Crémieux, Tess Cameron, Eoghan McCabe, Pippa Lamb, Jack Dreifuss, David Tisch, TJ Parker, Surprise U.S.-China Trade Deal, Trump EO on Drug Prices, New Air Force One in 2025?, Perplexity Valuation Surge

You're watching TVPN. Today is Monday, May 12, 2025. We are live from the temple of.

Technology, the fortress of finance, the capital of capital. We are wearing white suits. You know what that means? The market is ripping.

The market is ripping. I never doubted it for a second. Never doubted America for a second. Never doubted the market for a second. We were never gone. And yet we are so back.

We are so, we are so back.

And we got a great show for you today. We're diving, we got a bunch of fun stuff. We're talking US China trade deal. We're talking Trump EO on biotech. We have a few biotech folks coming on, talking about drug prices, talking about TJ Parker himself. TJ Parker is coming on Cremieux is coming on. A couple other folks we have here. Here's the full breakdown. We're going to dive through everything. We're going to give you a market recap. Break down the US China trade deal. Break down the Trump EO on drug prices. Is there a new Air Force one coming in 2025? Polymarket has an analysis. There's a whole bunch of rumors. There's a piece in the Wall Street Journal about it. And of course Perplexity is raising more money. They're in. They've advanced from regular talks to advanced talks. It's big news. Overnight success. It kind of is with Perplexity. It's a young company. Then we have a whole bunch of guests coming on cremu, Tess, Jack, Pippa, Aan and Gabriel. And then I think we got cut off at the end because we have even more people towards the back half of the show. We have maxed out the number of slots on our, on our graphic and we will have to advance and go deeper and get a better graphic in the future. Anyway, let's kick it off with this post from Joe Wiesenthal, the stalwart. He says recession odds are way down from the highs though still up substantially from the start of the year. So things are looking better than they were a week ago, two weeks ago, three weeks ago.

I think we got up to, what was it, 60%, 60% at one point.

But we're pulling through, we're doing okay. And Ray Dalio is 42%.

Probably has multiple holes in his wall this morning. He's just slamming, slamming.

There's a new order coming, but not today.

Not today, Ray.

Not today, Ray. Yeah. Joe Rosenthal summed it up. He said the two biggest losers today are people hoping for a Trump led economic catastrophe.

Keep going.

Members of the big chess party who thought the tariff announcement was some brilliant strategic plan that would reshape the global.

Economy.

In a way that was beneficial for the US and so huge win for the nothing ever happens crew because we essentially round tripped right back where we started. The market went down, the market went up and we're back right where we started.

But yeah, the nothing ever happens on Polymarket. For the nothing ever happens May Polymarket is sitting at 80, 78% right now.

I can't tell if you're joking.

No, they actually ever.

Nothing ever happens. How do they measure whether something happens?

Well, I think we would know if something happened, you know.

Yeah, you'll definitely know if something happens here.

I'm gonna have the team pull it out.

Okay, pull that.

Guys, we have a screenshot.

He says also macro podcasters. Yeah, yeah, yeah, yeah, it's wild. But you gotta give us credit here. A couple weeks ago when the tariff news hit, we were very cautiously neutral. I guess we were kind of in the camp of nothing ever happens. But I was saying this feels. Given the market sell off, it feels like Covid. It feels like the interest rate hikes. It feels like 08 crisis. We could eventually this gets really bad. We, we could see thought leadership pieces from venture capitalists about this. But what did we say? We said that Sequoia didn't.

They didn't drop first, they didn't drop the memo.

They didn't drop the memo because the nature of this was different because it was self inflicted and therefore it could always be pulled back. And that's exactly what we've seen. And so we went there and back again and we're back where we started basically. But there's some good stuff in there. There's some bad stuff. I think I have some opinions and Jordy has some opinions and we'll break through. But QCAP summed it up nicely. Said. Come tell us about the US empire collapsing. Honey and Ray Dalios in the in the attic. Very sad. It's a great, great post. Great post. Anyway, the surprise US China trade deal gives global economy reprieve. Tariff reductions are bigger than expected and Besant says neither side wants to decouple. So a few days ago it would have seemed almost impossible.

We're boys again.

We're boys again.

Did we just become boys again? Yes, seems like it.

Everyone loves it.

When the announcement went out yesterday, I read it. The one that was on the White House website. I read it as very soft. Like nowhere in that announcement was anyone taking any type of real victory Lap, if you actually read between the lines.

Yeah, but it's soft. In what way? Like, soft.

Like it was like we got some things that we wanted.

Okay. But not anything specific.

But anyways, we can, we can go forward.

And that's weird because normally, I mean, I feel like the, the, the, the White House press release is always going to be different from the, from the Trump truth social post, which is probably going to be claiming victory in like the most aggressive fashion. But yeah, even that I haven't seen very much aggressive. Like we won from the Trump camp broadly. So I don't know. That's kind of weird.

But because we're back, we're.

We started most of where we started.

Yeah.

And. Yeah. I mean, has anything changed? I don't even know. There's some tariffs. I mean, sticking around, I guess you.

Offline earlier, you made a good point, which is that even, even if nothing changed, the mindset of the American CEO executive team is that after this, is that generally you can't bet on stability with China forever. And if you're not willing to think about alternatives.

We haven't even talked about that. Hat. Just drop the hat.

Drop the hat.

Just. No, no comment. Yes. So anyway, my thesis here, I'm not trying to be like a shill for the history of the last three weeks. I think it is pretty chaotic. But the interesting takeaway is that in the intervening period, you did see a lot of CEOs think seriously about what, what it would take to reshore, what it would take to build a new factory in America, shift to a contract manufacturer in America. Some of those deals probably got signed and will stick. Just because the, the immense pressure of the 145% tariff meant that, okay, let's work a deal, and then enough of that happens and then maybe some of those deals stick. Yeah, sure. It's not as competitive as if we went back. It's not as cheap as if we went back on our move to move. Like we moved to America. We could move back now because the tariff is kind of gone or it's dropping. But we always know that there's this risk that the tariff comes back. It made the idea of a really, really bad trade war very, I don't know, real. Like it felt real. And so this happened at the end of Q1. There were a lot of Q1 board meetings that happened during that era, like the Trump trade war era.

And it was short.

It was short, but memorable. But a lot of those, A lot of those people probably at least walked through the question of what would it take to decouple?

And somebody could push back on that and say Trump could have just said, hey, in 2026, we're going to be implementing 145% tariffs in these industries. You have a year to make changes so that your business survives and we can, you know, reshore.

Yep.

The industries that are strategically, it would.

Have been the lower volatility option.

Yeah.

But if, I would say that if you're long volume, you hate that. Yeah, but I mean, I mean, seriously, like, like, if that had been the plan, if it had been, hey, there's, there's 145% tariffs coming in a year. Do you think that the Q1 board meetings would have been that serious? Because a lot of people would have said, well, like, yeah, we probably should get started about thinking about finding a co packer in America or think about how we route our supply chain, et cetera, et cetera, as opposed to all hands on deck. Let's go and make this a priority. Let's go and see if there's an option here. So I don't necessarily think it's like a good outcome. I don't really know, but I think there's something here. There's like a silver lining where at least most executives went through the mental exercise in the last month of what would it look like if we did decouple with China? And some of those CEOs will say, you know what, let's actually just do that plan now. And I don't know that that's going to be a huge boom in reindustrialization or completely reshape the global economy or world order, but at least American companies are more prepared now. So I think that that's like, maybe I would call it a silver lining. Not like this was how it was always planned to be. And this is like the good outcome.

Big Chess.

Yeah. Yeah. I'm not, I'm not a member of Big Chess, but remember we talked to Jordan Schneider at China Talk, and, and I was like, Jordan, like, you're, you're all doom and gloom right now on these, on this trade war. Is it possible that in six years or we're talking about this like we talked about the first trade war during Trump won, which was like, not great. And all the economists said that one was bad, but like, we got through it and it was okay. I was kind of in the nothing ever happens camp. And he was like, no, no, no, this, this one's different. It's so much worse. And I was like, but Trump can just roll it back. Right. Like he could do that. Not saying, predicting that he will, but like he could. And he was like, oh, but no, it's like this is different. This is way worse. And I think I'm right. I think I got him. I don't know. We'll have to see. We'll have to roll the tape and get him back on and actually debate it. But it feels like this, this could be a win for team Nothing ever happened.

Yeah. Right now the market is certainly pricing.

That in, John, but it's also, it's also just a 90 day pause. And so it's totally possible that things heat back up. Right. And then we could be talking about disaster and more trade war, but hopefully not because we're buddies now. We're friends.

Yeah.

Yeah.

We're boys again.

Yeah, we're boys.

Benchmark. Go forward with your man's investment. Take it all back.

Just do it.

That was crazy that that kind of came at the end of the week, but the Treasury Department is investigating them. I'm interested to see how that, that works out.

Yeah. You really saved Sonia when I asked her that question.

Yeah. You really put her on the spot.

I don't know why not. I'm like, I have to train myself that not every VC is as loose lipped as Delian.

Yeah.

And some of them have decorum.

Yeah, yeah, yeah. They don't like to talk about other.

I'm just so used to like, oh, well, yeah, like Delian will talk about any deal, any company, any other VC. Most other VCs are diplomatic, but not darling. So that's why we have him on sometimes. That's why we have the diplomatic VCs on sometimes. Anyway, let's go through what actually happened with the US China trade deal. The world's two biggest economies unwound for now most of the tariffs they had imposed on each other since April in a tit for tat battle that was threatening to stoke US Inflation, crash China's export engine and upend the global economy. Stock markets in the United States and elsewhere surged on the news. The dollar and bond yields rose, reflecting expectations for faster US Growth. As trade tensions recede, exporters breathe a sigh of relief. I'm sure Ryan Peterson got his first sleep score above 50 in a month.

He deserves it.

He does. Investors and analysts said the outcome was much better for the global economy than they had expected on Saturday when the US And Chinese negotiators started two days of intensive talks at the Geneva residents of the Swiss ambassador to the United States.

Great setting, great setting. Probably some type of lake view, I would have to imagine.

Yes.

Be hard not to have a lake view in Switzerland, to be honest.

Switzerland's kind of, kind of set up to be this kind of like Switzerland, Switzerland negotiation.

Yeah, geopolitically.

Yeah, it's kind of like the Switzerland.

Of like geopolitical negotiation. Yeah, exactly, that's right, John. The US Agreed to lower the base level of tariffs on most Chinese goods to 30% from 145%. While China said it would cut its levies on US products to 10% from 125%. Pretty good 30% rate imposed by the US includes a levy, levy, levy, levy. Related to China's alleged role in the fentanyl crisis plaguing the US an issue in the weekend's talks. The US tariff on many Chinese products will be higher than 30%. US duties on steel, aluminum and autos remain in place, as do some earlier tariffs on certain Chinese goods imposed during President Trump's first term in office and that of former President Joe Biden.

Yeah, it's, we're getting to the scalpel, not the sledgehammer. Everyone says, oh, you know, the precision doge is too much of a sledgehammer, should be more of a scalpel. There is, there are things you need to cut. Same thing with these tariffs. They need to be targeted on specific industries that are, you know, important and strategic. Well, you know, sometimes you gotta use a, use a sledgehammer before you get in there with a scalpel and clean.

Things up, I guess, break things up.

A bit, smash it into pieces and then come in with a precision trim around the edges. But Washington and Beijing agreed to keep the new tariff levels in place for 90 days with the goal of working toward a broader deal on tariff on trade and further talks. China said it would cancel or suspend some non tariff trade measures. It had imposed a hit back at the U.S. potentially excluding, including easing export restrictions on critical minerals used in batteries and other high tech applications. Speaking at a news conference, the Treasury Secretary said it was seeking a long last lasting and durable trade deal. So it's just a, you know, a negotiation and they're renegotiating everything. Neither side wants to decouple, he said. We're a couple. We're couple. We're couple of countries.

Couple maxing couple. We're couple maxing.

Just a couple, yeah. U.S. said the. Besson said the U.S. still had grave concerns about its unbalanced trading relationship with China, which is legitimate. He cited issues such as China's Management of its currency and subsidies for manufacturing, which Washington believes are a major factor driving factory job losses in the United States. Those and other issues will be discussed in talks over the next 90 days. The outcome. The outcome forestalls what for now, what was shaping up to be a destructive clash between the world's two biggest economies with potential ripple effects across the globe. Very interesting.

Yeah. This was something that a lot of people in D2C were paying attention to. But retailers in the US were warning of empty shelves if they couldn't get Chinese products. And some small businesses were worried they would go under without easy access to China's vast factory floor. Economists warrant higher prices and shortages risked reigniting inflation for China. An unrestrained trade deal with the US Would threaten millions of jobs tied to serving US Consumers and potentially worsen trade tensions with other countries. Wary of a surge in Chinese imports, China was also worried about losing access to some US Products it still needs, such as Boeing planes, aircraft parts, and certain chips. Yeah, the other thing here is this was sort of underreported last week, but the Chinese central bank was cutting rates in response to the tariffs. So they, you know, clearly, interestingly, our Fed did not as well. Yeah.

So we were kind of ready to buckle down because the market was pretty resilient. Like, if the market had truly been in free fall and there was no, you know, buy the dip meme in America, the degens saved us.

You think the American investor.

American is like, the prices are too low. I got to get in. I got to mortgage my house to go long. And the Fed and the Treasury Secretary. The Fed is just like, you know what? Like, we don't need to cut rates.

Like, the Americans are simply too bullish.

They'll just never stop buying the debt. It's great. But I mean, the one thing that I. That I like about this is I think the. I think the fentanyl tariffs should be pretty bipartisan. Like, that seems like something that we're truly. No one wins. Like, you can make the argument about, like, a free market around electric vehicles and, like, competition being good for the electric vehicle market. I see a lot of stuff from Chinese EV companies, and I'm like, yes, I want American companies to win, but also I want those cars to be here so that there's more pressure on American companies to make cooler and cheaper cars. Like, there's that crazy car that has. It's a ev, but it has a gas engine that just charges the battery. So it has. Like, on a single tank, you can go like, 800 miles it's like, insane. There's a Chinese car that floats. There's those Chinese cars that have, like, the, the LED screens on the back so you can talk to the person behind you, say, like, hey, stop tailgating me. Basically, yeah. There's like, all these cool features, all.

These insane features, some of which are silly, some of which are actually.

Yeah, but I like, I like competition in the market. I like free markets generally, and I'd love to get there. I don't feel that way about fentanyl. Like, I, I, I do think fentanyl is so bad that it should just be banned and, like, China should do everything they can to stop exporting it. And so the Wall Street Journal writes through. Though the sides didn't come to an agreement over the fentanyl tariffs, the U.S. the U.S. made clear in private meetings its views on the importance of combating the deadly drug. Trump has accused China of playing a role in the illicit fentanyl trade, something Beijing denies. In a private meeting on Saturday, Besson picked up a bit of sugar out of a dish on the table and told Chinese officials that the amount he was holding could kill a person if it were fentanyl. Said a person with direct knowledge of the exchange. That's pretty dramatic. He picked up a little more sugar and said that amount could kill people across Geneva. Then he picked up more and said that could kill people across Switzerland. So dramatic. It's good, though.

He's cooking.

He's cooking. He's a showman. Trump likes a yapper, a talker, somebody who can present. Yeah, sure, it's huge.

Showbiz, baby.

In a briefing with a small group of reporters, Besson said that although fentanyl wasn't the main focus of the trade talks, the Chinese delegation included a senior Chinese official who was able to discuss the issue in detail with the US officials. Such an official, who at later press conference Bessant identified as deputy minister, isn't usually part of the trade team, Besson said, and that shows their responsiveness to our concerns. So China actually sent someone, a deputy minister, to say, hey, we're not admitting guilt, but we're in the conversation where we're going to send somebody who's, who's, who, who can actually speak to this particular issue, which I think is good, because, you know, it, it, it's, it's way harder to steal, man. Like, yes, they should be able to just send as many drugs like they, they should be responsible for that. And it's like our DEA can't. Like, we, like the United States goes into Mexico and like hunts down drug traffickers, right? Yeah. A lot harder to do that in China. Like, they, they do not want us sending our like, DEA guys kicking down doors in Beijing if they're, if they are doing.

Yeah. And to be clear that the cartels are the ones that are basically distributors for the fentanyl. And their position is we wouldn't do this if there wasn't a buyer in America. Right.

Yeah.

