Communist coffee hits NYC, RIP Hulu, GPT-5 arrives and more | E2161

It's been done. So maybe, I mean, listen, I don't, I don't describe any bad intent here, but you, you thought people wouldn't be confused?

I, I would say the majority were not confused. But hey, you're confused.

Explicitly did it with the TechCrunch one to confuse people. So let's call it what it is. You're hacking media to confuse people to get attention. Correct? Sure.

This week in startups is brought to you by Lemon IO. Hire pre vetted remote developers and get 15% off your first four weeks of developer time at Lemon IO Twist. CLA innovation takes balance. Our CPAs, consultants and wealth advisors can help you get from startup to where you want to end up. Get started now@claconnect.com tech and tech. Say it without saying it. Head to get Tech Twist or your favorite registrar to get a clean, sharp tech domain today.

All right, everybody. Welcome to this week in Startups. I'm Jason Calacanis back home in Austin, Texas. Had a great dinner last night with my team, my growing team. I don't know how many people we're up to, but man, launch is growing. With me again today. Alex Wilhelm, you know, from TechCrunch, CautiousOptimism News. Is that right?

Nailed it. First try, Jason. I'm so confident.

CautiousOptimism News. I got pretty posted up. Go ahead. And I think you should go to your daily. Right now. Right?

Yeah. Five days a week.

Not the right move. I need deeper insights from you. I'm gonna just give you, I'm gonna be your editor in chief. I think you should go to two or three days a week, let the news build up because the news is a commodity now. All the bullet points, Alex, and I think what people would rather have is your insight, your take. So I am going to give you permission to run an experiment. It's your choice. Obviously it's your business to try that for August. Alex's analysis. Because when I see you cover the bullet points, I'm finding I know 80% of what you're saying. You're just taking the time to type it. But I don't care about that. I know the headline. Your readers are so in the know that I think you should just do the headline. Alex's analysis.

I will play with this and I will let you know how it goes. Thank you for the idea.

Just an experiment.

I love experiments.

Is there a shorter version? Alexnalysis I feel like we're almost at something. We've almost got analysis, Alex, analysis.

Two idiots, Lon and I Do all day is Brandon Eames and make memes and do jokes. Trying to come up with all day long, all day long. That's our life, the life we've chosen. All right. And with me, of course, Lon Harris.

Hey, everybody.

Our editorial director. You know, we had a great meeting last night with our team.

Yeah.

One thing I realized is we need to. You know, I have the pilot co pilot concept.

What? What do you mean by the pilot co pilot concept?

It's something I learned as in management. I used to have very few resources, so I would staff. We used to say, man, but I would staff. Now I staff. I don't man. You understand why, Alex?

Yes. Because your team is majority women.

It happens to be the truth. You know, I have three daughters, so I say staff. We staff.

Yeah, yeah. No, I'm with you. I'm teaching people.

I'm teaching. Yeah. There was a period in time where at the. We had a woman who would come, an investor who would come to our accelerator, and every time somebody used the wrong gender pronouns or whatever, when she would give them a review of their business, she would start with like a five minute lecture. You said sales guys. I would like you to know that there are women who work.

And it was just like.

It was like clockwork. It was just like, oh, my God, these poor founders. So I had to, like, do a thing. Like when she would come and say, I just want you all to know that there are firefighters, not firemen. They're firefighters. Like, you gotta understand the non gender words. Anyway. All right. There's a lot in the news. I like coffee.

Got a big coffee story.

We got a big coffee story today because I remember a great fraud that had occurred with something called Lucking Coffee. And Alex remembers it as well. But this incredible baked books, which, you know, baking the books in China is. I don't want to be derogatory here, but it's not uncommon. Let's just say that it wouldn't be like a shocker that somebody had put their thumb on the scale. So they had some sort of accounting scandal. Sure. But the news now is that they're launching in New York.

Correct.

This meme has merged with the socialism meme, which means. I'm interested. Coffee and socialism. Let's go.

You and you and every. Every undergraduate poetry student loves coffee and socialism. So, yes, you summarize. Luckin, they're a Chinese coffee house chain founded in Beijing in 2017. They have been rapidly expanding over the last few years. Luckin stores in mainland China now outnumber Stores, Starbucks, which is an incredible stat to think about. They are opening two locations in Manhattan, Greenwich Village and Chelsea. Now as you mentioned, Luckin was accused of accounting fraud in early 2020. They denied it, but then later, after investigations, the company did admit to falsifying around $310 million worth of money. 300.

Say it again. London.

300. How many million? Million. $310 million worth of that is a lot of. How do you even fake that much? You gotta fake buying all those beans, brewing all of those cups of cod like that.

I mean I can tell you a million ways to run a scam like this. It's pretty simple. I mean you just, you count the number of cups and then somebody at the manager at the end of the shift who refreshes them just takes 50 cups, puts 50 extra sals in the register and you count it up.

Pretty sure, I guess. So. The company got hit in China. They wound up going through bad bankruptcy procedures. In 2021. They emerged from bankruptcy, emerged from bankruptcy in early 2022. And that was when they started this new international push. So they've expanded to Singapore and Malaysia already and now here they are, they have landed in the US of A. Their 2025 Q2 earnings showed 47% year over year growth. 1.72 billion in total revenue and, and GAAP operating income of 237,026,206 locations around the world. That's a lot.

That's a lot of coffee. That's a lot of coffee. Now this has become quite successful for a number of reasons. One is price. Yes, they've realized that sugar, milk, ice and coffee, none of those ingredients in and of themselves are particularly expensive. Yeah. So they have run the price down.

They also have another leg up variety of drinks like they, they have a lot. It's some of the tiktoks we saw compared it. It's almost more like a boba shop with their variety of different kinds of drinks than just a coffee house. So a lot of those drinks probably have less expensive ingredients than coffee in them. So you can also cut the price there.

Yes.

And I just want to add here that there's a difference between the way we think of coffee shops here in the States or probably Europe as well, and the way Luckin operates in China, it's mostly a mobile ordering experience. And then you arrive, pick up your drink and leave. So you can have higher efficiency stores and therefore Jason, lower prices. So it's, it's not a place where you have newspapers laying around.

Starbucks, not the third space. It's not a European experience where you drink out of a ceramic cup. And that's super interesting when you think about it culturally in Europe to ask for a to go cup is like, they're like, why just drink your coffee and enjoy the moment.

Relax. Three cigarettes. Enjoy your coffee.

Why not? Sure, I'll just pop it out. Why not pop it out? So brace for impact, boys. I'm overdoing now.

Now here we go. Now it's a show. For those of you watching our show, now it's a show.

So, and then America we got used to, yeah, like having a third space place to work on.

Starbucks was always very explicit about. It's like an Italian coffee shop. The, the drinks have Italian names. It's that leisurely European vibe. Sit down, grab a comfy chair and yeah, we've, we've talked about how that is a little bit out of step with the times that we're in when people want to like go into Starbucks, get their drink and go. And now you're in line behind, you know, eight kids who want unicorn frappuccinos and now it's your whole afternoon. So Luckin is a different experience.

What's been the reaction to this in my hometown, I wonder?

I mean on one level they're embracing it. They were doing pop ups. They got those long lines just like you always do when you have Instagram friendly pop up social media experiences. People don't want to miss out. What is this new Matcha thing? People are drinking. But there has also been a little bit of a pushback about the communist China origins of the company. And people are making connections to the candidacy of Zoran Mamdani, the Democratic socialist candidate who has taken over New York.

