Aaron Levie, Alexis Ohanian, R.J. Halperin, Cristóbal Valenzuela, David Zagaynov, Sam Lessin, xAI Merges with X, Isomorphic Labs Raises $600M

You're watching TVPN. It's Monday, March 31, 2025, and we are live from the temple of technology.

The fortress of finance, the capital of capital.

This show starts now. We got a great show for you folks. Jordi, how was your weekend?

It was fantastic. I was having an intense podcasting withdrawals.

It's rough, right?

Pretty much. Until last night when I could kind of see, you know, sort of the end of the downtime on the horizon.

And we also got extremely pulled on the show because Elon clearly knows that we're live from 11 to 2 Pacific. So as soon, as soon as we logged off, he announces that X and Xai are merging. Very rude of him, but we were both. We'll talk about it.

We were both in the car, heading to meetings.

Yes.

And the urge to just turn around.

Yep.

You know, sort of donut u turn. Turn around, go back to the studio was strong. Yeah, it was rough, but we're back.

Yeah. We need to figure out what our, like, breaking breaking news product is. A lot of people were saying, hey, we should hop on a spaces, which I've actually never really done. Kind of hearkens back to the clubhouse era. I think it would be cool. I actually had, like, back to back to back, not just meetings, but also phone calls. And I was, like, touring studios while on phone calls. It was like I couldn't break away from it. But, you know, we were able to take the full weekend to digest the news and bring you a breakdown of this very interesting deal between X and Xai. And there's a bunch of precedent around this that I don't think people have really been talking about enough, which is that this isn't the first time Elon's done something like this. He, of course, bought SolarCity while at Tesla. And so I. I want to take us through first, the Wall Street Journal reaction to or just like, the facts of the deal. X&Xai. X&Xai are now one company. So I want to break down that. Then I want to talk about some of the reaction what people are saying on X, what how people think this will create value or whether it's a good or bad idea. And then I want to go through some of the Xai, The. The history here.

And we're going to have the take Smith, former early Facebook employee Sam Lesson show.

I'm excited for this.

To break down the merger. Yep.

I'm sure he's gonna have a good.

He's gonna have. He's gonna have more takes than we can fit. Into 15 minutes. But it's gonna be a great time.

Yeah. And we have a bunch of other great guests on the show. But that's in 90 minutes.

Yeah. Other guests. We got David, who is the co founder of Poseidon.

I'm so glad he can come on.

They launched a new plane today.

Yeah, that's great.

Uh, who else we got? We got Aaron Levy from Box, who I'm very interested.

I don't.

We gotta ask, we gotta ask the story of how he amassed two and a half million followers. It's probably just like being like early and about a platform.

Oh yeah.

But still fantastic. We got Cristobal, co founder and CEO of Runway coming on.

Yeah, they launched.

Then we have Alexis Ohanian and a new port co founder of his RJ who's creating a new sort of like twitch for watching sports live in a very entertaining way. And then I think there's one more. It's actually getting. No, that's it. That's it. That's it for today. Very excited and. Yeah. Should we get into it?

Yeah. So from the Wall Street Journal. Musk merges his AI company with X claiming a combined value of $113 billion. That's 80 billion for XAI and. And 33 billion for X. X of course was bought for something like 46 billion but had about $10 billion in debt. Artificial intelligence startup Xai has acquired X, the social media platform he owns an all star transaction that fuses two of the billionaires biggest technology bets and assigns the new enterprise a lofty valuation. The deal combines the two Musk controlled companies racing to create powerful new tools that could transform the economy. With social media platform that holds a fire hose of chatter from around the globe. X can serve as a powerful distribution for Xai's products including its AI chatbot Grok and provide a valuable feed of real time data to power the startup's models. Executives at the companies which share personnel believe and it's funny because they've already had a deal in place. Clearly Grok is very deeply integrated in Axe. It says that they're already sharing personnel and so there's very clearly like blurry lines from day one. And I think that putting the companies together actually makes a lot of sense. But I'm interested to hear your take.

I generally had a mixed reaction to this. I think it makes sense for Elon. He's sort of got a lot of balls in the air. He's juggling. The teams were already sort of overlapping pretty substantially. My concern is just around focus. It's like, okay, the combined entity, both of them are still very much startups in some way.

Right.

Like X has been in this sort.

Of like they put it back in founder.

Back in founder. Yeah. Not even founder mode, but just startup mode. Super running lean on budgets. Right. You know, really focusing on, you know, just growing revenue and all these things that just historically weren't super important at Twitter for one reason or another. So now seeing them together, I'm just. I have some. I understand how it makes sense from a team standpoint, from a fundraising standpoint, but ultimately it's just sort of unclear to me that, like, I understand that X can be a powerful distribution tool.

Yep.

I don't know. I don't know what. It's unclear to me that it's working as a distribution tool other than people use Grok.

Yeah.

Within X.

Sure.

But that doesn't necessarily need to be rock. It's almost.

Yeah. I mean, it is a powerful distribution tool, but when you think about it as like, if you want to get 100 million people to use your LLM and you have a 43 or $33 billion budget.

Yeah.

To do that, like, could you acquire 100 million people a different way?

Yeah.

And that's like buying the entire inventory of every super bowl ad for the next decade. Right?

Exactly.

Like, we're talking tens of billions of dollars is a lot. Could put up billboards in every single. In every single metro with ad quick. You could like, you could do a lot. Right.

Yeah. So. So my point of view is if any other entrepreneur in the world was doing this, I would just be like, blanket bearish.

Yep.

But it's Elon, so we're going to give him the benefit of the doubt.

Yeah. I'm actually taking the other side of this. I'm like, super bullish on this. I think it makes a ton of sense. I don't know about the exact valuations, but in terms of just putting the two together, I think it makes sense for both. First you look at how quickly Zuck was able to catch up on LLM distribution with llama by stuffing it in Instagram and WhatsApp and how natural that distribution point makes sense. ChatGPT was able to break through because it was the first and now the apps installed, it's on my home row. But Anthropic has not been able to get to, like, the normie.

I just think it's. It's one of those things. What is the prize? Is the prize being a. An answer engine, a sort of alternative to Google search Where people go there.

Yes.

To, you know, multiple times a day for information. If that's the prize, then the merger. I'm not really sure that it works because to date I've continued to use chat GPT for a lot of stuff.

I think more and more people are moving over and they'll use the one that's just one fingertip away as opposed to swiping up and picking a different app. And so I wouldn't be surprised. I mean, the interesting question is like how much traffic to Grok is driven by in x app usage versus just people going to grok.com? aside from like the market entry of, you know, obviously Grok is going to get a lot of attention just because it's an Elon project and it's going to essentially go viral. Any product can go viral. You know, anthropic Claude 3.5 went viral on axis, even though it's not an Elon project. The question is, is how much enduring value.

I just want to see, I want to see a deeper analysis from somebody internally at XAI that the distribution edge and the data edge are legitimately real and working and making people more likely to want to use Grok.

Yep.

And actually helping Grok go mainstream, which is the final prize. Right. I don't.

Yeah, I mean, I think, I think on the distribution side we learned this lesson from Facebook when Facebook was trying to launch new apps to challenge up and comers. So when Instagram launched at one point, Facebook launched a separate app called Facebook Camera, I think it was called. And it was an Instagram clone. Just a complete clone.

Yeah.

And they were like, well, we have, you know, 500 million Diu's, like we'll just send a push notification for all of them and of course they'll move over. And they didn't happen at all. And so they added feature like camera functionality and photo functionality to the Facebook app. Then they bought Instagram. And then what happened with Snapchat? Well, they actually launched another clone at a certain point and I think Reels was even like a separate app for a while. And again and again they've learned this. They've learned that people go to a single app and they do stuff within that app and you can kind of push them around that app. It's very, very hard to durably move someone to a new app. Yeah. And so, yeah, I feel like using.

I'm not using Grok as a search engine within X.

Yes.

And I'm not yet using it as a search engine outside or an answer engine outside of X.

Yes.

So this I. And I don't see what they can do to. To change that other than sort of marketing Grok more as a consumer product and sort of.

I somewhat disagree with that. I mean, to be clear, I'm not you. Like, Grok has not become my number one LLM. It's still ChatGPT, but. But I do think that there's something about seeing a post from someone who's on the edge of your understanding, someone talking about, you know, like, if I see a Joe Weisenthal post and he's going really deep on like, jobs and labor and interest rates and all these different economic things that I'm not really fully tapped in on, being able to just click a button and, and just get great definitions. Being able to say, hey, go give me the historical context here, chart it out for me. Pull all the data right there. I'm going to do that. And I'm already doing that. In some ways, I forget exactly the last GROK query I went, but I posted, but it was something like that where someone was making a reference to something and I didn't fully understand the historical context that they were referencing. And so click the button and got a pretty good answer. And I think that could grow as. Because so many times when I kick off a Google search, it's like, oh, you know, Saquon Barkley won the, the Super Bowl. And I'm like, like, who won the super bowl the last 10 years? And I always just go over to Google. But if I can just click Grok right there and just say, okay, I just saw that on my Timeline, there's, you know, an update about the Philadelphia Eagles super bowl championship run. I want more context. I can just click that button. I think that that could be a, a durable source of, of like, LLM entry points. And it just feels like we all agree that, that the, that the foundation model layer is commoditizing.

Yeah.

And that the application layer is where the value will accrue. And so either you have to break through in such a massive way like ChatGPT that you, you get an app that's installed on everyone's phone and then you iterate on that app so fast that you keep creating like, viral moments, like Studio Ghibli stuff, and then you build out, you know, all these different functionalities, like the deep research tool and you. And you make it an app that people want to keep opening. And ChatGPT has been able to do that. So they kind of catapulted their Way to all of a sudden becoming not just a foundation lab, but a consumer tech company.

Yeah.

And it's been very hard, but they've gotten there and then all of their competitors are typically partnering with a social network, I feel like. And so I don't know. That makes a ton of sense to me.

Yeah. There is the other side to be hon. When you look at, when you look at X AI and X as a sort of combined 113ish billion dollar entity. Yep. It is a. I'm not sort of like bearish on the overall investment at that price because you're basically getting one of the few social networks that matters in the world but also as a professional network.

Yep.

That I think has massive growth potential by itself as a platform and you're getting a call option on sort of like Elon's AI bet. And like I think that if X continues to operate like it has been for the next five, 10 years, it by itself is at least a hundred billion dollar company over time.

I agree.

And all you have to do is just sort of like, you know, do a, you know, you don't have to do a technical analysis or like full deep dive on meta. It's just sort of like if there's only a handful of social networks that matter and X can get to billions of users, which I believe it can, it should have this sort of intrinsic value at close to where it's marked at right now. That being said, it just feels like it's a very complicated strategy and complicated.

Elon loves those.

Yeah. He's run these before. So again I'm.

I agree with you.

I understand why it's happening. I'm long term bullish on the combined assets. I just don't think it makes as much sense as it makes sense from again that sort of financial standpoint, the team standpoint, all these kind of things. One talent org trying to just sort of become this sort of vortex for a type of person that thinks a certain way and wants to work on, you know, Elon's AI plus social bet.

Yep.

But I don't think it like my takeaway from it is everybody that's like, oh, slam dunk, like this makes so much sense. I agree with you now. Now it's going to be easy. Like there are some people on the timeline that are resting on their laurels that are, well, yeah, there's some people that are fairly well respected in the industry that are coming out and just saying like, yeah, this is a no brainer, etc. Etc. And I Don't necessarily think it's a no brainer. I think Elon will make it work, but not a slam dunk.

I think this, I mean it all goes back to Zurb and like if Elon had bought Twitter after the Zurb crash, I mean Twitter would have been trading at like 8 billion. Like if it had brought, gotten brought back down to earth after, you know, every stock was inflated and they all went down 80%. I mean Meta fantastic business drew down like 50 plus percent and it's like he could have bought it half off. And then at that point, I think, I think your point might be a little bit less, less real. These numbers do feel high, but of course it's Elon makes sense. The other interesting thing about this deal I think is, does what is the value of the data? So X has become very, very good at creating this walled garden. Right. Like you can no longer just view tweets or embed tweets. The API is locked down. You can't really just view them in an incognito browser. Like if you're not logged in, you'll see people's top tweets. But it's harder and harder to scrape this stuff out. And more and more people are bringing things onto the timeline from everywhere. And a lot of times that takes the form of somebody screenshots a book, somebody screenshots a Wall Street Journal article, somebody screenshots something that happens on Instagram but they bring it back to X. Yeah, and I think that's hard right now to categorize. Like the search function right now is not amazing because so many people are posting images and the text in the images isn't indexed. But obviously image models are getting way better as we saw with the studio Ghibli thing. And I think that there's a world where every image as it gets uploaded to X gets in every video gets really well tagged with, with information, even if it's in some sort of like latent space that isn't human interpretable. But at the very least like transcribe all of the subtitles and transcribe even if the captions are baked in, let's transcribe those and put those in a database that can be searched and then let's bake that into the next LLM training run. I think that's really, I think that could be valuable information. I think the more valuable information is probably just the real time nature of this, of these things like news still breaks on Twitter immediate. And X really is still a place where information goes out the same minute as everywhere else. And even if you look at a feed, if there's really, really huge news, it's possible that one of the mainstream media publications is the first one to report on it. But it'll hit X within two minutes and then the other, the other, like, you know, the Financial Times will have to write about it, but it'll take them a day or it'll take them a couple of hours to get something out. So if you want your LLM to be up to date, which I think people do, and we saw that with the first version of ChatGPT where they had the knowledge cut off. Do you remember this? And, and it was like, oh, like I can't get it to answer anything.

For the last three months.

Like that's unacceptable as an answer engine. Right.

So, and, and to be honest, I do believe that news breaks almost as quickly on Reddit. Like, sure. For example.

Yeah.

Reddit has a very active MMA community.

Yep.

The split second that somebody wins a fight, it's live and it's, you know, all the information is there. So.

And doesn't red open AI?

Yeah. So if OpenAI wants that sort of like breaking user generated, sort of like news.

Yep.

They can go to Reddit and say, we're going to give you totally $100 million a year for just like, you know, direct access.

Yep.

And so again, I think that this data is like more accessible than 33 billion.

Yeah, got it. But, but it's still important. And I, and I think, I think one thing we actually should be tracking is like, what. How does. It feels like the application layer is a problem that you need to solve. If you're a foundation model company, unless you're SSI and you're just going straight to super intelligence and you have no desire to play in the application space at all. But if you're anthropic, I feel like you need to figure out how are you going to solve the consumer angle at some point.

Yeah.

And they're partnered with a number of big tech companies.

Yeah.

Could there be a partnership with Snapchat or Pinterest or something? Are there any other assets out there that they could buddy up with because it's getting something important.

Apple I broadly. And Grok will approach enterprise going forward just because of how tumultuous X's relationship with large corporates has been. Now it's like, okay, now we're all combined and you should plug our LLM into your.

Well, it seems like Grok has not been super aggressive on the enterprise side, Anthropic has been much more aggressive on the enterprise.

Yeah, that's what I'm saying. But are they going to sort of say, you don't care about enterprise? We are a consumer application company.

Yep. And Anthropic seems to be more focused on the coding and driving, like the cursors and the manuscript.

The main thing is I'm very disappointed I didn't get the deck on this one of the combined entity. Maybe there wasn't a deck ever. It's very possible that Elon's, Elon was just like, this is happening now. But, but it, it makes sense to me if, if it's, you know, XAI is going to be the everything app, it's going to be social, it's going to be video, it's going to be search. Like, if Elon is making, you know, is simultaneously thinking, I want to make, I want to actually compete with, with Google. Right. He's like, it could be identity, it could be email. There's just so much.

Yeah.

And so if he's 100% oriented around the sort of everything app angle, then that's an LLM, obviously, but it should. I almost think you drop the, like XAI and just have it be X. Right.

Yeah. It is odd. All shares of X and XAI will be exchanged for shares in a new holding company named XAI Holdings Corp. And so he's, he's, he's, he's. It feels like he's weighting this as, like this is more of an AI effort and we bolted on a social network as opposed to.

This is both on a long enough time horizon. This just becomes you're in X and it's, there's no humans, it's just bots. In all of your comments Every. We're about 20% of the way.

They're not a fan of that. We'll see, though. Musk has combined two of his companies before. He used Tesla stock in 2016 to buy his solar energy company, SolarCity. Musk's other closely held businesses include SpaceX, a rocket startup, which I don't think he's ever bought anything for maybe some small. I think he did some vertical integration stuff. Neuralink, the brain implant chip firm, I could see that rolling into an AI company at some point. And Boring Company, the tunnel maker, which Boring and SpaceX were much more closely linked because if you remember when the hyperloop, when the hyperloop pitch dropped, Elon dropped a blog post saying we should have these tunnels where they vacuum out all the Air and then there's no wind resistance and you could travel on train very, very fast. He actually posted it both on SpaceX and Tesla's website, both of them. And, and it was like, okay, which company is doing this? And he was kind of like, I don't know, we'll figure it out. And then there was another company called Hyperloop that just was unaffiliated with Elon that started that company. I don't think that one went very well. Then he started Boring company and that one's just been grinding along for a while, no pun intended. But I mean you could see boring company. It's like, well, they make the road the Tesla drives on, so maybe merge those together. Or hey, it's like this super hard tech like these mega machines. Maybe the SpaceX team should be involved in that and so bring that.

Yeah.

But we'll see where it goes. His role as an advisor to President Trump has added to his influence and appeal for some investors at the time. Musk has has seen the polarizing effects of his political politics hit Tesla's value. Earlier this month, x raised roughly $900 million from new and existing value investors at a valuation just above its 44 billion takeover price in 2022. And we covered this a little bit how X became profitable and on an EBITDA basis, but there were a bunch of add backs so it was kind of unclear. It seems like the business has, has been hit on the ad side, but then of course is making money from the XAI deal because XAI is paying for data, which is fair, but it's like transaction. So it's hard to kind of exactly price and handicap that value. But at the same time, if Elon can consistently get money for XAI and grow that, then that pool of capital kind of continues and now they're all one, so it doesn't even really matter. I think you just needed to, to justify like, hey, this is like this makes sense together. And everyone's kind of in the same ballpark on this and all the shareholders are cool. I mean it is a private company after all, so it's really matter as much.

Yeah. At the end of the day, much easier to raise for this like collective, you know, just sort of, hey, you want to invest in Elon's AI bet you know, there's basically you should kind of pay any price.

Yep.

And we'll, we'll slap on X. Yeah. As, as almost a freebie.