And, and so naturally I think you need to go, but normally upstream and put pressure.

Yeah, but the question is how much pressure.

Right.

Because that does have a cost. Like America has been waging a war on drugs. There are negative externalities of that. There's a cost. Right. We have to pay for DEA agent salaries. We have to do a lot of different things. We wind up locking people up in jails that cost money. We have court systems that cost money. Like it all, it all is a tax on America when we fight the drug trafficking that happens in the United States.

Yeah.

We don't really have the ability or authority to do that abroad. So we have to ask China to, hey, invest in preventing fentanyl.

Yeah.

You certainly invest in the local dissemination of it and you have drug policies there, but we want you to take that as seriously even if they are just leaving your border. So potentially a strong step forward. I'm optimistic about it. Anyway, let's move on to the prescription drug executive order from Donald Trump. He posted, he was like, true.

He's like yesterday, he's like, it's feeling like a slow news day. We only, we only announced.

Yes.

Potential trade deal.

Yep.

Let's fast follow, you know, with, with, you know, a little Sunday to just shake up the biotech.

So I'll read a little bit about what Trump actually said. He said, for many years, the world capital W has wondered why prescription drugs capitalized and pharmaceuticals in the United States of America were all caps so much higher in price than they were in any other nation, sometimes being five to 10 times more expensive than the same drug manufactured in the exact same laboratory or plant by the same company. Question mark, Question mark, question mark. It is a good question. I think a lot of people have asked this both on the left and the right. And we'll go into Bernie Sanders plan and how that maps to Trump's plan and then we'll talk to some experts about is this, are we, should we be cautiously optimistic here? Is this great? Is this terrible? Price controls usually pretty bad from an economics perspective, but this is something different with this most favored nation strategy. So it was always difficult to explain and very embarrassing because in fact, there were no correct or rightful answer. The pharmaceutical drug companies would say for years that it was the research and development costs and that all of these costs were and would be for no reason whatsoever, borne by the suckers of America alone. Campaign contributions can do wonders, but not with me, not with the Republican Party. We are going to do the right thing, something that the Democrats have fought for many years. Therefore, I am pleased to announce this, that tomorrow morning I will be signing one of the most consequential executive orders in our company's history. Prescription drug and pharmaceutical prices will be reduced almost immediately by 30 to 80%. They will rise throughout the world. Of course, that's a prediction. We need to figure out if that's actually going to happen because the way this is structured, they don't actually have to reduce prices. They might just raise prices elsewhere.

But of course, this question the NASDAQ biotech index went up, up 4% today.

Insane. No one was expecting this. And, and we can go through some of these, some of these posts, but Delian said biotech markets are going to be a bloodbath on Monday. Kicking the dog when it's already down. I thought this was a good take. I liked it. I posted something similar. I wound up deleting my post because I was like I look stupid now. And sharp shark on the next post says has the grim reaper going from door to door just killing biotech over and over and over again because biotech had a hard go and seems to it seems that they can't catch a break. And then shield friend of the show says this is a policy. This, this is policy that was proposed by Bernie Sanders in 2018. Horseshoe theory again. Bernie Sanders new plan to bring down drug prices. Briefly explained the plan from Sanders and.

Rep. Ronna Bernie and Trump love PJs. Bernie was getting flack because he was using a PJ on the campaign trail and he said, you really expect me to sit at a United terminal when I'm getting. Yeah, he said. So Bernie and Trump have, have, you know, far more in common in many ways than at least many people would think.

Yeah, they're more alike than they are different.

They're both Americans.

They're both Americans. So TJ Parker, who's coming on the show later today, summed it up. He said, my initial take on the Trump drug pricing announcement, I could probably be convinced that a global most favored nation is a reasonable approach. The problem is even the federal government doesn't always know the actual net price of these drugs today. That's why I've always argued that you have to kill rebates first. It's the necessary precursor, the optimistic take. Forget rebates, forget margin buried in gpos. Just mandate a global MFN on list price and pharma will be forced to unwind the entire web of rebates, fees and other unnecessary complexity. My guess is that's the rough logic. Given the failed rebate repeal attempt in Trump 1.0, it will be nearly impossible to implement cleanly. But if it worked, it could be a brilliant end run around the current system. Now his pessimistic take. I still believe that the best long term strategy is to let market forces do their jobs, put power in the hands of consumers and let competition drive down price like every other retail category. That's more consistent with our capitalist instincts and more American. But so far that hasn't worked. It's been a disaster. So maybe I'm wrong. And so we'll have him unpack his his his takes a little bit more. And we're also bringing on Cremu in about 20 minutes at 11:45 to talk about answer this question like does the US actually overpay for drugs? He says common knowledge it says yes, but the real data says no because the US gets favorable prices for generic drugs and it primarily consumes generic drugs. In fact they're 91% of prescriptions. So I'm excited to talk to Cremieu about some of his analysis here. He's a great accountant and author on X. So let's go through some of the Wall Street Journal analysis of the EO aimed at lowering drug prices and break it down for you all. The executive order seeks to institute a policy known as most favored nation. You guys probably know about that. Seen this in a safe. Note that's the first time anyone's interacted with an mfn. When you're in founder mode, you're dealing with MFNS and the safes. Well now biotech companies will be dealing with the same clause globally.

It was a big moment when YC added the MFN clause. You remember that?

Yeah, maybe that's. Maybe JD got in there and was like hey I've heard about these things. MFN clauses, they working really well in Silicon Valley.

Could be a thing, could be a thing, could be a thing.

So the US Government pays prices for drugs that are tied to the prices paid by other countries. Many other countries pay lower prices for medications because their single payer health care systems negotiate for deals. Basically what we're doing is equalizing, trump said Monday before signing the order at the White House. He also said it was unfair for the US to shoulder the costs of research and development for pharmaceutical companies. American patients were effectively subsidizing socialist health care systems. Americans often pay higher sticker prices for drugs than people of other countries. For example, the list price of diabetes medication Jardiance I'm probably mispronouncing that was $611 for a 30 day supply last year according to health research nonprofit KFF, compared with $70 in Switzerland and $35 in Japan. That's a pretty big delta. You can see that issue. So the EO directs US Trade representatives and Commerce Department to take any appropriate action against unreasonable and discriminatory policies in foreign countries that are that suppress drug prices. It also gives RFK Jr 30 days to work with pharmaceutical companies on how to lower prices. If the drug companies don't lower prices within 180 days, the order gives Kennedy and others authority to propose rules and restrictions on drug companies and imports. The order doesn't specify whether pricing changes would apply to Medicare or Medicaid, suggesting that its impact could be broad and apply to commercial insurance. A White House official said that lowering the prices of drugs and for those who use Medicare Part D would be a strong focus, but didn't specify which medications. Hopefully it's trend D Ball Anavar just testosterone Just the essentials, just the essentials. Just the basics. We are paying Cremu actually posted like a post from the from a bodybuilder saying that like he's actually the bodybuilder is actually fine with the current structure because where is this let me find this getting imported, he said. I really like the status quo with pharmaceuticals where people with good insurance and or lots of money get bilked hard to fund new research so that high agency people like me can buy cutting edge experimental drugs from a great from gray market websites for a fraction of the price. Brutal bodybuilding bro.

Science always ahead of the curve. It is yeah one one analysis I got that I don't think is public at this point but I think a number of people have had this reaction is that MFN pricing in general will likely face lawsuits on constitutional and administrative law grounds. If Congress can pass a new law this would change but an MFN like benchmark could be folded into legislation as part of some type of like Medicare price negotiation right which happens frequently or international reference pricing and people are kind of theorizing that you could roll this like idea into legislation and the reconciliation bill in the House. But then that's just gonna be another factor that could potentially get that not passed in the first place. And so I think people were posting yesterday when this news rolled out like drug prices are going to drop tomorrow. And I don't see that happening. But I'm interested to talk to TJ later and just get a sense of, of how real price drops are going to be, if they're going to happen. If they are, what is the actual schedule, things like that.

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I mean, it is a controversial decision because it is government price setting. The Wall Street Journal has this quote from Alex Shrivener, the senior vice president of pharmaceutical research for Manufacturers of America trade association representing major drug companies. Government price setting in any form is bad for American patients. At a time when we are facing growing competition from China, policymakers should focus on fixing the flaws in the US system, not importing failed policies from abroad.

Yeah. So an example here is rent controls. So rent control in many cities have, if anything, been detrimental to the poor. A meta analysis of over 100 studies showed that rent control often leads to reduced supply of rental housing as it discourages new construction and investment. So that the comp here would be if pharmaceuticals can't charge what they want to charge, they will invest less in R and D. Whether or not that that ends up being true, I'm sure could be debated as well. But a 2017 study by Stanford economists found that after rent control was expanded in San Francisco, landlords removed 30% of the newly controlled units from the rental market, leading to a 15% decrease in the city's total rent housing stock. Property owners are more likely to neglect maintenance of their apartments. And a National Apartment association study in 2024 found that doubling the number of rent controlled units in a metropolitan area correlated with a 16% increase in severely inadequate housing units, indicating a decline in housing quality. So again, just a good kind of reference when thinking about, I mean, one.

Option is that they lower prices in America, but the other option is that they just raise prices everywhere else. Yeah, and if they do that, they might sell less drugs overall because people can't afford them in other countries. Although when the examples of like Switzerland and Japan, I feel like if Americans can afford $611 for a diabetes medication, like the Japanese should be able to as well, because they have similar cost of living in similar GDP per capita. So I wonder, would they really see a drop off in consumption or would they just see higher overall revenues and ultimately higher profits?

Well, it's possible. I mean, I mean, there's so many different factors, but one scenario is that there are alternative drugs in those countries that you can get that are generic, that are very inexpensive. And so the only way these Americans drugs can compete that aren't generic is to just have massively reduced prices. And so if you're a, you know, pharmaceutical company, you're going to say, well, we're making this for the American market. And then as a bonus, we'll sell it over here. Because even at $35 a dose, we still have amazing margins. Yeah, right.

It does. It is always odd when you run into something where it's like, you know, like you buy a car, you know, it's a big vehicle, it has a lot of metal, so you kind of expect it to be like tens of thousands of dollars. You go to the gas station, like, the gas costs money, and it's very obvious that it's like, well, it costs money to pump it out of the ground, deliver it to you. So it costs certain amount of money. But people always said this with, like, Facebook, where it's like, why don't they charge you? Like, if they. If you're not being charged, like, you are the product. And with healthcare, it feels like sometimes it's the opposite, where it's like, did it really cost $10,000 to drive me in the ambulance two miles? Like, how did that happen? And I get that my ins paid for it, but, like, something weird is going on here because, like, it just doesn't track at all. Whereas with many other things that you buy, you're like, yeah, it would basically.

Cost this reason if people were paying out of pocket, they would be like, wow, I'm getting scammed by this company.

Exactly.

But they get the bill and the insurance coverage. They're like, oh, like, yeah, strange.

But it is, it is very odd. Even, Even with like. Like there's a lot of R and D that goes into the iPhone and you buy it and it's $1,000 and you're like, okay, yeah, that actually kind of makes sense. That, like, checks out. Yeah, like, like, sure. You know, they can manufacture these for 300 and they're charging 900, but that margin goes into the R and D. And I get that. But it's weird. When it's like, you know, something that's the cost, 2 cents to make and they charge $10,000 for it. So I mean, health care has always been like an odd quagmire. And clearly, I mean, everyone seems to agree on both sides of the aisle that like something's off in America and that it's not particularly working well. And maybe that's, you know, hey, we need to just be healthier and eat healthier. Maybe it's we need different drug prices or different insurance policies. But I'm sure there'll be a lively discussion this week all about it. But if you are long biotech, you're short biotech. You got to express Your views on public.com investing for those who take it seriously. They got multi asset investing industry leading yields trusted by millions. Let's hear it. Public.com Anyway, let's go.

They have a big launch this week, which I'm excited for.

Let's go into another Trump story. There's so many. This has been a busy weekend. Trump administration in talks to accept new Air Force One as gift from Qatar. The Qatari government says possible transfer of plane for temporary use is under consideration. Obviously this is burning up the timeline. People very, very, very confused about this because apparently America has two brand new 747s that they're actively retrofitting. Did you see this take? Yeah, that they're like actively working on getting up to par. And the plane is like the least expensive part of Air Force One. It's like all the military equipment and stuff on there. So this feels like it was designed just to cause chaos basically or something. But it's like of all the different things. Anyway, the article here is they're in talks with the Qatari government into about accepting a luxury Qatari plane for his use as president and potentially beyond, according to people familiar with the matter. Under the potential arrangement, which is raising legal and ethical concerns, the plane owned by the Qatari royal family would be used as Air Force One while Trump is in office after being retrofitted by a US defense contractor. The US wouldn't pay for a luxury 747 style jumbo jet. It might then be gifted to the Trump Presidential library for Trump to use after he leaves office. And so obviously people are very, are very up in arms about this. Sean McGuire said the mainstream media has been wrong about so many things over the last few years. So I hope this is just more fake news, but if it is accurate, it would be the first of Trump's actions in this term. I find unequivocally wrong. Qatar uses money to silence people and buy favorite. And Josh Wolf is quote tweeting Sean saying Qatar played him perfectly. We will get you the American hostage. We will get you a new shiny plane. The best plane, bigger than any other presidential plane, not just Air Force One. Air Force One Mega Supreme. And then you will retire to your library. No president will ever afford such a beautiful, huge plane. We will help you bring peace to the Mid east and help you win a Nobel Peace. A lot of that sounds good. I want peace.

The. The Obama book deal. They could have gotten a private jet, but it would have been probably.

Yeah.

You know, more in the.

This one's complicated.

Not flying international.

Yeah. It's complicated flying through regional airports, obviously. I think, like, foreign governments should not be trying to curry favor with our elected officials, period.

Yes.

But I'm a huge, huge fan of giving your friends planes.

Totally.

Totally.

And we've actually put planes on our gift guides before. I realized that. So we're kind of to blame here because we advocated for this. I believe a 747 BBJ was on our Christmas gift guide.

Probably. What's a better gift?

I know.

To the right person.

I know. And so we kind of laid the playbook for this and then the guitarist just picked it up and they were like, oh, well, you know, TV and saying this, like, we should give it a try, but we'll see. Yeah. I mean, the good news here is like.

Yeah. When you think about the scale, right. It's like, well, this would be like me getting you like a Red Bull. You know, it's like literally like, hey, John, are you thirsty? You want a little pick me up? Do you want a Red Bull? Right. It's like currying from a balance sheet stand.

I'll do anything now that you got me the Red Bull, I'm. I'm in your pocket.

Value of the gift and con in the context of the balance sheet.

Yeah. It also is just so funny because it's not like it would be one thing if, like, I've seen some supercars that have been made in, like, in like, foreign countries that don't particularly don't typically produce. They don't have, like, large auto manufacturing segments and they look very cool. And it almost makes sense if you made a plane to gift one to America to be like, hey, like, there's a. There's a. There's a Kenyan supercar company that looks very cool. I was like, this is interesting. It's mostly like a retrofitted Lambo. But it has, like, a very unique design and it's. And it has, like, you know, all the, like, the colorway is designed to, like, mimic, like, I think it's from Morocco and. Cool. It's very, very cool. And gifting something like that to America would be cool just to say, like, hey, we appreciate you, America. You can put this in one of your museums. We're. We're entering this industry, and we're excited to partner with you. Hopefully, we can distribute these in your country. We can make these. That would be one thing. But it's really just like, it's an American company, Boeing, that makes the 747.

We bought a plane, and then we're going to give it back to the president.

And then America has to retrofitted because Boeing has a contract for 3.9 billion to deliver a bunch of planes to Air Force one. And then L3. Harris is a smaller defense contractor, an American company that has to overhaul the Boeing 747 that was formerly used by the. So it's like.

I mean, the big.

The big thing here, guitar, is just like, in the middle being like, hey, we put some nice leather seats in here.

Yeah. I mean, the, the. Where the plane gets retired to is a big question.

Sure.

It was given to the White House, and it was going to be effectively, you know, a presidential plane on an ongoing basis. There would not be a lot of issues with it. You could argue, okay, Trump's getting it when it's brand new or whatever. But, yeah, we'll see how this one plays out.

The other downstream thing about this is, like, as we're talking about, okay, maybe we shouldn't accept this plane, is it time to give back the Statue of Liberty to France?

I think France has had such an amazing monument, but every time you have.

To ask, like, are we making shrewd decisions with regard to France?

Totally.

