Hivemind: State of The Market, Saylor’s End Game & AI Growth in China

Nothing said on The Hive Mind is a recommendation to buy or sell securities or tokens. This podcast is strictly for informational purposes only, and any views expressed by anyone on the show are solely our own opinions, not financial advice.

Hello everyone, welcome back to another episode of The Hive Mind podcast. We were off last week, partly because the founders were in China doing a little AI trip. And so we're going to talk about markets. We're going to talk about that trip a decent amount today. As always on the podcast, we have Yan, Ventures Partner. We have Jason Yanowitz, Head of Markets at Delphi. And we have José Yanowitz, Head of Labs at Delphi Labs. Obviously myself, Ceteris, head of research at Delphi. And today we're also bringing on Rawson, who does AI investing at Delphi Ventures. And hopefully you've read a bunch of his stuff on Twitter, always posts really insightful bangers. So today is Wednesday, March 25th, 10:45 AM. Bitcoin is up to like $71.4K now.

Now?

Uh, there's been like a bit of relief over the past few days. Um, you know, there's these rumors of ceasefire and everything. How are, how are people feeling about the markets here? Maybe Jason Yanowitz, you want to start?

Um, it's a tough question. I don't know, these markets are really tough, especially when you get like, uh, headlines every like day day and a half, right, which just kind of whipsaw things. It's definitely not a market you want to be, um, I mean, if you are high leverage perp trading this market, it's, it's definitely got to be tough. Um, it's also kind of hard to have like a, like a real good understanding of like what the like impacts of what's already happened are going to be over the next, you know, like 3 to 6 months. Like not being like I'm clearly not like, you know, a geopolitical oil expert or energy expert, right? Even though energy is like a core input to everything, uh, throughout the economy. So like trying to gauge what the actual implications over the, you know, next 3 to 6 months are, at least, you know, with disruption, production, all of that stuff. Even if there is a ceasefire, like there still are going to be ramifications for that. So like I'm, I'm still trying to figure out and underwrite like what that is. And like, to me, it just seems like— I still feel like equities feel like are pretty priced to perfection right now. Like, I still feel like equities haven't really priced in, um, a lot of what's going on and what's already happened. I feel like you've already seen it kind of, you know, in a couple other areas start to manifest. So like, I don't know, I'm still super cautious right now. Like, I I don't know, I don't, I don't really trust either side at this point. I'm kind of just looking at the market to kind of give me like an idea of like what it's thinking. And like, I don't know, oil's still elevated, right? It's not really moving too much after these, you know, ceasefire headlines. It was, you know, down obviously initially on Trump's tweet yesterday. So like, I don't know, I don't have a great read on it. I still think there's probably higher likelihood to downside in the short to near term than, than upside. Like, I don't know, if I, if I had like a bunch of things that were, you know, down and, you know, down a couple percent and we rallied, I'd probably sell and just kind of look at it as like a nice gift to get out closer to break even and then kind of like reassess the, uh, the situation because it's definitely not clear what's— how this is gonna play out, in my opinion. Um, yeah, it's, it's a tough one. It's, it's a really tough market environment. Um, I'm curious what, what, uh, what everybody else thinks. And also, you know, with, with PD— or sorry, Rawson— um, being in China, like, what the, what the view is from people over there, right? Because like, I don't know, I only really get the view of Twitter and, and New York, right? So like, I'm kind of curious, like, what what the views are from elsewhere, um, on, on what's going on. It's, it's definitely interesting.

Yeah, I mean, I, I would say my news diet is still fairly like US-centric and like large majority of them non-domestic Chinese sources, but you do see some like viral videos and some viral posts. There was one that went viral of like, I think it was like retweeted by one of the affiliates of Chinese state media, which was a cartoon of like Persian cats, like basically kind of making fun of Trump for being like fairly erratic and like, you know, causing problems where like it, it wasn't necessary. Um, but like they would find ways around like their traditional paths to, to energy. And I think this is one of the reasons that the Chinese are investing so heavily in a lot of their domestic inputs and supply chains, right? Like realizing in a globalized world that it's increasingly going to be difficult to depend on traditional trading partners, and they don't want those vulnerabilities. So, hey, you just— we need our own semiconductors, we need to invest really heavily in renewables, we need to, you know, invest really heavily in nuclear. Um, but yeah, they are quite dependent on imports of oil, imports of food. Um, and so yeah, those are real dependencies that I'm sure people in the Chinese government are quite worried about knocking 10% of global oil offline that they were getting at a discount. So I don't know exactly what the views on the ground are. I'm sure they're pretty diverse, but I would assume folks are generally unhappy with one of their sizable energy import partners, obviously, in a chaotic situation.

Yeah, uh, I think crypto specifically, it's pretty promising to see Bitcoin not nuking while SAILOR isn't bidding with STRC proceeds. You know, perhaps the reason why is because people are pricing in him turning that faucet back on. And it seems like that game can go on for quite some time if you look at the dividend liability and the offsetting amount of kind of Bitcoin you can buy with each amount of issuance. So yeah, the idea there is just basically selling these preferreds at in the market and guaranteeing 11%. And as long as the market kind of keeps believing in his ability to repay that in the long run, um, which he kind of definitely has the ability to do so because he can sell other assets, namely, um, Strategy shares, if it's— as it kind of supplemented. So that game can go on for quite some time, and I think that is going to be kind of the next or the continued catalyst on the BCC side. Um, and, and yeah, I think that'll return next week with, with the dividend payment going out. But, um, it's, it's a bit different than what you see with kind of your normal stocks going ex, and, and, um, because you have this, this, uh, just ATM component. And then on the alt side, you kind of have these, these spurts of strength. Um, But then you, you get this periodic washout. I think it's pretty evident there's not that much money sloshing around because you have BTC strength and then kind of a handful of alts doing well. It's kind of just been the hot narrative at the time, right? You have TAO with the all-in guys shilling it, and then I think you see some other alts catching a bid, namely AI ones, um, in, in kind of Venice and Grass. And then You're still seeing a lot of strength in Hyperliquid as you get more alternative assets trading there and it becomes less crypto-centric. But outside of that, it's been pretty, pretty meager market. And so I think, yeah, the equities component is tricky. You definitely have somewhat of a slowdown in US consumer And I agree, there's, there's definitely quite a bit priced in. But I, you know, as before, we've seen the market held up regardless of kind of consumer strength. You know, you can, you can maybe expect that to continue, but at a certain point, uh, I think it realistically can if you kind of have continued weakness. Question is just going to be, will there be some kind of stimmy activity going into midterms, or Will something be done on that front to create an environment that's more favorable for when people are heading to the voting booths? But I agree, it's tricky. I feel like Bitcoin's in a decent spot with how much it's been flushed out and kind of the— not relative strength, but it's the fact that it's holding off while the bid is offline. I think it'll be— yeah. Telling to see basically how much it continues. I think if you, if you don't have any massive escalations in the conflict, even when, you know, just now when Iran came out and said, you know, these demands are very far away, equity has actually held up well too, right? And what you, what you do want to look for is strength in the face of bad news. So I think there's some signal in that.