Where are they expressing these opinions? I'm just going to, I'm wondering where would a young socialist in New York comment on the communist coffee company?

I mean it's all happening on TikTok, as we say on the show.

Who owns TikTok?

A Chinese company called ByteDance with connections to the Chinese company.

And Jeff Yass.

When you're a busy founder finding a new developer, my God, that can become a full time job. And you've got enough on your plate. I mean you're running a startup, but Lemon IO has done the hard part for, for you already. They've got a crop of pre vetted developers that they've ensured are experienced, results oriented and prepared to make an impact at your startup. And they can work right now at competitive rates. These are skilled handpicked devs with a minimum of three years of on the job experience and just 1% of applicants are accepted into their program. Lemon IO isn't just recruiting you the top talent that's out there. They're helping you integrate them into your team. If anything goes wrong, Lemon will find you a replacement developer asap. And many of our launch founders and founder university companies have staffed up with Lemon IO and we always get the best feedback. So go to Lemon IO Twist and find the perfect developer or even a tech team in less than 48 hours. And Twist listeners get 15% off their first four weeks. Stop burning money. Hire developers smarter. Visit Lemon IO Twist. So the CCP, the Chinese Communist coffee producers own the Chinese coffee party. Yes, they own the.

They own the TikTok, the caffeinated Chinese coffee party.

And now they're going to own New York City.

They're coming. I mean, they're coming for New York. It's a little bit aggressive. Do you want to see? We've got some of these TikToks.

Oh, we do have TikToks. Okay, great.

We can look at a few Luckin TikToks.

All right, so. So we have some options here, Lon. We have the official announcement one, we have the local news coverage and then we have the woman in the hammer and sickle jersey.

Yeah, I'm going with three. Hammer and sickle jersey.

Do it.

We got options. We got options.

Somebody get their daughter.

All right, here we go. Let's. Let's do it, boys.

Okay, here we go.

Hey guys, come with me to get a two dollar cup of communist coffee. So this specific co coffee shop.

This is great.

Has more locations in China than Starbucks does. Okay, I'm going to come back to make a video there later. But no, this company went through a $300 million accounting scandal where they faked their profits because capitalism sucks. And then they started paying their workers and putting the money back into the coffee and what actually matters. And now they are more successful than Starbucks. European family that doesn't know how to walk on the sidewalk.

Back in New York.

Of course, this location is right by NYU campus. Should have paid your workers.

Oh, man, you're from New York. Starbucks.

So the fact that the I know that street Chinese communist coffee shop is on this strip is crazy. Yeah, it's the very first store in the US.

Oh, they numbered it.

I got the iced coconut latte.

Iced coconut latte.

That sounds good. They also have a pineapple.

Time for a little review.

That's so loud in here. She's beautiful.

And it is full of finance bros in here. But the barista complimented my shirt. So we see each other. Recycling.

No waste.

No, wait, wait.

No, no. You missed the banger. There's a total banger in here.

Yeah, we gotta keep going.

Alex, you gotta keep going because this is, like, amazing. Now, is she. Is that like a European accent?

Chinese company is coming to the U.S. german.

I think she's a New Yorker.

I'm. I'm sensing, like, country.

They're better.

She's got a little bit.

You are.

Oh, did you hear that one? Rewind that little bit. This is her best line. This girl's all bags. This young lady. They're all bangers all the time. Sorry, I spoke perfect. One more time. Sorry.

This be the beginning of Chinese companies coming to the US and disrupting the market and being better than American companies. Even though it's literally a communist country. They're better at capitalism than you are.

O. That st. That stung. She got me on that one.

She's right, Janita. This is janita on. On TikTok.dj a n g I T.

A like any other coffee I think I've had. And this is also just in time for the Duncan boycott because not every company needs to be talking about eugenics in their advertisements.

Oh, she's taking out Starbucks. Dunkin. Capitalism. Keep going, girl.

You go making lots of enemies today.

Smooth. Okay. Smoothie.

It goes down, like, super smooth.

Yeah. Socialism usually does go down smoothly at first. Yeah. The other side that you got to worry about. There's a lot to take away from this. I think I'm sending this to. To my guy, J.D. vance. I'm going to send this to J.D. vance because this feels like a. This is the beginning of a MAGA angle that we could go after here, which is that the Chinese companies undercutting American brands. Let's just let this sink in for a second. We're allowing. Go ahead.

Oh, I was just gonna say fast fashion. We did see.

We saw it with fast fashion.

Your American companies got beat by Sheehan and those.

You cut me off at the. You cut me off at the pass.

Oh, sorry. Go ahead.

No, it's okay. I'm going to give my rant because my. This is a mini rant. America is so dumb that we're going to allow Luckin to come in. Sponsored by the ccc. Ccp. The Chinese Communist Caffeine Coffee Party.

Collective Party Collective.

Comrades. We're so dumb that we've let TikTok come in and take over social media and program Our children. Now we're going to allow them to come in and destroy one of our iconic brands by undercutting them. Keep in mind that this, if, if China really wanted to damage one of the great strengths of America, it's our brands, why are we allowing them to come in and do this? I know that they're allowing Starbucks, but Starbucks has been struggling and they're going to sell off the business in China. I guess my question. Hold on, let me finish my rant. Keep your questions. Gentlemen, I need to finish my rant here, please. This is the start of a communist tsunami. This is a brilliant technique by the comrades in China. Pick a company, our automotive companies, and then send BYD in with the ships we talked about. Just on Monday, send Luckin in, undercut every American brand, get all those jobs onshored to China, have all that money and all that profits come back to China. Which, by the way, is exactly what we did to them. We said, hey, make our iPhones designed in Cupertino, made in China. The people in China made a buck an hour. They were jumping off the buildings. They had to put safety nets around the Foxconn buildings to keep all the suicides because they were working six days a week putting in tiny screws and just the most arduous labor you can imagine. Or amongst the most arduous labor. And now they know our playbook, which is build a great brand and win the hearts and minds of consumers. This is something that is being done deliberately, strategically and thoughtfully and deftly by the Chinese communist caffeine coffee company Party. They're doing this on purpose. They see, okay, Instagram is number one. We bring in TikTok, Tesla is number one, we bring in BYD Starbucks is number one. We're going to bring in Luckin. And what's the next thing to fall? What's an American iconic brand that they will want to take from us next? Disney parks.

The NFL.

The NFL.

Well, I mean, seriously, it's already happening. The number one most profitable animated film, box office wise, around the globe of all time came out last year, earlier this year. It's called Nisha 2. It's Chinese, it's with, I don't know, they already are pulling up on screen.

Yeah.

N E Z H A2 is how you, it's how you spell it. They're already making blockbusters that exceed Hollywood films in China. There was Also, I think 2024. His top film was called Detective Chinatown and it was a Chinese movie. And so, yeah, they're, they're already taking US out in the entertainment field.

I'm taking action here. I'm putting 100% tariff on Luckin Coffee. I want to try it. It's okay. You could try it, but not for $1.99. All right, you're paying 399. And that $2 is going to re education camps here in the United States to re educate. Here's my question. Communist sympathizers. Okay.