Are we being too nice to them because they've curried favor with us by sending us that monument? And so if we send it back and say, hey, we're done, it's going to be. It's going to be a clean relationship by the numbers from here on out.

Yeah. It's surprising you'd think that. That Trump would maybe try to draw attention towards that, Give the Statue of Liberty back to France, build one that's, you know, potentially five, ten times as big in its place.

I like that idea, honestly. I mean.

And it's actually more from an American flag.

I would be way more down for Qatar to give America a monument like The Statue of Liberty. Like we can have a Statue of Liberty all over the place. Be one in Florida. There could be one in Alcatraz. We've talked about this. Catalina Island.

Put a ramp. Put a ramp card in the Grand Canyon. A ramp card. Swiping the Grand Canyon.

The Grand Canyon. That's a good idea. That's, that's actually genius. Lifted by blimps. Just cruising, swiping the entire Grand Canyon. That's.

America runs on ramp.

That's, that's a very, that's a very American thing.

There's something there. And if Qatar could help finance that. So ramp doesn't need.

I'm sorry.

So, yeah, you know, more growth equity for it.

And that feels like something that, you know, it wouldn't, it wouldn't be like, oh, like, you know, Trump would have paid for that anyway. Like, like the whole thing with this plane is like, it takes something off of his personal balance sheet. Right. Because he gets a free plane.

Yeah.

But he was never going to buy a ramp car that swipes the Grand Canyon.

Yeah. Even if he should.

He should, he should.

Objectively should.

So, yeah, I mean, I think that's a great idea. Anyway, speaking of sponsors, Linear is a purpose built tool for planning and building products. Meet the system for modern software development, streamline issues, projects and product roadmaps. Also put your sales tax on autopilot. Spend less than five minutes per month on sales tax compliance.

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Oh, yeah, they're on the hat.

They're getting there. Actually, they came in late, but we.

Got Ramp on there.

We got the next one.

We got Wander Bezel ad quicks on there.

Even, even Roar right here. It's always in my vision.

Yeah, you can see it, right? Yeah, it's kind of crazy. Anyway, speaking of news, I started Perplexity's valuation surges to $14 billion in new funding around. You'd think this is from R for Rock, but it's in the Wall Street Journal. Berber gin got the scoop.

Yep. And to be clear, they are in advance talks for a new funding round.

They've advanced from talks to advanced talks.

So it's hard to know if this means they've signed a term sheet, if they've done any type of handshake deal. But venture capital firm Excel is set to lead the new round which is expected to total 500 million. People familiar with the matter said the raise underscores investor enthusiasm. For general artificial intelligence companies, some of which have begun to challenge Google's long standing dominance over search. Perplexity was valued at 9 billion last November, its fourth round that year. That was crazy. That really went on a wild run.

Insane.

It is one of a set of AI startups that have grown quickly after the launch of ChatGPT three years ago. The San Francisco based company sells an AI powered search tool that provides summarized answer using information gathered in the web.

Perplexity is launching its own web browser called Comet.

Yep. And that is. That is what got. We were talking about Comet.

Yeah.

With Arvind on the show and he answered your hypothetical and got a hit piece out of TechCrunch for it.

It's not a hit piece unless it comes from the hit piece region of the New York Times print edition. But it was close.

It's not a docs. It comes from the Docs region. The Washington Post.

But Eddie Q last week made news at Apple when he said that Google searches over Safari web browser fell over the past two months for the first time in more than 20 years. Years. And he attributed that drop to more people using generative AI services such as ChatGPT and Perplexity. And so Q said Apple has held conversations with perplexity, OpenAI and anthropic about adding AI search features into Safari. And so that would be a big deal if the iPhone kind of migrated away from from Google. But it's interesting to see where, where this goes. I'm excited that they have so much money. I like Arvind. It seems like a really, really tough market to compete compete with. Even in this narrative of like the application layer will be what's valuable. It's like that's true but you still have to aggregate enough demand to drive so much traffic to your application and have a flywheel there. When you're in consumer search. The it's not the same as oh like the bull case for Harvey is that they hire a bunch of great SDRs who can go sell into law firms. That's something that they can just scale up I feel like versus changing consumer habits from google.com or Google is my autocomplete. Right. So huge challenge in a huge market.

Yeah. The stuff, the stuff that's interesting to me is is they're doing these live earnings transcripts which are cool.

So that.

But Is that a $14 billion business?

Right.

You know, sort of subscale providing this sort of type of information that that's not necessarily hyper.

Well, we'll have to get relevant to the average. We'll have to get Samir Gandhi Excel on the show because he's join and we will see what he has to say about the deal once it closes, hopefully. And hopefully the rest of it goes smoothly. But we have Kermieu in the studio here to break down drug prices. Welcome to the stream. How are you? Can you hear us? Oh, wow. Voice changer too. Okay, let's go.

We're honored. We're honored.

What's new?

I think I'm using an AI voice changer.

Clearly we can't hear you at all with that thing. Is there any way we could turn this off?

Yeah, let me just check if I.

Can use a pitch change effect.

It's strong.

It's a little too powerful.

It's a little too powerful.

Being overpowered by the AI.

Yeah. We wanted to read through some of your posts, see if there's anything that.

We could break down that sounded a bit better.

Let's hear it.

Gotcha. Can you hear me?

This is amazing.

This is way better sound amazing.

Thank you so much.

Tremendous.

Okay, great. So, yes. What has been your take?

Yes, absolutely shocking there.

Anyway, thanks so much for joining. Can you break down the news? The Trump executive order. How are you interpreting the news? How would you explain it to a layperson?

So the idea behind the executive order is that we are getting ripped off because other countries are paying far, far less for the same drugs that we buy in the US for huge amounts. We pay $1,000 for Ozempic and Denmark pays $40. And that's just not fair. So the idea behind this is that we're banning geographic price discrimination. We're making it so you can only sell at, you know, the lowest rate that another developed country is willing to pay for a drug.

And how, how real is that? Like, and what, what drives that? Like the example that's developed by Novo, a Denmark company. Are they just doing their friends a solid by discounting it in their home country? Or does this apply to American companies selling abroad? And is it just like trying to capture any possible market at whatever price the local market will bear? Or is there something else going on with the dynamics of, like, insurance companies?

Bladder is exactly right. It is a group of largely American companies that are maximizing profits by selling at prices that allow them to, as I said, maximize profits? Yeah, they're just selling at whatever the market will bear. And if a country will not bear American level prices, then they aren't going to be selling at those prices there just for the simple reason of supply and demand.

Why does America like. Why can America bear such high prices? We were looking at the Wall Street Journal article and they were saying that for a particular drug, for diabetes, Americans were paying $611. In Switzerland it was 60 bucks, and in Japan it was 35. But Japan has a similar, similar economy to America. On a GDP per capita basis, they should be able to pay $600 in theory. What's going on there?

So the thing is that GDP per capita is actually not a very great way of getting at consumption. The Japanese save more. They actually are quite unproductive in the service industry. Other countries tend to have far, far lower levels of consumption relative to gdp. And this is especially true if they're a country like Ireland or Singapore, and for which a lot of their gdp, their exceptionally high GDP, seems to be driven by profit shifting where companies bring money over and doesn't actually affect the incomes much of the people who live there. So you'll see that Ireland, for example, has very relatively low gross national product relative to their gdp. They are able to consume considerably less than their GDP might indicate. But the US on the other hand, consumes a lot more than you might expect because everybody else's GDP is kind of out of whack compared to ours. We are the world's consumers and as such we consume a lot more. And we are actually are. The prices we pay are actually quite in line with what you would predict given our consumption, which is to say that prices grow a little slower than household income growth. And the US has exceptionally high household income. The high prices and the fact that they are relatively low, both are facts that stem from America just being really, really rich.

Why do you think the market, the NASDAQ biotech index is up over 4% today. Why do you think that is?

I was actually just about to do a differencing exercise with that to see if the biotechs were up more or less than the rest of the market because they are benefiting from the fact that the tariff barriers are actually going down as well today, which is wonderful news for them.

Yeah.

They however, might not be benefiting as much as the rest of the market, so I'll have to go check that afterwards. Another thing is there is a considerable expectation that this will fail. This was attempted. There's actually a CFR entry for this from 2020 and it was shot down by courts. And then the Biden admin came in and they ended the whole thing. And there are a lot of people who believe that this will not be able to go anywhere because it'll run into some sort of issue. I'm going to tell them no, the opposite. It will actually succeed and it will have pernicious effects because this is totally legal.

Yeah, interesting. Can you talk a little bit about the US as an early adopter and how that shapes drug pricing?

Oh, yes. So a large portion of the reason that the US pays so much for drugs is because our launch lag, the lag between, you know, getting the drug developed and getting the drug to market is so, so much smaller than elsewhere. To take an extreme example, the US's launch lag for new drugs is about six months versus the the UK's, which is about six years. Which means that if you're, if there's some new therapeutic that you really need, they'll probably approve that one pretty soon. But if there's a thing that's like an improvement on insulin, it'll probably take them many, many years to actually get that drug to market because they're just not willing to pay for it. They have considerable cost controls because they are a more managed care system, they provide a lot less care. And if there's something new that, like rules, but it's like a slight improvement on something else, they're going to go for the thing that is less expensive. They're just going to. We are aiming to maximize our tech adoption, whereas they are aiming to maximize to, you know, constrain their prices and do as well as they can under a certain set of a certain budget.

You talked about potential pernicious effects if this goes through. Are you using what happens when rent control is implemented in cities as a comp here? Do you think there's just going to be less R and D spend, less investment? What does that look like to you?

So, two things. We actually have wonderful models of this now and we know how this played out in 1991. I'll talk about the models first. The models suggest that this naive expectation that we're going to lower our drug spending by 50 to 80% just cannot happen. And because we're going to dynamically adjust prices, prices are determined in equilibrium and we're probably going to get about a 10% reduction in the US, but we're going to see a very, very large increase in a bunch of our allied countries. So, for example, Canada should be expected to see something like a 90% increase. They're a small market and they're going to be facing a lot higher prices. That's not going to be very good for them at all. The total pharma revenues as A result of this will fall considerably because this forces them, in order to comply with the regulation, to price above the profit maximizing level. In most other countries, this is bad for their returns and it's bad for the health of those countries. Now, when this was attempted in 1991 with the most favorite consumer model for firms, the prices didn't change for drugs that were under patent with no generic competition because everybody's already paying those. And it's just that the reason that we pay more for those is because we're the ones actually buying them and the other countries aren't really buying them very much at all. They don't do new drugs as quickly as we do. We do it way, way faster. Like sometimes it's an order of magnitude faster. There also was no change for just generic drugs in general, but there was a backfiring effect and prices rose about 4%, which is not huge, but it's something for drugs facing generic competition because of the uniform pricing under mfn, the compliance costs were really bad and there was an IRR shock such that the returns for the firms went down as a result. It was just not good for anybody. No winners. There are, okay, some winners. I should take that back. There are some people who do win from this. They're a minority and the future loses out because the returns to R and D go down and they're already very low. And we're. If you get less R and D then you get less improvement in the future.

Can you, can you dive deeper into R and D? As I understand it, there's basic science research that's done at universities. Kind of the foundational research on DNA might come out of a academic lab that's funded as a nonprofit. Maybe there's NIH grants that go in there. Then at a certain point a biotech company raises essentially venture capital, maybe gets acquired or IPOs and rolled into one of the big pharmaceutical companies. There's losses and losses and losses for years and years and years. And then at the last second there's a blockbuster drug that makes a billion dollars and the math works out. But on a 10 year, 20 year time horizon, is that in a good place? Should that change over time? Like what is your view on, on how we as like humanity are paying for drug development right now?

We are paying way too much for drug development. We are paying out the nose for something that is not nearly as efficient as it could be. And we know it could be a lot more efficient and a lot better targeted and everything else because we know that Other countries are doing it well. For example, China in 2016 introduced wonderful trial reforms that we should have had. I don't know why, we never even had this where you can recruit people from across the country to participate in your trial. In the US if you want to do that, you're going to be constrained to one center and if you are constrained to like one hospital, you are probably going to be flying people in. That adds a lot of extra cost. You are going to probably be constraining your sample as much as you can. Yeah, that adds a lot of uncertainty. That makes your trials less reliable. So you're more likely to have a trial that produces a false positive or a false negative. We have, these reforms have been implemented in China and they've worked wonders. China's actually ahead of us as of this year in terms of the number of trials they have going and the beyond that. They have a higher number and they have a higher number of people in each individual trial. They are beating the hell out of the US because of some simple reforms that the FDA could actually implement right now. They could go in, they could have a direct final rule on a bunch of these things and change this overnight to make stuff less expensive. They could also reform gmp, the good manufacturing practices in ways that take off a lot of the costs from, for example, gene therapies. Like having to produce tons of placebo at a time is a very silly rule. We could actually mimic countries like Australia or we could do follow the WHO's the World Health Organization's GMP guidelines and cut costs right away. The wonderful thing about the US though, when it comes to R and D is that we have a good way of directing R and D funding. We have lots of connections between the public sector and, well, I should say the sort of quasi public private R D drives. Like we have universities with a lot of industry directive, a lot of industry grants, a lot of knowledge of where they should be focusing and whatnot. And this leads to a situation where even our publicly public funds are able to be allocated to things that have good returns. That's why it's going to be very difficult to replace whatever happens here with public funds. Because it's. You're going to have to just figure out how are you going to distribute that money, how are you going to do what the industry does, which is to find areas with pretty good returns, pretty reliably. When we. The elasticity of research funding to the returns is very, very high. It is very considerable. So we're going to see a very Stark reduction in R and D. And that's going to have pretty major effects in the future. It's also going to lead to R and D outsourcing. It's going to move to other countries because of the cost angle. It'll very likely move to China because they have the best R and D environment right now for pharmaceuticals and because the US is doing this and additionally the manufacturing is likely to move there too.

Yeah. As you work through the effects of this executive order, if it goes through, is that good for America? Is it good for humanity? Are we closer to a cure for cancer? Does this accelerate or decelerate overall biotechnology progress in one way or another in your, in your opinion?

Unfortunately, this is very likely to massively decelerate things. This is likely to be something that causes a lot of harm to research for many years to come. The IRR for biotech is, for pharma is already below the average cost of capital. And we've recently had a little bit of rebounding. But if people were expecting it for many years to go basically to zero, a little bit of rebounding due to Covid, there was a blip and that was, that was okay. There's a lot of funding going into biotech for Covid reasons. And then there's been a GLP LED boom in returns as well. And that's been, been tremendous. But that has an expiration date because we know what's going to happen with the patents and we know that people are very likely going to go for cheap generic Ozempic when it comes about in 2033 or whatever, rather than the better terzepatide or red a true tide based products just because it's going to be so cheap. And at that point the GLP boom will be over and we'll have to return to the state of what's going on with pharma. And what's going on is very, very low IRRs that are going to go even lower due to this regulation. So it's unclear if pharmaceutical research can actually survive in the US given this, because we're already teetering on the brink and moving even lower is. Well, it imperils the whole thing.

Brutal. How much did you read into the timing of all of this? It felt, initially it felt a little bit random because so much conversation had been on, on trade issues. But then once I sat with it a little bit, it felt conveniently timed given where, where, you know, Trump has been polling and things happening, you know, in Congress that, that, you know, they would like to get through.

Yeah, I actually don't know when I expected this to come out, but I did expect it to come out because it was an old thing. And they are trying to introduce a lot of the things that they try to run near the end of the previous administration and this was just up there. They're basically going to redo the same thing. They're going to fight the legal battles and then implement this. And I don't know if there's anything in particular that prompted this right now, but I knew that it was coming and I didn't know exactly when, but I expected it like within a few months of the admin actually coming in.

Anything else, Jordy?

Brutal. I was hoping for a white pill in there somewhere but didn't get it.

I do have a white pill.

Please, please, just one sir.

I'll give you a few actually. So there are a lot of efforts going on right now at the FDA and at HHS more generally to promote price transparency which will help with the PBM based Delta and price. They are looking to accelerate manufacturing and approvals for nearly genericable drugs. They're going to be participating in generic drug user fee amendment reform which is massive. I can go into that. The gmp. There's GMP reform happening and there are people looking to actually lower the costs of some of our most expensive drugs in a way that is not bad for innovation by implementing Louisiana's purchasing model. Across the whole country. There are a lot of really great things happening and it's likely the situation will be better in the long run, not because of this, but because of everything else that's going on.