Yeah, what do you think the actual endgame is for—

yeah, sorry, go ahead, Cedrus. What was the question? Well, I mean, I don't know if you want to take it in another direction, but I just felt like, uh, I don't know, I feel like this is a kind of an obvious place to, to be hedged and not take too much risk. Um, again, maybe, maybe I'm, uh, I'm, I'm happy to be wrong here, but But it does feel— I mean, now less, it's sort of more consensus, but its markets still haven't dipped that much. And it feels a bit like COVID when it was like 1,000 cases and Twitter, like our Twitter bubble was insanely loud about it, right? It seemed obvious within the Twitter bubble if you're following Balaji or even Selkis back then and a bunch of people who were talking about it. But outside, no one really knew about it, right? And it's like something which has like very potentially dire, like, asymmetric, uh, consequences. It doesn't really seem priced in. Or at least, like, even if there was a ceasefire announced, I don't know, markets are down like, like, you know, 2 or 3%. Like, I think S&P is down, you know, less than 5% for sure. It just feels like a place where I would rather just, just buy once, once this stuff is like fully cleared out. Because I, I don't know, I'm, I'm I'm not— clearly not an expert on this. And I think like no one's really an expert on geopolitics. Like what anyone I've ever listened to over the years has been like deeply wrong and deeply certain that they were right at the same time, which is kind of a deadly combo for the geopolitical experts. Sort of Peter Zeihan being the poster boy. But like there is a lot of like second order and third order consequences from having the strait closed for this long, from these like oil facilities getting bombed, the natural gas facilities getting bombed. Like we don't have much information, but it seems like some of this might be offline for years, that the Russia plant got bombed like yesterday or the day before too. We've never seen this kind of like level of supply destruction. And at the same time, the closing of the Strait of Hormuz, which affects like fertilizers, it affects oil, which affects everything else, seeps into CPI and makes like rate cuts way less likely. Obviously, I think affects risk on the margin. So I don't know. To me, it seems like Uh, uh, like a pretty clear spot where being defensive makes sense and just like buying higher in a few months once if this stuff clears.

If that's the case, I'm kind of in line with that. I mean, yeah, I, I've slowly kind of moved in that direction over the last 2 to 3 weeks, right? Like I started off coming back from PR actually like the, the day before I was looking at Polymarket, it's like, oh, odds that we strike Iran by the end of March was like 9% or something. Next day we're at war with Iran. I'm like, all right, well, like, nothing ever happens, right? So, and then like slowly I've started to make this progression towards what Jose's kind of described, um, like, yeah, I mean, I have like, you know, long-term holdings that I'm just, you know, just core portfolios that are, you know, multi-year things that I'm not touching. But like in terms of everything else, that's, you know, short, medium-term, tactical, whatever it is. Um, yeah, it's just very defensive for me. Like, I just— I don't have a great read, which means like I can't— I can't justify being super risk-on. And, and the intuitive thing for me is kind of, you know, what Jose lined out. It's like, I'm not an expert on this stuff, but if the core input to everything, literally like everything in, in economic growth, from food to to pretty much every— literally everything is disrupted this badly, and we don't really have a clear, clear view on, um, what it looks like to get this stuff back online, what those timelines are. Um, it could get worse, more things could get bombed, right? So I'm just like looking at it and it's like, yeah, I can't justify being super risk-on, um, at all. Uh, so yeah, and To that note, it's like, okay, well, like, what would I want to hedge my stuff with? Like, I wouldn't actually want to hedge with BTC for all of the reasons Jan lined out. Like, I'm not trying to hedge Bitcoin and then have Saylor come in and dump $10 billion in market buys over the next month or something, right? Like, I'm just not, not thinking that's ideal. So like, yeah, I think you just have to look at equities, and equities are clearly the, the main risk asset that hasn't priced in at least what's already happened, in my opinion. Um, let alone what, what, you know, what the actual timeline for the stuff coming back online could be. Um, I do think, you know, oil is probably going to be like— I, I, it's like, oil is not something I would trade. I have no, no edge in oil. But like, the things that oil impacts seems a lot like, right? Like, I don't know if oil is going to level off here or if it's going to level off at 90 or 100 or 70. Like, I don't know. But what I do know is it's going to be higher than it, you know, was before, most likely. So like, what does— you know, kind of thinking like, okay, like if oil is going to be like generally higher over the next year or two, like what things should be higher because of that? So you don't really have to make a huge directional bet on where oil ends up, just that it's going to be higher. Um, that's like the way I'm trying to think about it and reason out some tactical positions, at least. Um, But yeah, it's super tough. Like I keep saying, um, it's a super tough market environment for sure.