Are we. So my question is, are we so threatened by China because they are our largest rival? Is it because they are communist or is it something else? Because I feel like if this was a Brazilian coffee chain, if this was a Thai coffee chain, I don't think anybody would care. Everybody would be like, oh, cool, a Thai coffee chain. I want to try that. But for some reason we've elevated China the same way we did. I feel like the USSR in the 70s and 80s.

For good reason. I mean, for good reason. They've got a billion four people. They are extremely ambitious, they're hardworking and they are cutthroat. This is a cutthroat rival.

But I mean, is that not all true of India and that if.

But India, okay, tell me the Indian brand that's taking over our social media. Tell me the Indian brand taking over our cars. Tata's not dumping cars around the world for a chance.

But if this was an Indian coffee chain, I don't think anybody'd be like, oh, there's so many Indian people, they're coming for our company.

Here's what has to happen. One of the themes we talk about over and over again on this Week in startups is making sure you do your chores. I'm no expert on these things. I have some experience. Stephen Estes from cla is an expert. Let's talk about being cash efficient. Tell us about efficiency and what you see in the in the top tier startups in your practice.

We're seeing kind of an interesting trend out there where companies aren't needing to raise quite as much as they had in the past. You really have to be careful as a founder to only take on as much money as you really need. You got to do the forecast and you got to do the modeling and you got to dial in and get it right. Otherwise you're going to end up either not raising enough capital to get to where you're going and you're going to have to go get venture debt or go back, have an extender to the round, or you're going to give up too much of the company because you Just didn't recognize how much money you actually needed.

Yeah, very important to get this stuff right, folks. And that's really a bummer when startups don't do things in a button up way. I always have a great partner, a good partner to have on this adventure while things change. My friend Stephen over at CLA. Visit claconnect.com tech and don't forget to mention that your boy JCAL sent you. That's claconnect.com tech start today. What's good for the goose is good for the gander. I'm putting a $2 tariff on it. And if you want to launch your company here, you have to have a local partner. So you need to give 49% of the company, like we do when we're over in China. You gotta get a local partner. And some Americans gotta wet their beak on this. And we gotta have somebody from the administration on the board with a golden vote. A golden vote. I'm putting my guy, Howard Lutnick on the board of Luckin Coffee USA. We're taking 49%. It's going in the sovereign wealth fund. What's going on, usa?

No, Jason, no free trade. No, no.

It's over.

All of this is so. Oh, God. Okay, so a couple of things, couple of things. The reason why Chinese companies are coming after American brands is that the free market gave room for American entrepreneurs to build iconic global brands. Now in the case of byd, we are seeing the impacts of basically an industrial policy, the national level in China, subsidies and and so forth. So that I think is a market distortive area in the realm of coffee. While we joke about the, you know, Chinese communist caffeine collective, whatever, it's not actually part of the government system. So in my view, by telling American consumers you can't have lower priced coffee because Starbucks can't compete with this company. We're just reducing consumer welfare. And by approaching them and demanding golden shares, Jason, all we're doing is aping the ccp. So when you and I see that, that young lady, we wearing her, I presume, tongue in cheek hammer and sickle jersey. I didn't think your response to that was going to be excellent. Let's put that stamp on the US by forcing the same practices here.

Listen, if you want to better. Okay, I am looking for reciprocity here. You are correct about free markets. You're also making up a very good point. BYD is subsidized, which is called price dumping in America.

Agreed.

So we say no bueno to price dumping. What is $1.99 cup of coffee for a ginormous thing? It's price dumping. I believe Luckin Coffee is engaged in price dumping. I'm bringing back Lina Khan on special assignment. I call on Lina Khan to run a new division which will stop communism and socialism spreading into our country. Lina Khan, you are now part of the 47th administration. I'm calling my connects. You guys know I'm very connected. I'm calling my guy, Lutnick. Calling J.D. vance. And I am going to bring this to the top of the agenda. No price dumping. You need a local partner. We get our bets, we wet our beaks. If you want our market. No, in all seriousness, I do think it's like the price dumping is the issue. I don't mind the competition, but I do wonder if they get to bring their brands here. There's a Disneyland in. Is it in Hong Kong?

Shanghai.

It's in Shanghai.

Yeah.

I want to know if we could ask Producer Claude. It was incredible, by the way. And I have my comment browser set up to use. Producer Claude. Oh, nice. You can set your default.

Look at this. I can try out Opus 4.1 now. It's for complex challenges.

Don't get ahead of the docket, Lon. That's coming up later.

Oh, wait.

Dramatic foreshadowing.

Yeah. Let's ask it this question. What do you want to ask?

Yeah, let's do it.

Well, no, what I really would like to know from Producer Claude is.

He's listening.

What's the deal? What's the deal with Disney Shanghai? What is the deal?

Who are these people?

Who are these people getting 49% of Disney Shanghai? I want to know who owns the 49% of Disney Shanghai. Is it Xi Jinping personally who owns it? Because we have to have a partner there. Bobby Iger and Donnie and Eisner. They had to cut a deal.

The Shanghai Shendi Group, a Chinese state owned enterprise, owns 57% of the Shanghai Disney Resort.

What?

The Walt Disney Co. Owns 43%.

All right, that's it. I want. I'm upping my 49%. We need 58%. If you take 47% of Disney, I want at least 62% of Luckin. Case closed. I have given my verdict.

Yeah. Thank you. To Producer Claude. So did you see how speedy Opus 4 was with that answer?

I mean, if you put Oliver on that, it would have been seven minutes instead of seven seconds.

Producer Human is doing a great job.

He's great, but he's a human. Give me number Two, you have a number two culture story here.

I do, I do. It's a big. It's a big. It's a historical milestone. We've all seen this coming, but it's nonetheless an end of an era. Now that Disney owns Hulu outright, they purchased all the remaining shares that Comcast still held. They are going to sunset Hulu as a standalone app and platform and integrate it entirely within Disney plus buy 2026. Everybody will have a unified Disney Plus. Now. You'll still be able to, if you want to, just subscribe to Hulu content, you'll be able to do that. You can access just your Hulu or just your Disney plus, but it will all be under the Disney plus umbrella. Bob Iger told investors he thinks this is going to be not only a better, cleaner, less confusing user experience, but he thinks it's going to cut down on Churn. Fewer people are going to unsubscribe because they'll already have Disney plus and Hulu ready to go and because these two, they already have the same ad team. So this is going to unify a lot and allow them to bundle and do a lot more with ads now that it's just one platform and they don't have to worry about supporting Hulu and Disney plus. In addition, this is also an interesting footnote. They're going to sunset the Star brand internationally. When Disney first entered the Indian market, it bought Star India, which was the big native Indian streaming platform. And so in India, all this time, it's been Disney plus Star that's going away. Star is also going to just become Hulu.

In terms of fantastic. This is a great thing. We predicted it. And what this will do is if we could get producer Claude on this. I'm curious where Disney and Hulu are in their subscriber bases and where Netflix is, you know, in relation to this. Because consolidating these two, I don't know the overlap in subs, but this has gotta be pushing. I would think Disney over 200 million.

Well, we'll find out in a second.

Yeah, yeah. And where is Netflix at, Alex, in terms of their subscriber base and what was the first year Netflix offered the streaming service? Because what we have. Anybody who's got it?