What would the Louisiana plan look like? I'm not familiar with that.

Ah, so Louisiana did an amazing thing a few years ago. They basically went to every manufacturer of abclusa, this wonderful drug for hepatitis C that is a cure. And it's, it was super high cost. I think the cost is actually around $27,000 right now for 28 days. So it's not able to be done for Medicaid at a like meaningfully. So what they did is they negotiated with a producer of it and they said, you're going to be the exclusive provider for as much as we want. We're going to give you $30 million and you just give us as much as we want. And they're, they looked for people and they said, okay, you look like you're going to produce it all. They agreed and they just produced as much as they want. They could wanted. If the state demanded more, they would get more. That was part of the deal. So they started screening prisons, they started screening Medicaid patients, they started screening everyone in order to get as many people as possible this prescription for a formerly very high cost drug that had to them zero marginal cost because of the deal. Yeah, lots of pharma companies are actually willing to engage in this deal. They're willing to provide zero marginal cost drugs if you give them just one big contract and exclusivity. And this seems to be amazing. It worked really, really well. They reduced the rate of Hep C in the state, the Hep C death rate actually by about a sixth in about a year, which is incredible. They actually saved a ton of money on it. They reduced the number of organ transplants people needed. They did just lots of really, really wonderful things. And all they had to do was ask a manufacturer, hey, will you provide as much as we want if we pay you a set amount and give you exclusive rights in our state? And yeah, yeah.

Businesses love predictability, right?

What's that?

Yeah, businesses love predictability. Like it's predictable revenue and so even if it's at a lower margin, it's more guaranteed and higher volume. And so all the, all the math works out in the IRR increases.

Yeah. And when that model goes national, it's going to basically make our high price drug problem a thing of the past.

If there's a generic, that's fantastic. Well, that's a great white pill.

Thank you, thank you for that.

This is great. We'd love to have you back. This is a fantastic. I'm so, I'm so glad you were able to join really quickly.

Yeah. Thank you for making the time a lot.

Thanks so much and we'll talk to you soon.

All right, have a good one, guys.

Cheers.

Bye. We have our next guest hopping in the studio. But quickly, let me tell you about Vanta Automate compliance. Manage risk, Improve trust continuously. Vanta's trust management platform makes that manual work. Takes the manual work out of your security and compliance process and replaces it with continuous automation. Whether you're using your first framework or managing a complex program, go to vanta.com Anyway, thank you to Vanta so much and welcome to the stream. Tess, we'd love to chat with you if you're here. Let's bring you in. Can you hear us?

I sure can. Can you guys hear me okay?

Yeah, you sound great.

Welcome to the show. Great to meet you.

Thanks so much for hopping on on short notice. We're trying to make heads or tails out of the news. We were just Talking to one guest about the latest executive order around drug pricing. And we'd love to just get your, a little bit of your introduction and then how you are processing the news today and what's going on in the market and just kind of your high level take.

Absolutely. So thanks so much for having me on. So my name is Tess Cameron. I'm a principal at RA Capital Management and RA is a leading life sciences investment fund. We make investments across all stages, from seeding and building new companies all the way through to investing in later stage companies in the public markets. And I think this whole concept of most favored nation for, you know, drug pricing, it is not something new. It is something that we saw in the first Trump administration actually several times in 2018. It came back in 2020, first in one executive order, then in another executive order, and then in a rule from the center for Medicare and Medicare, you know, center for Medicare and Medicaid, a rule that ultimately did not get implemented because the rule was actually, you know, knocked down in court because they didn't follow, you know, certain procedures that were required from an Administrative Procedures act standpoint in order to get the rule through. So I think that broadly there being some rumors among the, you know, biotech investment community that this is something that was coming back. Right. Trump had made some statements about it's not fair that we are paying, you know, so much more than these other countries. And so I think investors were, you know, anticipating that there might be something.

Was it.

Do you think it was breakout? Oh, sorry, please jump.

Do you think it was priced in, in some way? Because the, so right now the, the NASDAQ biotech index is following the overall nasdaq.

Yeah. And perfectly last night, at least the peanut gallery, myself included, we're predicting bloodbath in the biotech market. I know, didn't happen. Are we just really stupid or do we get something wrong?

I am totally with you. So, yeah, I think this just shows the value of predictions in this kind of market. Where. But I think it's, I think it's for fundamental reasons that, you know, biotech stocks were like, biotech and pharma stocks were like actually up this morning. So like, my goodness, like, why the heck is that? And I think the reason is because the executive order and particularly the administration's language around the executive order was actually much more positive than I think people were anticipating. This doesn't necessarily mean that it will be positive. Right. But I think it's being interpreted positively. And I say that for a couple reasons. One is that, you know, I think the, you know, Trump made it very clear, like the focus is on other countries that aren't paying. Right. And the focus is more on those countries than the companies. And I have to say, as a biotech investor, you know, I think all of us are like totally behind that statement. Right. Like, you know, the fact that the UK and you know, a lot of Europe benefit from these like, super low drug prices, like that isn't, you know, they should be paying a lot more. There's actually a study that came out just a couple days ago that looks at the ways that a lot of these European countries set price, which is through these health technology assessments where they basically, you know, say that patients lives aren't worth particularly much and they very narrowly value, you know, the, the, you know, the benefits of these drugs in a way that, you know, undervalues the societal benefit of medicines by like more than 90%. Right. So these are not, you know, I think, I think what was really positive to hear is, you know, hey, the focus on getting other countries to pay more. You know, someone said, I think it was Trump actually who said, you know, hey, if you want to sell your cars here, you have to buy, you know, our medicines at a, you know, like market price. Right. And in the us, like, we do have a competitive market. I think also as a biotech investor, key thing is like, we want to keep that market competition going in the U.S. that is what drives drug prices down over time is like generic entry. It's like more branded competition. Much, much, much better than like importing foreign price controls that essentially are based on math that like, undervalues human life. Right. So good trade stuff, but like, bad if it results in like importing foreign price controls.

Are those.

I think the weight of those changed based on the language that we heard this morning.

Sure, sure.

Are those, are those. They're the, effectively the price controls that they have already. Are those happening at the EU level or country by country?

It is country by country and it's a very nuanced and very complicated process. But essentially like when a drug gets approved, US is almost always the first launch. Right. So 85% of new medicines launched anywhere in the world, those are available in the US and then it's a question of what other markets do you go to? And it's really complicated because all of these different, many of the different countries, they reference price each other. Right. So you don't want to like, start in a country that like, is reference pricing another country, and it's like, oh, no, like now, like, you know, our pricing is all, you know, messed up. So typically what companies do is they start with Germany, right, maybe they consider Japan. And then, you know, after they get pricing in one of those markets, then they go to these other markets. So this is why, like these countries are so staggered and they don't get the benefit of these medicines, like nearly as soon as the US does. They're usually delayed several years. But it's a very country by country, you know, decision making process. And it's not really a decision making process. It's kind of a take it or leave it, right? Like drug company. Do you want to launch in this market or not? If you do, like, here's your price, take it or leave it. And so actually having the US Government step in and say, like, hey, you're not just negotiating with the drug company, you're negotiating with the US Government now. And like, if you want to sell your cars in our country, you're going to have to pay the price that I want you to pay. Like, that becomes a more powerful statement where like now companies can actually be in a position where they can, you know, start, you know, seeing the benefit of, you know, more, you know, more deliberate, you know, trade negotiation by the US in favor of, you know, getting other countries to pay their share of research and development. US has been 75% of like, you know, drug biopharma research and development is what the US funds, which is just incredible. It's like defense, right? It's like similar to the NATO. Similar. The NATO issue, yeah.

Is there, is there something at the political level that the biotech community, broadly, both the large pharma companies and maybe even the more startup focused companies agree on in terms of changing regulation or how the government interfaces with the biotech community. Like, for example, I mean, we cover tech a lot and there's been a lot of rumblings about the government blocking acquisitions in general. Big tech companies want to acquire startups, startups want to sell themselves to big tech. And so tech as a whole has been pretty against the blocking of acquisitions. But is there an analogy there to how the biotech community broadly thinks about their list of priorities in Washington? And is this anywhere on that list?

I would say like across the board for, you know, big pharma companies and like little biotech, the like, it is all about like, let us compete, right? Like market competition is like such a great force for access and innovation and you know, bringing prices down in the U.S. like, let us compete and you know, enable that. And I think we have, you know, I think we see it in our access to medicines. It is because of the dynamic US market and market competition that we have so much access. It's because of US market competition that when generics come in, you know, prices will go down sometimes like 98%, right? Like Medicare pays 30 cents for like, you know, or even less. I think it's $0.03 actually for like each like Lipitor pill. And so that's great, right? And so let us compete, let us compete. You know, there should be government mechanisms, you know, we think, for drugs to actually go generic on time, right? So like, yeah, you don't want like drugs hanging out for 20 years, like on patent. That isn't really, you know, part of the deal. Right. But when we think about like, you know, what makes the US so dynamic and what brings patients a lot of benefit, it's like it's having that innovation and ensuring that that innovation is driven by market competition rather than government price controls actually helps, like instill more natural mechanisms for prices coming down. More branded competition, more generic competition. If the US Government just comes in and sets price, guess what's going to happen? You're not going to have, you know, a second to market branded product that's launching three years later, you know, coming to market and, you know, competing against this price at 1 because they're like, I'm not going to compete against the US Government. Right. Like US Government is going to get, you know, going to get what it wants. So I think that is somewhere where, you know, Biopharma as a whole big company, small company, I think all aligned on that. We had the Inflation Reduction act, right, which essentially instituted price controls in the Medicare market. And you know, the big inefficiency there was setting price for small molecule drugs at nine years. Biologics are at 13 years. Usually as investors, we're counting on like 14 years of exclusivity before a drug goes generic and drops off, obviously dependent on the quality of that patent. That's a price control that we don't want, you know, that's, that's already had an impact unfortunately, on small molecule innovation. So pills instead of, you know, shots and, you know, we don't think that's good, you know, for Medicare beneficiaries. And we don't want to see more price controls, you know, coming into this market because, you know, it could really cause something very special where, you know, America leads, which is biomedical innovation, to have a lot more challenges and less investment.

So generally, our last guest was sort of disappointed with the eo, he thought it was going to have negative implications, but generally felt he seemed somewhat unfazed. Can you talk about investor sentiment in biotech right now? The industry has had, you know, a rough few years and in many ways, you know, you could kind of just shrug this off and just say, all right, you know, just got to get through it. But I'm curious, you know, from your point of view, are there, what, what are the sort of positive outlooks right now from, from your standpoint? And what should people be paying attention to outside of this eo?

Yeah, absolutely. So, I mean, I think the reaction, you see it in the stocks, right? I think that, you know, there's, there's optimism that the impact of this policy may be a lot lower than people thought. And indeed, I think some of that is just, hey, it looks like this is going to happen through rulemaking instead of through, you know, some other kind of implementation that might be more top down and, and that may impact the probability of actually getting something that is like super broad based and like bringing pharma prices down across the board, that, that may lower the probability. So I think that's kind of what we're seeing in stocks. You know, I think in terms of just the sector, there's a lot of like, amazing stuff happening fundamentally. Right. And that's why as investors, when we see periods of volatility like this, it's very exciting from an opportunity set perspective because you have companies that have made incredible scientific progress. You have companies that have, you know, that are launching, you know, transformative medicines that are making really good progress. And we're seeing some real disconnects, you know, across the board for many, you know, for many companies. And that, you know, that's a great set of opportunities for investors. And you know, ultimately, I think America does really value biomedical innovation and, and, you know, we'll, we'll be rewarded for, you know, companies that make fundamental progress.

Can you talk a little bit about the life cycle of a new drug or new biotech company? Comparing it to tech, again, it feels like there's companies older than us that are still private. Because the nature of the tech market is that there are venture capital firms that are set up to do $5 billion injections at $100 billion valuation. And yet it feels like in biotech there's been a long history of going public at a much lower market cap. The stock moving based on FDA trials very early, before revenue, years on the market, pre revenue. Is there some sort of fundamental reason why companies in biotech Go public earlier or is that life cycle changing? Do I even have that, that, that characterization?

You are so right. No, you were absolutely right. So it is a very different life cycle. I mean, it, you know, it can take like, you know, 10 years for a drug to get to market. Like, you know, even when you've gotten into the clinic, 90% or more of, you know, what you're working on is going to fail. So it is a really, it is a really tough sector. You know, we're talking numbers in the billions. Like, you know, on a probability adjusted basis, it's like, you know, over two and a half billion to actually get a drug to market. So we're talking big investment, very high risk, and you know, as a result. Yeah, you're like, why is anyone doing this?

You would think it would be the day, but you would, you would think high burn, high capex, high risk, leave that in the private markets, but then Stripe, which has been making tons of revenue for a decade, get them in the public markets. And yet it's the opposite.

Yeah, I'm curious, I'm curious, curious if there's any type of disconnect between the public and the private markets in the sense that, hey, you can buy shares of a private company that has $0 in revenue at X valuation, or you can buy shares of a company that's public that has drugs and that has, you know, that, that are in market, that has revenue. Can you talk about that? You know, is that, is that, is that correct? Incorrect.

Typically what we see is that, you know, it's very unusual for any drug company that has a commercial product that is, like, marketed very rare for those companies to be private. Right. It exists in a few spaces, but like, very, very unusual. They're almost always public. And the reason that biotech companies tend to go public so early is because, you know, it takes so long to develop these drugs. And the depth of the capital markets for the biotech market, it's just deeper on the public side, there's a lot of investors who are like, hey, we do public market investing and maybe they do a little tiny bit of private market investing, but the pools of capital on the public side are just much larger. And so you see a lot of these companies going public very early. And the private company valuations, they tend to, on a lagged basis, follow the public market. Somewhat, you know, curious if that also happens in tech, but it might be that after you see like a real drawdown in the xbi, like six months later, if the XBI is still low like private companies will be like, you know, maybe that stuff up isn't going to be as big or like, maybe I have to be like a little bit more flexible on like valuation. So it usually takes some time, but like, everyone is usually looking at that because that is the exit. Typically before an M and A, there is, you know, certainly, you know, strategic M and A activity that happens for private companies, but usually it's after they've raised enough money to get to a point that, you know, a strategic is like cool. Like I think this drug is going to work. I'm going to take that risk now. And usually the company would like to be public to be able to raise the money to get to that point where they can be bought. So, you know, it's a, it's an interesting dynamic and certainly different, I think, than, than the tech world.

Can you talk about the longevity market from your point of view? In our world, every single once somebody has at least $1 billion of paper returns, they become very obsessed with longevity. Living forever. And so in tech, the companies that get attention. We had the, we had the, one of the co founders of New Limit on last week, which was an exciting conversation. But I'm curious from your point of view, more at a high level, give us kind of a broad overview of the longevity market, which I'm sure is just one area that you guys invest.

Absolutely, yeah. So the longevity market can mean many, many different things.

Every drug is.

You're threatening, right?

Yeah, exactly. And also with many different levels of scientific validation. So RA Capital, we are like a very data driven, like we're a very data driven organization. Right. A lot of the people who work at RA Capital are like PhDs or, you know, former physicians or sometimes even current physicians. And so very scientifically rigorous. But you know, I think we're developing and you know, have developed a lot of like really, really interesting research on, you know, scientifically oriented ways of extending like not just lifespan but health span. Right. So when we think about longevity, we tend to think about it not in terms of like, hey, do you want to be like, you know, hanging out on a couch, like, not really able to move, but you're like, I'm alive, I'm alive. Like, you know, as long as my.

Neuralink plugs in, I'm good.

Use the Internet at 150 as a vegetable, I'm good.

You're like, that's probably not my jam. Just being able to like use, I mean using a computer with your eyes at 150 would still be pretty Cool. But, like, if you could do more, that would be even more fantastic. Right. And so our focus has actually been more on, like, the health span side of things and really thinking through, like, you know, we actually think that there's a lot of, like, existing technologies and existing, you know, it's not, it's also not just about, like, treatment. It's about, you know, prevention and how do you identify, how do you diagnose, how do you kind of manage risk factors, like, very, very early. And so a lot of that involves having, like, algorithms for identification, having algorithms for, like, you know, disease prevention and identifying where there's a lot of, like, existing stuff that you can put to work in combination with, like, you know, novel, you know, novel agents to really improve health. Spanish. So that is an area that we're very excited about and certainly doing, you know, certainly doing a lot of work in.