Yeah, no, I was just gonna say, I think in the 1970s, like, the oil embargo took like 6 or 7% offline, and the Strait of Hormuz is like easily 10%. And obviously what happened in the 1970s was, uh, pretty catastrophic in terms of inflation, energy prices. I think it was offline for like 6 months or something. Um, so yeah, I think the US also has like a lot less space from a fiscal perspective to deal with it this time around.

So yeah, I think, I think one, one difference there is that I was reading something, I don't know if it was today or yesterday, about how much less oil actually is responsible for GDP versus the '70s. And so I think like that's obviously it's going to be bad, but I think a pure 1970s situation, like we're not as dependent on oil as we were then.

Yeah.

What's also US production capacity now versus then? I think it's quite a bit higher where we're now, we're like 2x the second largest, uh, yeah, we're like, yeah, we're like 20 million barrels.

So, so yeah, like the US situation has changed a lot, right? Um, but globally, you know, I would say there's still a lot of people that need oil for their economies to function. So yeah, if you just take— it's notoriously inelastic in terms of the demand and supply. So I feel if you just actually have an extended period of time where you take 10% of oil offline, then that would be quite destructive to demand across a whole host of other areas.

Yeah, um, can we talk about Sailor quick? Like, what do you guys think the end game is here? Because the way I see it, and Jeff Dorman— Jeff Dorman had a good tweet on this, and basically it's like, at the end, somebody needs to lose, right? Like, Master shareholders think they're safe, STRC, uh, owners think they're safe, the other ones in the stack think I think they're safe. Like, this STRC thing that he has, basically it's like a soft peg to $100, right? And then he changes the dividend yield to kind of get that back to $100, but he doesn't actually have an obligation to like continue to like actually peg that to $100 or continue even paying out the dividends. Now I think the dividends are also like very tax beneficial where I think they're like return of capital is the way they're distributed. So they're actually like tax-free or there's something where like if you look on that dashboard that FUD posted the other day, I know a few of us threw it around. They did like actual like the tax equivalent yield of STRC is actually like 30% or something right now. So yeah, because there's like—

how can it be 3x?

Well, because I think they're saying like, I think that yield is all tax-free, and so then they're just backing into what would the pre-tax yield have to be to get the same after-tax yield.

But like, wouldn't it be— yeah, I don't know why it would be 30% tax rate. It'd be like 14%, not 30.

No, no, no, you're right on that. 14.5. Um, I gotta look into that deeper. Yeah, but like, I don't know what the endgame is here because the only way this works forever is if Bitcoin CAGR is 30% a year, basically. Right. And like, that's what Saylor believes in everything. But I don't know, part of me feels like maybe there comes a point where he decides that like he has enough Bitcoin and then he just kind of like rugs one part of the capital stack. I don't know.

I mean, something has to— I agree, something has to lose. I mean, his targets $1 million. I forget what he's at now.

Um, so like $750K or even more than that.

Yeah, so I mean, in that, in that sense, he's not terribly far away. And I guess, you know, this is always a concern. Um, and there's a handful of ways this whole thing plays out. You can argue that in, in the current scenario, it probably increases the EV of, or the probability of success, in the sense that, you know, you don't necessarily want to be constantly buying new highs because eventually that, that comes back to really bite you. And that's been his MO for some time. So I think, you know, the, the probability of failure is actually higher if you keep buying new highs because ultimately when you get the pullback, you're in a much worse spot. And, you know, it's kind of what we saw with him now where Uh, his average price is kind of roughly where we are now. Um, I think dunking on that is kind of dumb because the real comparison is, is strategy price over that time period, but that's a different story. So I think, you know, if, if you're still bullish on this asset, then the probability of success actually improves if he's able to kind of deploy at this lull and, and then you know, the, the bid kind of comes back more broadly versus the bid disappearing as he's just, uh, breaking out and like basically creating new tops each time. Um, but yeah, I agree. I think one of these things have to rug. Um, you probably see the dividend go away first, and then if there are liquidity issues, uh, strategy probably takes the biggest hit. Um, because there's like selling BTC is obviously really tricky unless he, you know, telegraphs and says we will sell this finite amount and then nothing else because after selling this we're good on our debt coverage. And then it's just, okay, how do we try and monetize this, uh, balance sheet of Bitcoin and try and get yield off of it and grow things that way? Um, so they're like I think there's a world where, like, I think, yes, something has to lose, but there's a lot of things that lose before he has to sell Bitcoin, basically.

Yeah. I mean, if you look at this dashboard, great dashboard, BitcoinQuant, he's basically just become super horny for this stretch STRC recently. It's like the only thing he's really issuing outside of some at-the-money offerings. Like, if you look at the volume, you know, over the past few months, he basically is like predominantly STRC now. And then yeah, that effective yield is like 25%, which makes more sense. So basically they're taking the 55.2% max tax rate and then with the dividend of like 11-something percent. Um, so I mean, you can see why it's juicy to investors, but it also just feels like if you're holding this, you, you think in your head that you're going to be able to eventually like get out in time. Because I think that, like, obviously, if he stops to honor, like, any part of the capital stack, the MNF premium will go down, he won't be able to issue anything new. But like, if he hits a point of Bitcoin that he likes, then like, does he really care that Master trades at a discount, like an MNF discount? Like, if he's like majority shareholder, and he kind of owns all the Bitcoin in there anyways through Master, it's like, Maybe that is partly in his head, the end game of like once he gets enough Bitcoin, or like the, you know, the, the, the perpetual motion machine kind of like runs out, he's okay with like everything else kind of like failing and just master trading at discount. But yeah, I don't know, that's like the scenario where I think that's the one I want because that's the one where Bitcoin doesn't get like really impacted. You stop getting the inflows, but he's not like selling Bitcoin because, because it doesn't seem like he would ever sell Bitcoin to cover the dividend payments. Right. That kind of like is antithetical to the whole point of this whole game. So as that— yeah, interesting. As a dividend expense just gets bigger and bigger, it just kind of— yeah, something to keep. Obviously, this is like one of the major, the main market movers, and it has been over the last few years. So something to keep like watching for now. I think at least in the short term it'll probably only be accretive considering the size of them, but we'll see. He— if they actually— if he actually is able to issue like $20 billion more of this, then it becomes like a serious, you know—

I'd be surprised if he's able—

I'd be surprised if he's able to, for sure, for sure. But like even like $5 billion more still is a lot. Like, if he's paying 11% right now, it's a lot of cash. Yeah, like that interest expense can get up to like a billion dollars a year at some point, right? It's like, it's a lot. Um, so yeah, that's markets. I don't really have anything different to say from what you guys have said overall. I think, uh, yeah, crypto has looked good relative. And like, crypto does have a history of bottoming first, and like, that doesn't mean that, uh, this is the bottom or anything, but, um, seems like a lot of people who, you know, wanted to risk off their crypto did most of that. Um, we'll see. Obviously, if something really bad happens, like, that changes things.

