things that you guys are