What does deal flow look like for you? I know a lot of the best biotech companies, it seems like they. There's some tech transfer point out of a university lab, and then I've seen like, flagship pioneering is like incubating stuff and moderna came out of that. And there's just so many different.

And RA has an incubation arm too.

Yeah, yeah. There's so many different formats that you don't, you don't see a lot of like, oh, you know, kid in the garage said, you know what, I have a problem and I'm going to solve it myself. It's a very different pattern of entrepreneurship. So what does the lifecycle look like for you these days?

It's very different. I will tell you. I would actually love to see more like garage biotechs because I think, like, there's, you know, some more like, I think that there's actually, you know, in some ways, like, the entrepreneurial process for biotech has been a little too, like, institutionalized. Right. But let's, let's talk about it because, you know, the deal flow for biotech and like, how companies get formed can be in a number of different ways. Academia, right. Ideas coming out of academia is like a big one. Ideas coming out of, you know, venture funds is another big one. Right. And then you have like, you know, business people, often people who've like, you know, they've worked for a company, that company got sold, and they're like, hey, I want to come back and do another one. Here's like, these other areas and other parts, problems to solve. Right? Or maybe someone's coming out of big pharma with like an idea that they couldn't prosecute in their big pharma company because they were too risk averse and they want to start something new. But because biotech is like so high risk and requires so much capital, that process for like getting a company started is often, you know, I'd say there's like a bit more like institutional like process around that than I think you see in tech. Because it just like takes a lot of money to like go from, hey, I have this idea to like, oh, I even want to like test this in animal models and like try and get a drug out of this. Like, that is like millions of dollars. So I think that is something that is actually a real challenge for the, and that we at RA think is like a real challenge for like the biopharma ecosystem is, you know, look like we have to, you know, find ways that we can be more, you know, be more efficient and like, try and get to some of these answers more quick. Because when, you know, when you, when you look at, you know, when you look at the pace of, of innovation that is coming out of China, which is really, you know, pretty astonishing for biomedical innovation, it's like, that is a fundamentally different cost base and fundamentally different pace of iteration. And we, you know, there's a lot of work that I think we need to consider for our biotech ecosystem here to adapt.

Can we do a quick round of like, overrated, underrated? I'd love to know artificial intelligence, broadly, is it speeding up drug development? Is it overhyped? In Silicon Valley, everyone says, oh, we're just gonna, you know, ask ChatGPT to cure cancer. It's gonna happen next year.

It's a convenient line if you need to raise 30 billion yourself.

But, but, but what, what is the mood in the real industry from the folks?

Okay, so I would say that AI is like, it's overhyped in the sense that like AI itself is like, not like discovering and developing drugs. It is underhyped in the sense that like, oh my gosh, like, what a powerful tool. Like, we absolutely use it. Every single company worth their salt is using AI in their drug discovery process. Right? So it's a little bit of both. Usually when someone is talking about themselves as an AI company, you should approach with like, how different is this really? And like, but if a company is like, no, we don't use AI for anything, I would also be like, huh.

What about mRNA broadly moderna? Stefan Bissell was on a TED Talk saying before COVID saying, MRNA is going to be a cancer cure. The Stock's kind of gone up, gone back down. Is MRNA a technology that we're going to be seeing more of in the future in different applications? Applications or should we be thinking about moderna really just as like a, a pandemic frontline defense firm?

So let me talk about RNA therapeutics more broadly because actually MRNA therapeutics are like one flavor of RNA therapies and I would say like RNA therapeutics overall, like huge, huge potential. Right. Huge opportunity. I think that the challenge has been delivery. Right. How do you actually get these to the right biological target? And there's a lot of awesome work being done that can hopefully improve on that.

Yeah, that makes a ton of sense. What about GLP1s? I feel like everyone has heralded them as like a cure for everything from diabetes to obesity to gambling to just anything being lazy. I guess it cures, it seems to cure everything. Overhyped, under hyped. Overrated. Underrated or kind of under hyped under phenomenal drugs.

Phenomenal drugs. Lots of problems to solve. Right. The market isn't rewarding a lot of that now, but I think the market will in future. So lots of problems to solve. Need to improve on accessibility. Right. So how do we get like pills and patches instead of needles and how do we improve tolerability, Right. So that people are actually staying on these drugs? And you know, a big part of that is insurance coverage as well.

Last one for me. Are you worried pharma IRRs on average have been low. Our last guest was talking about how if you look at average returns, they're below the cost of capital today. Are you worried about net new investment in early stage biotech funds? Obviously, if there's less investment, you could imagine the returns actually going up because there's less competition for, for deals. Maybe. But what's your kind of high level take on incremental investment in early stage biotech?

My take is that there is a lot of great work to be done from a fundamental standpoint, but we need the incentives in place. So we've got to have a functioning market, we've got to have competition in order to incentivize that. So, you know, I think that's the best, that's the best thing that the government can do is ensure that there's, you know, strong market competition for pharmaceuticals. And, you know, loved hearing this morning that there's a real appetite for trying to get other countries to incentivize that innovation as well.

Yeah.

Do you think biotechnology process is overall accelerating or are we heading into a period Of. Of kind of rebuilding and stagnation. What's your overall optimism on the industry?

Broadly, My view is accelerating because we have to. Right. We have to. And we have better tools, too. The thing that causes biotech to take such an enormous amount of time is clinical trials. And like the clinical trial system in the US is just like clogged. Right. Everyone's trying to recruit the same patients at the same hospitals. So I think we need different ways of doing things, but I think that we have a lot of the tools to actually accelerate some of that innovation.

That's exciting.

Awesome. Well, thank you so much for joining us.

Thank you.

Yeah, yeah. Leaving on a high note.

Thank you so much.

This was really enjoyable. Thank you. Thank you, Tess.

Well, the market's up, so we have to celebrate.

Yeah. It's a white suit day.

Great to see you both.

Yeah, thanks for coming on. Cheers.

Thanks so much. That was great. I feel like I'm learning a ton from these interviews.

Yeah, we've been meaning to have a biotech day.

This is kind of the informal biotech day. Yeah. It kind of triggered it. But I'd love to go deeper here because it's such a. Every answer is something where I'm like, I've never heard this particular take before. I'm learning a lot.

It's interesting that Cremud. What didn't bring up the price controls in the European market. Right. Because that does feel like a factor. He was saying that, you know, European country or the pharma companies are selling at the rate in which the profit maximizing rate. And it sounds like there might be some other factors. We have Jack. Let's bring him in the waiting room. Let's bring him in.

Welcome to the stream. Jack, how you doing?

There he is. There he is.

I changed my shirt when I saw that you guys white. When you went light today, I had a dark shirt on.

Can we get no suit though? Hey.

But he's in the studio. Welcome to the stream. Let's go get the Ashton Hall.

Yeah, One more.

Let's go. We got Jack.

He's got news today.

He's got news.

He's got news. What news do you have? What's going on?

What you got for us?

This is.

You guys are getting the first look at this.

It's a.

It's a pleasure to do it here. We are announcing impatient ventures. Fun one.

Let's go. Another air horn. Another air horn.

How big is it?

So we set out to do 20 million.

Right away.

We had set up to do 20 million. We ended up over subscribing and doing 23 and a half million.

So congratulations.

You know, it was a tough market to start in February. 2023 was basically the rock. Stone cold bottom adventure, Stone cold bottom raiser.

Have you thought of concentrating the entire fund into a single foundation model company, just putting all 23 million in one deal?

I basically was hoping that that would be the case. I was just waiting to yolo in with Josh Kushner into something.

There you go.

I never next fund.

I mean seriously break down the question.

Maybe talk about, why don't you give people a little background, talk about AUM too. Because I don't think the first fund tells the whole story.

Yeah, so I was lucky enough to, to start investing honestly during Zerp when it was a little bit easier to raise capital. And, and so we did a series of SPBs while I was a founder in 20, 20, 21 and 22. First deal we did ended up being a CPG company. It might be the first and last CPG company, but it's my best investment. A high protein oatmeal brand called Oats. Overnight I met the, the founder. He was a pro poker player. I was a very serious poker player once in my life, which I think is an amazing skill set to have as a founder is that sort of decision tree between luck and what you actually did to impact an outcome. But yeah, we did about 30 million bucks of SPBs before the first fund and then along the fund we've done probably another 50 or 60 million. So Aum is, is north of nine figures. But we're, we're definitely, we're definitely, as they like to say in the industry, just getting started.

Just getting started.

That's great. Portfolio construction for the new fund. What's the average check size? How many deals are you trying to do? Are you leaving some on the table for pro rata and follow ons? Will there be a growth fund, an ipo, a special situations fund, debt fund? Are you getting into structured, structured credit, private credit at some point? What's going on?

I mean I'm, you know, import, export, you know, it's like, you know when you have those friends where you ask them what their parents do and they don't know and they say import, export, you just left wondering. But like everything's import, export, everything's import.

The capital, export it to the founders.

Yeah, exactly. So we're, we're a concentrated fund. We're going to do probably about 20 to 22. We're actually at 20 right now. And so we're just deciding kind of the last few that the nice part about being a first fund is you can not only make a lot of mistakes, you don't have to be as kind of like letter to the law of how, how it's done. I think as you scale AUM and you have institutional investors, we were fortunate to have an institutional investor as a top endowment. I need permission to say publicly, unfortunately I don't have that permission but as I've been told I can say it's a Boston based endowment that's in the, it's in the top quartile of investing. But so we, we, we have a generalist approach. How I think about it is I was reading somewhere the other day that somebody talked about how specialist funds actually outperform generalist funds for only fund one. But then as soon as you escape fund one, you start just getting decimated. And, and basically the articulation was if you're focused, it's because you're investing in whatever's of the time right, right now at the time it's, it's foundational models and, and deep tech. So everything from AI to robots. But you know, three years ago I saw a lot of people saying we're Web3 focused. And then they kind of like branded everything that way and then slowly walked off stage and pivoted as that industry changed from where it was three years ago. So I like to think of us as a generalist fund that dynamically invests in what the best categories you know of today is. And so right now that is, you know, robotics, that is deep tech, that is advanced manufacturing and defense. But we're also doing consumer. I think consumer is permanent, it's a permanent category. You know, I think we have yet to do a Web3 deal. I don't want to write it off. We did some pre fund stable coins that, that we're excited about. But you know, I think it's still a sort of to be determined, you know, what's going to work in Web3 because it's still just tokens with not a lot of value.

How do you find? There's been a number. Full disclosure, I'm an LP and impatient. But how do you think about investing in companies before there's any heat on the deal? I can think of a few companies in the fund that couldn't have been less hot at the time of investment. And then a year later you've got tier ones leading and they become super competitive. But, but what's your kind of, what are you looking for in a founder to get a sense of their abilities oftentimes before there's any revenue or sometimes not even an actual product yet.

Yeah, I mean that basically is kind of where I think our edge is, what we invest in which is I think you always hear it, it's about the people. But my line is I can't underwrite a business if I can't underwrite the founder. And so it's those characteristics of that founder that I feel like are a winning, you know, sort of profile. Because you know, comically the word pivot is so often used in startups because the beginning lifecycle of a company is one continuous pivot. And so I love the Mike Maples quote. 80% of his best investments were pivots. Mike Maples being the, you know, the floodgate founder. And I think that that couldn't be truer about so many of our best deals were sort of the business change later. And so what I'm really looking for is that the founder has. There's a line that I like to use which is never uncertain, often wrong. And so whatever they believe to be true at that point they believe it with 110%. But as soon as new information enters their, their head that that might change the way they, you know, go to market that might require them to need to shift their team. I'm looking for a founder's ability to be dynamic at as the sort of the information changes.

Break it out John. Let's do it. I mean I don't mind, I don't mind taking the suits to the dry.

Cleaner after this next studio I think we will be.

I wish I remember you guys remember there's like at least two or three Covid startups that were like. I think there's still one that does it where you can get like 10 minute delivery or something like that.

Cigars.

I mean I may. That might be the next great consumer business maybe.

Yeah, go puff for cigars.

What is your take on these like on these new zoomer companies. These, these young entrepreneurs who seem to be really good at like going viral on day one. Vibreals take over the Internet and then they kind of got to build the plane after they're already flying versus you know the Dylan Field story of like teal fellow in kind of private beta for like three years raising money, then launches Figma and goes on this like generational run. The fear and like the vibe is like hey guys, like you're taking the marketing a little bit too seriously. Maybe you're too good at Going viral before you, you really have any product. But are we just being like boomers if we're like, hey, you know, get in the, get in the garage and start coding?

I love that question. One of the companies that, you know, Jordy knows is in our portfolio and we're all big fans of. In fact, I think you both had the, the fish is shink.

Oh, yeah, yeah, yeah.

So I think they're out of, they're, they're, they're, they're at 40 Michelin stars of sort of their fish being distributed to restaurants.

I thought it only went up to three Michelin stars, but they got 40.

They got 40. They're hogging all the stars.

Really blew it off.

The one of the things I really appreciate about the CEO is quite young and you know, we backed him, you know, when he had two roommates from college working on the idea with him. And actually the original idea, he wanted to make autonomous fishing boats and he wanted to build the fish processing robots that kind of, you know, execute the fish when it's caught and then get it right.

The narrative, the narrative violation there is that Shinkei is a YC company that graduated YC and still had. And this is, this just goes to show how not hot robotics were in any type of sort of more antiquated industries that they could, that a founder of safe's category could get out of YC and just be out in the free market building in relative obscurity for. I don't know how long it was exactly, but if I remember, it was a few years.

But just to even finish, John, your question, One of the things I like about the CEO is there's a lot of pressure for him now that he is a, you know, tier one backed startup and has, you know, some of the best from SpaceX and Android working there to really scale revenue. The thing that he's focused on is quality revenue. And I think in the age of AI being able to pump numbers up quickly, I don't know what that company was, I don't want to say the wrong one. It was 11x or 11 labs or something that had like 10 million different.

Companies, but they're wildly different.

There was one that basically had like 10 million in revenue and like, like three weeks or something crazy. And it was just, turns out it was like all turned over like 90 churn. And so yeah, I think in this age of, of, of being able to scale as fast as we've ever been able to, quality revenue is really the most important thing I look for and does that founder understand what that means? So understanding you can. Economics are still in right now and I think the founders that don't understand.

Hot take.

Yeah, I mean hot take. You know margin profile, basic finance 101 stuff in conjunction with a market insight and the ability to scale and execute. That's an important thing that we underwrite is I don't know what your ultimate business is going to be, but will you know it when you see it?

Last question I have. Are you long or short? Burning Man? You've been a vocal proponent of Burning man over the years. Every year that I've known you, you've gone. I. I'm short. I gotta say. I'm short. I think it peaked a couple years ago but. But what's your take?

I got bad news for Burning Man.

I.

This will be my first year in which I do my hot VC summer in Europe.

Ooh.

Not a Burning Man.

Okay.

And so this is my taking off.

Could be a death mouth.

I think I will be back. I will say I have gotten deals and lps out of Burning man everybody year.

I've been there.

So you know I. I have a good batting average and the productivity but.

It definitely feels actions.

What's that?

The actions are speaking louder than words here. You're short.

Yeah, the revealed preference is the revealed preference.

Mega short.

I'm currently. I'd say I'm currently. I'm currently at. I'm staying in cash. I'm not lost.

Awesome. Well, it's great to have you on. Congrats on the milestone and yeah, good luck to you. I'm looking forward to fun2 announcement. I'm sure it'll be not too long away.

It'll be sometime after Burning man, which.

Great.

Anyway. Great. All right, we'll talk to you soon.

All right, fellas, thank you.

Thanks, Jack. See you.

Let's talk about Eight Sleep. Go to Eight Sleep.com.

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No, actually a 90 because we got.

Pippa from Sweet Capital coming in the studio in just a minute. Let me also tell you about Ad Quick out of home advertising made easy and 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. Pippa, are you here welcome to the show.

Hey John, how's it going?

It's good. Would you mind kicking us off a little bit of an introduction on yourself for those who don't know you.

Absolutely. It's great to be with you guys. I know we've been wanting to do this for a little while, so it's great to be with you.

Yeah. Somehow we missed you at Hill and Valley. It was a crazy day, but it was good seeing you guys.

You guys were overrun. We were the hottest spot at the conference.

So the tiny room in the corner was beating down the bed to go into. It was good.

It was a crazy day. Those guys did a great job.

Fantastic.