Netflix has just over 300 million global subscribers. Okay, I'm going to look up when they introduced streaming. It was like, oh, January 16, 2007 was when they first started streaming.

Okay. So they're at 18 years. Disney plus was five years ago, I believe, when they did that introductory $6, I think it was.

I think it's more like six year 2019 before it was pre pandemic.

Now I made a prediction on CNBC and I'd like to producer Claude to find it. I made two really spicy predictions when I was doing my CNBC rounds. One was they got to get rid of Tim Cook because Apple cannot come out with innovative products under Tim Cook. I want to get that call and we'll talk about that on Friday. And I want maybe a little mini victory for me. It's done great in getting an extra $3 out of every iPhone, every iteration. But I think I predicted that there's a possibility within the first 10 years that Disney would eclipse Netflix and that it would certainly be Netflix, then Disney, then whoever else.

So core Disney subscribers are at about 128 million as of the end of last year. The last time we got an accurate Hulu count, they had an additional 52 million. So put them both together, you're close to 180 million. Well behind of Netflix's 301.6 million as.

Of what about ESPN 25 also owned and big news out of ESPN today that they sold 10% of ESPN to NFL to NFL.

ASPN plus has 24.1 million subscribers.

That sounds about right.

Yeah. So now we're at 200 million plus. Yeah. In six years, Disney has achieved 66% of Netflix's 20. Oh, I got it almost 20 year.

Run in 2017 when Disney first announced plans to launch a streaming service, Calacanis told cnbc, quote, it will be very easy for them to get tens of millions of people to subscribe. And he said Disney is the one company that could compete with Netflix and streaming content from Amazon Prime. He predicted the top streaming platforms will be Disney, Netflix and Amazon.

We all understand the importance of a crisp, memorable, easy to spell domain name with one of those names you can say over the phone and people know how to type it in without asking you the spelling. But let's get real. The good ones are either taken or there's some poacher who's holding it and waiting for some huge payday and they don't reply to you. Even if you want to pay for a premium domain, you don't want to use up all your Runway on a domain name. That's just the truth for a startup. You want to put that valuable cash back into your startup's operations. So you should consider this a dot tech domain. You can get a clean, crisp, super memorable name for your website and company and signal out Loud to your customers and investors. We're a tech company. That's instant branding for you. That's why over 500,000 founders have collectively raised over 5 billion in investment building their companies on tech. So skip the hassle, head to www.get.nettech twist or go to your favorite registrar and grab your tech domain today.

That's.

That's. What year was that?

2017. 2017. When Disney.

Okay, so that was eight years ago.

That was when they first announced Disney. It didn't even launch for two more years.

So I need a victory lap. I need a victory lap. I'm going to go back on CNBC to take this lap. But this is, this is big news. And I also said, I think on that, that Disney was missing the hugest opportunities ever, which is to make Disney the singular place for all Disney services. The fact that they have not listened. I need somebody to get me a Bob Iger interview. And if I ever had another job, it would be a studio head. I would love to run Disney. I'm putting my name in the ring if this happens. I'm folding up shop. You're all coming with me to be on my Disney CEO jaunt. So I would like the Disney. Put me in the. As I said, put me in the game coach. I would love to be a little internal for the Twitter. I would love to be CEO of Disney.

Heck yeah.

Oh, here's what I do. Okay, Day one. Disney Merch is a tab in the app when you're watching a show. When you get to the end of the show, it shows you all the Disney merch and says, since you just finished Lilo and Stitch, or, you know, since you just finished watching whatever TV show. Here's the Fargo merchandise page. And since you completed season one, you get 20% off. If you complete season two, you'll get 30% off. And if you complete season three, you complete the whole series, you're gonna get a free T shirt or whatever it is. I don't know, something then for Disney Parks. Disney Parks. If you subscribe to Disney, you get first shot at the premiere dates at Disney Parks. The holidays. The holidays are for Disney subscribers. You can't walk up and buy a ticket for those days. You must have a Disney subscription. And we give first shot at those to the top, the top, longest tenured Disney subscribers. So if you have a Disney account for five years, you get to buy tickets first on the holidays, then second. So you get a pre sale. A pre sale at the beginning of the year. And we collect the money Ahead of time, it seems.

It's almost like Amazon prime, but it's like Disney Prime. You're joining their, like heavy users.

Correct, Correct.

The Disney adults list. Yeah, correct.

And everything is in. So there's a Disney World app, right?

Yeah. Oh, yeah.

I'm taking this.

You have to have the Disney app now. If you go to a Disney park, it's all through the app. You basically don't have a choice. You have to download.

And we're starting a Disney Miles program and a gamification.

Well, they have crazy too.

Yes. So as you go and do these different things, your Disney account and your karma in the Disney account grows and your badges grow. So when children go to Disney, you put your kids names in. They get to have credit for which rides they want on. They have the percentage complete they are for California Adventure, percentage complete for Disney World, percentage complete for Disney Shanghai, et cetera. As you move it up, you learn more and more. Here we go. All right, thank you. Let's drop off our friend producer. I'm sorry, editorial director Lon, thank you for coming on. And that was a brutal call I made back in the day, Alex, when I said Tim Cook, because the stock went on a rip. My point was the stock can go on a rip because it's a bean counter. And sure it's going to make. It's going to be a good bet on the stock, but it's not going to be a good long term bet technologically if the person running the show is a bean counter. And sure enough, here we are. And Apple cannot build a car, they cannot build a VR AR headset, and they cannot build a goddamn AI assistant. So like every major new category since I make these comments, which I'll talk about on Friday, seems to have been a whiff. Okay, should we go to our gas defenestration Russian accident?

Now, earlier this week, Jason, you saw a video of what appeared to be yourself doing the all in podcast, talking about a company. And you had this amazing moment when you said, did we talk about this show? Is that actually something that happened? So, Zach, we'll talk to you just a second. But Jason, do you want to show. Do you want me to show the original?

I think we should just show like the first up until my part of this and then we can pause it. But this was so crazy because people were like, oh, what episode was that? And I was like, I don't know. I think. Did I say that? Cause I do seem to remember people doing, you know, sending AI jobs to Manila, wherever, and they were actually using pretending it was AI and they were brute forcing it with humans. So I was like, did we talk about this or not?

Play the clip. Here's the clip.

We have a confession to make.

Brilliant.

Y'. All, we got a situation. Sources are calling the biggest tech scandal since soham Burek. A YC startup called Atom that creates 3D models from prompts for game developers has been exposed for allegedly using a human employer employee named Adam instead of artificial intelligence to manually edit those models.

Wait, so game developers thought they were using cutting edge AI, but it was just some dude pulling all nighters? Sleeping, bro.

If that's true, it goes on from there.

Basically, these guys hacked the system and people thought that this was real. And so I'm like, wait a second. And I. And I start asking like, did we do. I know that because there was another company as producer. Claude, what was the other company that was doing this exact thing?

Builder AI.

It was Builder AI. Okay, so this is. I thought maybe we're talking about builder AI, but then I see this Adam, so I see this young gentleman, Zach, dive. Zach, welcome to the program. Thank you. Thank you. And so take us behind your idea here.

The idea behind the video.

The idea here. Because this is sinister and brilliant and all those great things. Go. How'd you come up with this idea?