Yeah. It is interesting how much this has all moved away from AI safety discussions and into just look, LLMs are valuable. He talks more about the truth engine and in control of information and free speech.

I think what this could lead to is more you can imagine Elon doing keynotes for the combined entity and getting into actually sort of more illustrating what is this vehicle? What is the long term purpose of this vehicle? Because I think he got to an interesting point with Grok being the truth seeking AI. And that made sense. But now what does that mean? Are we back to just sort of the collective everything app? AI is everything. You know, it's sort of unclear, but I'm excited to see it play out.

Imagine he buys PayPal, rolls that back in. I mean, anything is possible.

This guy, I think he wants to kill PayPal probably.

It is, it is funny to think about like if the PayPal mafia never sold and like kept running that business because it's a. PayPal is a big.

Company, it's a multi trillion dollar business if they suck.

Because they probably have done stripe internally, they'd done plaid internally, they've done square internally. Right. Like all the, all the different companies that they created externally could have just been all part of that. So there, I mean, the reason that this deal is happening so quickly, I think is because X and XAI share many of the same investors. Sequoia Capital, VY Capital, Valor Equity Partners. X already owned a roughly 10% stake in XAI before the acquisition. Prior to the acquisition, they also shared some resources. And in xai's early days, its employees worked out of X's San Francisco office. XAI has also leased GPUs from X. And so everything's kind of flowing back and forth. Morgan Stanley advised on the deal. I think that's Michael Grimes went to my high school. Shout out. Michael Grimes advised on the deal, along with lawyers at Sullivan and Cromwell, according to people familiar with the matter. The social media site is expected to see ad revenue growth for the first time since the takeover this year. And Morgan Stanley has close ties to Musk, having advised on his $44 billion acquisition of Twitter. And that was a very controversial deal to, to work on because of course there's a whole bunch of debt that I think Morgan Stanley wound up holding on their balance sheet. And there was a question about like, is this just a disaster? Because obviously the market tanked and then the advertisers pulled out. But Elon is relentless and doesn't seem to like down rounds or let them happen ever. In his entire career, I think he's never done down round. He's always gotten creative and figured out a way to just look towards what the future is like and then build towards that long enough and then he makes it happen. So it's cool. Yeah.

So Tom Howard had a solid analysis. He says, hold up. He's quoting the original post from Elon announcing the deal. He says buy distribution channel with crap monetization and non optimal financing. So again, Elon had to really lever up to buy Twitter. He bought it at what many people would say was, was well beyond what it, what it should have been priced at. Separately launches xai, which is basically a research project, at least initially. Now using X to sort of distribute this sort of LLM to a large user base and that in turn can sort of help increase the valuation of xai. And anyways, I, I think it makes sense. Again, they were already sharing employees, resources, etc. They're basically one company.

Yeah. Do you want to go to the, to the counterpoint? Yeah. Compound.

So compound 2, 4, 8. It's hard to know what to make of XAI buying X. My gut is it smacks of desperation. On the surface. The deal values X Flat to Twitter's 2022 takeout takeover value despite massive underperformance on financial metrics, I would argue. I mean, wasn't Twitter. Twitter wasn't profitable at the time of.

Yes. So it's complicated. Like Twitter in its history had only had one profitable quarter ever. And so it was this weird company where they still were trading at a relatively high multiple. They were never really, they never really got the business working.

They were trading on cultural relevancy over.

Yeah. And there seems to be this like zombie land for these public tech companies sometimes where the ones that really get it working and our cash flowing and our get huge like Zuck and Meta.

Yeah.

But Twitter was never really like a cash machine. They had a couple good quarters where there were these like weird anomalies in their financials where some, some like, you know, lately get some like tax credit and they'd be like, oh yeah, we generated like 600 million in EBITDA or something that quarter. But it was like kind of iffy. The, the question I think you're getting to is like, hasn't the financial performance improved because Elon famously laid off 75% of the staff. They cut so many costs, like the cost basis has to be way lower. And I think that's true. The problem is that we as the public don't have audited public financials because it's not a public company. And so we've heard rumors and We've seen that, you know, the business might be doing better, might be producing a billion dollars in EBITDA and applying like a 40x profit PE multiple to this thing. Given all the opportunity. It's not that crazy. But we don't actually know how real is that profit or what's the shape of it or how, how new is it, how durable, what's the concentration like?

It's rare to have transactions of this size that are trading based on narrative and almost pure play. Sort of like founder bets.

Totally.

And that's what, that's what, that's what's kind of eye popping about this.

Totally. So compound.

It's an all stuff deal, it's a stock deal. X owners will now own 29% of the combined entity. Shifting from a near pure play social media bet in a highly strategic asset to an AI bet that's very much on the come up. Plus you get a diluted ownership in X. Yes, XAI is a powerful model, but not unusually so. XAI has de minimis revenue is hemorrhaging cash. We don't necessarily.

I got to stop here because he's saying like shifting from a near pure play social media bet and a highly strategic asset. Like I think we've played the highly strategic asset game for Twitter out a decade and we've seen that Disney doesn't want to buy it, Microsoft doesn't want to buy it. Like this idea that there was going to be some like white knight dark horse bidder that. Oh yes, it makes so much sense for Oracle to have this so they'll come in and pay some high price.

It's a strategic asset for Elon Musk.

Yeah, yeah, I guess. But like, like the reason that, the, the reason that the valuation was always high with Twitter back in the day was like, it was like if you want to compete with Meta and Facebook and Instagram, like buying Twitter would be a way to get in the, in the game in a serious way.

Yeah.

And I think we played that out and I, I don't know how strategic it is if that's the sense of what you're saying. But I agree with you, I agree with your, your interpretation of like what strategic asset means. Anyway, we can go on to.

Yes, XAI has de minimis revenue is hemorrhaging cash and its perspective, business opportunity seems very difficult given the relevant competition. A has a head start, B is murderer's row and C has existing business and GTM strategies to build on.

Yep.

So obviously you know, primarily referencing OpenAI chat, GPT here. And the big thing, and this is part of the reason why this transaction at a high level makes sense is like hey, we're gonna have to lever XAI up a bunch anyway. Yeah, X by itself is super levered. $12 billion of very high cost debt. I don't actually know what, what they're paying on that, but I would guess it's like gotta be close to like, like 10%. 10% which is over a billion dollars a year just carrying cost on, on the debt without actually paying it down.

Yep.

And so that's very painful. And so anyways.

It will be in perpetual cash raising mode until that changes which leaves its risk to the whims of the fundraising environment and the temperature of macro animal spirits. Except Elon seems to be fine with fundraising, so I don't know how big of a deal that is. And then I think he goes on to say I wouldn't bet against Elon. A few bonus thoughts prompted by questions. One Creditors. This is clearly a better structure for creditors. They retain their claim on Twitter and pick up optionality on xai which you mentioned earlier to clean up. I suspect this deal is actually cleanup for XAI to raise a new, a huge new equity round. And so yeah, it's interesting. I think the, I think it makes a ton of sense to put the two together. Yeah, I think it's interesting to see as we play this out how does when this, when this machine really gets humming, how big can this get? Because I'm feeling like number one ChatGPT is as we saw last week, still able to be stay on the frontier for, for nine months out of the year and then they get beat towards the end of the year basically and then they come out with something new and then they're still the number one. And so as long as they continually drop the frontier and get all these people to install, they can kind of ride it out because I bet you in, in you know, six months people are saying oh well, like there's actually like better Ghibli's if you really care about giblification in this app. But only the hardcore folks move over and that's the same thing with like Claude like Sonnet was like better so but people didn't really care enough to switch for if you're like a normie.

The interesting thing is I do believe if, if this combined entity were to go public right now it would trade well beyond the sort of private mark it prob pop to like a trillion. But the given how much sort of political pressure is on the company right now. Like it would be very chaotic.

Totally.

And maybe it wasn't the right move, but if the play is to basically take it out and Bill Gurley would be watching this one, he'd be like do not leave. But you could easily see this getting priced. You know, you could see this getting priced at a like even sort of stabilizing at a couple hundred billion dollars.

Just, just thing is so crazy. It's hard to price but I mean we actually saw evidence of like the market wants something that's pure play index to AI. That's not Nvidia. Nvidia had already like run up so much. There was not much left on that Apple or whatever. And we saw core weave go out. And what happened? Core weave priced right at 40. Bill Gurley very happy it didn't pop. But the, but I think the counterpoint to the, to the core weave thing is that it showed that there was not this insatiable demand for like oh, we need, we need a pure play company. We want it so badly, like we'll pay any price. It's going to pop huge. Like that didn't happen. Core weave was not able to, to become like this like meme. At least not yet. Yeah. But obviously XXI is like way crazier because like Elon like has so many fans and like huge allies all over Wall street and stuff.

So yeah, core we've also being a data center business that's not coming out. We're going to achieve AGI. It's more like you guys do a lot of revenue.

Yep.

You have a lot of leverage.

Yep.

And you have sort of medium term contracts.

Right.

That, that could go up in smoke. But, but who knows?

Yeah.

Either way, wild times. The most entertaining outcome is the most likely.

Let's go through the Tesla Solar City merger. I just some key bullet points that are kind of interesting to go down memory lane. SolarCity, founded in 2006 by Elon Musk's cousins, became number one in US residential solar installation by 2013. So he kind of delivered on the initial pitch and I heard this crazy story that like he thought about it at. He thought of the idea of Burning man or something like that. Have you heard this one? It's like a crazy like, like he was hanging out with a bunch of people and was like maybe we should do solar panels on people's houses. And then they just like went for it.

It's so funny because my entire life, as long as I've been truly conscious, solar panels on homes are just so Normal, Yeah, totally that. It's funny to think it was maybe one or a handful of companies that actually normalized it, but that's usually how things work.

So at the time Elon was like famous, but really he was only known for PayPal and SpaceX and 2006, these weren't like PayPal was a big deal. SpaceX was still very early. Elon provided the initial $10 million in the startup and Lyndon and Peter Reeve, his cousins, ran the company. He also served as SolarCity's chairman and was the largest individual shareholder, leveraging his vision of a sustainable energy future across his ventures. SolarCity's business model focused on solar panel, solar panel leasing and what are called PPA's, which are power purchase agreements. The customer pays no upfront cost for rooftop solar, solar installation, but then signs a long term agreement to buy the power produced. So it's basically like a no money down solar leasing model. And it was wildly popular. And so there was a little bit of like hard tech here, but most of the panels, I, I don't think that they were manufacturing them at, you know, gigafactory scale. Yeah, I think it was mostly, hey, let's buy a commoditized product and then innovate on the financial side.

Yeah.

And so this fuels rapid growth. But it was very capital intensive and debt fueled, of course, because you're giving a, you know, I don't know, I don't exactly know how much these cost, but let's say like you're giving someone 10,000 bucks or $100,000 in value like the solar panels and then the installation costs and then you're, you're paying that and you're amortizing it over 20 years, but you're not getting those payments from the customers for 10, 20 years. It takes a long time. And so every time you install new solar panels, you're accumulating debt on your balance sheet.

Yeah.

And you're also accumulating like a revenue stream, which is great but, but you have a major, major financing mismatch there. And so by 2015, warning signs emerged. SolarCity's stock price, which had peaked around $88 a share in 2014, began, began a steep decline in October of 2025. The company lost a quarter of its market value in one day, falling below the coveted unicorn one billion dollar valuation. The drop followed CEO Lyndon Reva's announcement that SolarCity would slow its expansion and cut costs as years of 80 to 90% growth had led to huge investments that were not yielding cash flow yet. We talked about that internally. Executives knew the company faced a looming liquidity Crisis. By late 2015, SolarCity's aggressive growth had left it with large operating losses and over $3 billion in debt by 2016. In fact, SolarCity was nearly insolvent prior to the Tesla merger. Court filings later revealed that weeks after the acquisition, auditors warned that SolarCity lacked sufficient cash to meet its obligations on a standalone basis. And so there's always this question about like, you know, kind a bailout, should he just let the company go bankrupt, buy it out of bankruptcy, do a proper bidding process like this was always like a hot button debated issue. But so to sustain growth, SolarCity diversified within the solar value chain. In 2014, it acquired Salavo, a solar panel manufacturing startup, and embarked, embarked on a, on construction of a massive 1 gigawatt solar panel factory in Buffalo, New York with substantial subsidies from the state. The Buffalo Gigafactory 2 was part of a plan to produce advanced solar modules domestically and reduce cost. And we talked to Casey Hanmer about this a little bit where, you know, he thinks that the, the, the Chinese manufacturers of solar panels are subsidizing them really, really heavily. And his, his argument was like, hey, when somebody's subsidizing something below their cost, you shouldn't tariff it, you should buy as much as possible to hurt them. Which is kind of funny, kind of hot take, but there has been incredible international pressure with these products.

We could have maybe pushed him a bit more on that and said, well, do you want to, you know, usually if somebody's selling something for less than what it actually costs, they have sort of sometime some sort of long term strategy that, that maybe isn't in your best interest.

Yeah, it's the learning curve pricing issue. So yes, they are losing money on each solar panel right now, but if we, if we all of a sudden provide to them 10x demand, they might be able to justify investments in 10x larger gigafactories and they might actually be able to lower the price to the point where they are profitable at a price that we can never compete with because we just are not scaled up enough. And that's certainly what's happened with tsmc, where TSMC has seen so much demand from Google and Nvidia and Apple and everyone else that, that they're getting to a place where no one else can compete. And they really have like essentially a monopoly on, on the 3 nanometer node.

And they're running this with cars right now.

Yeah, cars and phones and a lot of different Stuff, It's. It's all happening. So the cash squeeze got really severe. The company was holding emergency weekly cash management meetings, and its executives privately informed Musk that it needed an infusion of 180 to 300 million dollars to avoid default. I feel like Elon nowadays could like, raise that with one phone call for, like, literally anything. He could text Mark Andreessen and say, allison? Yeah, Ellison. Hey, I need 300 mil. Don't ask what it's for. It's just for something cool and be like, yeah, of course, dude, I got you. Attempts to raise equity or find outside investors during in early 2016 fell through, which is unfathomable, forcing desperate measures. The other Musk's other company, SpaceX, loaned SolarCity money to prevent its cash balance from triggering a bond default. Solar City had covenants requiring cash above 169 million. Hilarious number even his debt covenants include the number 69. Classic Elon. Like, even in the debt world, he's like, memeing. I don't know, it's probably just a coincidence, but you never know. In February 2016, as SolarCity's board grappled with how to avert bankruptcy, Musk met with Linton Lyndon Rivey to Reeve to explore a bold situation. Tesla Inc. Would acquire SolarCity, uniting Musk's electric vehicle and solar energy ventures. And I want to go through a couple bullet points on how the deal came together. So by 2016, SolarCity was in trouble. They were nearly insolvent, and they had $3.25 billion in debt. And again, like, this is the company that was trading in the billions. And then the market cap goes down to less than 1 billion. So the equity value debt to equity ratio is like really, really out of, out of WH. And so in June of 2016, Elon proposes that Tesla acquire SolarCity to form a vertically integrated clean energy company. And it makes a ton of sense that a Tesla owner, again, it's like, it's crazy because it's one of these Elon deals where it's like him, one hand washing the other, him talking to himself, and like, he's on the board and he owns all this and stuff. But at the same time, if you think about it, it's like Tesla customers love clean energy. They have the Tesla battery pack on the wall, the Tesla charger, and of course they want solar panels. So you imagine that it makes a ton of sense for to just sell all of this to one person. There's tons of like, sales channel stuff. And then also just in terms of manufacturing, like the gigafactory that produces the batteries and the cars can also produce the solar panels. Like it's not that crazy to me, but the deal is kind of crazy. And so there's an all stock deal that happens. SolarCity is valued at 2.6 billion and they and Tesla assumes 3 billion in debt. Shareholders got 0.11 Tesla shares per SolarCity share and then Tesla went on like a generational run. And every SolarCity shareholder, if they held, is very happy about this. Yeah, of course there was this conflict of interest because Elon was the chairman of SolarCity and the CEO of Tesla and he owned 22% of both and his brother, brother and cousins were board members and executives. Despite the controversy, 85% of unaffiliated shareholders approved the merger in November 2016. And that makes sense. Like, like if I'm, if I'm an unaffiliated shareholder and I just hear about this and I've never even met Elon, I'm going to be like, yeah, of course, like this deal makes sense, even though it's a little wonky, like put these companies together, I'm happy to be a shareholder in the combined entity. And so of course there's a legal battle still because 7, 85% approved, but some of them are upset. And so there's a shareholder lawsuit. They sued Tesla's board of board of directors for breach of fiduciary duty, which is what you sue for whenever you're unhappy about something. All directors except Musk settled for 60 million in 2020 via insurance. And so they had some key man insurance there or some. Yeah, I forget what it's called. It's the executive director, DNO Directors and Officers Insurance. Musk alone went to trial in 2021, accused of pushing the deal to bail out his failing investment. And family plaintiffs saw sought 13 billion in damages. Which is crazy because that's like way more than the debt and more than the equity. It's like more than everything combined. But Musk won. So in April 2022, a Delaware judge ruled in Musk's favor, stating that Tesla paid a fair price. Of course they did. If anything, they overpaid. And so as a SolarCity shareholder, you've, you've gotten a bunch of Tesla shares that basically like 10x, you got a really high price at the time of the deal. Like you have nothing to complain about. Why are you.

It was a full zero, like, like.

Literally three weeks later. Exactly. They were running out of cash. And so the Delaware judge, you know, Elon's been very rough on the Delaware judges, but in this case they say, you know, we got Musk's back. He's right. And the deal, this deal ultimately benefited shareholders, which I think we agree with. And then there was a post merger decline too. So even, even as they combined and they had all the resources and they took care of the cash management problem. Tesla's Solar installs fell 60% from 870 megawatts to 326 megawatts in just three years from 2015 to 2018. And Tesla lost its number one solar market position to Sunrun, which is another solar installer.

Sun runs different. Crushing it.