Yeah. So my name is Pippa Lam. I'm a partner at Suite Capital. We are a private investment fund. Clue is in the name, Sweet capital. My colleague started gaming company Candy Crush, most famously King.com, which they sold to Activision and then subsequently Microsoft. I run a huge game, I run the private investment fund for those founders and we sit between the US and Europe and invest sort of broadly multi stage again with private capital. So we can sort of invest across a whole wide range of sectors. And I'd say we're about 70% US allocation at this point.

Got it.

My background, I actually started out my career working for the British government on trade relations between the west, uk, US and China, which obviously quite topical today. And I then sort of moved into equity research, covered large cap, China tech, US tech, JP Morgan for five years. So pretty much just doing publics. Covered a lot of macro, which obviously is now, you know, increasingly relevant to sort of the tech world and private investing now, but been in venture and private investing for about five, six years now. So yeah, great to be here with you guys.

Yeah. How are the founders thinking about investing in gaming technology? I feel like every successful founder, they sell their company and they're either like, I'm never doing that industry again, I know too much about what can go wrong so I want to stay away from it. Or they're like, I'm an expert and I'm going to dominate the next generation of generational companies that come up in the industry. I know so much about, obviously there's a lot of value add there. So what's their feeling on gaming startups right now and are you doing any deals in that area broadly?

So I'd say, I'd say it goes both ways. So there are five founders of King, so I'd say a couple of the founders are like, send me back in, I'm ready For more gaming. In fact, one of our colleagues is actually started a new company as soon as his non compete pretty much ended with Activision and Microsoft last year. So he's straight, straight back in it. He's, he's operating sort of in stealth at the moment, but he's kind of straight back into operating. So very much bullish on gaming. And I see on the other side it's a little bit of a range between wanting to invest alongside more the gaming ecosystem, not so much purely on publishers. I think that obviously King and Candy Crush were such an incredible zeitgeist and breakout success. I think Match three and sort of casual gaming really rode the kind of mobile transition that we saw be so large for them and when they were coming up. I think obviously the gaming industry has moved a lot and of course my colleagues are still very interested in what's happening. I think a lot of what's happening obviously around AI and sort of the broader ecosystem, you know, still extremely tapped in. So we do look at gaming deals. But I'd say that, you know, it was partly the thing that you allude to about having, you know, knowing too much that has meant that we've, you know, with the private investing we do on the side, we've really moved out of purely doing gaming. We did also also have a non compete for quite a long time with Activision. So we were sort of forced in my earlier years to do sort of the gamification of adjacent sectors versus, you know, competing immediately with their former company.

Yeah.

How did you guys react to the news last week around the App Store and the changes to the App Store's payment or the forced changes to the App Store's payment policies?

Look, I think that, you know, I don't want to speak for them, but they certainly had an ongoing very interesting relationship with, with Apple throughout the course of, I guess as Candy Crush was coming up. I think also, you know, they really began at a time of sort of the Internet portal. You know, they really had to deal with how, you know, they were dealing with, you know, Facebook at the time matter and also Apple. So I think that, you know, broadly, you know, we're, we're hopeful around changes coming out. But I think that certainly the issues that we faced as operators certainly are. The world is drastically different now. We're no longer really at the fight to try and win mobile, which is really how they were having to come up at the time. I think it's too early to say, but it's certainly something that my colleagues are tracking Very closely. And certainly Sebastian Knitson, who I mentioned has started his own new company is actually facing now directly as they launch their first game. So let's see.

Gaming is such an interesting venture category because I feel like over the last like five years there's been a ton of breakout games like but they none of very few of them were like true venture backed like seed series A from main funds like Fortnite came out of Epic Games. It's like a 30 year old company. Roblox had this venture story but all the early backers, they became rich off of Roblox and Roblox was kind of like their main win. Then among us and Balatro were these huge successes but they were kind of of just like random indie developers who just kind of got lucky and weren't really like financialized in like the. Oh, we bet we're building a team. And then a lot of the game companies like pivoted. Like Slack was originally a game company and so right, you go into Silicon Valley, they eventually push you into B2B SaaS if you're a game company. But anyway, I mean we can talk about gaming all day, but I want to hear your take on the UK US trade deal. That was the first one to fall last week. You had a great breakdown on X about it. I'd love you to take me through kind of like what was your expectation, how do you process the news and, and what do you see going forward with that particular trade deal?

And maybe before you dive into that, even kind of the on the ground opinion in the uk how, how UK citizens have viewed this whole trade debacle given that they, they have a. We have a. The US has a trade surplus with the uk. Right.

Yeah, yeah, it's, it's funny. I know, I know. A friend, Ryan from Flagsport, tweeted, you know, the UK is the only country to have a trade surplus of the US to have a trade surplus of the uk so it doesn't bode well for other countries. Right. If we manage to like you know, that is, that is the beginning point. But I think, yeah, of the top 10 countries that the US has a trading partner with, the UK is, is the only one that they don't have a trade deficit with. So, so let's see. Yeah, look, I think it's a sort of find myself putting back my macro hat on again these days so much because we had finally this trade first trade agreement between the US and the UK announced last week and of course this morning with the news coming out of Geneva of how the US and China are hopefully going to move towards closer bilateral trade dialogue. So I think first on the UK piece, I know that sort of from behind the scenes that this has really been something that has been in the minds of the UK government ever since, since sort of mid February when we had, or end of February when we had that very sort of, you know, very productive and positive meeting between Prime Minister Keir Starmer and President Trump at the White House. I think that there has been on both sides a real determination to work towards a some sort of bilateral trade agreement that, you know, went beyond the Liberation Day Board where I think we were, you know, at 10% with some of the lowest country. So this has been in the works for, for weeks, certainly, I guess, yeah, a few months since then. And I think the reception has been broadly positive. You know, I think that of course there are still talks to be had. I know Ambassador Peter Mandelson has said that this is, this is a, it's not a still picture. I think he said it's a movie that the trade will continue, the trade talks will continue. But if you look at the headlines, it brings down to the average, I think, tariff to somewhere between 1 and 2%. That is the aim, which of course is. Is hugely beneficial for both when we were really sort of stuck at the 10%. So I'd say it's been broadly very positive. Obviously markets reacted well to it and it really hit some of the key points around sort of steel and autos, which I think are in both sides views potentially a blueprint for how the US is going to engage with other trade partners. I think that's where I would like to see things move next, is really expanding this into a broader dialogue around UK and US tech partnerships. I think that that is certainly something that we should keep our eyes peeled on over the coming weeks and something that, you know, I think there's a lot of interest on the UK side about really firming up our relationship with, you know, US Big tech. We already have a fantastic working relationship with many large tech companies in the us but I think we could really push the needle on some of the sectors that have become issues of national security, AI, defense, robotics and stuff like that. So, yeah, broadly positive. And I think it's been interesting to watch how we've seen the UK public and also UK big industry react to the new administration and what the White House is doing.

Do you think the UK will be kind of a net importer or exporter of venture capital over the next few years. Obviously there's a lot of LPs there that would love to invest in American companies. There's also new projects to invest in UK based entrepreneurs and new startups. So what is the trade balance look like from a venture capitalist perspective?

I think it depends who you ask. I think that traditionally we have struggled in the UK and I say we obviously I'm British, I do, I have, I have personally as a microcosm spent about 70% of my AUM on the US so I think it's clear sort of how I voted with our wallets. But I think certainly if you, if you look at Europe, there has traditionally been a issue with getting scaled capital to the pre IPO stage. So you know, you had a lot of this homegrown seed capital and sort of, you know, of course US counterparts setting up their UK offices, be it Accel, who's done very well there in Index, who are, you know, still big firms in the us but they really found their footing in Europe. And then in recent years you had, you know, Sequoia come in, you had, you know, Andreessen Horowitz do a big crypto play, NEA and many others. So I think that there is certainly continue to be sort of a. Well, you know, the UK has really wanted to welcome US venture capital, but of course it has also raised the question as to why isn't there more homegrown, you know, European and US funding at that later stage. So I think, you know, in some ways the industry is just more nascent there. So the law has taken time to scale up these, these funds. But yeah, I mean I personally think that we should continue to try and push for, for greater collaboration on the capital side at those later stages as well.

Do you think the, the UK is a good kind of launch pad for investing in the Nordics broadly? Because, because the Nordics seem to be a little bit of violation of the narrative that Europe isn't producing generational companies. You have Spotify, Skype, there's tons of stuff out of Sweden and Estonia and there seem to be pockets of like really entrepreneurial cultures there, even if it doesn't fit like the traditional Euro narrative. So is that an interesting angle to go set up in the UK and then deploy into the Nordics broadly?

Okay, first of all, I want to know if my colleagues have been texting you because four of my founders are Swedish, the other is Italian. So this is definitely like a setup. But yeah, look, we're a big fan of obviously investing in the Nordics. I think that my General view. And John, I saw a lot of you at the end of last year when around the US election, I was on the ground in the US for a couple of months during that ramp up and I think I remember on election night being at a sort of election watch party and a lot of people were saying to me, okay, well this is great, you know, in many ways for the US tech scene, but how will this impact the UK and Europe? And I was the one going around saying, look, this is a fantastic chance for, you know, the UK and you know, the US's closest allies to also benefit from some of these hopefully blockages that are moving, especially within the tech sector. So my view is that, you know, the UK is still a fantastic place from which to welcome, you know, tech companies as a gateway to broadly Europe. I do think the Nordics are definitely a sweet spot. So King obviously basically also being a part of that. The, the Nordic gaming community is huge.

Well, they didn't even make this list. I'm looking at this list. Cursor Client, my sequel, my technically, yeah.

Skype or yeah, King. I mean King Invest listed on the, on the New York Stock Exchange. But you know, its headquarters were in London but its co founders were, a lot of them are Swedish. But certainly we, we, you know, our second office really is Stockholm. So yeah, big fan of that. And I think that it's, it's proof that both in the Nordics and also in Eastern Europe you've had some really breakout sectors, including gaming. So yeah.

What about foundation models? Has anybody kind of raised around like we're the UK OpenAI, let's raise. This has got to be worth a billion. Got to be worth at least a billion.

Yeah, so we haven't, so yeah, we haven't had our own sort of foundation model in that sense. I think that's something that the UK is seriously considering. And as we think about the scheme of sovereign capital and secure capital and how the UK is actually going to be able to compete at that level of this sort of AI ecosystem. Of course, across the Channel in France we have Mistral and you know, famously we, you know, we've had incredible generational AI talents on the engineering side in the UK for a long time. But you know, DeepMind, DeepMind was DeepMind was started in the UK and obviously moved over to Google. So I think that, but certainly as the UK government thinks about this next generation of AI companies and sort of technology companies in general, it's certainly something that is very top of mind for how both dcit, the Department of Science and Technology, the Foreign Office and also number 10. Think about these things.

Have you thought specifically about expatriating entrepreneurs? I mean, just go find the best entrepreneur, set them up with the first round, take a huge chunk of the company and then say, hey, go to San Francisco. That's where you need to be. Go build the company. Because there is. The aperture widens. When all of a sudden you're talking about, yes, American companies, but founded by European entrepreneurs, then you're in the trillions of dollars of market cap.

Right, yeah, sure, we could. I mean, if we already look at companies that fit that, then we sort of, we can draw a line nowhere. I mean, Stripe in theory has British like, you know, founders or Irish.

Irish. Let's not.

I know, I know.

I am a separatist. I am against.

But if we really. I think what's important though is, is, you know, it's keeping. I think the UK government would be also keeping its homegrown talent in the uk. I think that's obviously a very sore spot as to why DeepMind did leave. And I think that the UK in my view, needs to look at itself and consider what are the requirements that you really need to build, you know, multi trillion dollar market cap companies in the UK and Europe more broadly. But, you know, I, I think that there is, if you look at this current administration, there has been a lot of really encouraging signs. Early at the beginning of this year, we had the AI, an AI act that PM signed off on where, you know, 20 new ideas around how to enable AI progress in the UK specifically were, were announced and adopted. And that really came from a lot of great work from, you know, collaborators in the venture capital industry in the uk, friend of mine, Matt Clifford, who has been advising number 10 on, you know, really the opportunity around AI and AI security. So, yeah, so, yeah, let's, let's see. But I think that my hope is stepping out more broadly that the conversation between the UK and the US can also start a bit of a blueprint for how the US starts to work with some of the other allies on tariffs and also on tech partnerships.

That's great. Well, thank you so much for joining. That's fantastic.

Our UK official UK correspondent.

Let's get a sound effect.

Let's get an air horn for you.

We need the.

Thank you. Honored to be that, guys.

Yeah, yeah, yeah, we'd love to be back soon. We'll talk to you soon.

Good to see you.

Really quickly, let me tell you about Bezel. You can shop over 25,500 luxury watches fully authenticate in house by Bezel's team of experts. Go to get bezel.com, tell them TVPN sent you. And we have our next guest ready for us to join the show. The founder of Intercom. Welcome to the stream, gentlemen.

Who are you?

Look at that microphone. Look at the lag time.

You were ready for this terrible.

No, it's good.

Fantastic.

It's good, it's fantastic.

I don't want to mispronounce your name. Can you pronounce it for me?

Well, before I tell you, there are two types of people in this world. I found out. There are those who guess and then there are the rare few fucking gentlemen. But thank you because you'll never guess. It's pronounced so kind of like O H N ohn.

Wait, you cut your lag right?

As you said, it's pronounced own, basically own. So as if you spelled it O H, N O, N. Awesome. A lot of people say Owen and I will accept that.

Okay, well, thank you for joining us.

It's great to have you.

Would you mind just giving us a brief interview of kind of you brief intro to your kind of entrepreneurial journey and the company that you built and kind of then we can dive into a bunch of the hot topics. I'm sure we'll be talking about AI venture, all the typical topics, but I'd love to know. Kind of like your story.

Yeah, in a nutshell. I moved from Dublin, Ireland in 2011, a long, long time ago to the Bay Area in San Francisco. We started the Intercom around then. Intercom at that time was a general purpose customer communication platform. We had a cute little messenger, the first of its type. You put it on your website, in your app and it was great for sales support, marketing, use cases. And it blew up two or three years into Intercom. We were the fastest growing software companies in Salesforce. Slack subsequently beat us. But that was our hot start. And yeah, it's been an incredible part.

Of the whole journey since Snippet trend. Right. Like you were able to boil down installation of your product to just like a few lines of HTML or JavaScript. And so the integration all of a sudden went from get a FOIA deployed engineer build on top of our API to drop this snippet into your website and you're good to go with some basic functionality. Is that correct?

Yeah, yeah. There was, there was other people doing it. There was a company called Olark years ago that had like a kind of a live chat thing. We were a little different. We were on messenger. So it was a mix between live chat and kind of, you know, asynchronous. But what was different about our approach was that you'd install the JavaScript and it would start to learn about your customers. And so you had a really data rich customer experience. So in many ways it was almost like a CRM for digital businesses. But at core to it was all the communication stuff.

How did the business model evolve? Were you on kind of just like a monthly plan for a little bit? Did you go monthly based at some point?

We tried approximately 14 trillion price plans. Most of them were unsuccessful. But we, you know, we charged per seat and per message. The problem with a really horizontal product like ours was, was that you're trying to capture value in a dozen directions. So you have a super complex pricing model if you're really trying to do all the things. So we, yeah, we did that and then eventually we picked a lane. So these days we're in customer service.

Okay, so. So you've tried all these business models. I have to ask you about Salesforce. They're moving to this like ticket completion pricing, getting away from seat pricing. Is that a reasonable strategy? Is that the future? Like Marc Benioff has kind of said? Are you testing that? Do you have any information on what we should expect from future pricing of these types of services in an AI driven world?

Yeah, I think it'll stick. We were the first to charge per resolution. Salesforce came to me.

Oh, there we go. Yeah. Hey, we're going to source.

What do you guys think about this? Does it work? And we like it. We like it because it's aligned with our customers. We don't charge you if we don't do work for you. And every time we do work, we charge you. And when we make our technology better at doing work, we earn more money. And right now, forgive the plug fin, our AI agent is the highest performing agent and service. And so we more. We earn more per customer, at least when you charge for resolutions, than the other guys, because we just do more work.

Oh, interesting. Wait, so it's highest performing not on a particular benchmark, but on just how much money it makes?

No.

Well, yes, because I've been saying that actually the real measure of AI is how much, how much economic value can it create? And it's weird to say because we want to be like, oh, it's really good at math or whatever, but I'd much prefer like, no, it actually does a job solves real problems. It solves a real problem and there's no better measure than that. Than economics.