But yeah, I'd have a lot less conviction in BTC right now if it wasn't for STRC.

Yeah, yeah. Um, let's go to China because we're already 25 minutes in. I think—

yeah, I was trying to—

guys, talk. So yeah, how was, uh, I think, Jason, you want to start?

So by the way, uh, yeah, because you, you, you kind of were a lot of the instigator for this, been, been sort of shilling China to us for for a while, and we've been talking to a bunch of managers there, getting excited about the ecosystem. Maybe you want to like kick it, kick us off.

Yeah, so I guess, um, I don't know if it was shilling China, but it was just living here, being on the ground, and like seeing kind of the density of AI talent, deep tech talent, robotics talent, and kind of the dissonance between that and, um, market sentiment towards China after I got here in like early 2024. It was kind of, you know, the classic China's uninvestable. You know, it's not a market economy. Like, they're cracking down on all of their internet companies. And like, obviously that did happen. And then there was a massive real estate bust. And so, you know, it seems like the Chinese economy did go through 4 or 5 years where there was a massive deleveraging. A lot of foreign capital fled, especially institutional capital. But then, you know, in 2024, I was here on the ground. You started talking with people. And obviously the AI revolution was happening in the US. And I think sentiment was like, there was just a little bit of a disconnect between sentiment being super low and then kind of actual talent on the ground being some of the best in the world, right? And so obviously over the course of 2025, that started to shift a little bit with the Deepseek moment and then obviously Chinese humanoids and then the rise of China open source. And so yeah, it was kind of just like, hey, instead of just reading talking points as they come through in the news, which tend to bifurcate between China is uninvestable and like TikTok videos that China is like taking over the world, there's actually a lot of nuance and there's things that are structurally very difficult about China, but there's also a lot of positives in terms of like human capital, infrastructure, supply chains. And so actually coming to visit, meet with entrepreneurs on the ground, meet with investors is the best way to actually collect those nuanced data points for yourself. And so, yeah, I was excited to kind of host the group as they came to kind of meet a good number of folks that I've been chatting with here for the last probably 6 months when we started getting a little bit more serious. But yeah, as José mentioned in his note, I do feel like Over the last 3 months in particular, valuation has started to accelerate quite dramatically. You've seen the Hong Kong markets obviously starting to get very excited, particularly around like AI and robotics names. You know, a lot of early-stage funds that we've been looking at are seeing their portfolio companies marked up by some of the sizable growth funds in China. So yeah, I do think the ecosystem in terms of valuation is evolving quite quickly. If you look at indices across the board, it's still materially below the US, and I think there's reasons for that, right? There's— there are like less deep capital markets, there's regulatory overhang, geopolitical overhang. But at the end of the day, I also think there's basically two markets that have a full vertical AI stack, um, and one of them's the US, which obviously has a very, very robust and deep capital market, and a lot of those names have been bid up pretty tremendously. And then now increasingly there's China, which is number 2. So yeah, obviously it's a complicated market and there's reasons why you should be cautious, but it's also one I feel like that's worth looking at and basically evaluating for yourself before just like using secondhand hearsay to basically come to, come to your own conclusion.

Yeah, by the way, I got an email actually from Dan Jun that the Hong Kong Stock Exchange became the biggest in the world in 2025. I didn't realize this, but, uh, it was 119 new listings and more than $30 billion in IPO proceeds, which apparently is both— is more than both New York Stock Exchange and NASDAQ. Which is kind of crazy. And you could definitely see that on the ground, there was something very crypto going on. Like, I mean, Zippoo and Minimax are the two big model companies there, and they both went public, uh, and they're trading at like $40 and $50B basically on, on like less than $100 million of revenue for, for both of them, which is kind of wild because it's, it's, it's like, like 5 to 10x the multiple that OpenAI or Anthropic ever raised at. you know, and I would definitely pay more per dollar of revenue for Anthropic or OpenAI than I would for these Chinese model companies. So it's very frothy. And then you're kind of seeing the private markets raise using these public marks as comps. But obviously the public marks are like pre-unlocks. So it's a very crypto, which I think my crypto experience helped me dodge actually, because I was getting pretty excited at one point. About some of these private opportunities. But yeah, it's tough when the public mark is like pre-unlocks and you never know when you can go public either. Um, and I also think they're just like the only two ways to bet on Chinese AI right now, like pure plays is like Zhipu and Minimax. I think when more things go public, it sort of gets diluted. Um, but what I would say, so yeah, software I was kind of underwhelmed by. I was also underwhelmed by just like, I wrote an update on, on Twitter and I think Rostam is going to put one out too, and I'm curious to hear what Jan thought of everything. But I was underwhelmed by software. I was a bit underwhelmed by the founder quality overall, um, but I was really, uh, impressed with hardware. Like, I think it's really hard for anyone to compete on hardware with China given just some of the stuff we saw in, in Shenzhen, right? And some of the stuff we heard, uh, just the iteration cycles with when you have 70% of your inputs coming from the Greater Bay Area, and like pretty much everything comes from China. And we saw some, we saw a lot of like robotics companies, a lot of consumer hardware. I think it's very hard, like if you're building that, not building it in China is probably going to be pretty tough, which is kind of like pretty obvious conclusion, uh, not, not particularly contrarian. But, uh, yeah, curious, Jan, if you had any, any takeaways actually.