We actually did it first for April Fool's where we made an April Fool's prank where we put up a fake TechCrunch article and said that the AI behind Adam was actually a guy called Adam. And it went fairly viral on X. In fact, we even had some foreign investors call us and freak out. But I was like, it's fine. And then, yeah, then we decided to do it again. And with the new AI video, as you can tell, it's getting pretty close to real, but yeah.

Okay, which tool did you use to make these fake AIs?

Right now you can use a mixed tool. So you can use 11 labs clone someone's voice. You can use the lip sync models. And then vo. We actually use a company shout out to them, Yuzu Labs, who are really good at doing AI avatars.

Okay. And you're a YC founder?

Yes. Winter 25.

Congratulations. Not. Not easy to get into the program. And YC does look for pirates. They look for punk rock people who will break the rules. I've been there. This is a minor infraction. I was an investor in Uber, Rob and countless other companies that Ben rules, you know, and we're even more punk rock than you, Zach. But I saw this and I was like, hey, Zach, what's the story here? So I DM with him, like, hey, listen, people are confused, and you can't do this kind of stuff to the point at which you're confusing people. Now, I've had people do. There was a all in AI that a kid named Edward did from a company called Podcast AI that I wound up investing in, and he did this digital all in one, but it was so bad back then, we all knew it was fake. The problem with yours, Zach, is you did it too good. The tools are too good. People were actually confused. So I said, zach, you can't do this. You can't take me out of this.

I will say most people would think probably a joke that a guy called Adam is doing, but, you know.

Yes, except it's been done, so maybe. I mean, listen, I don't ascribe any bad intent here, but you thought people wouldn't be confused.

I would say the majority were not confused. But, hey, you're confused.

You explicitly did it with the TechCrunch one to confuse people. So let's call it what it is. You are hacking media to confuse people to get attention. Correct? Sure, sure. Okay. So I told Zach. I was like, zach, you can't do this kind of stuff. Take me out of it, because I don't want to be a spoil sport here, but this is causing confusion. Also, I do endorsements, and I have. I have an endorsement with Athena. So, like, if you can use me as an endorser, that messes up my business. So I got to nip this in the bud because literally in the last this year, I've had no less than 10 startups use me in their ads, including my friend David Freeberg's team cut me talking about super gut and then put me in a paid ad campaign. You didn't put any money behind this, did you, Isaac? You didn't do a paid ad campaign, did you? Be honest.

I know if you did, we didn't do a paid ad campaign. The ad was free. Even making you a Muppet was free.

Exactly. So then Zack's like, okay, fine. And I was like. And please take me out of the previous one. So I was like, a little hardcore with Zack. But Zach was a gentleman. He knew he was in the wrong, I think, and he fixed it. But then he decided he would dunk on me. Well played. Here you go, Alex, play the next one.

I have cut my dear friends to the place where Jason arrives in his new getup. I think this is a really good fashion for you, Jason. Let's do it.

I like it. I like it.

Has been expensive. Exposed for allegedly using a human employee named Adam instead of artificial intelligence.

Hilarious. Edit those models. Wait, so game developers thought they were using cutting edge AI, but it was just some dude pulling all nighters.

Even better.

So the Muppet thing's been done a bunch, but yeah. So that was your way of like giving me a little counterpunch, Zach, you wanted to be a little spicy with jcal. Yeah. Yeah.

Well, I mean it got me on the podcast, so I can't blame you for it.

So what's the status of the company? I mean, explain. So well done. You hacked media, I give you credit for that. But in all sincerity, please don't use me in ads. And there's like a bigger issue now. There's crypto ads. I don't know if you've seen this, Zach. Have you ever seen me or Sachs or Elon or Chamath doing crypto ads on like YouTube and TikTok on live streams? No.

No, I haven't. The only thing I will make you into, Jason, is a 3D model. That's the only thing.

I mean, okay, I mean there's some, there's some amount of fair use. Just there's a thing called right to publicity. I sent you this link because I also there was a teaching moment because I was like, hey, Zach, if this is going to become like a regular thing, just know right to publicity is even if you parody a person, you still need to get permission and can't confuse. You got to put all kinds of disclaimers. That's why when there was like a group of advertising. I don't know if you remember this, Alex, on radio where they would use celebrities voices and they would use like Arnold's voice or whoever, some iconic voice and they'd be like celebrity impersonator, not the actual Arnold Schwarzenegger.

Oh yeah.

And they would be like, I love to eat the super human bars. They're incredible. So I just was like, zach, just know like you can't like do this as like a, you know, 100% of the time thing. You know, one time's okay, but tell me about the business and what you guys are doing. Since you said you got yourself here, you could create a little bit of ruckus. And now everybody's talking about, oh, Jake, Al has no sense of humor. Okay, fine, I have a sense of humor. I mean it's punk rock. But just don't do it as a programmatic thing.

Which one did you think was funnier? The first or the second video?

Well, obviously the second is better. But these deep fake crypto ones are the ones I'm really concerned about. I had somebody tell me in my DMs that they had bought $10,000 worth of like, J Coin or something in a crypto scam and they wanted their money back. And then they sent me pictures of the dm. So somebody created fake ads using AI, Then they DM from fake accounts on, like, Instagram. These Instagram accounts I'm not aware of because they download my whole Instagram account, they create a copy and they block.

Me and they block you.

So you don't know that they're doing this stuff. So there was like, just so you know, Zach, why their sensitivity here is like, I don't want my, you know, people who listen to the show and the listeners to get scammed. And this is like part of that whole genre of using AI to do this. So there's like a real thing here. It's not. Not like I'm just singling you out, but tell us about the company.

Yeah, so we're Adam. We're an AI powered CAD editor and 3D modeling tool. So basically, like the model of the company is that you can just speak anything into existence.

Right.

So I could say, make a Snap Fit enclosure for Raspberry PI and it'll generate the CAD model with a subset of parameters. Or I can even say, like, make a figurine of Jason holding a cup of CCP coffee. I could 3D print that and put it on my desk and show it.

Absolutely, yes. Make me a true comrade.

Jason, can I show you what it looks like when we use it? We have a. I have a demo for you.

Great. Awesome. Go run the demo for Zach. Let's get him some customers. Who's it for, Zach? Who's this for? Is it people making video games? Is it for people who are like traditional CAD people, or are you trying to do a Canva did and make CAD something that everybody can do and kind of induce an audience to exist?

Yeah, I think where AI is right now, we're bringing the floor down. So what we're allowing people to do is people who really want a 3D model who don't necessarily have the modeling skills. A bit like Canva is they can just go in, describe exactly what they want, and then, you know, 3D print it or put into their video games. And then we also have professionals. So we have some AA game studios using it to sort of make assets for their games.

Oh, they are making assets. Yeah. I did hear that a lot of folks are now making assets in real time using AI too. Is that part of the vision where you could like actually have the tool built into the backend and world create and like insert things in real time?

Yeah, exactly.

User feedback, the big thing.

I mean a lot of the asset generators out there, you just like put an image in or put a prompt in and you can't edit it. Ours is the only tool that is like ChatGPT. Right. You can keep conversing with it.

Right.

So I could have you holding the CCP coffee and then we could, you know, have the same thing and have you, you know, having a communist flag as well. So we can, we could keep editing it.

Where are you guys based?

We're in SF in the Marina.

Well, congratulations. You raise money. Were you able to raise money on this ide? Where you at? Who's the lead investor here?