They've been crushing it. And so today Tesla has actually, has actually shifted away from highly commoditized solar panel installation to, to battery storage. So they sell those power walls. We looked at one, it was $192 million installation. Right. Wasn't that. Yeah, you could just go on their configurator and say, yeah, I actually need like a gigawatt of power. Can you send me it? And they'll be like, sure, but, but listen this. In 2024, Tesla Energy hit 10 billion in annual revenue powered by powerwalls and megapacks. And so yeah, like I think of the powerwall as like, oh, it's like this cute like little side project. It's like the AirPods of the Tesla world. Like that's a lot of money, 10 billion revenue. And so even though like the solar angle didn't really pan out, like Musk was right over the very long term that like vertically integrated clean tech energy would be a good strategy, good company. And so just an interesting thing that like, you know, to think about with the X X and XAI thing, like it's hard to predict where this goes in the next five, 10 years. Is it a good deal right now? Will there be a lawsuit? Like all of that kind of, of steps to the side of really trying to concretely visualize what does the social networking and AI/LLM consumer productization of AI look like in 5 years, 10 years. And can he figure out something that is good in that space, in that time? Yeah, and I don't know. He has a lot of money and a lot of time and a lot of effort.

Time for Ben Thompson to be on vacation.

I know he did one, he did one unscripted podcast about it and he was pretty bullish on it. He said he thinks it makes a lot of sense. But we'll have to wait to get Ben's Full take anyway. Such a funny, such a funny deal. Never a dull moment in tech. My number one advice for Elon is you're combining these two companies. It's more important to control costs more than ever. So go to ramp.comelon Time is money. Save both, Save both. Easy to use. Corporate cards, bill payments, accounting, and a whole lot more all in one place. I would love to see X and Xai both on ramp. Really understand, I mean, big thing of Ramp is like you're paying for two subscriptions and it identifies that automatically. Right. It's like you're merging these two companies, you know.

Well actually I imagine a lot of their contracts are primarily SEAT based and maybe aren't saving much money at all. But you can always save money.

That man hates losing money.

If anyone in our audience signs up for Ramp and doesn't find a way to save at least a hundred dollars a month. I was gonna say like a thousand, I don't know, but then somebody would.

Depend on your scale.

Yeah, it depends at your scale. But you sign up for Ramp, you're gonna save, you're gonna save some money.

And you're gonna save some time, baby.

And you're going to save some time.

Well, let's stay with Musk and go on to this exclusive in the Wall Street Journal.

That's right.

Apple and Musk are clashing over satellite expansion plans. We talked about this a little bit. The iPhone is getting Starlink direct to cell. So you'll be able to communicate with the Starlink satellites from your phone. Very cool. It's already live in some places. You can send like a single text message on a satellite network. But obviously this is a really, really tough deal in a very, in a very big. There's a lot at stake obviously because once you don't need the cell phone towers, you can use the satellite communication everywhere. That's going to be a big differentiator for any cell provider. So Apple, here are the key points. Apple and SpaceX are competing for spectrum rights to expand their satellite based communication services. Apple's outer space ambitions have drawn the ire of SpaceX CEO Elon Musk. Musk, who has pushed regulators to stall expansion efforts from Apple Partners. Despite their, despite their rivalry, Apple and SpaceX need each other to achieve their respective goals in the satellite market. And so Apple has been investing heavily in satellite based communications that keep users connected in places where traditional wireless signals aren't available. Musk SpaceX meanwhile has launched more than 550 satellites that provide cell phone connectivity via its Starlink service to build capacity. The companies are competing for valuable spectrum rights airways that carry the signals which are in limited supply. It's very interesting, like the, the wireless spectrum, when it goes, when, when there's a block up for sale, there's this whole auction. It's governed by the fcc. Brendan Carr, the new FCC commissioner is the guy who kind of oversees that now. But I don't know if you remember this, but back in 2011, 2012, TV stopped being over the air. Like do you remember rabbit ears? Do you remember those little antenna that you put on a TV that just stopped? We had the digital transition tv. You could still get TV but it wouldn't be over the air. And so that block of spectrum was then re auctioned off for other things. And that's where like the 5G spectrum kind of comes in. And so Apple's outer space investments have drawn Musk's ire. SpaceX pushed federal regulators to stall an Apple funded satellite expansion effort. The conflict intensified in recent months after SpaceX and its partner T Mobile sought Apple's cooperation to offer Starlink on iPhones. The company's engaged intense discussions, intense discussions and eventually reached an agreement that allows SpaceX and T mobile satellite cell phone service, which will debut this summer, to appear seamlessly on newer iPhones. So even though SpaceX has a deal with T Mobile, they need Apple to opt in and say yes, we're going to allow this, we're going to build this, this is going to be a function. It's not enough to just say oh, SpaceX and T mobile agree, you got to get it in.

Has Apple any ever shared about what its long term ambitions are? Because I imagine long term you'd want to just cut the carriers out completely and just own, you know, basically have another hundred dollar a month sort of.

Yeah, it's kind of a, it's kind of a match made in heaven with. If Musk and Apple can partner up and just cut out the middleman entirely, it'd be amazing. But again I think the satellite Internet just does not work in buildings. It just does not penetrate. And so we're not anywhere near there. So it's very much like a nice to have add on.

Nothing penetrates my home because I use lead paint.

You live in a Faraday cage?

Yeah, developed using lead paint to create a Faraday cage in my home.

I mean a lot of people are doing that. They're worried about microplastics so they're switching to leaded gasoline.

Calling it now lead paint. Lead paint coming Back in. In a big way.

Yeah, you don't want the microplastics. Let's just use the lead full for sure. Go full lead. Offering greater connectivity and hard to reach areas could spur more iPhone sales. Connectivity.

What do you call activity?

Connectivity. Connectivity. Greater adoption of SpaceX. SpaceX and Starlink. In some ways, the companies need one another to pursue respective strategies. So Apple's currently partnered with Global Star, which I think is one of those satellite Internet companies that just puts up like a huge washing machine guy. It's like a massive. Not in leo. It's not a constellation like Starlink and Global Star. It's very high latency.

Global star is a $2.6 billion company. So.

So there's a few of these companies. Astranis is one of them that puts up like a much larger satellite. It's locked in geosynchronous orbit. There's fewer satellites, but they're higher bandwidth. And then Elon, because SpaceX has all this residual capability, they can just throw up Starlink satellites whenever they don't have a full ship, basically throw it up there, create a whole constellation. It's a lot lower, they'll burn up a lot faster. But the benefit is that it's a lot, It's a lot lower latency. And so, you know, famously, like, you can game on a plane, you can take a FaceTime call on, on, on your private plane if you have Starlink. Whereas with Global Star, if you've used Apple's satellite service, like you could definitely not have a conversation on it. It takes forever to upload even a small text message, but it's still very powerful.

I was using Apple service during the fires, during LA fires, because I was trying to help. It was this, you know, it was a crazy time, but I was trying to get my buddy's solar panel turned on because he wasn't around to help his mother, like. And I was using the sort of very. It's a very dinky service. You got to be outside pointing it around.

This is interesting. You said Global Star is worth what, 2 billion?

Yeah. Not a lot.

So last year Apple invested more than 1 billion in global Star.

Yeah. So they must be the biggest outside.

Shareholder unless they invested a really high valuation. Just got wiped right now, but you know, 20% this okay. They own 20. Not bad. Apple serves part of that $1 billion.

I think was like basically services, revenue, sure, sure, sure.

So invested in the deal broadly. And of course the service allows you to send text messages, call emergency assistance, seek roadside help, et cetera. The new spending is intended to help globalstar develop a new global satellite fleet to improve space based iPhone usage. This technology has already helped save lives, apple said. These satellite features are designed to complement carrier offerings, giving users even more ways to stay connected. SpaceX recently asked the FCC to dismiss a Global Star application seeking permission to use certain spectrum for the new network of Apple finance satellites. Document show it's called the airwaves it uses it called the airwaves it uses to carry Apple's users emergency signals, an underused resource. SpaceX didn't respond to comment, so SpaceX and T Mobile revealed their plan to offer always on texting in remote areas during a rollout event in Texas inside Apple. Some staff believe SpaceX's announcement of the T Mobile agreement was designed to front run Apple's news disclosed soon after that it would provide emergency texting through satellites on some iPhones. Musk's Tesla and Apple long ago competed over talent for developer for developing driverless cars. The two sides also had spats related to X. There's that famous like Apple might be pulling out of advertising on X. Elon goes and meets with Tim Cook and then they kind of like figure it out. Yeah it was also the question of like was there a way for Apple for Elon to make X a premium service that was based on subscription revenue without causing without paying the 30% to Apple, which would be obviously very very cumbersome for him. The social media company relies on Apple for distribution on its App Store and advertising dollars. And there was also of like if, if Musk goes too far with the free speech, will Apple kick them out of the App Store? That didn't happen. But Musk at times has considered building a smartphone himself over frustration with how Apple controls distribution of third party apps. But nothing's really, really happening there and then, he said. Elon said, the idea of making a phone makes me want to die, but if I have to make a phone I will. I love it. Cracking a market dominated by Apple and Samsung, whose devices account for around 40% of the global smartphone market, would be tough, according to analysts in orbit. SpaceX through its Starlink operation, has far more satellites than Apple and industry leaders believe Global Star alone won't be able to satisfy the iPhone makers needs. Apple has held talks with other satellite providers over the years to secure more spectrum, people familiar with those discussions said. It explored investments in the Colorado based satellite operator EchoStar to provide more satellites and spectrum to support iPhone connectivity that people say. Apple previously worked on a satellite plan with Boeing and Everyone is trying to do deals with everyone in the great space phone race of 2025.

It's fascinating because Global Star has contracted SpaceX to launch satellites.

Of course. Yeah, there's no vertically integrated satellite Internet or. Yeah, satellite Internet provider. They're all using either SpaceX's launch capacity or separately. And we'll talk about this today, their pure play on launch capacity. So, yeah, SpaceX is definitely unique in the fact that they make the satellites and then also launch them. And so that's obviously much better for margins and all the different stuff.

And again, part of the. There's a world in the future where X is not only the everything app, it's your personal AI, it's your cell phone. It has sort of 24. 7 Connectivity via satellite and you're hopelessly dependent on it in the way that you are the iPhone. And I'm sure.

But can you imagine if your phone only worked on starlink? So it's like, yeah, you got to go outside, you got to touch grass.

That would be bullish.

That'd be bullish.

I think that'd be great.

It'd be like Pokemon Go, everyone. I saw a bunch of people playing Pokemon Go at some meetup in Pasadena and they were all on their phones. It was very dystopian actually. But it was cool to see them all walking around a golf course. Like, at least they were getting outside.

Just in the middle of a driving race.

Oh yeah, they shut down the whole golf course to exclusive Pokemon Go.

Can you imagine being the golfer that's just showing up on a Saturday just like finally get a little time off.

It is funny because they only, they only shut down half the golf course. Like, like One of the one set of the 18 holes was shut down for the event so you could actually play. And then you'd see like, you know, a thousand Pokemon Go players, like, heads down, like, oh, I caught a charizard, like, very excited. It's great. Anyway, if you're traveling a lot and you have a starlink and you want to hang out, why don't you find your Happy place@wander.com?

Find your happy place. Find your happy place.

Book a wander with inspiring views, hotel grade amenities, dreamy beds, top tier cleaning and 247 concierge services. It's a vacation home.

Better folks. I gotta go. Tvn Go go. Follow Kyle Tibbets Historical run at Kyle K Y L E T I B B I T T S. He posts some of the best Wanders every single day. He's their chief marketing officer yeah, he's their cmo. He's a friend of ours and he just posted one a bit earlier called Malibu Ridge that just looks 10 out of 10 iconic. We got to get over there. Shirts close to my house and yeah, we got some, we got some shoots coming up. We got some shoots in the pipeline. We're going to be leveraging some wanders.

I love it.

Very excited about that.

Well, should we move on to isomorphic labs? $600 million for AI drug development. They were backed by Google. Thank you for the size gong. Demis Hassabis, the CEO of Isomorphic Labs, of course has been at Google for years. He founded DeepMind and famously beat Lisa Dahl in Go with his AlphaGo product and team. Fascinating documentary if you haven't seen it all about AlphaGo. Move 37 really shook Lee Sedal to his core. One of the greatest moments in, in AI history basically. But we'll take you through it. It's very interesting. It's very early. Everyone kind of expects AI will help in drug design. Drug development could help us live forever. Like really, really amazing applications. But we haven't seen AI really move the needle or move the biotech markets yet. So still early. But Thrive Capital is getting in early, as you should if you believe that this is the future. So they raised $600 million in the first external funding round to boost artificial intelligence drug design pipeline across multiple therapeutic areas. And so they're taking an ensemble approach. They're really looking at not just one drug, which is the kind of the normal biotech strategy. Even a company like Moderna, before they got into MRNA vaccines, they were focused on, you know, one, one specific biotech technology. And a lot of companies will go public as a biotech company saying like, we're an Alzheimer's company, we have a drug that's targeting Alzheimer's, not Isomorphic Labs. Isomorphic wants to work across multiple therapeutic areas. And so this is actually a subsidiary of Alphabet, started four years ago. Thrive Capital led the funding round with participation from Google Ventures. But they're potentially spinning out and we've seen this with Waymo too, where Waymo starting to take external funding and potentially spinning out as well. This company is based in London and they'll receive follow on capital from the existing.

So fascinating that, that Google allows for this sort of massive external investment in companies that are, you know, they're effectively acting as some type of like venture studio. But you think with how much cash they produce, they would just want to own all of these. But sometimes having an external, you know, Board members can, can help.

Yeah, I mean, I, I think that there's something about maybe this is a kind of an ad, like an admission by Google that says, like, hey, like these companies, these ideas are great, but they can't really thrive when they're 100% owned by Google. Like, we just need the, the.

It's almost that external pressure.

External pressure, yeah. It's like, who are we talking to about this? Where. I think maybe Delian was, was talking about this where it can be very tricky when you have, when you're a company and you have like a billionaire patron who's just kind of paying payroll off their own balance sheet and they can kind of bail you out forever, but there's no pressure. And the venture model of like, like, hey, you raised enough money to get to the next milestone. You have 12 to 18 months, maybe you stretch that to 24, maybe it goes somewhere else. But like, you have to deliver some sort of milestone and get on, you're off the research track. This is not. Go spend 20 years anymore and figure out if you can create a grand unified theory of the universe. This is, can you commercialize, can you make really, really solid traction to justify the next round? And that treadmill has worked in technology development for decades. And so I think Google's maybe just admitting that. There's also the question of just if. How do you incentivize someone who's at a subsidiary financially? Like if you go, and I wonder.

What these cap tables look like. Right, because you have to imagine Google.

100 Google at the start, right?

Yeah, but, but post investment you've got, you know, the founders got to have some direct exposure. I would imagine the team is now working on. It would want exposure, you know, who knows?

Yeah, I mean, I would imagine that Google outside of GV and Google Ventures, probably owns 50% of the company still, or something like that. They probably gave a lot to employees and founders, but it was definitely incubated there and built there. And so they deserve a large chunk of the equity. But that will probably get diluted down over time as the company does more, more investment rounds. So the company will use the investment to advance its AI research and development and expand its team. Demis said this funding will help further turbocharge the development of our next generation AI drug design engine. And of course, while at DeepMind, Demis worked on the team that's created AlphaFold, solved the protein folding problem. That was an interesting development because everyone thought that protein folding was extremely resistant to computational efforts, that it was not going to be solved. They solved it very quickly. But also when they did solve it, it didn't really move the biotech markets in an interesting way like you would expect. It's like, hey, like the thing that's really hard just got solved. It's now trivial. Like you would expect all of the companies to kind of get a little bump, but nothing happened in the market because it turns out that that protein folding, while it is important in drug development, it is not a major cost center. Yes, you need to use this. I think it's like an X ray crystallography machine or something. You need to use some really expensive equipment, but at the end of the day you kind of just pay a PhD to do it. And they're kind of a starving student. And it's not that big of a barrier to drug development, even though it is from a philosophical and mathematical perspective, a very, very difficult, difficult problem. And it's very impressive that they solved it. It didn't really unlock. It wasn't like, oh yeah, protein folding. AlphaFold came out and then we got a new cancer drug the next day. Like, that's that. We were not that limited on it. And so this is the interesting quote. Demis says his mission is one day solving all disease with help of AI. He's coming for it all, not just one area.

And while OpenAI's GPUs burn due to the Ghibli use Google's TPU burning on fire trying to further Brian Johnson's goals of living forever.

They already have partnerships with Eli Lilly and Novartis for drug design and development through AI. And they put out a press release. They talked a little bit more about this. They're bringing together top tier investor groups with deep AI and life science, his expertise. They want to transform the industry through an interdisciplinary approach. It feels like this press release was maybe written by Gemini 2.5. Who knows? Press releases just sound like boring all the time. I wish he'd just done a thread. He did post about it, but it was kind of like, okay, yeah, we get it, you're bullish. There was an interesting post I saw by Zachary Spiro here. He says this means Isomorphic has raised somewhere between 12 to 40x the average UK funding round for companies at this stage.

Even at that stage.

Yeah.

Well, how is he describing stage?

Probably growth equity or like series B or something like that.

I don't know because if this is the first. Is this the first external round?

It is the first external round.

40 times the average prep. Clearly saying it's more of a.

This is the interesting benchmark. It's so large it's equivalent to more than a quarter of all UK Life Science VC investment in 2014 for 2024. So last year all UK Life Science VC companies, VC backed companies raised just four times what they just raised.

Thrive like 2 billion thrive goes to London for one trip and they're let's.

Just buy it all.

We are venture capital in the UK now basically.

But it makes sense. It's like, like Demis has had, you know, an incredible impact on the industry. He's built DeepMind which became Google's like fantastic AI research organization. Google at one point had Google Brain and then also de and they wound up merging them because it was too much and they had two research orgs that were kind of going back and forth. But he's a legend in the industry and he's. And he really has again and again and again just created.

He's an absolute dog.

He's an absolute dog. He's an absolute dog. He really is like I mean solved go mu0 another legendary AI system. Same thing with, I mean yeah, it's like Google's been doing an incredible amount of work on the research side. Just I think that the productization has been a little bit slow because a lot of these organizations within Google they feel like modern interpretations of the academic lab. They're very much just hey, you have unlimited money, unlimited time. Go work on science and research and don't even think about how this will actually make money. And that's produced some incredible results. But at the same time it's not, it hasn't really produced incredible products or businesses or durable value. And so I'm in support of them spinning it out.

Yep. But yeah, we don't want these moonshot projects just living within Google without any sort of urgency to actually deliver commercial results.

Yeah, I agree. So but until Demis solves all disease, I think the best thing that you can do for your health is just get some good sleep. Go to eight sleep.com nights, fuel your best days and turn any bed into.

The sleeping experience Called out on X that you can use your true med funds.

Oh yeah, that's right.

Buy your eight sleep.

Yeah.

Shout out basically buy pre tax.