Yeah, no, the, um It was interesting to see the consensus from the perspective of builders and investors there around the ideal kind of archetype of what they're trying to invest in, which is a combination of Chinese hardware manufacturing know-how and talent and just engineering talent, and then trying to service Western markets. And, and so, and in order to do that, you kind of need someone Western on the front end, basically, and then, uh, Chinese on the back end. Where, like, even all the hardware that's kind of being built in the US is still sourced originally from China. And so kind of exactly what you're saying, where you need someone there to shorten the, the iteration cycle. And then, like, they— there's broad consensus there that, you know, the, the Chinese consumer market is pretty weak for, you know, a couple of reasons. One, just the— what I was pretty surprised to hear was just the degree of kind of youth unemployment, and particularly that there's probably— it's probably 2x the headline number.

Yeah, that's what Jason Yanowitz said, right?

He said 25%, but like, I was looking around, everything says that's probably overstated. But so like, let's just call it 20%. And then the idea being that it's actually probably understated by half because because so many people are just going to grad school after university because they can't really find positions. And so, you know, you have that from a consumer, uh, perspective. And then you also have, um, just the, the low propensity to spend on products from Chinese consumers. I think it's, it's kind of, you know, somewhat of a cultural thing where they've just been able to produce things at usually a fraction of the cost and kind of specialize in, in copying and knockoffs. And, you know, that kind of permeates through the, the consumer spending patterns. And, and so their goal really is to just target Western markets. And so, um, the— it was funny, I think, you know, we went in there obviously very open-minded about, uh, trying to partner and, and, and invest there. And, um, but I think if you kind of question Americans on US-China relations, they would think of it a bit more adversarial, whereas, you know, everyone we spoke to was really welcoming. There was, you know, all— everything was focused on how do we kind of work together. There wasn't this, this us versus them component. You know, maybe it's just the appropriate strategy because that is what serves them best, but it still felt very genuine. And, you know, everyone was really welcoming. But I think they just, they realized that the, the American and Western more broadly, consumer is kind of where you want to be selling. And so it's positioning you, trying to find, you know, a way to kind of leverage the know-how of selling to Western markets with the know-how of producing in Eastern ones.

Yeah, you also just had a lot of founders that were like so impressive on paper, like they'd been at the top university in China, which is literally like the top university in the world, right? And also I think, I think it's actually the most selective place in the world. I think it's more so than the IITs even, just obviously just given the sheer number of people that, that want to go there. Um, and then they were stinted DJI or ByteDance, managing like 100 people, like products with, with hundreds of millions of users. Um, but like when they were pitching, it just lacked a certain like vision and, and, and like some of the, I mean In the US, it's kind of like you have the opposite problem, right? You have like a bunch of people that pitch really well, but actually there's no substance, but they just sell you like these big dreams. And in China, you definitely had like the reverse of that where it was just like, yeah, they're just not in general, they were not good. Obviously there's a language barrier, but I'd say like not good pitchers, not super visionary with the stuff that was being built. It was always like something. It was generally stuff that already existed, right? There was not like a lot of, like when we went to SF together last time, there was like the dude drilling into the earth to terraform, you know, and like, and people trying to build new models and stuff like this. Um, and, and in China, it's much more like we're doing, uh, lovable, but, you know, we're going to execute faster, or, you know, we're, we're doing like, uh, lawnmower robots, but they're like way cheaper and better. You know, it was, it was a lot of like 1 to X versus 0 to 1, which is maybe just like cultural, right? Like if you have to be like, if you have to compete on this, on this really hardcore grades and, and, and, and stuff your whole life, you just don't have the time to, to do any, and it does, it's not rewarded, right? Having these.

Yeah.

Um, yeah. So I don't know how, yeah, I mean, uh, I guess to do that, you have to be rewarded like on valuation because the ceilings are just much smaller, I think. And I just didn't feel like you were like most of the seeds were being done like $30 million or more. And then there was a bunch of pre-launch consumer stuff at like $100 or $200 million. It wasn't very compelling, I think, on the startup side right now. Right.

Yeah.

We didn't see too much. It was— yeah.

And then as soon as we left, we are like Towards the tail end of the trip, some, some more negative regulatory headlines hit in terms of basically China being less reliant on Western capital into their markets and, and basically kind of gatekeeping and making it difficult for Americans in particular to be able to invest in these markets at various stages. And so I think it's reasonable to expect that rhetoric to accelerate— not accelerate, but to continue in this direction from both sides, you know, US and China. But I think what that translates to is probably a lower ceiling on some of these Chinese markets, just because they are, uh, going to be, you know, gated of Western and American capital in particular, where I think Right now, people are looking for good opportunities, and you're seeing a lot of kind of, you know, activity in late-stage secondary markets for pre-IPO companies. But I think, you know, China seems like, or is very clearly the other big global player. And so I think that there was going to be a shift in terms of investing and capital shifting there. But that's, I'm sure it'll still happen, but to a much smaller degree. And that has knock-on effects, right? It's just, if, if this money's not coming in, then some other pocket won't follow. And so, uh, I think what that basically does is just kind of reduce the ceiling on, on the opportunities and the multiples that some of these can trade at, um, for the time being.

Yeah, which you got— you can see that in public markets, like the— it trades at like 60% on a P/E multiple. And you know, the size generally, it's like much smaller than the US markets. But I would say you didn't— it's tough because in SF you do have like, for the talent that comes out of, let's say, OpenAI and Anthropic and stuff, they do sometimes raise like $4 billion seeds, right? So you don't have that in China, right? Like even the, the, the really expensive seeds aren't $4 billion, but they are like $100 million or $200 million, right? Um, so it's definitely cheaper at the top level, but I'd say the median valuation is probably like fairly similar. Um, which isn't the case in public markets. But yeah, I mean, one thing that stood out, just to also say some, some positive stuff because it was a super impressive trip, was how hard they work. Like, we had meetings at all hours of the day, all weekends. Like, the people made no distinction between weekends and weekdays. Um, one founder came to meet us on the day his wife gave birth, which was pretty Chad, uh, depending how you want to look at it, I guess.