Yeah, so we, I mean we're lucky enough that we had, you know, we had a launch during YC that was pretty much one of the most viral YC launches of all time. So we raised like a very healthy seed round. We'll probably announce it in a few weeks or so.

Oh great.

Awesome. And then, yeah, so we basically during yc we made the very first like sort of web based text to CAD editor. So some people call it like Vercel V0 for CAD. Even Guillermo called it C0. Then we built this 3D asset generator tool in the last 2, 3 months. Best asset generator tool in the market. And now we're going full fledged on sort of AICAD research. But Alex can show you a little bit.

Here's an example, Jason, that I made. So my prompt was a model of an elf wearing a Lorna Shore T shirt. And I picked that because heavy metal bands have very, very complicated logos ready to jump out of a tree. And here it is.

Amazing.

This thing, isn't that. Is that crazy cool. I would actually play a game with this guy in it. I think it's fantastic.

Awesome. Hey, since we have you on Zach, how do you talking about ip, how do you think about IP in these kind of tools? Has been a big issue with output. Right. Obviously training data is one thing, but output, like if you ask it to make a Jedi or a Disney character, will it do that or do you have to like start thinking about those kind of issues now?

Yeah, I mean, you know, I feel like that's a problem for the big dogs out there, if anything like, you know, initially we were content moderating it, but we found that users wanted to generate different ip. And I guess since the models are slightly different and adjusted, we kind of allow you to generate any single character you can think of. So your favorite movie character, you can generate a figurine, print it, or put it in your game.

Awesome. All right. In your interpretation of ip, no problem using other people's IP for the output?

Not yet.

All right, so there's a lot of lessons here for you about IP usage. I would not let people output other IP things.

You could make a video game you and adjacent. Wouldn't that be sick?

What's that?

We could make a video game where you're, like, walking around and stuff. We could have you.

That would be sick. That would be sick. Yeah.

We could have you slash down the CCP coffee.

So I love it. I love it. So is there any room in the seed round now? I feel like I need to get my beak wet here. What's going on with the seed round? What's going on? Is there room for jcal in the scene?

We could let jcal in. If we get exclusive publicity rights, we can, like, deepfake you whenever we want. I can make giant 3D printed models of you. I'll put it on top of the power supply notes.

All right, well, send the 50bps as an advisor agreement over and we'll get that signed straight away. And then let me know about the term sheet. Maybe we'll pop in a quick Hyundai and we'll be along for the ride. But I wish you great success with it. And yeah, it was great to meet you and have a little back and forth with you. All in good fun, folks. All in good fun.

All right, peace. Check us out at Adam New.

Oh, yeah. Adam New.

Adam New. And if you want to generate JSON in 3D and post it on Twitter, you can do it.

Subdomain New.

Yeah, it's like bolt New.

You know, it's becoming a neat domain. I like that. Yeah. Zach, continued success and great to get to know you. And I will see you on X, sir. All right. Well done. I thought it'd be fun to just cut this off before it becomes like, a Palmer lucky situation. His enemies accumulate. And this kid Zach is just. I know a punk rock founder. Like, I kind of. This is. My speciality is finding the punk rock founders, because I was kind of one of those back in the day. Because the second I was like, hey, you know, maybe you can't do this kind of thing, he's like, oh yeah, let me escalate this because I can get more views. And I'm like, yep, that's what I would have done when I was your age. Yep, that's exactly what I would have done. As a 25 or 30 year founder.

I do it twice, you tell me to stop again, I do it four times, you tell me a third time, then I'm probably going to tone it down.

But in all seriousness, this will become an issue over time. I don't recommend doing this. As for people listening, don't ever take a known person's talking about your product and put it in an ad because this recently happened. Actually, I think it was Huberman. Look up ask producer Claude about Andrew Huberman doing a lawsuit based on people. I think it was Tim Ferriss, Andrew Huberman and Peter Attia. And one of those three or multiple of them had to write a bunch of cease and desist letters. And I think it was Huberman because people were taking Huberman who might talk about a compound on like Joe Rogan and you know, he might talk about, I don't know, like vitamin D or something and then they cut him talking about vitamin D and then put their supplement ad on it. But this was like not just, you know, a startup, you know, in their seed round doing it on Twitter, precociously, this was programmatically, they were buying millions of dollars of ads and using his likeness in it. And they, and then somebody did it to Joe Rogan as well. Now if you do it to those two people, they're in the business of their image. Like I think, you know, you would have Joe Rogan reading ads for these people. So now you're circumventing his ability to run his business. And that's when you lose in court for a big dollar number. And you would have to go back and pay for that violation in a major way. Now in this one, you could argue a little bit of parody. No harm, no foul, there was no damages. But with Huberman's case, Andrew Huberman's case against a nutraceuticals company or something, he can actually claim significant damages because he had his. He has advertisers as well.

So here From May of 2024, Jason is an Andrew Huberman post from Facebook in which he says, unfortunately many ads are currently running on social media. They use my face or a drawing of it to sell it. He sent cease and desist letters and then he lists here are actual sponsors down below. So yes, this was Huberman. You were dead on.

Yeah, And I don't know if it actually went to a lawsuit or not, but this is going to become, you know, young people have a different view, and technologists have always had a different view of IP copyright and the kind of fairness of this stuff. And so in one instance where somebody did this programmatically and paid for it, they were like, we're just fans. And I was like, that's fine, but you understand, this is our business. And then unbeknownst to me, they went and bought some ads on this Week in Store. So I was like, wait a second, is this the same company that was stealing? They're like, yeah, they felt bad about. They bought these ads. Now this was a company doing tens of millions in revenue. So I was like, okay, that's a nice gesture. Sure. I didn't ask them to do it, but I did think, gosh, I always think when a founder is doing something close to the line, I should just give them a little bit of like, hey, be careful. Which is actually what I did in the Palmer Lucky situation. I was like, you know, don't buy covert trolling ads because it could blow up in your face. Anyway, I may have said it in a spicy way, so I'm sorry if I said it too spicy, which I probably did. I was a little spicier back in the day. But we've got more news in the docket. Let's get to the docket. Is there anything more news for us? Because there's a lot of major news today. I saw that. I think the biggest one is OpenAI dropped two open source models. Wait, I thought they were out of the open source business.

Pause. Not open source. Open weights.

Open weights, not open source.

Totally different, but still much more open and as.

So you can't see the source code, but you can change the weights. So maybe you could explain to the audience what's going on here. Yeah.

Okay, so I knew this question was coming, so I spent a lot of time trying to figure out how to best respond to what the hell is an open. Wait.

Yeah, sure.

First thing, at the top level, you can download these models and you can run them locally. You don't have to interact with them via an API or an inference provider. You can run them on your computer at home, or if you have a serious GPU from Nvidia, you can run the larger model there. Open weights is not the code. So you cannot download the code and actually extract the individual lines. But what you can think of is that weights are a bit like memory or the knowledge of the app once it was trained. And because they're open, you can see what OpenAI did. This is dramatically more transparent than the most recent generations of OpenAI models. And it is, I think, driving some change. So, for example, Xai Jason, in the wake of this announced Elon said this, I think it was today that they're going to open source, maybe open. Wait, Grok 2 after having open source Grok 1 back in the day. So a good move by OpenAI. You love to call them closed AI here. They're making a good step in that direction. But it's not open source. And so people are making mixing those two a little bit. And I think it's important to make the distinction.