Yep. So if you have a FSA HSA account, you got some money burning a hole in your pocket. Head over to 8sleep.com and check out with Trumit. Can't recommend it enough.

Just do it.

And a lot of these companies, they have FSA HSA programs. You can Just start accruing it, pay it down. There you go. It's all good.

How'd you do last night?

I imagine I did well. Let's check.

I. To be honest. Fantastic numbers. Was watching White Lotus 98. And I don't recommend Night Lotus, Night.

Lotus, Night Lotus never Day Lotus only.

White Lotus before bed. Not a. Not a great combo. I only got 6 hours and 42 minutes of sleep last night.

I got 7:24.

So much asleep is just getting, you know, really getting the time in, you know?

Yeah, you got to put in the.

Time and once you're getting the time in, sleep on your pod. Yeah, not in the pod.

You need a good morning routine. You get a. Need a good nighttime routine. You got to go to bed. You got to start your bedtime routine.

At 5:30pm I need a keg of Saratoga water to just do a quick keg stand.

There you go.

Keg stand in the evening. Saratoga water.

Yeah, you're good.

Sparkling.

You could do it with the Aurora. The roar is a keg. You should flip that bad boy over.

We should. You're a huge keg stand guy.

I'm a huge cake.

You're bringing keg stands back?

Yeah. Yeah. We need to take back Tech Brown. That was a great take back Meathead.

That was a great post earlier.

It was fine.

Maybe it was last night.

I think it was last.

For those that missed it, John said, if you're trying to avoid microplastics, don't drink beer out of those red plastic solo cups. Stick to keg stands.

Stick to keg stands.

And that only got about 25% of the likes of your other post, which was the heat death of the universe is unacceptable. We need to address entropy in a meaningful way within the next 10 to 100 years at Gary Tan. So hopefully is that one doing well. It's. It's over 400.

Okay, we're going with that one. Yeah. The Garytan one went viral.

Any.

Any problems that you have right now?

Yeah, just tag Gary Tan.

Tag. Tag gt.

This, of course comes from like a pretty serious post. Deep Prasad, who I've actually met years ago. Nice guy. He said last night around 3:30 to 4:00am okay, that's your first mistake, Deep. You should have been sleeping, but this is crazy. He said he was shot at twice near his hotel in San Francisco. Very scary. So they chased me to my hotel and shot the second time when I ran inside and got one of the staff to come out. We both heard a Glock and he saw the gun while I Saw the bullet impacts. I'm still shaking. Very sorry to hear that. I hope you're okay. That is very rough and it was no laughing matter until we found out that you were safe. And then at the end of your post, you just added Gary Tan, like, hey, help me. And so people had a lot of fun with this. It turned into a meme. Glad that you're safe, but we're gonna meme.

I mean, and he's safe.

No meme format says, I'm sorry that happened, but what is Gary going to do? And there is a little bit of like, Gary Tan has just become like Batman of San Francisco. You just like put up the bat signal anytime anything bad happens. And so we had a lot of fun with this. Jordy put up a similar post in the format talking about the difference between east coast and west coast time and how the east coast has a three hour advantage on us and Gary Tan should fix it for us.

It's absolutely brutal. Perpetual three hour head start on the day forever. We should flip it. We should flip it every six months. It should flip.

Yeah. That wouldn't cause chaos at all.

In, in sports, you know, you don't let one, you know, team just sort of like pick their side.

We don't. China, one time zone.

Yeah.

Russia, 13 time zones.

Thirteen.

Yeah. So long. And it's funny because it's like they're both like pretty big countries, but it's clear that like, like Russia was just like, let's have as many times as possible. And China was like, let's have as few as possible. And so, yeah, I think if you're on like the, I think if you're in the western side of China, like the sun sets like really early.

Yeah.

Something, something odd happens, but you got to deal with it because they're not putting up an easy west rivalry. It's one team.

Well, I gotta. I got some breaking news.

Okay. Hit me.

We have a new partner.

Oh, yeah.

If you look in the ticker right now, you'll see a lovely logo for numerl. So shout out to Nate, Sam and Matt over at numerl. So break it down. What is numeral? You're about to note, numeral puts sales tax on autopilot for leading e. Commerce and SaaS businesses. It is the platform for sales tax compliance. John, you already know that. They already work with a thousand plus different e. Commerce and SaaS businesses. They power Ridge Wallet, our friends Sean and Connor. They also power Graza, which is a company that is absolutely crushing.

It's in The Hayes portfolio.

It's in the Hays family portfolio. I think it's like a clean.

But they got their own ticker on here.

They got their own ticker too. So they're ticked up.

They're ticked up.

We love to see it.

You gotta scroll down so that.

Fantastic.

Our ticker doesn't block their ticker. Let's look at their Benchmark series. They got great teams. Very cool. And I mean, two things. Sales tax is such a hassle because it's. There's just so many sales tax jurisdictions. It's like the perfect thing for automation and software.

I was deathly afraid because I just yelled out benchmark Series A. And I was like, oh, wait, did that not get announced yet? It did get announced. Leaking. It got. It got announced.

Congrats to the team. We love a Benchmark Series A.

I'm.

Very excited to be Sam, the CEO.

Yeah.

Splits is. Spends time in la.

Yeah. We'll have to have a bunch of.

Them as soon as he's back on.

Do you remember the golden age of e commerce when you just didn't have to pay sales tax? And Amazon was just like, yeah, if you're not in Seattle, like, we're a Seattle company. Like, we don't have Nexus in California.

Yeah.

And they just. And it was this crazy arbitrage because you could buy things and you just wouldn't pay tax if you bought it online. And then eventually Amazon was like, okay, yeah, we actually have Nexus everywhere and we gotta pay tax everywhere. And it got a lot less fun. But now that it is a lot less fun, the fund's coming back because of sales tax automation. So what's the call to action?

Go to numeral hq.com numeralhq.com yeah. To have them on the show, it's great. We are eventually going to sell some merch and we will be running on numero.

That's great. Guillermo, friend of the show, former guest of the show, has a post here. There's no better investment in the world than America. It's people, it's culture, it's land, it's company companies, it's freedom. Leaders. In AI, there's no second place. I'd buy every stock in every square foot. It's only been in the blink of an eye since 1776, and the best is yet to come. Let's hear it. Let's hear it for America, folks. Thank you.

John, what happened to the American flag that we used to have on the set? Did you take it for your bedroom?

I don't know, I was thinking we need a mask American flag somewhere on the set. Yeah, well, we're working on a new studio. Folks. Folks, I'm sure we'll maybe we should just paint the whole wall American flag. I'm also seriously looking at a cyber truck that's wrapped with the American flag and throwing a sticker on there. I bought this before Elon went crazy. And see if people fall for it just the most aggressive screaming eagle and be like, yeah, yeah, I bought it before Elon went crazy. Or. Or maybe you throw that. I bought this after Elon went crazy.

I kind of want to do a copy pasta of this Guo post that says there's no better investment in the world than Vercel. It's culture, it's land, it's companies, it's freedom. Leaders in AI. There's no second place. I'd buy every stock and every square foot. It's only been a blink of an.

Eye since 2014 when they incorporated when Guo launched NextJS. Isn't that the one he launched? Very fun. Anyway, if you're looking to get in on America, on the action in America, buying every stock in America to invest in America investing for those who take it seriously, multi asset investing industry leading yields and they're trusted by millions, folks. Anyway, let's move on to Tom Bloomfield over at Y Combinator. He says software engineers are highly paid farmers tending their crops by hand. We just invented the combine harvester. The world is going to have a lot more food and a lot fewer farmers in very short order. I think this is true of doctors and lawyers too. But maybe a year or two later we're going to have abundance of an abundance of incredibly high quality knowledge work at very low prices. Instead of living off gruel, everyone is going to have bananas and kiwi fruit for pennies. The farmer. But the farmers will need something to find something else to do with their time.

It's actually so wild that you can take a, you can, you can take any type of media, whether it's text, screenshot, PDF, image, et cetera, put it into any of these models and get and say pretend to be this and give me an analysis of this content and then it just spits out a really robust analysis from the lens and you're effectively getting to hire a lawyer, an intelligence operative, a doctor, et cetera, to do this sort of pretty in depth analysis for effectively $0.

This is a very.

And that is still just dramatically underhyped.

This is a very, potentially a very stupid take. But I haven't Seen it. And I wonder if there's something good here. Like, we talked about Jevons Paradox, where Deepseek drops the cost of inference and paradoxically, the overall demand goes up. Right? That's Jevons Paradox. Now, I've always wondered, like, is Jevons Paradox just price elasticity? Because if a product is very price elastic, like a price inelastic good is cigarettes, like, the price goes up, people buy the same amount. But with a price inelastic good, I have more to inspire myself to grind harder, of course. But, yeah, well, that's a Veblen good. And recently I said we should put 100% tariffs on Veblen goods because, because Veblen goods are goods that the demand increases when the price goes up. So that's something like a Patek Philippe is a Veblen good? Because you, you're like, oh, it's a $200,000, I want to buy it more.

I was joking about the auto tariffs being actually good for the economy. Because, okay, if, if, you know, whatever, If a Daytona SP3 costs 25% more, I'm going to work harder, simply going to grind harder.

And you're joking, but that's actually the economic analysis of what a Veblen good is. That's exactly how an economist would describe how a Veblen good works, which is why I think that post is funny. But what's interesting is, like, if you have, if you have price inelastic, if you have price inelasticity for AI inference, as the price goes down, if it's truly very price inelastic or price elastic, what will happen is your demand increases disproportionately to the price, and so you're actually selling more at the lower price. And so your overall revenue goes up. And that's what Jevons Paradox predicts about GPUs and new technologies. But is there a Jevons Paradox for software? And I think that's what we're hearing from a lot of folks in the industry who say, hey, yeah, it's going to be much easier to write code, but there's a lot more code to write. And so what's interesting is, like, it's possible that the software engineering industry actually grows even though the price of software engineering declines, and you have a sort of Jevons Paradox, but we'll have to figure it out. We certainly see that with, with Studio Ghibli's. Like someone was chirping at Mike Tyson for posting a Studio Ghibli photo of him with A. With a pigeon. And somebody was like, you're a millionaire. Like, why aren't you paying an artist to do this? And. And the thing was like, look, like he was never going to pay an artist to do that because, like, did you see somebody. He's not thinking about that. That's not something he was doing.

Somebody quoted that and said something to the effect of, hey, I'm looking for an artist to make me a picture of Mike Tyson with a pigeon and My budget is $0.

Exactly.

Let me know if anybody wants to.

Let me know if anyone's interested. Exactly. And so you have this weird, this weird paradox where it's possible that demand for art and demand for engineering, it all increases. And it's kind of unclear what that does to jobs. You would imagine there's fewer software engineers like what Tom Bloomfield here is saying, but we could see a lot more code, a lot more doctoring and lawyering. And we certainly can imagine that with legal where all of a sudden like everyone's suing each other constantly because it's all AI powered and it's gonna get very weird.

But yeah, but yeah, it's one of those things. I think. I do think more legal work will happen when you have these sort of chat GPT. Like, I mean, people are already using chat GPT to generate legal docs. I think it's more dump in legal docs. And usually those types of people were never going to hire a traditional lawyer.

Yeah.

But then there's some intersection of people that would have hired a lawyer. But now we'll just pay.

Yeah.

You know, or they're like, I pay 200 bucks a month.

Hey, chatgpt, draft a restraining order for a podcaster who stole my idea.

Let's get 50 times a day.

Aaron, the CEO of Box, is coming on the show in just a few minutes. I want to read his post because.

Nope, he's actually coming on at 12:45. We got.

Yeah. So 15, 15 minutes.

Sorry.

But I want to give some context about what I'm excited to talk to him about because he has been very rigorous in his evals and I'm sure Avi schiffman from. From friend.com is just kicking himself reading this post because Aaron saying that Gemini 2.5 Pro is a big step towards AI being useful in the enterprise. So Box has an AI enterprise eval, an evaluation, and Gemini 2.5 Pro scored 3 points better overall than Gemini 2.0 Pro for accurate single shot data extraction from enterprise docs. This entails asking the model to Pull out many fields at once from the dock and the jump is actually bigger, specifically in areas where it must work through a complicated through complicated logic in a document. Obviously this is extremely helpful for Box. You have a ton of documents in your enterprise kind of, you know, document storage warehouse and all of a sudden you can just query across everything. Note. Doesn't matter if it's a PDF or Excel sheet, it's going to pull it all out, which is awesome. It performs much better when tasks require more time thinking and not just jumping to the first answer it assumes is right, such as deducing dates in a contract when you have to reason through multiple sections in the content economy, up with the correct answer. Accuracy and data extraction is obviously insanely critical for enterprise AI use cases. You can't get data wrong when working with enterprise information for a mission critical use case. This is the difference between being able to deploy AI or not in financial services, healthcare, life sciences and many other places. It's amazing to see the continued performance and capability breakthroughs happening in AI, but it only seems to be accelerating. So what I'm interested in is the like Gemini 2.5 Pro. It's a Google product. Google has Google Drive. Box obviously competes with Google Drive. He's going to be probably offering this as a product. How does that deal get done? What are the risks to partnering versus building your own foundation model? Is AI and data extraction a sustaining innovation or a disruptive innovation? Box is unique in that they're still a founder mode company. Aaron's still a CEO. He founded the company and so you would imagine that he'd be able to move faster on product product and that could be a pretty big differentiator in the short term. So I'm excited to hear what he has to say about all that. And you know, if he gets it really working, he should run some more ads on Ad Quick out of home advertising. Maybe he's measurable. Say goodbye to the headaches of out of home advertising only Ad Quick combines technology, out of home expertise and data to enable efficient, seamless ad buying across the globe.

We know someone who is on the cap table Avad Quick.

Who?

Alexis Ohanian.

Let's go.

The man himself.

And he's coming. He's coming on RJ right now from.

See if he's here.

Let's go.

And this is maybe our second time having two guests.

We're still figuring it out. We might do a four up. We might just see one person. They'll scroll back and forth depending on who's talking. But we always love having Alexis on the show. He's got so much to talk about, so much history.

And he's always cooking.

He's always cooking.

He's a chef and.

Hey, how you doing, rj?

Hey guys. I wasn't sure if you could see me or not. Not gonna lie, we could always see you.

Now, how you doing?

I'm good guys, how are you?

We're good. Can you start with just like a little bit of intro yourself, your company, what you're working on?

Yeah, yeah, really quickly. I'm rj. I'm the CEO and co founder of Playback. I can go more detail in my background, but just really high level. I actually have a little bit of a non traditional background for a startup founder. I was a hedge fund analyst at an activist hedge fund based here in San Francisco called Value Act Capital. So kind of investing in large cap public companies. In terms of Playback, look, the idea is pretty simple. We're trying to create a better way to watch sports by integrating creators and communities directly into the content itself. In practice, what that looks like is it looks like a little bit of a combination of like a traditional NBA or MLB broadcast with a Twitch creator stream overlaid on top of it. So creators can basically add their own voice, own commentary, and most importantly, they can actually interact with an audience while they watch these games. And what we found is that that's just like a way better way to watch sports. And then I'm sure we can get into more detail on this stuff. But we had a couple big announcements last week in terms of obviously adding Alexis and 776 to the team and a new partnership with MLB. But yeah, that's the high level, dude.

I loved it right away for a few reasons. One, we basically are doing for technology and business news what you're doing for sports in a way where we don't do any journalism. We're basically sort of providing sort of this like commentary reactions, reactions to news. And I think what you tapped into is basically, you know, just an existing behavior which is so many people are sort of consuming sports content in this sort of bifurcated way where they're getting their commentary from YouTube or Twitch and then they're getting their, the broadcasts, you know, through these sort of legacy providers and like sort of putting that in the same place just makes a lot of sense because I, I don't, I don't watch, I don't watch a ton of, I don't watch a ton of sports. But if I want to like get a recap on F1, I'm going to YouTube. I'm not turning on the sort of like, like post race.

And a lot of those. Yeah, I watch a lot of those, like, F1 reactions. And they can barely even use photos. They have to go to Getty Images, license them. They can never use the real footage. And I'm just like, as a viewer, I want. I want everyone to be able to use the footage in the right ways. And it just requires figuring out all the licensing and stuff. I remember seeing on Twitch, someone was watching a boxing match that was clearly pay per view. You've probably seen this and they had the controller and they're like, I'm. Don't worry, it's just a photo. Real video game I'm playing. I'm just playing the photo. Real video game dodging and dive into. Yeah, yeah, exactly. They're like, getting really into it and it's like, clearly they're just. They're just like pirating the pay per view stream for their viewers and the viewers are just like, ignoring that guy and just watching the. The pay per view stream.

Talk about how. I want to know how you, through the licensing and the rights work for all this stuff.

So just, just first off, totally agree with everything you guys are saying. Like, it's one of those things where to me, like, one of the internal maxims we use is like, you know, can the next Stephen A. Smith just be an independent creator on playback? Like, they don't need to go work for espn, they don't need to go work for Fox or one of the big traditional media companies. And I think the only thing that's held back, like, independent sports creators is the lack of content and lack of rights. Like, it's just been too hard to do it. So one of our goals was to kind of mesh those two things together. The way we've done it is actually pretty interesting. So essentially both this is true, and I think you guys know this, but we have partnerships now with NBA and NBA League Pass and MLB and MLB tv. And the way those partnerships actually work is MLB TV and NBA League Pass are just apps on playback. So we kind of created this, like, bifurcated system where there's like an app layer where these, like, you know, content companies and streaming services can put their content, still deliver it the exact same way in a lot of ways, still get all that user data, still have the same subscriber relationship, but then we can overlay on top of it this creator experience because sort of everyone agrees that this is a good idea. It's just really hard to actually fit it into the existing rights ecosystem. And the way we've been able to do this with this app layer just makes it a lot easier. It was still a lot of work to get the partnerships over the line. Like our MLB partnership went live on Thursday. We first agreed to that partnership in July of 2024 and then actually been negotiating it and talking about it for like nine months prior to that. So it's still a long, long process. But I think the like sort of structure we've set up here is pretty scalable and it can hopefully work with anyone. Basically.

That's awesome.

Amazing. Well, natural fit to partner with Alexis given that he not only is a sports fan, but he's creating new leagues. Obviously I wanted to give you an opportunity to talk about Athlos, but maybe before we get into that, I'd love, I'd love to kind of get your take on it, Alexis and, and what kind of got you over the line to partner up in a big way way.