But it was, yeah, debatably Chad.

I mean, it was, he was like, I'm not a doctor. Like, what am I going to do?

Sure.

So sure.

His wife loved that comment.

Yeah.

And insanely qualified, insanely hardworking, really nice people too. Like extremely welcoming. Yeah. And I think there are some interesting, like I do think there's some alpha in finding these founders that are sort of more divergent. There and finding managers who were looking for that because I think there's a lot of pattern matching going on, people looking for people that have been to ByteDance and stuff like that.

Yeah.

And on the software side, it's just hard to invest in software right now. Like, I don't know. I, yeah, the, you're always one big lab release away from like being irrelevant, right? Like these things are moving so fast. It's just really tough. Like I don't, I don't know. I used to, I was really excited about applications and vertical AI, kind of talked about it here. Now I'm not even sure. I mean, I still think there's going to be opportunities there, but I don't even know if we're going to have UIs, right? If agents get good enough, you don't need a UI. Like you can just ask for what you want and receive it like generatively and on the go. So yeah, I don't know.

I think, I mean, I think that, I think those are fair critiques and I do think that I expect over the next 24 months, like the US model providers to continue to pull ahead just based on the compute, like the sheer breadth of compute that they're going to bring to bear. But at the same time, I do think like the US economy and other Western economies are like very exposed to rapid AI disruption and like the entire economic model is generally services-based. And obviously China has a big component of that too, but less so considering it's more of a manufacturing-led economy. So I think that presents a pretty big question mark. And then the other thing is I feel the US is trying to have its cake and eat it too, where, hey, we're going to reindustrialize, but we still want to have the reserve currency of the world and the deepest capital markets of the world. And those things are often in tension, right? Do you want to depreciate your currency and invest really heavily in being competitive on exports and reinvest on infrastructure? While simultaneously like having a strong dollar, while simultaneously having the rest of the world invest in treasuries, which is propping up the stock market, right? Like at some point you kind of have to choose which path you want to go down. And in my mind, like in the event that the US does pull back from its role as global hegemon, then like other markets and other equity markets are likely to need to be relatively inflated compared with the US, which has been basically the capital markets for the globe for an extended period of time. And so I'm not saying that won't happen, but I am saying in the event that the US does choose to pull back from its role starting in 1945, then I do think there will be ramifications for how people choose to allocate capital. And yeah, like, will you continue to have 65+% of the relative market weight you know, um, basically saving in US indices 15 years from now? I, I don't know, right?

I mean, I'm really bullish Chinese public markets still, uh, honestly, like that, at this, at this, at these levels. And I think Hong Kong is going to keep doing well, although like I don't know that thing well enough. There's some people telling us about some shenanigans that go on there that reminded me of crypto, and I don't know how, how true that is or not with these IPOs. But I do think the public markets are going to do well. Um, it's also like, it's hard to understand what the Chinese government wants. Um, like, and you kind of need to know that before investing in China, right? In a way that you don't with the US. Like, the US, like, Trump can do and say as much like dumb shit as he wants, but the courts event— like, there's rule of law, right? So there's some— there's, you know, he probably won't get a third term. Like, the the tariffs get ruled unconstitutional, whatever. That just doesn't happen in China. And so like today you find out they arrested, or the Manus founders are detained, you know, and then they did this thing where they don't want like offshore vehicles to offshore vehicles. Yan is insulting me in chat. So it's hard to say what they want. Like, it seems like it would make sense for them to have like, keep the private markets pretty, like, let Chinese nationals benefit from those and sort of definitely not let their talent leave and go start companies elsewhere. And not ARB like the China talent, because there's a lot of people trying to do that, right? Where they will have our hardware in China and we'll have engineering here, but we'll set up a company in Singapore or Hong Kong or even the US. And I think that's clearly like something they don't want. Right. Um, but the public markets, it seems like it would benefit them to have like really liquid, rich public markets, uh, where you can like dump on foreigners. Right. I don't know. Um, yeah, but, but it's not clear to me that they want that.

Well, it seems like they kind of do, because they, they're, they're trying to block that last late stage, or based on that regulation with with red chips, right? It's, it's there. It's, they're okay with you buying in, in equity in public markets, right? Where the Chinese investors can get liquidity and effectively dump on foreigners, which it's a protectionist policy. I get it. But I like, yeah, no, that is what they're trying to do though, based on like that regulation.

Didn't they, weren't they trying to encourage people to go public on in Shanghai rather than Hong Kong?

No, you just like, it's basically this, this particular structure that you use that they were less excited about you listing in, in Hong Kong. So like, as opposed to having the Moonshot structure, they preferred like the Jipu structure, which just gives them like more, more domestic control. And it's not like this ZIE entity, like shadow entity that's like actually in Cayman. I think it's just like, uh, the Chinese government's way to ensure that they actually have more control over a lot of like the larger strategic AI companies. Um, but yeah, I mean, I would say like clearly relative to the US, like the upside for capital is capped, right? Like you'll never have companies that challenge the state in China. But simultaneously, I also feel like there is a period where having a relatively, not a crazy stock market, but an inflating stock market to basically fill the gap that is a massive deflationary rug from the real estate market over the last 3 years. They do need pieces of the economy to start inflating and rotating store of wealth from real estate, which got to be very unhealthy in terms of cost of living, which had obviously impact on demographics, to inflating the equity market to get out of this deflationary spiral is something that seems to be fairly palatable from a strategic perspective. So yeah, I guess I do see the Chinese government tentatively starting to be excited about a long-term structural bull market that doesn't get too crazy just because it is an avenue out of the current deflationary environment, which is obviously a pretty good tailwind for equities. So are there pockets where things seem super frothy like Minimax and Chipu? Yes. But at the same time, holistically, I actually would expect the next 5 years to see pretty— not crazy, but structural appreciation in RMB and a relatively healthy, slowly growing equity market just to help them get out of this deflationary event that they've been in for the last 4 years.