Okay, so in a way, when you train these things, you might weight certain information over others, I think is another way to say it. And so, you know, like, maybe this is not correct. I would like to have somebody really figure out how to explain this. We understand that there's parameters and all this stuff, but how do you weight different things as being truer or more important, I guess, is how you could think about this. So if you were going to do something specifically with this model and make a cursor AI competitor, you would maybe tweak the weights and maybe you think, oh, the stuff we scraped off stack overflow is more important, or this GitHub stuff is more important, or this GitHub ranking makes this thing more important and slide the weights around. It's always been known that Microsoft owned the source code and the weights in the OpenAI relationship where they bought like half the company or whatever it is. So this feels really interesting to me because you can also run it on your local computer. And we knew this was coming. And what this means is when you start thinking about IP or privacy, this is going to have a big impact on it. If you're doing something like, I don't know, I'm taking, you know, pictures of my grandparents or whatever, and I'm making them into videos like people are doing. Sure. Do I want to upload those photos to OpenAI and give them those. And then the next person who makes pictures of a grandpa, it's my grandpa. You know, you get the idea. So, and then on a privacy basis, if you were doing deep analysis of your documents, do you really want that in the cloud with somebody else? And then somebody else you happen to index, I don't know, salaries, bonuses, legal documents, you know, this stuff can get pretty gnarly. And then it's training their model. You will have a large language model in the operating system, on your phone, on your computer. This is where Apple, which has been just totally description when it comes to LLMs, could actually maybe come from behind if they were to take one of these open models or work on one and then incorporate it into their operating systems of which they have billions of users. Oh lordy. That would sync with. And I predict they'll do this. I predict Apple will use one of these models encrypted on your devices so you never have to use a cloud based service and be subpoenaed for what you do. And when you choose to subpoena Apple because there was a terrorist attack at was it San Bernardino and they wouldn't unlock the iPhones. It was San Bernardino, I believe. Right. And they were like oh, there was a terrorist attack. Love to help you, CIA, FBI, everybody. But we don't have access to it. That's a bold thing to do as Apple. Right? Like terrorism, you know, explicit images of minors. Like there's a small cohort of things that any reasonable person would say turn it over. But Apple has taken the stance quite bravely, I will say of saying we don't have access to that and then giving you that information of the terrorists would compromise billions of people on our platform. Therefore we're going to make this higher level decision that ankling slowing down the next terrorist attack and finding out where the terror cell is is more important to Apple. They're willing to pay the price of another terrorist attack occurring from a sleeper cell then compromising billions of people's privacy by having a backdoor. That's a hard, hard, hard decision to make this. I'm glad I don't have to make it.

Yeah, this just came up. Nvidia put out a blog post yesterday or today, Jason, I forget exactly which. And they said there are no kill switches and no backdoors in Nvidia hardware. Nvidia is currently trying to get back into selling its H20 chips in China, working with the Trump administration on getting permission to do that. And I think China is a worried that what they're going to get is backdoored chips. Just like the US would worry about a Chinese company sending compromised chips to the US and so they're making a pretty clear stand about that. And then also we've seen the UK work recently to try to get companies again to break encryption and provide backdoors. And Nvidia said in its post, don't forget the. Was it the Clipper chip that had the compromise backdoor that led to all the Security flaws. And so in the case of Apple, I feel like what they're doing is they're just saying encryption is or is not and there's no middle ground to offer up to law enforcement. I'm sure that if Apple could find a way to have encryption be compromised in a way that was safe, which I know sounds oxymoronic, they'd go for it. But I just think they're being technologically honest. So that's my take. Of course we care about children. Of course we care about stopping terrorism. But I mean, either way, I don't.

Care about everybody's privacy. A right to privacy is the term I just used. That's for public figures. Having the right to publicity actually is what it's called. But a right to privacy is even more core than what celebrities have to deal with. And, oh, I was correct. I see here producer Claude lets us know that Tim Ferriss successfully got an injunction.

Very good.

Tim Ferriss and a company he owns, Chrisa Performance, obtained a default judgment against defendants alleged to have improperly used his name and likeness in connection with a fraudulent scheme. According to the case, Alliance Publishing and Pagan Twitty perpetrated a fraudulent get rich scheme in which they published a flyer asking targets to mail $97 and $100 to a dealer and whatever, blah, blah, blah. So anyway, people are scammers. I mean, scammers are out there. It's like that's part of becoming a known entity in the world is that people will try to leverage your followers into some dark place.

Okay, on the OpenAI point though, just a couple more small things I want to make sure we share with founders because I think this, this matters for what they're building. So there's two models from OpenAI you can play with. There's the 220 billion parameter model and then a 20 billion parameter model. One's Fortune for data centers, one's fortune for home use. There are lots of fun. The metrics seem to be by benchmarks, pretty good. I've heard some people say there's a lot of hallucinations, but it's certainly, I think having more open models in the market is good. And Jason, on the show we've talked about how when we think about open source AI, it's really a Chinese product now as American companies mostly go closed source. So here is a rejoinder from the west, if you will. I think that's very important. And then there's two other. There's a couple more things about AI models and I'm going to just run through these. But I think for all the founders out there who are building and are curious about what they can build with, here's the latest. So the other thing is DeepMind, which is part of Google, released a thing called Genie 3, which is a world model that has much better context maintenance. So essentially, if you're playing inside this world model, Jason, and you turn around, it doesn't forget what you've seen, which means that it's now much more useful, much more high fidelity. It's just great. I'm not going to go through a Demo today, but Genie 3, if you want to take a look at that anthropic, dropped a very incremental improvement to Claude 4, called Claude 4.1. Again, the benchmarks say it's better, but it's going to be more a matter of taste. So I'll be curious to see what people think about that in the coming days. Then the big news is that tomorrow OpenAI is going to release GPT5.

Oh, yeah. Well, this is the big one. Wow, that's the shebang. Maybe we should do a live release of that. That's incredible. What do people expect in the ChatGPT5? I heard a rumor. No hallucinations, more reasoning. What is the expectation here? Have they tipped their cards and said, here's what's happening? And when was the. When was ChatGPT4 launched? I wonder how many months between those. That's amazing.

Producer Claude, can we get the gap from GPT3 to GPT4 and then GPT4 to tomorrow, please, so we can compare those? That'd be lovely. The most important reporting that I saw. To answer your question, though, Reuters spoke to several people who have had access to GPT5. Didn't share their name because they're under NDA, but they specifically said it's better at coding, it's better at reasoning, but critically, of course it's going to be better. The question is how much? Right. They said it's not going to be as big of a ju as we saw from GPT 3 to GPT 4 from 5.

Okay, so they're downplaying it. That's interesting. Trying to manage expectations.

So GPT4 came out in March of 2023. GPT3 came out in June of 2020. So that was just under three years. This is just over three years, just over two years. So actually it's a little bit faster from four to five than three to four.

Huh?

Who would have thought?

Interesting. There's been a big kerfuffle Between Cloud for layer. Yeah. And comment. And you emailed the found. You emailed the press department there and I cc'd the founder. And we got kind of the backstory here on the Perplexity versus Cloudflare. I don't know if it's on the docket.

Did I not add Arvind to that email?

I did. You probably didn't, but I did because I was like, arvind should know about this.