Dude, I had a tweet from six years ago ranting about it only being a matter of time for someone to build the product because there is a lot of product that gets done. So the syncing and everything works well and the partnerships and took a minute, but thankfully RJ and the team did it. And, and the only reason this one was an easy one to spot even six years ago is, is I think for anyone who spent time in gaming, we watched the ascent of Twitch, you know, shout out to Justin and Emmett who, who found that one of the most popular things people would want to watch people watch was video games esports, whether it was competitive or not. And what are games other than, you know, whether it's sporting events or League of Legends, it's, it's abstracted away. It's the same damn thing. But what gets you in the way is the rights deal. And that was obviously not going to be solved easily. But I first got into sports. It was actually one of my first investments after leaving Reddit in 2020 and splitting initialized up was launching Angel City FC, now the most valuable women's soccer team in the world, or sorry, women's professional team in the world. But what I found getting into sports was here was this world, especially in the emerging side, where folks didn't really have any of the media dollars at stake so they could move a lot faster with innovation because you weren't looking at billion dollar rights deals, you could just assess from first principles. And I think that's why We've had the success we've had in emerging sports and then what it was going to take was really seeing the uptick of this new generation of sports fan. That's the reason Angel City has been so successful. We're talking to a very different sports fan than the traditional one. It's a fan that lives here, Right. That watches on their terms. It's a younger fan. And so now, thanks to the success of emerging league, the big four can look and say, okay, like maybe we need to reach out to fans here and technology is the way to do it. And it just took time. But the market's ready now and RJ delivered.

Yeah.

And talk about kind of with playback, you have an opportunity to truly sort of productize sports culture in a way that I feel like Twitch early on was just very much like video game culture. Like the entire thing was built around that. How are you approaching kind of like bringing sports culture into the kind of the product layer?

Yeah, it's a good, it's a good question. Honestly, the easiest way we've kind of done this is I think a hallmark of sports culture is that people like to get their takes off. Like they're very interactive and active in their fandom. And it's honestly like the biggest dividing line between what a 24 year old fan looks like versus a 48 year old fan is like, you know, 48 year old fan leans back, turns on the TV and just like relaxes and probably still yells at the TV. But a 24 year old fan actually watches, wants to yell and be heard while they're yelling. And so one of the first tweaks we made to the product is we actually built it originally in sort of the, the Twitch style of like a one to many. Like it's just a creator basically talking. And what we did is we, we switched that from a, like a one to many to actually a stage concept. So creators can actually bring people from the audience up on stage to chat with them, debate with them, do whatever. And like our best users are like very frequent stage requesters or even joiners. Like they're always trying to kind of get their takes off. And I think that's kind of a microcosm for how we think about why we're focused on sports is like, if we can continue to tailor it to this user and this use case, like we're gonna have a much better chance of like carving out our niche and kind of winning the use case. But yeah, there's lots of other little things, but hopefully that gives You a good at least early signal? Yeah.

Do you see, you know, maybe it's happening today already, but do you see former pro athletes sort of like retiring in the same way they do now, saying, I'm going to start a podcast ass. You know, once. Once they're out of the league, you know, I'm going to get on playback and I'm going to just start being basically a super fan providing that commentary. Yeah. Is that part of the vision?

Our biggest creator is Gilbert Arenas, so very classic example of that. And I've also been very successful as like an independent content creator. He has a show called Gil's Arena. It's very similar, honestly, to what you guys are doing live on YouTube four times a week. Been super successful in that venue and has transitioned into a playback creator too. He's live, you know, four times a week with us at night and will be basically seven times a week for the playoffs on. And he's been super successful because I think he has like the right blend of like he has a content creator mindset. Like he can actually think like what's going to go viral, what's interesting people, what do people want to talk about? Like what's just basically fun. But he's also an ex player, so people sort of naturally want to hear what he has to say. But yeah, he's been super successful. I can even. I can send you guys a clip. You had a really fun clip that went very, very viral this past week when. When Giddy hit the game winner basically for. For Lakers versus Bulls. That was really fun. But yeah, I can follow up with that.

Can you talk a little bit about monetization on your end? Obviously, I'm paying the MLB through their app. You're sitting on top of that. It makes a lot of sense that if I'm following a creator and I'm tipping them, that money just flows through you. Take a cut of that. But on Twitch, they're actually running ads as well. I imagine that the MLB would be pretty upset if you just start running ads on top of their ads and kind of disintermedia them there. Is there some sort of partnership? Like you obviously, as a digital platform have even more information. You could target better. There's a lot of different things. How are you thinking about monetization over the long term?

Yeah, so short term it's just focused on the creator monetization that you reference. Like, I think we have a long Runway and we have great investment to kind of build to the long term. But yeah, near term it's all about basically these independent sports creators, can we actually help them build a business? So obviously tipping is one category, but even just room subscriptions is what we call them, like the ability to offer an actual subscription to their audience for either like limited interactive interactivity or even like premium streams. That's the primary focus right now. Long term, though, I think there's sort of two options. One is like, there is already a proven model around, like advertising sponsorships in partnership with the leagues.

Right.

So, so the leagues do have these partnerships with Amazon and YouTube and other like, obviously fully scaled platforms to deliver ads for them and then a healthy cut goes to the partner, basically. So that's one category. The other category is like, I kind of think once we're big enough, there's going to be a really big opportunity for what we call like platform revenue, which is basically like some percent of our of the subscribers we drive, obviously to these partners we should earn a percent of that. But also there's going to be new services that we can kind of offer. So the two obvious ones that come to mind are, are E commerce and sports betting.

Right.

Like being able to bet from within this experience, being able to buy a ticket from within this experience. Like all of these are going to be sort of like high quality opportunities and we expect both enable that and make money from that, if that makes sense.

Yeah. For me, it's kind of silly right now that you have a creator who's providing reactions and commentary to sports on one platform and saying, use my code and go to prize picks or go to, you know, Underdog or Joey and, and Jake's, you know, platform, like better, better. Like it's very silly that these are just happening in one place where a sports fan wants to like post up. They're just like fully immersed in the game, the commentary and whatever sort of activity they're doing on top of that.

So I mean, maybe merging a social network and an LLM foundation model company as well. Yeah, just merge it all.

Yeah, yeah. Lbo. A big quarter trillion.

I. I see a quarter trillion dollar valuation here.

Yeah.

Let's throw it all together last.

We got a minute left. Alexis, tell us. I wanted the update on Athlos. There was some stuff going on over the weekend.

Yeah, the greatest show in track. We started this women's track league last year. Three million people tuned in for it. I was the biggest person in the history of the sport. Fastest ladies in the world and it was a blast. We're doing it again October 10th in New York. And of course we're going to be streaming it on playback.

Yeah, I was going to say, are you going to have a, are you going to be providing commentary?

You don't want to hear my commentary. But there is to your point though, right? This is why I love the idea of building in a new, in this case building a brand new league. But even in emerging sports is. Is you can re underwrite everything from first principles, right? We can say because we don't have a billion dollar streaming deal, media deal yet, we can say, okay, what's the best thing for fans and what's wild is there is a long, long, long tale of creators who love this sport or even just mildly curious about this sport who are going to be able to bring their audience to watch it. And I really believe if you haven't watched John Boy, like I'm not an MLB guy, I'm not a baseball guy, but I fell in love with this sport through this random creator. Happens to be a Nick. Not a Knicks fan, a Yankees fan. Nobody's perfect. But he's a big Yankees fan and does these voiceovers of baseball that delight even a non fan. Like it's just so engaging and to me that that is the future of sports and it's just seems, seems kind of silly that we've had all this talent emerge from streamers talking about video games, but we've never seen the new John Madden or the next Pat McAfee and it's going to happen here imminently.

In these next years.

Love it. Guys, thank you for jumping on. Very excited. I'm going to hit the size gong for you and we look forward to tuning in to some playbacks in the near future and hope you guys crush the rest of your Monday.

Yeah. Good luck.

Thank you.

Cheers. Very cool. It's crazy that, that. Do people bet on running a lot yet? Horse betting is huge. Why is betting on, you know, people like these personalities, track stars. Why is this not.

You should be able to do a whole track day. Just head to the track, get some, get some interest.

I mean I respect horses. We love horses.

I went to the Kentucky Derby. Why can't I just go to, you know, the Human Derby?

The Derb.

The Derby.

The Derb.

How we doing? Do we have our next guest? Not yet. Hopefully coming in soon. I think that's very cool. It's interesting. I mean you have to wonder if Twitch is thinking about that. They're so big. Amazon has the rights to a bunch of stuff. It seems so logical. But man, I mean it's been a Decade, and they haven't done it.

I mean, part of it is it's great for.

For.

It's great for business if your competitor is owned by Amazon.

Yeah, exactly.

And not that they can't innovate at all, but I mean, for a long.

Time, Amateur was the CEO of Twitch and was running essentially an independent organization from Amazon. But of course, he stepped down and now Twitch has been much more absorbed in the Amazon ecosystem. It is a fascinating model. Have you seen on Twitch how the Twitch prime model, how if you have Amazon prime, you get one free sub subscription to a creator? And so most people who use Twitch, they really have one favorite person that they tune into every time. It's not really like YouTube where you're bouncing around watching 25 different creators, and so you go in and you get a free one. And so they would give $5 a month, and then the Twitch Prime, I think, delivered maybe $2. Only like, the margin went through, but still you would have these. These creators with like, huge organizations. What are you looking for? Water?

I was looking for a year, but I thought you had two. We got Aaron in the chat here.

Bring him in.

There we go.

How you doing, Aaron?

Hey, guys. How's it going?

Welcome. We're doing great. We're doing great to finally have you. You should have been on, like, you know, we've had like 50 plus guests at this point. You should have been on the first one.

Why wasn't I a launch partner for this thing?

I know.

Seriously. Oh, well, we're making up for today.

Okay, great. Another podcast. Awesome. Good work.

Yes.

Yeah, yeah, yeah. That was the genesis, right? The world didn't need.

You said technology needed a podcast. That was the idea, for sure. I want to talk about the enterprise AI eval and how the different LLMs are interacting at box. Is this a sustaining innovation? Is this a disruptive innovation? Is Google arrival? You're gassing them up? What's going on?

There were like nine questions in there. Where do you want me to. Where do you want me to start?

Wherever you want.

Yeah. I mean, we're pretty pumped about AI, as you can imagine. So we, we've been building this platform to help enterprises store their data for a couple decades now. And we have hundreds of billions of files within box. And the one challenge with content, financial documents and resumes and marketing assets and contracts is you create it, you share it, and then you kind of never look at it again. And so what happens is you see this sort of curve of people. Content remains hot for a day or Two, and then it kind of goes into an archive stuff state.

Yep.

And AI is the first thing that lets you actually tap into all of the value of all of your data, you know, no matter how old it is and when it was created and who it was shared with and where it is. So for us, it's this massive breakthrough which is you can turn all of this unstructured data into, you know, effectively usable knowledge for an organization. And so we, we, we're kind of betting the whole company on this idea of in the future when you work with your content, you're going to have AI agents that go out and read your documents for you, you know, create analysis, you know, go through all your contracts, find exactly the data you're looking for, automate workflows across any business process. So that's effectively why we're all in. And, and so we're, you know, trying to think through what are the implications in the future of enterprise software. Yeah, you know, I'm very much on the side right now that it's a TAM expansion of software as a, as opposed to kind of a TAM compression. I think this lets enterprise software startups or incumbents go after much bigger markets because you're now tapping into just a completely different budget pool in an organization. But yeah, lots happening at the moment.

What about training a foundation model? Did you consider it? It seems like. Can you talk a little bit about value accrual versus foundation model, layer versus application layer?

We thought about it for like six and a half minutes and that's a.

Long time in 2025.

Exactly. So in, back in, you know, the moment we saw ChatGPT, like there was like one brainstorm of like, oh, do we need to like fine tune our own models and, or even train our own models on, on, you know, certain data sets? And, and we basically quickly concluded like, no, that doesn't make any sense. And the math is really clear. It's like if you have Google and xai, we didn't, you know, didn't have XAI at that point. But, but you had, you know, OpenAI, anthropic Google Meta at a minimum.

You just don't want to be, you.

Don'T want to be fighting that war from a capital standpoint or even just a deep research talent standpoint. So, you know, you always want to be, as a, you know, a startup or any size company, you kind of want to be on the side of the tailwinds of the market. And the tailwinds in this case are that there's like now Five or six at scale. Companies that are deploying hundreds of billions of dollars, you know, on computers and training data and talent.

Talent.

So you want to be riding that wave as much as possible. And so we've built an architecture that lets us tap into any of the AI models, whoever makes them great.

Jordy, you had quoted somebody, I think it was a couple days ago, that basically delivered a pretty good prompt about a paragraph of text describing a website that they wanted. And it just sort of pops out this beautiful landing page. And the designer said, we are so cool.

Hooked.

That was a reaction for a lot of people last week. Maybe that was reaction if you're a studio Ghibli. I'm kidding. But. But you said, here's how this plays out. AI makes producing amazing designs more affordable and faster. Designers get to offload the long tail work, iterate faster and serve more clients or projects. Customers get better results faster or cheaper, inducing more demand for great design. It's basically calling Jevons Paradox. Paradox on design. Is there any, like, context that, that you feel like is worth adding there? Because I, I think they're. They generally, you see these sort of big, you know, exciting releases or updates to models, and there's like a lot of sort of doom. But if I was, if I was in high school and I, like, enjoyed design, I would be calling up every single SMB and I wouldn't even. What I wouldn't do is say, hey, will you pay for this website? I was, I would say, I designed this website for you already and you can have it for whatever 100 bucks and you could just be printing in like seconds.

Right.

So I had a positive takeaway. I think you did too. But I was curious if you had anything else.

I mean, I took it way further than the initial thought on how you kind of growth hack that, which is.

I think, a great idea.

I think everybody got really excited about Jevons Paradox because of the efficiency of AI models, the theory that as they get more efficient, efficient consumption goes up. But there's an equal amount of Jevons Paradox of all of the applied use cases of AI. And so that gets you closer to then the human labor side, which is, if you just think about most markets on the planet I would argue are sort of smaller than they should be. If the cost of delivering the service was cheaper, you would have Jevons Paradox for almost every domain in the world. Like, and let's take a very easy one. If healthcare was cheaper, we'd probably consume it more. Like, my biggest hurdle to Seeing a doctor is, it's a nightmare to just even get a date on the calendar to see anybody. And so just think about all of the things. If you could increase the productivity of that particular category, which is an inverse or corollary to lowering the cost of delivering that thing or making it more available or making it more expensive, accessible, would the consumption of that category go up? And I think there's not a lot of markets that are kind of at this perfect saturation level of, of what the potential demand is. And we saw this in the very, you know, I think in modern tech. We saw this, let's say in Uber as an example. There was this really funny article that, that some economist wrote like 15 years ago about Uber that was like the best case scenario is this takes like half the taxi revenue and it's like a $5 billion business or something.

Something.

And what the guy obviously totally missed, the forest from the trees, is if you just make Uber and liquidity of a taxi service 100 times more efficient, the market actually goes up by let's say 100x. And he couldn't quite process that. But we're doing the same thing over and over again in AI where we're sort of thinking like, oh wow, we made this thing way more efficient. That means it's going to compress the size of that market. When actually what it will mean is that to your exact point point, all of the people on the planet that have really bad design right now, they'll have some, some entrepreneurial, some, you know, high ingenuity person going and saying, okay, now I can actually do better design for the first time ever because it's affordable to do great design for this small bakery that, that would never have hired a designer. They never would have, you know, thought even to make their, their website look good, but now it's actually affordable to do so. And so I think that's actually going to play out, you know, many, many times over in AI. There'll be some categories where we are at equilibrium of supply and demand. But I'd argue most categories this is not the case. Even as an example, taking another knowledge workspace, let's say there's a lot of AI startups doing legal work, AI for lawyers. And one theory is, okay, wow, is it a really bad time to be a lawyer? On the other hand, if you make it much more accessible to now ask a question that's a legal question, I'm still going to follow up and say, okay, can you paper this now as a contract or can you Just give me a little bit extra advice. But we've lowered the barrier to now getting access to even thinking about what is the legal implication for a particular thing that then grows the demand of that space. And even in the category of, let's say, internal legal work at a company, if I could make it so we could review contracts faster with customers that we're going back and forth on, I'm not going to have fewer lawyers in the company. We're going to actually just have higher throughput of our deal review process. So there's a lot of these areas where you're just going to actually see an increase in demand of the overall category as AI comes and drives productivity in these spaces.

Talk about just hiring and headcount expansion. Generally you have thousands of employees already at box. When you're talking with the team about doing headcount planning, are you pushing people to say, do we actually need this person? Or if you just figured out how to use sort of these tools better, could we get away with without sort of adding that, that incremental person? Because there's been a lot of, you know, the Klarna CEO came out and was basically like, we're not, we're never hiring anyone again. And like, obviously that's really good marketing, but like, what, what's the reality and how are you approaching it?

Yeah, so, so we, we are, we are 100% committed to being, being an AI first company just across the entire business. So we want every employee using AI to be as productive as possible. You know, with all the right asterisks of, you know, if you're doing production code, you're still responsible for what the AI produces. It's not the AI agent. So all the normal, you know, kind of T's and C's on that, but for the most part, we look at it through the lens of if we can cause efficiency in a particular area of the business business, we want to reinvest those gains back into another area in the business, might be even the same category or same function. But we want to use those dollars that we're freeing up to actually reinvest into the areas that were previously constrained. And this is sort of even in the case of things like customer success, where you're getting kind of like the first line of defense, hey, I need to reset a password. Those types of things that we can now begin to automate with AI, the dollars, at least in our case, that we save on that kind of.

You.

Know, you know, kind of human labor that, that will actually go back into the same exact organization. But now for more proactive customer success managers that we're always constrained by. We can't, we can't hire enough people to go out and do a proactive outreach to our customers and help them strategically because we have to have people that, that are responding to, to tickets. And what's interesting in this case, and it's, I think it's an optimistic, you know, sort of story about AI in most cases it will be the same person that sort of moves from one type of work to the other. Our classic kind of customer success manager type roles oftentimes started in support at either our company or some other one. So really what it lets you do is recalibrate your talent to increasingly more strategic ways of using it. Go and translate this marketing asset into 10 languages is a much less strategic use of time than help go work on the next marketing campaign that we want to go deliver. So it's, it really just lets you readjust into more and more strategic things. And that I think is a, is an analog for what we can expect for most AI impact in an enterprise context.