Yeah, absolutely. You know, work in some sense is a bit of a commodity to a degree. Right. And so, you know, if you can charge more for your work than others, or if you earn more from doing work, it means that you're providing more value to the world. Yeah, totally. So, yeah, we have more customers than anyone else in the AI service agent space. We have more revenue than anyone else.

That's very cool.

Yeah. Average resolution rate, etc.

Have you been in general applying AI to customer service? Makes a lot of sense. There's a lot of spend there. It's just a generally good application of LLMs. Were you surprised at how many companies came in to try to compete in the category, given that the Intercom of AI, I imagine, is Intercom. Right. Because I feel like a lot of companies came out and just said like, oh, we're making AI agents for CX or we're making, you know, more. More native experiences. But in this case it feels like, you know, there's always been this debate, right? Is AI a disruptive innovation or is it an extending innovation? And I'm sure as the models have gotten better and better, you've just gotten more excited about their potential at Intercom. So maybe talk about the kind of market dynamic.

Yeah, it's been interesting. So in hindsight, I'm not at all surprised because it's a giant category. I mean, the space we're eventually going for is all customer experience, sales, marketing success, service. There's certainly trillions of dollars spent on salaries globally doing all of that work. So of course many other people are going to chase it. I do think that categories are going to be more, you know, they're going to be shared in a way that they weren't in the past. There's no way one company gets half of that trillions. It's just not the case. There's going to be many different players in the space. At the time, I was a little surprised. We were first out of the gate and we had so many different advantages. But I was only surprised because I had yet to realize that times are changing. The technology world is just so much more competitive now. When we started in 2011, you pick your lane, you probably would have a direct competitor if you were doing something interesting, but you wouldn't have 16. That just was not the case. And I don't have a hypothesis for why that is. I mean, if I had to guess, I guess I would say that AI is most likely the biggest innovation the world has seen since The Internet maybe way bigger than the Internet. When there are new technology changes, opportunities open left and right and opportunists come out of the woodwork. I mean, opportunists in the bus way, wonderful entrepreneurs come out of the woodwork to go and pounce on those on that moment. So I don't know, it's fascinating. It's incredibly competitive. And not just our space, every single category in AI. I mean, think of like note taking. Just make anything up.

AI is Gary Tan's fault. Let's just say it. I mean, I love the guy, but we got to hold him, him accountable for all the competition.

Wait, who is that?

I was thinking, I was saying I love Gary Tan, but it's clearly his fault. There's so many startups now.

I mean, half, half the intercom competitors are YC companies.

Yeah, I mean, you know that like something like three or four of the top payroll companies all went through YC deal. There was this narrative of like, oh, YC doesn't fund competitive companies. Like, no, they fund a ton of competitive company. But it's great. Yeah, I mean competition breeds innovation and breeds, you know, these huge power law comes. Like it's all, it's all good stuff, but it is very, it is very, very competitive. Right now I want to hear about your evolution with artificial intelligence. Take me through. Were you tinkering with the GPT3 Da Vinci API playground? Were you trying to implement that stuff? Was, were there times when it was unsuccessful and then it became successful? Is reinforcement, learning and reasoning the critical turning point for you guys? Like, how have the different eras of AI over the past few years played out into your product strategy?

I will answer that question. I first do have to mention that I think you just heard a burp live on air. Did you ever hear that?

No, you didn't hear that?

Okay, good. I just. A lot of LaCroix, it was just like the burpee moment.

Oh my God, we're all getting carbonated.

Yeah, good thing we're going to cook this out, right?

Yeah, good thing it's not live.

Yeah, good thing it's not live.

Thank goodness we didn't randomly choose to live stream the show.

To your question. So there hasn't been, for people in our space, major innovation at the model layer or within the model providers that has dramatically changed how it is that we function. So much of the innovation is in the orchestration around the models and a lot of the ways in which we've got these massive performance gains over all of our competitors is that we've built a lot of our own AI to allow us to do more sophisticated rag and use multiple models in different types of ways. We've needed to be very experimental. We've run something like 200 different AB tests to Eke out different improvements along the way.

Interesting.

Going forward, the next innovations will likely come by way of these application layer companies starting to work in their own models. At least right now. This space is so dynamic, so I may have a different opinion in just weeks. At least right now it looks like the biggest leaps forward for the verticalized AI application companies will come by way of building verticalized offerings where they have applications and models kind of working together and somehow leveraging that interconnection.

Yeah, we need an application layer. Sound effect on the soundboard. Yeah, I wonder. I imagine that there was an era where you were effectively building AI agents or AI chatbots back during the chatbot boom that were defined much more like linear business logic if then statements and you layer those up and that might be derided today, but it was value creative back then. I'm wondering if there is a world where having done that work results in a better product today because you can slot LLMs in to the business logic or train a model to interact with some of the business logic because I imagine customers and companies do want to enforce some rules and restrictions around the interactions. And so if you already have those, those, those bumper lanes on the, on the metaphorical bowling alley, you're. You're going to be able to deliver a better product. But can you talk to me about the evolution of that, that rules based chatbot development to modern. Oh, I just have an LLM that one shots it.

Yeah, well, you basically said all the smart things I could say, but I'll just repeat it. There was three generations around the third generation. Now the first generation was all the conditional stuff and we had pretty sophisticated conditional stuff where you could build big beautiful graphical diagrams that showed exactly how the customer would flow through your machine. That was great. Generation 2 used machine learning and it used various heuristics that learned from all of the human data points we have about conversations that happen to try and route people to the right answers in your knowledge base and would pull out little snippets. So we had a thing we ended up calling a resolution bot because I can share exclusively here that Zendesk threatened to sue us because we had an offering called Answer Bot. And little did we know, apparently they also had an answer.

Oh no.

Yes, yes. Generation three now is L.L. amper. And so that is one that uses AI as we know it today, and it does away with everything in generation one and two. Except, as you say, there are some companies like us that can leverage those innovations. So we sell to banks, we sell to businesses with highly restricted operations in regulatory environments that don't allow them to make mistakes. You know, you get it. Our customers very much want confidence that the LLM is not going to just hiccup and bump its way in the wrong direction, you know, hallucinate, even though, you know, we've managed to squash pretty much all.

The classic example would be, you know, somebody gets the LLM to refund them a huge amount for some purchase that.

They don't prompt injection. I heard about that at an airline.

Yeah. I think a big question I have is at what point is your AI actually better than an agent that would use the platform? Right. Because right now, over the last few years, as AI got kind of good, but maybe not great, I would still find myself in that sort of cycle of being like, you know, kind of getting frustrated and just saying, talk to a human, talk to a human. But you could eventually get to the point where somebody would actually just prefer to talk to an AI because it's instantaneous and you can really potentially move a lot faster than an agent who's working across, you know, multiple open tickets. So I'm curious, like, what, what is the point where it kind of flips? Where the average user is, you know, is preferring to talk to artificial intelligence?

Yeah, the world is coming to exactly that point for the average user, but it's there for a lot of people already. You know, we have multiple funny instances where we see people asking for the bot. We see requests increase when people realize that they can ask quick questions and get quick answers. We see resolution rates and kind of response times improve dramatically for certain categories of questions. The dirty little truth in the era of AI is that well applied AI is far better than humans. It is always available, always stays on script, is never rude, often gets the answer far more right than the humans. We've run a couple of different studies where we've classified the answers that human agents provided using internal, you know, LLM products that we've built. We found that only 65% of the tickets that humans marked as resolved are actually resolved. So the humans are way worse than they think, way worse than they report. And just anecdotally, you will have far kind of messier experiences that humans than you will with a very good AI agent. The problem is that still most AI agents are not Very good. Most of them are in fact GPT wrappers. And so there is a lot of kind of crappiness. The very big consumer products that already provide shit support don't really mind, but in the future won't be acceptable. But we are nearing that point.

Yeah. Has it been a challenge figuring out the right way to message Intercom's products given that many of your actual core DAUs on the customer side, the actual reps, are people that over time, like they have to be using the software and realizing somewhat slowly or maybe quickly that they aren't as good as the underlying system. And that's kind of a difficult, very human question. Crisis.

Yeah. Look, the reality is there's a couple realities. One reality is that, that those people on the ground and even the support leaders are often not those buying these technologies. You know, there's a vested interest in those two groups of people not adopting them. And so a lot of people adopting these technologies or CTOs, even CEOs that realize their opportunity, their, their, their operations and customer experiences could be dramatically improved by bringing these agents to the fore. I will say that often these agents are almost sugar on top. They resolve, at least right now, some of the easier issues and the humans are still needed for the harder ones. They're serving on met demand. So sometimes people will deploy fin our agent to their free customers that they never gave support to before. But often when they deploy it, like I mentioned earlier, people will ask more questions and so it increases demand too. So you're not really seeing, we haven't seen big mass layoffs where the humans are just obsolete. That said, all of that said, it will compete with human work and AI and robotics is simply going to compete with the most repetitive, most demeaning, least enjoyable, least purposeful work out there. And if you talk to customer support reps, very few of them want to be customer support reps. Long term, it's a great way to get into the tech world, earn a tech salary, learn what you want to do. But pretty much all tech people have their mind and eye on something else.

Yeah. What, what are your high level thoughts on the AI sales agent market? You know, we've seen hundreds of companies at this point and the face, the face says it all. But, but yeah, I mean I met you, you said earlier in the call that you guys will eventually get into sales and marketing. And so I'm sure you have a ton of opinions on it.

And great customer service is often a sales role. You're closing the customer as they ask questions and the Best sales, the best customer service reps I've ever worked with have always been able to turn a customer interaction into a sales interaction.

Yeah. And it's just a much different dynamic. Sort of taking inbound concerns, feedback with a product, trying to solve it with AI and then passing it to a human quickly versus opposed to spam, spamming somebody with just nonsense. My favorite one was a sales agent that was like reaching out to somebody in New York and it's like, hey.

Have you, what do you like doing?

You should try to go to the opera in Central Park.

The Big Apple never sleeps. I'm ready to close anyway. Yeah. What's your take on the AI BDR race?

I don't know. It's, it's, you know, you know the way they say marketers ruin all channels. You know, all, all channels get, you know, exploited and trashed and spammed and completely destroyed by marketers. Because the job of marketing is to find, you know, the frontier, like white space where it's not flooded by other marketers. So all sales and marketing is really exploiting to death all opportunities until people are thoroughly sick and sick to the teeth of them. So, so that's going to happen with AI, you know, unfortunately. And it's already happening. You know, I've gotten tricked a couple times with some emails. I open them, some of them are kind of on point and you're like you, this is, God, I don't even know if I'm allowed to say this F word. I've said it three times.

We're working on getting a bleeper.

But you're a family friendly show. We don't swear, but we, we won't hold it against you.

Okay. Thank you for not holding against me. I will try my very best to not use it one more time. But I, I, I don't, I don't know if it's going to work but like you said, there's a full spectrum there, there's a massive spectrum and yeah, no, it's.

The challenge is the, the any tool that's decent will get such rapid adoption because of the Internet being the best distribution channel ever and X even it used to be faster than apps. Yep. So I think the issue is, is any tool that's worth anything will just be used so much that it'll quickly lose any type of, of real edge.

I have a follow up on the cost side of things. Obviously some of these API calls are quite expensive, especially if you're doing O3 level reasoning, test time inference. Like everyone knows that It'll get cheaper, it'll get baked down into a six. Or there'll be specific chips that run these things really cheaply in even six months, even a few years, the cost per tokens dropping. But at the same time, we've heard about startups that are like, yeah, I burned through 500k of OpenAI credits in a couple months testing this thing out. So is there a world where you've actually seen an impact on your cogs or your margins in the short term? And have you had to work with the board or investors to kind of think through that cost benefit analysis or have you always been able to kind of dance around it so that the business always feels like a software business and feels like it has very high gross margins like any other tech company? Or is the fundamental gravity and the laws of physics around building a software company changed or at least temporarily changed?

I think it's too early to say and I think it's a really pertinent question. Obviously when we started and we launched Fin like four months after ChatGPT came out, each resolution cost us $1.20 and we charged 99 cents. So we decided to take a loss on that. We don't share our margin at the moment, but it's very, very healthy now. Yeah, of course, I think businesses that like ours build very deep applications on top of these base level models will be able to extract plenty of value because of what makes them unique. Those that are simply GPT wrappers will need to charge something closer to GPT prices, but model prices are just going to continue to come down. So in the same way that SaaS companies were able to make 80% margins on AWS in the future, pretty much everyone will be able to make 80% margins on OpenAI or AWS when they run their own model. So I actually. We'll see, but I don't think it's going to net out where the margin structure is completely different.

Yeah.

How much have you followed the Klarna CEO? One day he says, oh, we fired everyone. Now he says we rehired everyone next week. I think he just found the ultimate attention hack is we gotta have him on the show. Gotta have him on the show. But it's basically basically just, just flip flop. Yes.

Risk on Nice.

I don't know. Yeah, he's really good at marketing.

Yeah, yeah. What has your kind of founder journey been and where do you see the company going over the long term? Like from the outside? I think it's, you know, there's a lot of people that would see intercom and just think, like, oh, like venture back. They're going to sell and get rolled into something else. It seems like you've been in founder mode for a long time, and it doesn't seem like the writing's on the wall for you to stop. You're enjoying what you're doing. What do you see your. The rest.

Yeah. In many ways, the company, the biggest opportunity is still ahead in terms of being perfect.

This is one of those things where roll out, where we talk to a founder and we're like, wait, like, if he's really going to work on this for, like, 20 years, like, it's going to be insane. So, yeah, I'm interested to hear, like, what do you see all the time?

Talk about your ambitions.

Yeah, yeah.

I mean, I'm 14 years in now, which is long. You know, most people are like, oh.

Success over overnight success.

Well, you know, we were an overnight success two years in, and then we just did it for another 12 years.

That's great.

Yeah, maybe we messed it up. You know, there have definitely been periods, certainly near the tail end of our first chapter, where, you know, we were all tired. I actually was off for two years. I was sick and tried to run away and ended up coming back. That's a whole other show. Perhaps. But the AI thing definitely reinvigorated us totally. And, you know, it's a. You know, I won't deny that I'm 41 now. I was 26 when I started Intercom. It's a different thing when you're a little older. AI, give or take, is a young man's game. Certainly now that the world is so competitive, people are working their damn asses off. And a lot of our competitors, they're in their 20s. They're working literally seven days a week, 12 hours a day. We don't do that. So we have to take advantage of the things that make us unique. But the thing that keeps us going and that keeps me going is just the scale of potential. You know, our business is accelerating dramatically now. I think next year, our growth rate, our annual growth rate will have doubled three years in a row. And these are very significant growth rates. That was all I was looking for.

There we go. I mean, guys, chill. He's still talking. He's still talking. Come on.

Thank you.

Thank you. But, yeah, for a company at scale in the hundreds of millions, to accelerate at that pace is just insane. And it's because of this AI stuff. And yet, very literally, we've just scratched the surface. I mean, if we're going to do the future of work, then we're only getting started.

What do you think about the early stage AI market, the rapper market? People were very bearish on it. Then we saw OpenAI acquire windsurf for $3 billion. And it felt like, you know, it's very special company, very incredible team, but it felt like it could be game on for. Every big tech company needs a rapper or a startup in every single category. And so all of a sudden you could see, sure, maybe some of these companies don't become massive public companies, but. But if a founder out there is building a narrow AI solution for something that can slot very neatly into AWS or Azure or Microsoft Office, you could see kind of game on in the M and A markets and some good outcomes for the founders and maybe even the VCs. What do you think?

Yeah, I mean, from what I hear, their M and A activity is picking up. Certainly from our perspective, all sorts of bigger companies have started to ping us. It's, it's, it's kind of a thing, you know, the. What I respond to this channel question is, is, is, is, is. I just ask how, how big is this market really? I mean, if we are doing the future of work, if.

Oh, we lost. There we go. Sorry.

If Cursor or Wayne Surf are doing a big majority of future development work, these things are insanely valuable. So all of this is just way bigger than software, like AI, AI, applications, wrappers, etc. Maybe they're 100x the total software market. Maybe they're a thousandx. Maybe that's way too much. But think about it. They're doing all of work.

I really. VCs get, you know, so much shit. But I would love for all the VCs swear jar, buddy. Yeah, yeah, yeah, I gotta put one in the square jar. But, but I would love for all the VCs to just be right this time, like all the rounds, you know, the perplexity of 14 billion. Like if, you know, if they're just. What if it all works out right?