I meant to. My bad on that one. Okay, so anyways, no apologizing on Twist. The backstory here is getting there.

Getting there, getting there.

A while ago, maybe a month, Cloudflare announced pay per crawl. This was a big deal. We talked about it on the show. The idea was if an AI model going out to the Internet to collect information on behalf of a user query wanted to come to JasonCallocanis Tumblr GIF, you could say, no, you have to pay us a cent or whatever to come take our information and bring it back to your user. I think we said this was pretty reasonable and an interesting experiment in economics for the Internet. Time passes. Paper Crawl has been in closed beta. Now they're working with publishers. We'll see what it looks like when it comes out. They have not responded to my notes asking how that's going, but we'll see. So Cloudflare comes out this week with a post essentially accusing Perplexity of very bad behavior online. They said that, look, we set up a test website that had a big stop sign for AI, and then we used Perplexity's models to take a look at this. And we found the information and accused them essentially of being bad online citizens. And Perplexity fired back with, you guys don't know how technology works. Which was an interesting moment because here we have two very different perspectives that don't seem to be talking in the same language. Jason. So maybe you can explain what you mean by they're acting in good faith, because I think that's an interesting, important point here.

Okay, so you never let a good argument get in the way of reality because both companies now are being talked about, which I think is part of the point. Yes, you can send a crawler out. There's many third party services that you can fire up as a developer to go crawl websites. It will fire up a web browser, a virtual machine, and it looks like a user agent. Right. So it looks like a human being is browsing. Say something that doesn't let you scrape it, like Reddit or Quora. Like you ever go to Quora, and you try to click on an answer and it gives you, like, maybe the first 500 words that says, hey, you got to log in to see this.

I hate that.

Well, but it's the perfect example of somebody trying to protect their IP from these crawls. Absolutely. So what Cloudflare is basically saying is perplexity is trying to circumvent that. And I can tell you, all the LLMs have tried to circumvent this, but now we're starting to get to the point where lawsuits are flying and something's at stake. And that's why these language models now need to behave, because Disney New York Times are suing and we've got actual court cases. So people are being more thoughtful about this. It's amazing what Cloudflare is doing by saying, hey, if you want to crawl our websites, that's okay. Here's the rules, here's where you send the money. And if Cloudflare, what does Cloudflare take? 10%. I don't know what their vig is. I would love to.

I think they've released that. But if it's more than 10%, we're going to take them out back and whack them with sticks.

I think 10% feels like a reasonable vig. I would pay them that. I don't think 30% would be. But 10% seems reasonable for them to manage the buy and sell side and, you know, 10% plus your stripe fee, so they get a full 10%. I think that would be reasonable, actually. Maybe.

You're literally describing the substack model, and I think that's fine.

Yeah, it's, like, enough for them to maintain the service and pay for their team. And it's not predatory in any way. It's kind of genius, I have to say. It's a really unique way to do it. It empowers the content creators and it gives a programmatic way for LLMs to ask for permission. Now, in comes the rub. We've been talking about the browser's role in this. You could. And we Talked today about OpenAI having a language model you can run locally. You're allowed to do whatever you want on your desktop with other people's ip. So if you paid well, you paid for it. So if you bought my book and you decided to take screenshots and you decided to run analysis on it, and you bookmarked it, more power to you as an individual. You paid for it. You can remix it. Just like you take the physical book, you could cut it up, put it on your wall, make a copy of it for a backup. But as long as you don't distribute it. Right. So if you want a photocopy of my book, so you have a backup and you have it in one house and the other in case the house burns down, God forbid. I mean, it's nonsensical because you could get the bound book for the same price as a photocopy. You get the point. Browsers are not detectable. These third parties are. And I think what's happening is there might be some confusion that comment users using the browser are doing queries. So when I showed, hey, I'm doing a United Airlines task, and it goes. And it fires off on my local desktop, the browser, to go do things. What I suspect is happening here is when I just told you I had Slack summarize the channel using the comment browser powered by Claude. How does Slack look at that? It looks at it as my user agent. It looks at it as my desktop. It doesn't look at it as a backend scraper. Now, if you took that content and you trained your LLM on it, you would be using me as a proxy to backdoor into stealing content.

Yeah.

Okay, so let's use the Quora example. CORA says, hey, you can't use this in your language model. But you and I go on there and we say, oh, give us all the questions about core vats. And we start reading them and we say, oh, get us the best answers on these Corvettes and teach us about the whole corpus of Corvette history or whatever. And we build this whole document in deep research on it. And we've queried over a number of days a thousand pages of Corvette information and history and lore that Quora owns. Quora owns that even though the users made it, they made it with the understanding it goes into the core corpus. And Quora said, you can't have this. Well, what if that then fed the Perplexity language model? Well, the founder of Perplexity said, they're not doing that, so whatever you're doing is not happening. So there might just be like, they're talking through each other, perhaps a misunderstanding of the user agents. But this is where the details matter. Details really matter. And that's what a show like this week in startups is about. We get into the very nuanced, granular details of these kerfuffles. And this donnybrook is valid. It's an important one.

It's very important. And I think the way where I come down on this, putting aside the technical differences of Whether or not Cloudflare, quote, misunderstood 20 to 25 million user agent requests that are not scrapers, according to Perplexity's blog post.

How many? 25 million?

Yeah. 20 to 25 million user agent requests are not scrapers. Anyways, that's from the long Perplexity post about this. We will sort this out. But what I, what I'm worried about is this. The idea that if I go to, let's say, ChatGPT and ask it a question and it pings 47 websites, collects the information and brings it back to me and gives me a summarized paragraph and then OpenAI says, well, we're not doing that. Alex says, not really. There, there's a, there's a automation and scale differential here. And I tried to talk about this for something that I wrote and I was trying to think of the analogy as food. So, Jason, if you come over to my house, you can eat anything you want, open the pantry, the refrigerator, the freezers, steal from the kids, I don't care. There's lots of food. Come over, eat. But if you sent a robotic courier to my house to collect food for.

Other people, in which you're doing it.

And the automation, because it's not one to one. And so I'm concerned that people are saying as long as a user requests it in some tenuous capacity, anything downstream from there counts as Alex requested or Jason wants it and therefore it's okay.

Not true. Yeah. And the other thing is these websites will also block you if you do unnatural behaviors. So people for all time have been creating local index like Google does, and so they'll just have their browser open 100 LinkedIn pages and start scraping. And there's infinite number of tools online. You can get to do a user agent in your browser to spam people with inmails and you're paying for inmails. There's a throttle on it. You only send so many. But there were tools in the early days to just automatically like posts on Twitter, automatically retweet stuff and, you know, create all this garbage on the Internet. And so it's up to the website owner as well that if somebody does more than 100 clicks in an hour to pause them and say, hey, we noticed you did 100 page loads in an hour. A normal human being can't really do that. So what's going on here? And pause your account or freeze your account and sophisticated people like say Crunchbase or the Wall Street Journal or the New York Times, anybody who's got a subscription product or Quora Stack overflow. They build these things in to know a user, or what appears to be a user is doing something with malfeasance. This is incredibly niche, but an important topic. Topic. Okay, this has been another amazing episode of this week in startups. My amazing co host Alex Lon x.com Alex x.com Jason x.com Lon x.com TWI startups we'll see you all on Friday. Bye bye bye bye.