Can you talk about going public? Is it as bad as people say you went public young, You're a young guy, your hair's gray. Is responsible of the, Is it because the sec? Sec?

It's actually not because of the sec, it's because of the hedge funds.

Okay.

There's always this conversation of if we magically change the listing requirements or something of a company, would that be better? I actually don't think, I think that's a red herring. I think that the scrutiny that the SEC requires, the governance that you have to have, I actually think is all net positive on companies. I think that like just lets you run a more stable, mature, you know, thoughtful business. And, and you know, any reduction in that probably, if anything just causes adverse selection for the kind of companies that eventually go public. I think, I think the, the, the. And this, you know, Brad Gerstner kind of kicked this conversation off a couple days ago or yesterday online of, of like, you know, about the supply of IPOs. I think this is firmly actually in Brad's hand hands. This is a private, this is a private capital market dynamic which is as long as you have him and the CO twos and the Sequoias and everybody else doing very large late stage deals, as long as you have capital in the private market to stay private longer, that is the real thing that will reduce IPOs. And I don't necessarily know that there's any kind of grand economic loss for that. But SEC has nothing to do with this. This is firmly, you know, in the private, private sector. We could, we could decide do we want more IPOs or not.

Last question. Did. How did you react to the XAI X merger? You have more followers on this platform than probably anyone I follow, but Elon himself. Yeah, I'm curious what your take is. You've been, you've been here since day one.

I, you know, was, was early on the, the Twitter wave. I know. I mean, I mean Elon clearly likes to keep buying X so it's. He will find another way. I mean the.

Twice now.

Yeah, I have, I don't have a particularly strong opinion other than, you know, I want. I do wonder if like Tesla is the ultimate acquirer of xai. But you know, I don't know how he's going to kind of, you know, make all these worlds come together but, you know, will be interesting to see but no impact on my life.

So.

Yeah. Yeah. As long as we can post.

As long as we can post, we're good. Just don't turn off the posting.

Don't turn off the posting. And what I don't want is, I don't really want like a write this tweet button. I. I hope that's the one thing that they won't do. I think, I think that like a lot of these platforms like LinkedIn has this, you know, like help AI write your post and like I just think you get slop. Like it would be nice if, if this could be like a slot free environment, artisanal on X.

What do you. No way. Unfathomable.

No, we want handcrafted, artisanal, organic farm to table posts.

Yes, exactly.

We need artisanal content.

We need artisanal content. I agree with that. Well, thanks.

It's great to have you. We'd love to have you back on when you have Box News.

We'll talk to you soon. Bye. Who got coming in?

We got Sam. Lesson.

We can keep it up on X and Xai. Let's bring him in, get a hot take, get him out of here.

The take Smith himself.

I want to hear it. I want to hear it. You know it's going to be good. Is that a yes or a no?

He's here.

No, he's here.

There he is.

Welcome to tbpn.

You going to get me in here and get me out of here? I want some hot takes. Spicy enough?

Yeah. I mean, you know what we're talking about. X. Xai, what's the Take sustaining.

We got. We technically have like 12 minutes, so we should probably just let you just go on a giga rant.

Just ran.

But first I want to say you're the only person I know that's been getting more tan throughout winter. And I think it's because of all the tennis. But you also. Were, were you skiing recently? It's because of the skiing.

And I'm not done.

I'm not done.

He's not done putting up 60 days on the epic pass or whatever.

What do you think I am? A basic.

Where there's no passive.

There's an app that you track your days in. I forget what it's called, but it's people tracking Garmin. Maybe it's a Garmin. Okay.

Garmin.

Yeah, Garmin.

There's no epic where I go. Okay.

Yeah. There's no chairlifts. It's all helicopters and cats, Right?

Oh, it is.

Listen, I'm just trying to live the VC dream, you know, you're doing it.

Keep it up.

Yeah.

Speaking of new Z, dream on something.

Yeah. You were probably, probably, you know, midway down some peak when the news broke. But talk to us, what was your reaction? We had sort of a, you know, sort of. I remained sort of long term bullish. Elon having a sort of an AI bet and how could he not? Yeah, yeah, yeah. And on, you know, this platform that we've built our, you know, our show on. But to me it's like, you know, it's generally like complicated. There's a lot of ways to kind of like, you know, maybe poke some, some holes in it. But I was curious to get your initial reaction as somebody who's been, you know, bearish, bearish on just a lot of stuff in AI on everything except meta. Because the reaction was like, like people, people were really big tech. Yeah. People were just like immediately like, yeah, this makes total sense, you know, et cetera. But, you know, there's.

So look, I actually think to Elon's credit, it makes total sense of her. Elon Musk, Right? Like Elon is the king of cheap money, Right. If no one played ZIRP in history better than Elon, right? You basically come up with a long term vision that can require infinite capital. You're the world's greatest marketer. You sell the shit out of it. You raise infinite free money and you build stuff. Right? He did that. Great. Now it turns out the ZIRP free money is over. But you know, where there's free money, AI narratives, right? AI narratives is where the free Money is. So obviously Elon's got to have an AI narrative because he's the king of free money money. And so I think when you look at the Twitter X thing, I mean it seemed, I mean he literally named them. They're, they're like, how could they not end up combining? Like literally one was distributing the other. They're layered on top of each other. They basically have the same name. And to Elon's credit, in terms of pulling this off, I mean, what is this really? This is AOL Time Warner. If Time Warner had like a ton of debt, right. Like, and so, and so you use an inflated, you use the zero cost capital, inflated valuation thing, which is the AI thing, to buy the thing you also happen to own. That's an actual asset. Twitter's great. I love Twitter. Right, but it also has a, whatever tens of billions of dollar debt noose around it, right?

It's 12. It's not tens, it's 12. Exactly.

Oh, 12, sorry, a 12 of debt around it.

It.

And like, what's not to like about it? Right? If you're Elon, it's a great deal all around is what I would say. But what does it actually add up to? I mean, like, look, the entire question is what are these, I call them mid market AI players actually worth? Right? And that's the, I mean I again, as you know, I've been very consistent on this for years. If you're the biggest in the world and your cost of capital is zero. Sure. Like build out a huge AI infrastructure, ideally one where it's non cannibalistic, like meta, ideally one where you know how to make money off of it, like meta. If you're a tiny baby player, take all the leverage, fire your customer service team, like be more efficient. Hooray. But I think these mid market players, I don't understand the numbers.

I mean you said it makes sense for Elon, but I feel like when we were looking through the deal, it's like the SolarCity Tesla acquisition, 100%. And it looks, and it looks good for the Tesla shareholders too because they effectively get out at the same price they got in and at they're in this new thing. If you're a Tesla shareholder, are you happy or not?

Well, wait, which one's Tesla? Now are we saying that X AI is Tesla?

Because they're. No, no. So if you went in on the Twitter deal and you're sitting at X and the valuation probably went down and then it goes back up and you get out at like 44 it's about where you got in but now you're in this combined entity.

Well let's, let's put it this way. I think the question, the question is there's probably and I don't know this, you guys probably do. There's gotta be some market for XAI shares floating around on and markets, you know, things that are worth what people are willing to pay for them. So if you bought into Twitter @44 and it's not worth 44 despite the fact I love it despite the fact you guys love it, just not right. And all of a sudden there's a market for XAI plus Twitter at whatever the number is is and you can get out and you want out. Who cares? Right?

So this seems like a win win. It's not just Elon like the, the original Twitter slash X shareholder but I guess also happen.

But I guess but if you're a.

I don't know if you're an X AI shareholder it's just kind of, I mean this kind of fits in the world of you know, we, we live in a world of spheres of influence right now this is not my line by the way. This is smarter hedge fund friends of mine line which is we've gone from kind of from a legalistic globally open market it to a world multipolar worlds of spheres of influence. You know, if you bought into X AI you bought into Elon's sphere. If you bought into Twitter, you bought into Elon sphere, what are things actually worth?

Meh.

Who knows. But like you're kind of just betting on Elon holistically and this is a nice consolidation which by the way gets him out of a very large debt bill. Right. That he was personally liable for in some way shape or form.

But I mean it just feels like Tesla SolarCity all over again. But if you Tesla SolarCity City, that deal worked out for everyone.

Well it's not clear it actually worked out for Tesla shareholders. It's fine because it's a rounding error.

They're making 10 billion now they're making Tesla energy on batteries and stuff. Yeah, they pivoted away from that.

Did they need Solar City for that?

I don't know.

I mean, maybe not. Like if you think about the Solar City story when it was pretty weak when it was acquired it was we're going to stick solar panels on the roofs of Teslas and that's why we should buy this thing. Like, like it didn't really make any sense. Right.

And like in the house of the Tesla owner. Right.

I Mean, it's like you're already there.

To install the, install the battery pack, install the charger install.

We all, I get it. I'm saying we all know you look back on the history of that deal, that was a this thing is about to die, bail out. I'll come up with a one page letter that makes that justifies it because we're going to put some solar panels on the roofs or some shit, right? It was like completely made up. Now when number go up, all sins are forgiven, right? And so what I'd say is number go up. So everyone's fine and no one's the.

Master of number go up.

He's the master of number go up, right? So is that kind of, that's the kind of story in general, I think there's a real Elon narrative which is master of zero cost money in master of narrative, number go up, right? And the reality is it's kind of like very Roman is like as long as everyone's getting paid, everyone's on your side, Even Doge. Doge, right. Like the whole thing with the Dogecoin is brilliant. Like the best way to build more followers is to get them paid. Right. And Elon has been the king of that. Now the question is it works in both directions and we'll see how that plays out now.

But you know, I think what I'm, what I'm interested in is like I want to hear Elon speak for an hour about the combined entity and what that really means versus data and distribution, right? Like the two narratives have been like, like, you know, Xai gets distribution, X and sort of data. So, so it makes sense. But for me, it was, it was more easy to visualize how x was worth $44 billion when it's sort of an Elon pure play, sort of social media bet in a, you know, strategic influential asset. And if he is able to continue to grow earnings and grow the importance of the platform, it's easy to see how that's, that's like, you know, maybe it's $100 billion company someday. Now you have Xai and it's, you know, you're sort of looking at this collective entity being like it's a founder, it's a pure play, like founder bet at this price.

I mean, look, I. In the end of the day, the problem with all this AI stuff is it's either worth infinity or zero. And no rational person can do a discounted cash flow on an infinity or zero, right? And, and I think that's kind of where everyone's stuck, which is why it's so narrative dominate. Personally I think to say I actually quite like Grok. I use it like I have on my home screen Grok and OpenAI and all of them next to each other. And when my finger goes, which button do I press?

I press Grok.

You know why? Because it's kind of marginally faster and fun. Whatever, I don't know what that's worth. Right, but we'll see. Right?

And the bull case for that behavior is that Grok could replace Google for.

Exactly. I say Google's a multi trillion dollar company. You slice it up and all of a sudden you're getting a couple hundred billion dollar bet. Maybe, maybe this is the one.

This is a mistake.

Maybe this is a mistake that people make. I think consistently when thinking about AI, which is the story of will you use LLMs to look things up? Yeah, of course. Yeah, you're definitely going to use them like you know, but the idea, it's kind of like the same stories when people say hey, I pay accountant $120,000 a year. AI accountant $10 a year. Therefore AI accountant worth 120 times. That's not how it works. It's just it's worth 10 and like the, it's all about the marginal advantage. And so it's not clear to me, I mean it is very clear to me that a lot of search volume that currently goes through Google and gets resolved by you know, shitty web pages people have set up to farm those searches goes, that behavior goes away. Where commerce go, where the ads dollars actually go and whether just searches like it's just not the same market configuration anymore and who gets that money. That's all really TBD is my view and it's really unclear. I mean again it's a very binary game. So that's the one. That's why I think it's very hard to value right now. But I think the big picture is so long as private investors are willing to flip foot the Hail Marys, the binary outcomes and believe that, you know, again, Elon is the king of cheap money.

How do you feel about market concentration? Google has like 99% of the search market. Meta has 99% of the social networking market. It feels like LLMs could be a little bit more oligopolistic on the consumer side. But if history is any guide like these monopolies kind of run away with it at some point. Point. What are you feeling?

I don't actually, I think the question is if you think really what I'd say with Google and Meta are, is they're not technologies, they're economies. Right? And this is the really. I think the mistake people make is if you think that Google's a technology company and Google searches technology purely then and you're like, wow, technology tends to compound and run away. Then you're like, yeah, like this would.

End up that way.

Same thing with social networking. There's no actual technology. I mean, yes, there is like some stuff Facebook invented on the way to scale, but like it's not fundamentally a technology company, it's an economy. And I think the problem with LLMs is people are equating them to an economy, but they're not, they're just a technical level. Now if someone actually nailed the. Everyone's pouring every single thought they have into it and all the knowledge of the world into the LLM and then that single element aside is like the smartest fucking thing in the world.

But that's what they're doing with this deal.

But they're not.

You go on X and you get paid a crude greater payout for bringing information to X and then that gets siphoned into XAI and better answers.

Agree.

But here's the thing that you have to understand, and this is really important, is one of the big economic failures of the Internet is that the economy of the Internet, both social and search, is actually driven around entertainment.

Right.

And engagement, not around information or truth. Right. And so the reality is what you're basically at best, that's what the economy's work, that's why we're so screwed on so many things, is because there's actually no, no economy of truth. There's an economy of entertainment. And I think that's getting, going to get quashed in a bunch of ways because again, if Nothing else, and LLMs do generate infinite free personalized entertainment, right? And like that's going to like crush that economy. It's not clear to me. I mean I can tell you the vision where yes, for some reason X becomes this machine that pumps all of the world's knowledge and then somehow Grok has some fundamental advantage on knowledge. I can tell you the story, but I don't see any indication of that actually being what's played out. And I would argue that again that was the same story Google had didn't play out that way. It ended up being a commerce engine and a bunch of dead Internet theory stuff. Unfortunately, it's not the way that social played out either because social is just a dopamine feed. Unfortunately it's not an information machine. And so that's really the question of how you get there. And we'll see. I am very skeptical that the mid market players who are saying LLMs are, are a compounding economy actually have anything right now. I think they have technology that's pretty fun and it's all pretty undifferentiated, but we'll see.

Where do you think XAI would trade if it were to IPO tomorrow?

Well, so this is a really interesting question, right. Because basically you have two dynamics at play. Either it's traded as a meme coin.

Right.

If it's traded as a meme coin, it might be huge. Right. It's the same thing with like, you know, Mr. Beast wants to go public. We talked about him.

Yeah.

The last time I was on on. It's like if Mr. Beast's, you know, public company trades like a meme coin, it trains like gme, then it might be a very, very large number if it trades on a discounted cash flow basis or as like a traditional accepted business the way like not very well. Right. And so I think that's really just the question, you know, as the retail versus enterprise versus like effectively real serious business world compete. How these things trade is all about the marginal buyer. Right. And what that marginal buyer belief system is as much as anything else.

Yep, got it.

Well, we got to move on to the next interview.

Bye, friends.

Talk to you soon. He said, bye, friends. Great to have you, Sam. Thanks for coming on. We got Chris a. Is it Chris? Oh, wait, no, we got David. Is he in the waiting room?

That's right, from Poseidon. Let's do it. I'm gonna let you take Poseidon himself.

Can you grab me a your. Thank you. David, what's going on? Big day for you and a big flag.

Thank you. Yeah, no, it's been a great day here. We finally launched in public. We've been in stealth for a bit over a year now. So it's really exciting to show the world what we've been working on.

It's amazing. And if I remember correctly, some of the very first posts we featured on this show at the beginning of last year, weren't they yours? I feel like you came.

Yeah, I think there was one. Yeah. Way back.

So thank you for contributing to us, us getting this off the ground. But talk about the Poseidon Seagull, kind of the genesis of the company. Would love to hear kind of like, you know, your backstory and then. And then the first, you know, has it been a year And a half of the business. How long have you even been in market?

Yeah, so we. I can go way back to the beginning. We started right around like December 23rd, January of 24. Raised our initial pre seed and and the way that the company got together was it's me and to my co founders Isaac, Zeke, Dup and Parker. And so we were I think ideating about logistics and aerospace and I think logistics especially has been a market that's been largely unchanged for the past 100 years. The types of planes that we're flying are largely the same 737 same like Cessnas. And on the the ship cargo side has been pretty much containerized cargo with very much spoken hub model. And so we were going through a bunch of ideas of what we could build to disrupt this. Thought about airships for a while and those are very interesting but have their own set of problems. A couple other things but then I think one night at a random party in San Francisco a girl walked up to Isaac and was like hey, you should look into Ekranoplans. And we were like what are ekranoplans? So we spent the next night night just like binging YouTube videos and like documentary series. So chronoplans were these like types of vehicles that were built in the Soviet Union in the 60s and 70s and at the time they were like the highest cargo capacity like planes ever built. Like they're like flying ships essentially. And so they're constrained to fly in ground effect which is a regime when you're flying extremely close to the surface of the ground or in this case water because water is extremely flat. Where you have an aerodynamic boost it does two things. It a largely reduces your drag and it increases your lift so you can carry a lot more and spend a lot less fuel. So it's like increase of your lift drag ratio by 30 to 50%. There's a huge deal. And so we started looking at those and the really crazy thing about ground effect vehicles smaller and age is like a lot of the problems that the Soviet side are solved for the most part. So it's really done a controls issue and a materials science problem. Them and composites are incredible material science. So like carbon fiber and controls is like much like. I think we've solved those problems pretty well now. And so but the really cool thing is like the ground picked vehicles are not regulated by the faa. They're regulated by the Coast Guard. And so Coast Guard certification is significantly easier than faa. And so you have like really great companies that have built cool like Evtol stuff. And like, they've ipoed or spocked or whatever for billions of dollars, but they've never actually had a commercial flight because the FAA regulatory process is so long. So it's like a decade plus to get certified. But if you're going through the Coast Guard, and so it's. If you're flying sub 150 meters and it's the same thing internationally, Europe under the imo, you get certified as like what is technically a boat. And so what we're building are flying boats.

Yeah, we talked to Billy Thalamer at Regent. He's doing personnel carriers. But that regulatory arbitrage is just like, amazing.

Even off air. After we had Billy on, you were.

Just like, I'm so excited about this. I love that.

A good reg Arb just.

Yeah, Reg arb. It's previously the domain of crypto stuff, but now in hard tech, we're taking advantage of regarb.

So we have the video. I want to pull up the video, and I want you to just kind of like talk over it. Ben, can you pull it up quickly?