Yeah.

And then China itself, I mean, we are— the first city we spent about a week in was Shenzhen. So basically it's a metropolis of about 20 million people, but it was a fishing village 45 years ago. So everything is brand new, clean, It's really, really a sight to behold, especially relative to kind of the decrepit state of a lot of Western blue cities. And basically what's happening here, like, you just feel safe there. Everything is orderly. You kind of see drones doing deliveries. It definitely feels futuristic. And it's kind of, I think, the headline you heard going into it. Um, and then Shanghai was, was really beautiful too. Uh, it was pretty funny. You kind of see elements like, this kind of looks like Paris, this kind of looks like London, this kind of looks like New York. And then so, but, um, yeah, really just beautiful modern city.

Um, what was, what was like the coolest— let's do something more fun. Not that this, this has been great, but like I saw some things like from Anil, but, uh, what was like the coolest thing you guys saw? Unlike maybe like the robotic side or I don't know, like the, your favorite.

Yeah. I had to leave early, so I missed the dark factory tour. So I'm pretty, pretty salty about missing that. Um, so I think the coolest thing for me was the humanoids, but I imagine for those guys that that was probably it.

Yeah. The Xiaomi dark factory was pretty absurd. It's just like, I don't know what, what size was it? Do you remember, Rossen?

I think it was 500,000. Uh, square feet.

Yeah, I'm a word, so I'm not a numbers guy.

Yeah, it was like just of just robots, uh, robot arms, like automated, um, like, like transport vehicles.

Yeah, I think they're producing a car every 90 seconds or something insane like that.

Yeah, it's, it's pretty crazy. It wasn't, uh, I don't think we saw the, the, the dark one. There was some humans there. Doing like helping the machines or fixing the machines or stuff like that. But the scale of it was like mind-blowing. Yeah, like totally insane. And also just Xiaomi, like went from idea to shipping their first car in like 18 months to mass production in like 3 years. It's just like only something that could only happen in China. It's just like absurd, right? Apple spent 10 years and like $10 billion or something and couldn't get a single car. Shipped.

So yeah, I do think, like, I, I do think you guys had some, some quite, quite solid critiques that I agreed with. But the one thing that I do think is, like, shouldn't be underestimated is kind of like the Andy Grove, like, uh, line of reasoning. Not the only the paranoid survive, but like, if you, if you lose proximity to, like, the forces of production and the production line, then you also, like, start to lose the ability to innovate on those things, right? And I think that's like a really good example where Xiaomi is just like, you know, close to production of a ton of different, like, types of electronics. And so they can spin up a beautiful car within like 1.5 years, whereas Apple ended up outsourcing like all of those things, you know, over the course of decades, and now are much further from, you know, a lot of the processes that would need to like basically build a beautiful car. Um, and so yeah, like I think Dan Wong talks about this a lot, but just there, there is a, a high cost of innovation to not being close to the actual production and just doing design and financialization. Like eventually does come back to bite your ability to innovate, um, especially in deep tech or manufacturing and a lot of these other domains. So, so yeah, it's like maybe you have less like single founder visionaries, but you do have an ecosystem that, you know, is continuously and rapidly evolving, which I think if you look at things like DJI and their tech stack, or what's going to come in robotics and what we've seen in EVs, um, I, I would expect that stuff isn't going to slow down.

Yeah, I think what one funny point was basically everyone we spoke to was, you know, very smart, humble, measured, and, and, you know, not hyperbolic at all. But they were just— the one thing everyone was also highly convicted in was just that the global market share will be 70% China, 30% US, 0% Europe. Like everyone is just convinced Europe is cooked. And it was just pretty funny.

It was the number one bonding experience between the Americans and the Chinese. You'd have this like stately elderly Chinese man, and he'd be like, oh yes, like obviously in humanoids, you know, China will have 70% share and the Americans will have 30% share and the Europeans will have nothing. And, you know, me and Jan look at each other like, yes, of course, of course, yes. Give Jose a quick sideways glance. Um, but yeah, like I honestly do think it will be very difficult for, for places like Europe in terms of competition I think US is definitely a little bit more, um, has its own growth engines, but I feel China's— I mean, Europe is a little bit more like directly in the line of fire because China's kind of going after a lot of its industries and just doing it better. Um, well, I mean, they're doing it better than, than some US company—

a lot of US companies too. We just have protectionist policies and a strong consumer, and so you have a large enough market that, that can kind of insulate itself in certain areas. But so they're like, they don't export some of these products like the Chinese electric vehicles that we would just take an Uber ride were all really nice.

Yeah. Don't you— didn't you guys— didn't you guys feel while you were there that like the quality of life relative to the cost was like abnormally kind of high and like the, at least to me, like in China, it just feels like the, the exchange rate does feel too low.

And you go back to some trade-offs though. Like I, I, I would jaywalk and I would look at you and I would watch you patiently waiting for your green light.

I live here, man. You know, I, I gotta, I gotta, I gotta—

and you're driving and you're getting like photographed every 100, every car, whatever.

There's like every car that drives by, you're just getting photographed.

Really? Like you can see the flashes?

So yeah, I'm not saying that.

I'm not saying there's a passport.

Yeah, yeah, yeah. I'm not saying there's not trade-offs. I basically was saying like relative to the material quality, it just seems like the RMB is undervalued. Like, like it— they should let it kind of float and, and actually it would allow the rest of the globe to be more competitive on exports and it would actually solve a lot of the trade imbalances. Like this is basically what the US wants, right? Hey, can you actually have the RMB appreciate slightly so we have less of a trade imbalance? Like we don't want to have, you know, if you look at Scott Bessant's latest speeches, we don't want to have decoupling. We just want to have adjustment because this is unsustainable. And a lot of people would say China has an unsustainable trading relationship with the rest of the globe because they just, export so much, and a lot of it has to do with the fact that the exchange rate is relatively low. And so I actually think a lot of those issues, if you just saw the RMB appreciate by like 20% overnight, would, would be assuaged pretty materially. That has other—

people have been saying that for years though. I feel like I've been hearing this for, for years that they should do this, that they're going to do this. Like, why haven't they done it yet?

Uh, yeah, I'm not sure I want to say this on a podcast. Um, yeah, I mean, I, I think, I think it's basically like there are strategic industries that China wants to be very competitive in. Also, having a ton of exports like basically allows them as the state to direct resources as they see fit and strategically and compound in areas that are nationally strategic to them. Whereas if you appreciate the RMB, it's effectively kind of giving more of the wages to kind of consumers and workers, and they would obviously then be able to direct that capital individually as opposed to having more centralized control over how it's spent, basically.

Agreed, guys. I gotta jump to another call. I'm already 10 minutes late, but yeah, yeah, this is good.

I mean, we're up on an hour now, you guys. Um, see you, Jose.

See you.

But, uh, probably wrap it anyways. I thought that was a good talk. I don't know if anybody else— anything else they want to bring up?

No, that was great. I, I loved listening to, uh, to the China takeaways.

It was great.

Thank you, guys. Yeah, and explore myself Was the food—

yeah, come—

how was the food, Yan?

Yeah, I don't try. Yeah, uh, I am a bit of a garbage disposal when it comes to food. Like, I'll eat everything and anything. So, uh, I didn't— I, I liked it. I mean, I think what ended up happening is there's basically— and, and Ross can definitely, uh, provide better detail on this— there's Chinese food and Cantonese food. And what ended up— and Cantonese food's a bit more exotic. It's a bit more squishy. Uh, squishy is probably like one of the best words to describe it. Uh, and, and so like squiddy and, and kind of just, just weird fish and, and anthropods that you can't really, uh, figure out. But it was good. It was just every dinner that we went to and even some lunches where Basically the MO is if you're— if it's fancy, it usually skews Cantonese, and every one of these dinners ended up being fancy. So it was just like 80% of our meals. Um, and the Chinese food though, we had a couple times, was, was really good. I mean, I, I liked all of it. I think we just ended up having like 90% Cantonese, and I think that, that ratio was the, was the issue.

Squishy, good word, huh?

Yeah, sorry, my, my, uh, my video cut out, but yeah, I, I would say, uh, we spent a good amount of time in Shenzhen, which is, you know, uh, obviously in Guangdong, close to Hong Kong. And so yeah, they, they like, uh, there's a lot of Cantonese cuisine, which I would say at the high end is pretty fancy and a little more exotic. So the guys, you know I think did well being adventurous in some of their meals. Yeah, I guess I actually am partial. I kind of feel like Chinese cuisine is one of those where actually the everyday street stalls, actually for my palate, tends to be better and easier than the super high-end stuff which starts to get a little bit more creative. So, when in doubt, I actually feel like the blue-collar street stall option options tend to be, um, you know, the stuff that I, I actually really like about Chinese cuisine. But Chinese cuisine's super diverse, so, you know, if you're in Yunnan, you'll get very different from when you're in Xinjiang, from when you're in Shenzhen, from when you're in Shanghai. Like, you know, it, it's, it's pretty, it's pretty diverse. But I thought the guys did well with, um, some, some more creative dishes.

Honestly, the most difficult thing to consume, and I'm a pretty big drinker, was this booze that they have there. Holy hell, what is it called again?

Baijiu. I thought you were a huge, huge Baijiu fan by the end of the trip.

Yeah, it's, it's, uh, it's probably one of the harder alcohols I've, I've to consume I've ever tried.

Yeah, it's, it's definitely an acquired taste, but it's like, yeah, I mean, it's all the rage, especially with the older cohort in China. If you go to like a lunch with anyone over 45, I think there'll be a good amount of baijiu consumed. It's a pretty big part of the culture. But yeah, I do think that in general, if you come to China, I've been very impressed by the hospitality living here. I feel like people in general, when they're hosting, are exceptionally gracious and really, really welcoming. And hopefully Jan and Jose and the guys felt that on this trip. Like, every time someone takes you out for a meal or like invites you over, they typically do go above and beyond. So I, I feel it's like actually a very generous people despite what is portrayed oftentimes in the media.

100%. Yeah, I couldn't, couldn't agree more. And, and, uh, one element I really enjoyed was just that every large dinner was a round table. And so you basically had the food sitting in the middle and this, this, this plate would rotate maybe like, I don't know, one rotation every 2 minutes. So you gradually pick off food and, and put it on your plate. But the other element was just that even if you had a group of 6 or 15, it still managed to just be one conversation for the most part that everyone was kind of a part of. Where as I think most other areas you have these rectangular tables and, and it siphons off into 3 or 4 and it just becomes chaos, whereas here it was a really good setup to kind of for everyone to meet each other and kind of be all speaking, uh, about one thing. I thought that was really productive because you didn't have this issue where it's like, oh, I'm— I don't really get to meet this person or hear about them because, you know, the whole point of this was to, to do, you know, meet and greets and understand how people are thinking about, uh, Chinese markets, Western markets, and everything in between. And so this was a really fun way to do that. Bullish roundtables.

Well, yeah, um, sounds like it was fun. I'll have to go someday, Ross. I'll have to hit you up.

Uh, yeah, come, come on through, sir.

Yeah, but, uh, but yeah, I think we'll, we'll wrap it here for this week. Uh, thanks everyone for coming on. Thanks, Ross, for making a guest appearance. Uh, I think that was some cool insights. Into the Chinese tech and AI market. Um, and yeah, we'll see everybody else in a couple weeks.

Thank you.