And while we're waiting for that, I'd love to know a little bit more. Oh, here we go.

You can mute it, Ben.

I don't see it.

Okay.

Okay. Maybe try watch. I mean, we'll just.

Seagull. Okay.

Pretty cool. So this is.

Put Starlink on it.

So this is it taking off? Yeah, like flying at about. About 8% feet is peak. And so the.

How fast is this?

It cruises 65 miles an hour. We hit 115 miles an hour and 115.

Let's go.

Yeah, Some drop changes. I think we'll hit 160 on our next set of tests.

You got to get in sports car numbers. I want to see 200 Bugatti Veyron goes what, 250.

Yeah. We got a race one.

You gotta go. Yeah, yeah. Do the Nurburgring in this thing.

I love. I mean, the design looks fantastic.

So when you say ground effect, does it have to fly over water or. Or. I mean, this looks just like a plane. Can you just fly it over land too?

Yeah, so. So, like, if you're flying in ground effect, you generally want to fly over water because water is like extremely flat. And so, like, you'll have waves, and even in waves, you'll fly slightly higher and it'll average out, but you can find ground effect and like the, like, I don't know, like the. The salt flats or something. But ours is what's considered to be like A class B, class C ground effect vehicle. And so we're not restricted to ground effect, we've just optimized A aerodynamically to take advantage of ground effect.

Got it.

But we could fly out of it up to 150 meters.

Can you talk about what we're going to?

Yeah. Can you talk a little bit more about the tech tree that enables this? It sounded like there's some material science stuff like carbon fiber is cheaper. Then there's also like the miniaturization of electronics. Like you have Starlink on that thing. That's not possible a couple of years ago. The question's really just like why now? But I want like more of a breakdown of like, of like all the different things from the regulatory to the tech tree that's enabled this to happen now and not earlier. Because at the same time like this feels like something that could have happened decades ago. But why are we just, why are we just breaking through with this now?

Yeah, so I think like starting on like the material science side, I think it's really interesting. Like composites have really come into their own last like 10, 15 years. And so in terms of like being having like actually like very like good many like there's very good manufacturing here. So like sure, APV composites is where we get all of ours. And that's in Livermore. It's like an hour drive.

Oh, cool.

It's kind of awesome.

And that's both like the science of those composites but also the cost or is it just the cost that's come.

Down both and like the amount to which they're being used. And so like sure, you're having your like large planes, like your airbuses are being built, built with composite wings. And so aerospace as a whole has really moved into composites as opposed to just aluminum. And so then on the electronics side I think there's in the same way that GPUs for gamers enabled machine learning. They're just like the hobbyist grade RC stuff has gotten extremely good. And so just really move forward the quality motors available, the quality of, of like electronic systems, sensors, the types of sensors that are available right now have gone small enough that we can fit them on here.

Yep.

And really the Seagull has started as like a quarter scale prototype of our full scale vehicle, which is going to be a 50 foot 2 ton capacity vehicle.

That's what I was going to ask. I was going to talk about sort of long term capacity scale and then like the applications of this because at that size to me it looks like like something you would use for potentially defense applications is a big one.

But I thought you were going to say pleasure craft and like going out.

And just getting, going out with your boys, with your boys on the ground.

Effect vehicle with your boys having a glass of champagne.

That'd be a really good time. But yeah. So is your guys first focus like logistics and sort of like long, sort of longer term, longer distance transportation port, that kind of thing?

Yeah. So I think as I was saying this started as just like four scale prototype demonstrator. Figure out the aero body design, validate a bunch of stuff. But as we were building, became aware that it was a pretty capable vehicle in and of itself and we designed it for manufacturing. So we reached out to the DoD specifically like the Naval Surface Warfare center people and SOCOM and they all had their own specific mission profiles that they were interested in in with the Seagull. And so it's like pretty large payload capacity relative to size and being able to operate in like marine domains instead of doing stuff like anti submarine warfare, like UV detection. Very like urgent and like high priority logistics and goods is on the, on the defense side for the Seagull. And then we're starting operations commercially with it for doing like very like mo mostly like medical deliveries to remote islands and then at the full scale carrying 2 tons. The idea is to be able to compete with air freight for coastal and island logistics and cargo. And through a bunch of things we are going to be able to get to roughly a quarter or third of the price per kilogram per mile.

It seems like Zipline's done pretty well with the medical deliveries stuff. I was surprised to see how long that company's been around and how much they've grown. So clearly there's like these niche markets that are really important in logistics and in transportation.

Yep.

Jordy, you got another question or.

No.

I mean that was it. I just wanted to bring you on to say thank you for the early. I was saying you missed it earlier. I just remember. I don't, I don't remember much of what you posted, but I do remember featuring covering your.

In terms of military applications. It sounds like logistics first, then maybe isr. But is there going to put a bomb on this thing at some point.

I'm responsible for what they stick in it, but there are discussions about a wide range of different payload options.

But I mean just stepping away from the business applications, is that something we even need? We hear about the hypersonic missiles being able to kind of bob and weave and they don't fly on a traditional parabolic ICBM trajectory, so they're harder to shoot down. This thing seems obviously maneuverable. Is there military value on a weapons platform for this thing or is it just like too slow and too small to. To really like, matter?

Yeah, the. It's definitely faster than like torpedo per se, but the unique advantage of it is when you're flying at such a low elevation, you're flying below radar. Yeah, it's a, like very stealthy platform, flying like a ship, so you can get pretty close to the enemy lines without being spotted.

That's cool. Back on the tech tree, are you, are you doing any AI on board? Even like OPENCV to do collision detection? Like you'd get on like a DJI drone or is everything kind of remote controlled right now? Teleoperated? How are you thinking about the evolution of that tech?

Yes. So the way that we built it out is that it starts with being teleoperated because you need to train the systems and so running it's like on a hardware level. It's like Pixalk and Ardupilot that we like modified it. And Ardupilot's like an open source platform.

Cool.

I know guys at Anduril use it as well. And so there's a few sensors that we have on board. We have a sonar, we have a radar and just like a visual camera sensor. So, yeah, taking stuff in terms of like collision detection, like elevation detection, maintaining stable flight. So yeah, we're building for our own models.

So when you're flying it, are you doing FPV or is it just at a computer screen? Like, what, what does that actually look like? Like for the pilot.

Yeah, for. For the pilot. When you're like flying in just like remotely, we have the, the computer screen with all the different like signals on it. You get all your stats.

Flight simulator.

Yeah, basically. And then you have the camera on board so you could actually see where you're going.

That makes sense. Cool.

Super cool.

That's amazing. Well, good luck.

Really impressive what you've built in so little time with in a very efficient way. So congrats again. Congrats to the whole team. Appreciate it. Looking forward to the next update.

Yeah, we'll talk to you soon.

Thank you guys.

Cheers.

Bye. And we're going deeper on AI image generation. We got the CEO of Runway ML coming in the temple of technology, Cristobal Valenzuela from Runway. I'm a huge fan of Runway. I used it years ago. They had a fantastic feature that would allow you to basically create a green screen, even if you didn't have. Even if you didn't record. Record the footage on a green screen. And so you could do all these funny things. Remember Zuck using the flag when he was surfing on Lake Tahoe? I was able to use Runway to select just the flag, and then I could put a different flag there. And it would have been so hard to do in After Effects, which is a software I kind of know pretty well, but it takes a ton of time to do rotoscoping. And that was the moment when I was like, oh, this company is doing really cool stuff now. They've gotten into image generation, video generation, and a whole lot more. And today they launched a new Gen 4 video model. And I want to hear all about it. So welcome to the stream. Christobal.

Yeah, thank you for having me here.

Thanks so much for joining. I have a million questions, but let's just start with can you introduce yourself, the company, and what you launched today?

Yeah. I mean, you did kind of a pretty great job. OG You've been using Runway since a couple of years.

That's great.

Great. Yeah.

So we just introduced Runway just a couple of hours ago. Sorry, Gen 4 just a couple of hours ago. It's our latest video model. It's basically a new frontier, I would say, of not only video generation, but it's storytelling. It solves one of the most pressing things of AI video these days, which is consistency. So you can create really consistent worlds. And the way we wanted to emphasize this idea of consistency is that besides just releasing a model, and I think it's kind of the model part is the first stage. We put together a collection of different shorts and films that if you watch them, if you guys haven't watched them, like, definitely try watching them. It's just like a few minutes. They're short films.

It's crazy.

It's such a trip because you're looking at it and, you know it's AI and it's not.

We're passing the Uncanny Valley for sure, and faster than the VFX stuff did. I mean, we. That. That took 20 years, and it feels like AI video generation. It's been like a few years. There was an uncanny Valley for a while, but we're getting the other side really fast. Fast.

Yeah. I mean, we worked in Runway for almost seven years, so it's definitely been like, more than like, a couple, like two or three years. But. But yeah, I would say the last two, three years have been, like, really fast. And I Don't think we're even close to, like, the final stage of our media will come.

Yeah.

I think there's still a long way to go. But. But the point is really to point that once you start, like, seeing how good the stuff that you can do with Runway is, and you layer in a really good creative mind, you can make stuff that you just, like, forget how you're watching something that's completely general.

Yeah, we need a new eval. We had the Will Smith eating spaghetti. We blew past that. That's photoreal. The next one, I think, should be Born Identity Style, Shaky cam. You know that? Because I think AI could not do that today.

I think the next evil should be just, like, how good the movie is, how good it is, how many awards, how many people are watching it. That's evil. I think that's our internal goal is basically to make sure that. That you judge by the quality of the story more than anything else.

I'm sure last Wednesday, whenever the Ghibli meme started ripping, I'm sure some of your investors, big and small, reached out. Hey, did you see this?

I'm curious.

What if you had to answer that question? Like, you know, what was your immediate reaction to it? It's amazing that you guys so quickly followed it up with something that is, you know, so you come on the.

Show, we ask you the stupid questions, and then you don't have to answer the stupid questions from your investors.

Yeah, yeah. You just one time share the clip.

So. So I have to be honest. No. Reach out. To be honest, Like, I don't think. No, like, yeah, it wasn't, like, a. Like, a thing. I think it was it. I think there's a separation between, like, memes and, like, more of the casual, like, fun stuff that I think it's great. You can just kind of, like, have fun. It's like a trend. But I think if you're making, like, good professional content, if you make a living out of making content, like making a meme or, like, one image, it's not going to get you far. It's like you need a suit of different tools. Tools. And so I don't think we've. I saw the trend, and I saw the images, and I think they're great, but I don't think they're. No one really thought about us, to be honest.

Yeah. The thing that I think was part of what made that so viral is that it didn't require sophisticated prompt engineering. Image One line, Studio Ghibli.

You can actually have, like, a Text replacement on my iPhone. A shortcut. Now I just upload a photo SJ SGS and it automatically expands the studio Ghibli style and then it just does it.

Yeah, but, but so, so more importantly, as it, as it comes to using Runway and video, how important do you think prompt engineering is in the context of Runway? Long term is, I'm assuming it's just not going to be a thing. You just sort of describe exactly what you're kind of feeling off the cuff and create something beautiful.

Beautiful, exactly. So prompting is a way of sampling something out of the model, like basically getting what you need. But there's many other ways of getting what you need with much more control. Because language doesn't really have all the nuances of describing a composition or the style, the mood or the feel of something. So the idea, for example with Gen4 is that I know you saw the demo, but you can combine images of real things. You can take a photo of something you actually have. You can take, take a color grade and kind of like a moody scene and you can take a location. There's no prompting. Just put them in and create the composition that you like. And you can get a much more specific detail thing rather than just trying to use the words correctly to get to where you need to go. So it really depends on what you need. But I think prompting is overrated. Just language is a unique interface will not get you too far because storytelling and films, particularly in video, is just so hard to just describe it. Words, you know.

Yeah.

How, how, how many years away do you think we are from being able to one shot a, a movie that could, you know, win, you know, an award winning movie. Right. It feels like so many movies in Hollywood's are sort of derivative Hero's Journey. It's set of sort of characters, but it's somewhat predictable. You could imagine that like from a storytelling standpoint, a lot of models could already deliver something that, that's like pretty good from a story standpoint. And so to catch up you need.

The, I mean from what we're hearing, like the GPU cost alone, it would be like hundreds of thousands of dollars right now.

But yeah, sure, but if you're a movie theater today, I mean, we're here in la, we've been actually touring studio spaces and almost every single studio space is completely empty because like it's just too expensive to film in la. So I, I, I can see a world in the future where a big studio is just like run does these expensive sort of prompts then they get no, no, totally. They remix it or whatever. But I'm curious what your take is.

Yeah, I mean if you look at the. The lonely little flame. That shirt I was just mentioning before, that's production value before Gen4. We're talking about hundreds of thousands of dollars. That's a very expensive thing to make make. It took us like two to three days to make like the first rough sketch of that. And then like another few days to just like get the final comp. So you can by a version of one. The whole thing was done with one person.

Wow.

And so I think you, you are there. You can technically just take that same process and it's something we're doing already and do it like for longer future films. It's more of like you're gonna sustain the attention of your viewer not by how fancy or how expensive the thing is, like, but just how good the story. And just iterating on the shots takes you a lot of time. And so I think the issue with the way we've been traditionally making very high end production things is that the budgets have like skyrocket. To the point it's unsustainable. To your point, you're spending hundreds of billions of dollars trying to make something. And then if you need to make something, you're going to bet for the thing that the safest, which is like superheroes and franchises that you know will return. Which I think from a, from like filmmaking perspective has kind of like prevented like new independent stories from actually like being made. Because it's much more risky actually. And I think part of this new wave of models is that it will kind of like flip that a little bit and allow this like independent set of people. Actually don't, don't use those studios, just like use Runway and like make the films to yourself. There's no excuses like you can just do it yourself, you know.

Do you think the big Hollywood studios are reacting quickly enough to the advancements of Runway and other, you know, are that. Do you feel like they're sort of properly planning around the sort of the biggest change to filmmaking in our lifetimes?

Yeah, I mean, I think so many are. I mean Bob Iger said it was the most important technology of their company just a couple of days ago. I think many more that we work with are pretty much on that same vein. I think some are more advanced than others. I think for a long time it wasn't clear to many what this meant. And to be clear, I think that's fair. Because if you look at like Video generation four years ago, no one took it seriously. Like no one cared. It was so. I mean, maybe you were like using Runway for like rotoscoping and green screen, but like that was a small amount of people, right? And I think now I can show you a film that makes you feel something. And it was done like in two to three days, all generated and that's when you wake up. And I think some have woken up before, but some are still like dormant. But I think, yeah, everyone is really paying attention to.

Can you talk a little bit about just like style transfer animatics and the importance of like generating the first image in something. Like images in ChatGPT. I could imagine a world where it's a lot easier and maybe even more efficient to block out a story in Minecraft or in Roblox and really direct it and be very, very solid. I kind of program the camera move, I know the shots, I know the layout, but then I just want to take it to photo real. And that style transfer is what you guys are great at. Versus I'm going to be purely prompting and really hands off. How do these things evolve? What's most important? Is there an important step function where we work from one to get to the next?

No, I think you're right. There's many people who've been using Runway to do exactly what you're saying. You block the scenes by using either 3D software or just props. We have a way of rendering content using existing video. So I don't know if you guys have seen it, but you use our performance of yourself. It's like advanced motion tracking. And then that drives the performance of the generation that you're creating, creating. And that's great because it allows you basically to like, you become your storyboard. You are defining the shots in the way you want it. And I think the essence also is that once you create a mood, there's a few. For example, another short film that we released called the Hurt. It's like the story of two guys hiding from each other in this dark, moody scene. We start with one image and then you can use Gen4 to position the camera in different parts of the scene. And you kind of like, like it's interesting because the model becomes like a cinematographer. It's kind of helping you understand or provoking you with ideas of how you want to do it, which is different from how you do filmmaking traditionally, because you can't afford to do that in traditional filmmaking. You have kind of like a set leafs of shots that you need to make and it's very expensive to like, not do those here. You can just like wander around and kind of like find your angle. And I think that's also interesting. It changes the nature of how you make things in the first place.

Place.

It's a much more experimental, like, you're kind of finding ways and you're getting to stories that you never thought you could.

That.

That to me is the most exciting thing because historically, if you're a director and you're like, I'm gonna bring, you know, these, you know, superstars out to this, like, desert and we have one day to get this shot and then we gotta go this other location. Yeah, this other shot. Storyboarding's gonna be basically like, you could have a better idea midway through the shooting and not actually be able to do it necessarily without calling the producer and being like, hey, I need another 20 million bucks because we missed. It's the same. It's like one person sort of deciding in the moment. It's that. And if you think about how different startups have been historically, where startups are this sort of like daily iteration and you can adapt the strategy and you can adapt the product versus filmmaking, which is like, well, you write the script and yeah, you can change it along the way and you can change it in post, but then every decision is just so much more expensive.

Yeah, I've been thinking about it as like you're playing in a jazz band and you're improvising and so you get a shot, you see something and then you can go anywhere you want. It's like whatever you want to fill and then like, take it there. It's very fun. It's. It's something I haven't filled for in a tool in really a while.

How do you think about the kind of shift in or the ratio or breakdown of creators creative video content as it relates to fiction versus non fiction like YouTube. And the iPhone has exploded the amount of creativity. And we've gotten hours and hours of like, non fiction content. Everything from like Mr. Beast videos to video essays, histories, podcasts. All this stuff that's non fiction fiction stuff hasn't really taken off on YouTube in the same way. That's still kind of the domain of Hollywood. Of course. Tangerine won Academy Awards. It was shot on an iPhone. It took a number of years to get there from, you know, the iPhone being produced, but it, but it did eventually democratize filmmaking to the point where an iPhone filmmaker could win awards. Do you think Runway is more of a. Of a benefit to people that Want to tell fiction stories or do you think we'll see kind of the same breakdown where there'll just be a ton of nonfiction content that goes to through Runway and you're seeing like illustrated video essays or I can just pull up history of, you know, Yerba Mate and all of a sudden I just get this beautiful story that's visually intriguing, but it's still nonfiction.

I think Runway is made for stories. That's what the ethos of the company is. And I think functional or not fictional, like stories are just stories. And I think we're humans are like obsessed with stories and will consume anything that tells the story. And so I think, I think you're right. YouTube hasn't been like like yet good at perhaps like triple A content or like professional like fictional content. And it's better to do it's like more informal like blog type of things because it's just cheaper. But I think this is particularly interesting because like what gen models like Gen 4 do is break that barrier. Now you, anyone, basically anyone out there who has a YouTube channel right now can create a type of content that looks like someone made it in a studio with 50, $100 million. And I think that's the, that's like the last unlock, I would say, media wise, the first one was like, everyone can do like this. Everyone can just create their own channels and tell their own stories. But then professional grade content has been for the last couple of years, the last kind of like stage. And it's only been accessible to this very subtle of companies. And now it should be everyone. It should be basically anyone who has great stories. It's like creating meritocracy. Whoever has the best stories will win.

What happens to movie stars. Right? You can imagine early on with some of these AI generated films, somebody's planning to generate a film using entirely AI. They don't plan to have any on site shoots or anything like that, but they want to go. They go to Brad Pitt and they say, we're going to give you 10 million bucks to start this film. Because Brad Pitt, if they just completely used his likeness and his voice and whatever. But then over time people start realizing like, hey, it's actually much more valuable if I kind of create my own potentially like IP or own superstars from the ground up. Because I can, instead of paying Brad 10 million for one movie, I could invest a lot of money in this sort of. Yeah, I can make my own Gigachad.

Yeah.

And I don't have to pay any of the fees. And maybe there's some R and D ish to sort of generate that character. But what happens to our stars? Yeah, well, I don't think it changes.

That much, to be honest. I think we had that capacity of doing that for a long time. I mean animation and like CGI and anything that's non like live action has. We've been able to do that for quite a long time. It's more. The cost of it is really expensive. I think you can still have a space and a world where you can have both. You can have characters and actors performing the way they do and you can have this new medium, it's a new format. It's like a video game that allows you to create infinite worlds. Maybe the two might overlap. You might bring some elements of the real world into this. You may create some elements, generate it into and it will swap. I don't see them as a replacement. I don't see them as like, oh, we're going to suddenly stop hiring actors. Actually for most of our shots you actually require actors to do like act one or performances that you can transpose into the way you want. And so I think it's more of like a change more than like oh, we're going to suddenly stop doing everything we're doing and do this new thing.

Now that makes sense. Do you have any type of sort of like long term cost target for a 90 minute movie in 4K? Is it something that in a decade it's a dollar or is you know how long just compute wise or like. Yeah, I mean ignore the sort of like the prompting. Yeah, well free opex of like, like.

You used to have to pay by the foot for film. Yeah. And it was very expensive to get it developed. Now anyone with a Phone can record 200 hours of footage for you know, a couple hundred dollar used phone. So.

So I think maybe the way to think about cost is to think also to the point to understand how like the models and the optimization of this model is like progressing. You're going to get really soon to a point where you can run these models in real time. And so by the time you run them in real time, you're streaming the pixels as you're watching them, interacting with them. And so if you do so, then the story first of all never ends. There's no 60, 90 minutes. It can be days that you can just start generating. And it's the cost of inference. It could just be as cheap as. However Nvidia wants to optimize their GPUs to make it faster for Everyone and cheaper for everyone. So I think it's just a couple of dollars if you want to make.

It's like a LUT file that you just import and you have it wandering around.

It's amazing.

What does the business of Runway look like at that point? And how are you thinking about the importance of like value accrual in the application layer? Are you thinking you go more B2B and try and get big contracts? You want to go B2C and just get every consumer on some $1000 a month plan? How are you thinking about pricing and customer base so far?

For now, our focus is being professionals, mostly making sure that those who make a living out of telling stories can use Runway to accelerate their work work. I think there's still a lot of creators and individuals that will start becoming professionals because of this. I now could do things that will require an army of VFX artists and there are many other people who can feel the same. Right now, our plan is mostly to make sure that those who want to tell something can actually tell a story. And that's a wide spectrum of folks. So we work with Lionsgate, major production studios to independent studios, indie studios, studios like filmmakers themselves. Just groups of like two, three people making amazing stuff. And then we have a Noisebone app so consumers can also make stuff. I think like the mission of a company is like, look, this is the most important technology for like art. Like I. I've started working on this because I had the idea that neural networks applied to art will like eventually become a new form of art. And I want to be part of that. And I think the consequences of that go beyond just B2B and B2C. It's like everyone out there should be making great stuff.

Stuff.

Are you optimistic about any of the hardware developments kind of speeding up Runway rendering or generation? Obviously there's like new Nvidia chips coming. But then there's also startups that are focused on transformer models baked into silicon, like etched. There's Cerebras, there's grok, not the XAI thing, but the chip company. And then there's like the deep SEQ approach, which was. It seemed like they mostly just worked on algorithmic improvements to speed up inference. Where are you most optimistic about Getting the next 10x improvement in your models and your systems?

I think those are all interesting developments. We've been watching some of them really closely. I think right now cost is mostly for us at the scale of what the business is and the research that we do. The main factor and so if you give me X performance but it's unproven or I will need to spend six months trying to debug into much performance and whatever. I already know that makes it really hard to switch. And so I think it's cost, mostly cost in the sense of how cheap can I get just my compute and for how long can you guarantee me that price and maybe a price better after and then performance improvements, if they're significant, will matter a lot. But I don't think we've seen something so significant yet that will make us like either switch or move to other hardware. I do think it's important. I do feel like all of the chips that are being made to compete with Nvidia are relevant, but for us, it's still very hard to see a world we can switch, to be honest.

Makes sense. Last question.

This has been great.

This has been awesome. We'd love to have you back. This is really informative. Thanks so much. I've been a fan for so long. I wanted to talk to you.

I'm really glad I got this time. Thank you for having me make some pretty cinematic videos. At some point we're going to and.

I want, I, I, I really want to do the style transfer thing on some of our older content.

You can now, you can now, you.

Can just create now it's animated. So yeah, we'll definitely be racking up those Runway bills when we get to hitting render it all. I want every piece of B roll we've ever filmed in Studio Ghibli style. I don't care what it costs. I want to pull it. It's worth it.

You.

Yeah. That's awesome. It's such a fun time and there's so much that you can do with this stuff. So thanks for powering it and thanks for stopping by the show.

Yeah. And congratulations to.

Congratulations on the new model.

Impressed?

Perfectly timed, Dr. DC.

Thank you, guys.

Take care.

All right, we can do some timeline. And then OpenAI dropped some news about a new open weight model with reasoning in the coming months.

That's fun.

And I'm gonna use the rest.

Okay. Well, while Jordi is doing that, I want to take a look at this video from Isar Aerospace, which is a company I hadn't heard of before, but they had the most cinematic rocket crash I've ever seen from NASASpaceflight.com drone and pad footage from Isar Sparrow Aerospace Spectrum launch. You can see it avoided the pad when it came down. Andrew McCallop, friend of the show, says insane footage quality. Sorry about the loss but serious credit to your media team. Top tier work. I couldn't agree more. We'll have to pull it up because it's the most cinematic just footage ever from this drone. It looks like they color graded it. It looks amazing. And Ashley Vance also chimed in and said this launch site slaps because it was great and it's just a beautiful, beautiful website. But speaking of beautiful things, go to bezel doc getbezel.com Shop over 23,500 luxury watches fully authenticated in house by Bezel's team of experts. Get a luxury watch, folks. Anyway, how are we doing on the footage of Icear Aerospace Spectrum launch? I'd love to have the founder on the show where we did Defense Week or Defense Day. We're thinking about splitting that up because we kind of did manufacturing in there and then also weapons systems. I think we need to break it up for further. Do Space Launch Day specifically. Maybe we'll do Space Satellite Day specifically. But I saw Aerospace would be a fantastic company to include in the Space Day if we do it. Because I want to talk to these folks and I want to see what cameras are they using to film this stuff because it looks great. And we have the video here. So check it out, folks. Isar Aerospace.

I think you got to pan down more, Ben.

Oh, here we go.

We're good now.

So look at this. This is so beautiful. I can't get enough of this. Look at this. The rocket takes off. Very sad that it didn't make it to orbit, but very cool video. And look at this. The drone just going higher and higher. This is why you got to watch the video, folks. Sorry for everyone on the RSS feed, but the rocket's going up, up, up, and then starts flipping over and winds up crashing. I actually don't know where this was. It looks like it's in Antarctica or something, but I think it might be in Europe. I'm not sure. But beautiful glaciers.

They got to get Harry Stebbings over to the launch site, have him figure out what's going on.

But this. This post came. Look at that. Wow. Big like, like, look. Look at the teal and orange. It's just the classic Hollywood color grade. Looks like a Transformer movie. Fantastic. And so if you're doing something cool, like the takeaway is just like, spend the money on the nice camera because you're going to get a lot of attention, and attention is all you need. Rad backwards, this one. It was unrelated, but it felt related. He says caring is cool. You should care A lot and work really hard. That's the coolest stuff ever. And I saw those folks blowing up that rocket and I was like, you know what? It didn't go well. But they care. They care there. I love that.

Try again.

And should we go to Gokul Rajaram? He says AI shrinks the skill premium. A year ago portfolio company would ask me every week on tips to hire senior engineers. They found it really hard to attract seasoned builders. For the past couple months they have stayed conspicuously silent on this topic. Today I asked them why had they finally found their dream senior engineer hire. They said we don't need senior engineers. Our junior and mid level engineers are, are able to use AI to solve every logic and system design problem. This is what we were talking to Patty about. Chatgpt is his colonel and Cursor is his army or something like that. I like that model but really it's like yeah, you know you have these tools and systems that plug in that help speed up the autocomplete and the implementation of your ideas. But how do you, how do you reality check? And it's the rubber duck test. Can you explain what you're building, what your architecture is? And the, these reasoning models are fantastic at that. So Gokul goes on and says this will be one of the pervasive effect, pervasive effects of AI. AI will massively erode the premium charged by senior professionals in any white collar role. You might still need the 0.01% of talent to build world scale systems but the top 1 to 10% are going to see massive competition from the middle 50% as AI up levels the latter skill group. I don't know if you had to take Jordy but I thought it was interesting.

Yeah, I mean it's interesting. Last night I had a question that I wanted to ask a friend of mine who is a, a very much an expert in the subject. And I felt like, and, and I, I reached out to him, I said hey, can you chat about this thing? But I also asked the same question to a language model.

Yeah.

And like hours before my buddy responded I got a like satisfactory or potentially even better answer than my friend would have given me.

Yep.

And I think that that scenario is basically similar to what what Gokul is, is describing here.

Yeah.

Which is good. It's sort of, I mean again it's sort of leveling the playing field in many ways. The Internet as a technology leveled the playing field globally where like you didn't have to be in the United States to compete with with US workers for jobs. It could be a web developer in UK or India or whatever competing for work in the us.

So yeah, I want to go to this post by Dylan Patel. He says data center Capex is going to zero grok struggling deploying anthropic extremely low limits for paid plus cursor Google not offering 2.5 on API OpenAI not serving O3 struggling to serve 4o image Azure still not serving many models including 0103 deep research 4.5 and this is so funny because he's the most respected analyst in semiconductors. Dylan Patel obviously the founder of Semianalysis but the first line is a joke and if you don't have a good irony detector you would just read this completely wrong. And fortunately Brad Gerstner chimes in and says bizarre how the GPU doomer all somehow understand true demand better than the companies who all have massive compute shortage and are melting down their GPUs and scrambling to find supply. And so I mean yeah, if you look at the how long it takes to inference some of these models, it's all very slow. It does seem like demand is very high. Just anecdotally I think we saw that everyone is using all of these models all the time and they are intense from a GPU demand perspective. And you can just see it.

Gary Basin actually has a good point here saying they're looking at two different timescales. The short term squeeze is priced in, but that capacity for the short term squeeze is in many ways coming online or being built out.

Yeah, there's also this interesting dynamic where some of the founder mode companies do have an incentive to overstate the level to which they are overstrained. It's like the classic Steedsh founders like I can't sleep, my phone's ring constantly, I'm the most popular startup. We're growing too fast. Like you kind of know that if you signal that to the market you're going to get more term sheets and stuff. But I don't believe Google is in that mindset with like oh yeah, like if we don't offer 2.5 on API like the market's going to see that and price us higher. It would be very odd if all of these dynamics were fake. It would be, it would be reasonable if it were like just one was oh that person's kind of overstating or they're a challenger and so they say oh we're so popular. But when they're all struggling, clearly there's there would be an economic incentive for one of them to break rank and say, actually we have, we have plenty of GPUs, so come over to us. We would love to have your business. When they're all struggling, it's definitely a sign that Data Center Capex is not going to zero. In fact, and speaking of 40 images and ChatGPT, there was an interesting post by Technium saying 4o image generation can do calculations during its image generation. Somehow this was community noted because the first LLM prompt, so it's a picture of a calculator and the prompt is make an image of a calculator app for the calculation 53 times 88. And the result of that calculation is 4600. And this would be shocking if the LLM had just been able to, or the image model had just been able to do this at image generation time. But in fact it appears that in the prompt reasoning step, before the image is generated, there is an internal prompt interpretation that runs that that basically hydrates the prompt and adds extra context. And so someone else shared that and said that when you, if you give the exact same prompt in the screenshot, you can see that they pre process the prompt and that that prompt actually does the math, which is still impressive that it can get it right. Let's not be wrong about that. But it is, it is interesting. And this is a, this is obviously just like, like a huge unlock and obviously pairing LLMs with image generation. This is the future. And this is I think, why this new image generation. The Studio ghibli vacation of ChatGPT, it didn't happen in Dall E3 or Dall E4 like a separate app. It just happened in ChatGPT and it takes advantage of all the other ChatGPT features and eventually you're going to see consolidation soon. So you can upload a PDF, have it search the Internet, do some deep research, generate an image with images and ChatGPT. It's all going to happen in the same app and same window, which is great but interesting, like kind of technical deep dive here. Is there anything else you want to run through on the timeline? Because we are past 2pm, we've been.

Streaming for three hours. I wanted to take an opportunity to talk about another new partner which some people have called out in the ticker, which is polymarket.

Polymarket, that's right.

And we're very excited to be partnering with Shane and Matt.

Yes, thank you. Very happy to have them as a partner. Thank you.

And the reason that we were so excited to partner with them is that The Poly Market platform is news. Right. Like it is a way to understand the world and understand news. And, and so it's a natural fit to integrate into the ticker. It's like everything that's happening in tech, like, here's how to get an understanding of it. We're going to be sort of updating the ticker, making it.

Yeah, we're going to make improving it.

Iterating basically, like improving it day by day like we do. And we're also going to be creating some of our own models and they already just have markets. One of my favorites it's of kind going right now is AI wins IMO gold medal in 2025 at 61%.

That's really high.

Which is really high. And what that would mean is that everybody basically gets the average ramp employee.

Yep.

Or average cognition employee seriously on their team. And so yeah, there, there's a bunch of other stuff. Some of this stuff feels like, I probably can't say this so this is not an ad, but it's just commentary. Some of this stuff feels like free money money just because it's like, you know, you look at the probabilities on some of this stuff. But.

And I think it'll be cool because polymarket's been known for political prediction markets, but we never talk about politics. And genuinely this is not a political show. And so I'm just excited to build markets around tech predictions. I love, you know, will the next starship make orbit? How many starship launches will there be in 2025? Like, these are the markets that I've always cared more about and I'm excited to highlight on this show. Show and kind of. There are plenty of other shows that are partnered with polymarket that can highlight the important political markets. I want to drive the tech markets forward for sure. So that's what I'm excited.

Yeah. There's so much other stuff. I mean, which company has the best AI model by end of April? Google sitting at 51% which again is not what I think the average person on X would even tell you.

Dangerous. It's forbidden knowledge.

It's for. It's forbidden knowledge.

But look at this. I mean, Sundar Pichai posts 2.5 Pro ship today to everyone. Find it in the drop down here. Gemini.google.com still he puts up 5k. Likes a million views. Built different.

Built different.

He does it. He's so confident. He throws the link in there. He's got the hilarious image. I'm grow. Sundar's growing on me, man. I I like the, I like that he's going direct links.

Yeah, I am the Internet.

I'll post this. Whatever. It's also hilarious. It's in this dropdown on a subdomain. Like you're taking it seriously, Sundar, but like, how seriously are you taking it? Should this just be baked into the Google search box? Right, but hopefully soon. And I'm excited. I mean it seems like they're, they are hearing the message, we need better productization. Google legendary team in terms of, of AI algorithm development. Attention is all you need. That's a Google paper. They created the transformer. Time to capitalize, guys. You got the TPUs, you got the team, you got the distribution.

Has a polymarket for Google's Wiz acquisition being blocked before July. Sitting at a very 6, only 6% chance. But, and that's an interesting one because.

Normally when a big acquisition is going on, you can actually determine, you can extract that market from the stock price movement. So like you can see how Activision is trading and understand, okay, the market expects that Activision will be acquired. This is what happened with the Twitter acquisition. Like it went right to 46 billion or 44 billion or whatever Elon was going to pay and then it would, it would drop by a little bit based on the probability that it would not go through. But Wiz is a private company, so you don't have that, you don't have that real time data on how the share price is trading, which you can use to address whether or not the deal is going to go through. Polymarket comes in there. Very cool.

We got it. We're also sitting at a 25% chance that X relaunches vine before July.

Do you think they need to do that? I feel like they have the video feed they have, their secondary apps are rough. Yeah. Stuff it all in one app and they're, they're very good at getting you to open up. One video, it auto plays, then it scrolls you to the next one. Pretty soon it's just all slow slop, but you're watching it anyway. Those unregretted user seconds are dropping to zero. But we'll see. I mean, I'd love a Vine comeback. The vine team, one of the just legendary crew of entrepreneurs.

Yeah, the other thing that we're going to be paying attention to as April starts is just what's happening with TikTok.

Oh yeah.

Polymarket says today there's a 30% chance chance that the TikTok acquisition is announced before May.

Wow, that's pretty high.

Yeah, I mean, it's high, but that's also what everybody's been orienting around this early April sort of deadline to get a deal done.

So we'll see. There we go. Oracle, Walmart. Ben Thompson says Walmart should buy them.

You'll think there's only a 1% chance that Mr. Beast is the winning bidder. So no faith in the Beastman, no.

Faith in Jim Me. Oh, well. Well, that's a great show for you guys today, folks. Thanks for watching. Leave Us five stars. Apple podcast, Spotify, stay tuned. Repost all of our clips like and fave everything. Do it, do everything. Thanks.

Also, last shout out.

Yeah.

Chris Amadon, we saw you got Nate sleep. We're competing with you now.

Yep. I want to see you put out.

See those scores, Chris.

Let's see it.

That's it. Thank you, folks. We will see you tomorrow. Have a fantastic rest of your day.

Bye.