It'd be amazing. What did you do before founding Intercom? And would you do anything different? Or would you recommend that path to the next generation of entrepreneurs?

I was starting companies, I was doing consulting, software development, design. I don't know, there's a dozen paths, maybe 100 paths into this at this point. I wouldn't do anything differently. You get to a certain age in life where you love all your mistakes. Maybe you like look at your younger self and you're like, wow, look at you. Look what you did. But it made you who you are. So no, no regrets. And people should just follow their own pots, follow their hearts.

I love that. Yeah, follow your heart.

Well, I am so excited for you.

Yeah. The whole team actually extremely bullish, these conversations. We're just like, oh, my God.

Yeah. No, I mean, you guys are. You guys basically, you know, 14 year overnight success in the exact purpose.

Definitely in the conversation.

Definitely in the conversation. But no, just in the perfect position to take advantage of a massive trend, but then also deliver that value back to all of your existing customers and all your new customers.

So great time. Let's get the Ashton hall effect and thank him for joining the show.

Thank you for joining the show.

Thank you, gentlemen. Great.

It's great. Great chatting. Come back on again.

Yeah, yeah, we'll have to have you back on soon. There's so much more to talk about. We'll talk.

Cheers.

And I think we have David from Box Group in the waiting room. We'll bring him in, chat with him. We love when a venture capitalist yaps about venture capital. It's one of our favorite activities. We got a plan. I would love to get his take on what are we going to do in August? Because I think August might be an existential crisis for the show. As all of you know, every venture capitalist takes all of August off and so we won't have nearly as many guests.

I think we go to the south of France and just do man on the street interviews.

Yeah. What do you do for.

Hey, what do you do for living?

Multi stage venture capitalist. I think we have to.

What about getting in a scuba diving suit and swimming up to boats and say, hey, what do you. What do you do for a living?

Let's bring him in and we'll get his take. David, welcome to the show. How you doing?

Why limited to the south of France? There are a lot of destinations. You guys are being quite isolated.

Okay, okay, so give us the full tour. How do we make sure that the show doesn't implode in August when all the venture capitalists go on vacation and we have no one to yap with?

I think you need a yacht.

A yacht, okay.

Yeah, like you guys need a yacht. And then you travel from port to port.

Bring the search of the VCs.

Yes.

Okay. And what ports?

Take the show on the road.

We're going.

There's a. I mean, there's a level vc. And then as they get more advanced, I feel like you can find new destinations. Antarctica for the really successful Adventurous.

Yeah. If your yacht doesn't have an icebreaker, I'm sorry, you're not ready to read. You're not ready to lead the series B's of.

I agree. I think we should get into HALO jumping so when we, when we get intel, hey, there's a big VC in Antarctica. We're just, just pull in the parachute minutes before hitting the ground, seconds before hitting the ground, show up with the mic. What do you do for a living?

And if this period as you alluded to works, I mean the destinations we're going to expand to tremendous.

I think so.

There's something here. There's something here. We'll keep noodling on it anyway.

They have a wander location in all the places you need to go. I mean, let's get the plugs going.

We do, we do need a wander. We do need a wander in Antarctica.

Yeah.

They should definitely get some of those John Andrews working on it on. On board the Greenland location. The ones that just pop up purely for marketing mostly. But you know, I would take them up on that for sure.

Yeah.

But yeah. How was your weekend? How are you processing all the, the flurry of, of news and business and trade deals and biotech? Do you have any exposure in your portfolio? What are you excited about right now?

I think we. My wife makes clothes in China.

Okay.

So that, that's my main exposure. So I live with exposure. Sure, if you will. And so. And making clothes is not a good business for anybody. And. And then when you get tariffed aggressively, you start doing math and your math already doesn't work.

Yeah.

So then you're like, oh, what if we make it worse? And so I think I live with her emotions which, which impacted me. I think as a venture firm, we're generalists, we have exposure in all different categories. I think you know the TJ who's joining you after, I think we'll talk about the, the pharmaceutical side of this. I think there's. You're in a world where reading headlines, reacting to them and then waiting until the news comes out.

Right.

You read about the China deal. It's like we made a deal. We'll let you know. Know the details.

Yeah.

Okay.

Market. Market immediately starts pricing it in zero rush.

Just let us know whenever you get a chance and then we'll understand things better. And I feel like all of the news is getting rolled out like that where you're like, here's the headline, more to come. And I think reacting again, reacting to that as an early stage VC is, is important for Twitter or what we call X. It's important for podcasts and really unimportant for the actual job. So you have to balance these two stressors out which is like how do I get engaged and sound like this is really impactful to me and it matters and I have to overreact and then on the same time just doesn't matter.

Well, I think for you, if you're a true contrarian, which every VC should be, everybody's bearish biotech, they've had a bunch of of issues over the years. You should just invest in like 30 new biotech companies today. Even without any sort of real insider edge.

Just we probably did. I was on an airplane today and there's a chance that we did that.

Like 30 new deals. Yeah.

We're investors in Zach Weinberg's Curie which in fact does 30 new biotech deals regularly. So we have achieved your goal.

Yeah, I think he's hopping on the show next week to give us his, his, his take off all the biotech.

Yeah, there's going to be three more news cycles.

Yeah, I'm sure. Yeah. I mean talk more about that idea of like patience and venture. There was this headline recently that Tiger Global, they got really stung during the ZURP era but they're looking a lot better because they put a bunch of money in OpenAI and that eventually seasoned. We saw the same thing with the FTX fund buying a big stake in Anthropic and the deal winding up looking great over time.

And they invested in Cursor too.

Oh yeah, cursor.

OpenAI invest in cursor, right.

Yeah, yeah. Didn't FTX as well?

Yeah, they might have. Yeah, I think so. But they sold that. That got sold by the.

Yeah, yeah, yeah, yeah. It got sold in like the bankruptcy.

No one knows who bought it.

Yeah, I mean that FTX's investment was not one of the best investments ever. It was the person bought it out.

Of the cursor mouth on Twitter that was shared. Made no sense.

Yeah, the 200 to 500 million that was.

That's not how math works. Yeah, like there's no equation that equals that. Like you can't get there. So I was confused by that but I didn't want to keep my mouth shut.

Maybe they're like a fifty thousand dollar post money.

The three is not very good at numbers yet.

Yeah, we invested in the seed precede of Cursor and I. That math wasn't correct. Yeah, I can tell you otherwise you.

Wouldn'T, you wouldn't be Doing podcasts anymore.

From a hotel room.

Yeah, yeah.

I would be on my yacht.

Yeah, yeah. I mean, speaking of, like, cursor and just like the, the, the AI application market broadly, how are you thinking about demand from the hyperscalers for finding a dance partner in the application layer companies? There was a big meme for a while that all these companies are just going to get steamrolled by the foundation model companies. Now we're seeing deals get done. And I've been, you know, arguing with Jordi about, you know, what if there is a world where every hyperscaler needs a dance partner in AI in the AI application layer and there's just a flurry of M and A deals, that seems plausible, but Jordi's a little bit more hesitant about that. What's your take on how the, how the M and A markets look for application layer AI companies and big tech now in the new era?

I think, I think, you know, application layer companies is a catch. All of so many different behaviors and pass in. Does every application layer company look the same? No, I think what you're looking at is in many ways a brand. And there is like a speed, momentum and scale advantage to not being first mover, but to being fastest mover. Is there a barrier to switching like there has been historically in software? Probably not. But in many spaces, barriers haven't been the thing that defends winners. It has been brand and it has been sort of recognition. And I think that that piece has been under sort of underappreciated. And OpenAI is the perfect example of that. Right. Chat GPT. The idea that that, like, name.

Yeah.

Created it became a household. It's like, hard to say. It's weird. I don't think technical people understand, like, why is that the name? But yet here it is. Household name.

Yep.

It's. It's very hard to disrupt that on a better model. A better piece of technology isn't going to suddenly, like, the same way Google won search by Google becoming the verb. Not because Google's search engine necessarily was always the single best product, the single best tech, even though it was for the most part, I think there's a brand value. And so at the app layer, I think brand is equally going to be important here, if you can and more users, more usage on your product, it ideally improves because of, as you know, AI. And that's going to matter. There's a compounding value of scale that's different than just the initial momentum. And I think that that's underappreciated in Terms of M and A. I'm more interested to see if the big companies need to buy app layer companies. Right. The fangs of the world or the big seven. If the government allows actual M and A to happen anymore. I think that's the more intriguing unlock versus all the sort of foundation models buying a handful of app layer companies. I think there is a value of sort of buy users and by scale that you're probably looking at at the beginning stages.

Yeah, it's almost more like product. Like I feel like Google has their destination website. They can point google.com to anything and they can funnel a billion. I mean Sundar recently said that Google has over a billion users of generative AI. And this is the same story with Llama getting stuffed into WhatsApp and Instagram. They have a billion users, but the product isn't thought of in the same conversation as ChatGPT, which is a destination, a front end, the front door to artificial intelligence. And so. So yeah, there's something that there's some still secret sauce to building really great products that happens kind of only in the startup ecosystem.

And if you look at Facebook now meta on the way up, they were buying things every step of the way that felt either threatening or felt interesting. So if you go back to Friendfeed, a, they bought a CTO there, right? And so Brett stayed on and built a big chunk of the technology inside of Facebook. But Friendfeed was an interesting early momentum company and then they bought Obviously Instagram and WhatsApp totally sort of separate channels within this bigger ecosystem. It ties into the business model. I look at those acquisitions as how you historically built companies in tech. If you go to this previous 10 year period when the government sort of stopped allowing it and valuations and founder expectations just became misaligned with acquirers. You saw so little M and A in terms of companies growing and getting bigger. And I think you're coming back into an era where the valuations of the foundation model companies, the valuations of the big tech public companies are so large that you can actually hit a founder expectation in terms of acquisitions and not make as big of a dent. You're not paying Twitter page 10% of their equity for semise back in the day, which is crazy.

What can can venture as we know it today survive even in a low M and A environment just because all that matters is the power laws or does it make things a lot? You know, the power law has survived.

For 10 years because you got it. You had a period of zerp and then you had I think, well, me.

A, I 10 years is like one fun cycle.

If you're lucky. But, but I think it created momentum of liquidity for a moment and I think it saved this dearth of M and A. And so is this moment in time where people were able to find liquidity after seven, eight years of very minimal M and A. Do I think VC needs M& A as a like secondary channel for exits? Yes, I, I think v 15 years into my career that was like a bet I've been mostly wrong on is that there would be a lot of old companies buying new companies. I think AI might be a catalyst for that forcing function. Right. If you are not able to buy software, you might have to buy companies to modernize.

Yeah, it's super interesting like playing back some of the other Facebook acquisitions like they bought Control Labs. Do you remember this? It's a rich wristband that could basically read your mind. And so if you, if you pinch your fingers it would pick up on the electrical signals and be able to put that into the computer in the VR face. They acquired control labs between 500, 500 million and a billion. And this was, when was this? 2019 I guess. So it's been six years. They still haven't commercialized that technology but they're going to in the new Orion smart glasses and so just so much they have John.

It's, it's, it's in the iPhone when you squeeze it it's like give John Moore this dopamine, he likes it.

The iPhone is made by Apple. I just want to clarify.

But, but, but then Facebook was trying to buy a VR fitness app and they got blocked and everyone was like it's so dumb because like the FTC said that, that they were creating a monopoly in the VR fitness industry and everyone's like what are you talking about? There is no VR fitness industry. But at the same time when you think about Facebook's really or Meta's really long term horizon, if they can sit on Control Labs for six years before seeing any sort of economic return, they're still not even close. What could that team gone on to do? Maybe they could have done something cool. I don't know.

Facebook from 2005 to 2015 if 50 acquisitions.

50. Wow.

50. Right. These are real and some of them were Aqua hires or some of them were, were the version of Aqua Hire that was aligned to like future, you know, value at Facebook.

I think Sam Lesson came in through.

There was Hot Potato, Justin Schaefer's early company. There was a bunch of early acquisitions that were team acquisitions when it made sense and those people became involved important at Facebook. And I think when you look at today's modern companies, they were not built off of that same talent acquisition the same same way to build a company. I think you might get back to that because not every one of these companies is going to succeed. But if the value of the ones that are succeeding skyrockets quick enough, your equity becomes attractive to a company that is looking for a home. And I think that's a real alignment.

You talked earlier about companies potentially buying brand from all the companies that you've invested in. Brand in the early days doesn't matter. You know, usually when you guys are writing a check brand, if somebody's trying to sell you on how great their brand is, it probably means there's other fundamental issues with the company like the team's not, you know, anyways. Brands take a long time to build. I'm curious if you have any framework, framework for evaluating whether or not a team has the capability of building a brand that is going to resonate over time. Just because brand can originate from so many different places, right? You can build a great brand because you ship quickly. You can build a great brand because you have good taste, you know, and your marketing assets.

I think brand is this, this big amorphous word that when applied to specific spaces means something totally different. The brand that cursor has built their audience and, and how they've gone about building that is totally not related to a D to C. You know, we're early investors in like Warby Parker. Warby Parker is a version of a consumer product brand. I think in software capital helps. I think there's this two sided thing. One is users and a community, however that fills in within your company. A community can be like a B2B startup building customer momentum where the customers are telling other people to sign up. But I think it's users and the community of users sort of spreading the word. And I think in this moment in time, capital helps. If you're telling this like every six months fundraising story, you're creating momentum for your company that is different than your competitive set. And so if you can go out into the market and say our valuation doubles up every six months, we're able to raise from top tier investors. You're able to hire differently when you're going to pitch in a competitive hiring process and you're able to show that this is the rocket ship that you're trying to tell that potential hire that it is. I think those Things matter. And I think that a brand in all those components can compound to make you some version of, I don't want to say too big to fail, but sort of you're getting made the winner.

You have a lot of people that care about your success.

Yeah. And you're getting made the winner. You're the default winner at some point. You're not fired for picking that company. If it gets to be that big of a name. No one's fired today for picking Salesforce. And I think when you're trying to challenge a company that no one's fired for picking, you have to really be a unique outlier to get somebody to risk their job. In essence, by picking your company, we're an investor in the eight year overnight success of Clay. Can you do your sound effect, please?

Which one? I mean, we got a lot. Just do them all.

Thank you. Congratulations. Perfect overnight success.

That one. But you know, Clay, today, eight years in, is starting to, to do a go to market motion that starts to compete with some of your entrenched software players. And I think that it takes a lot of product build and that's been in the past 10 years, something that's been hard to do as a startup because you're not funded for these five, seven year builds of software. And I think, you know, as the Intercom founder said, if you can develop software automatically or through, you know, a combination of your engineers and AI, the scale of product that you can build will happen a lot more rapidly.

Tell us a story of meeting and investing in TJ back in the day since he's coming on next.

Good one, tj. Yeah, I met tj.

He must have been a rascal back then.

I think Skype, to be fair, it wasn't Zoom. It wasn't like Google Meets. It was pre all that. So it had to be Skype. And I was in the room with, I believe, TJ's first employee. Not TJ and not Elliot. So it's like the first employee was physically in the room and he skyped in. Luckily, TJ and TJ and I really liked each other, but we didn't meet for like four or five months after we Skyped and I invested. So it's been a journey. You know, we were, we were the first investor in Pillpack in that original. He was in techstars in Boston and really feels good when you get the sound effect.

You gotta work for it, you know.

Brings the energy level like way out.

It takes a lot long time to get feedback. And this is like immediate, immediate all.

You had to do is do something 10 years ago.

Exactly. So I appreciate that.

12 years ago.

It's a thankless job, venture capital.

So. Yeah. And, and then, you know, watching TJ's journey and then tricking TJ into becoming a VC, it's probably a point of, you know, pride in my career and watching him thrive, being able to ski, golf and invest all at the same time, which is first to do it.

No, it's funny with tj, we gotta, I gotta ask him about this when he comes on, but it's like I, I don't know if I've met, I've met anyone who's a vc who hates VC broadly as much as tj. Like he seems like he has like a disdain for pride in it. Yeah, yeah, he has a pride in how, how much disdain he has for the, for the profession. But I think part of it, he gets some ability to kind of laugh at the industry given that, you know, he got to a billion dollar outcome. Billion dollar outcome less than five years.

He knows something about an industry that no one else knows about.

And his company got to a billion dollars of revenue in less than 10 years. And so I think you get the ability to kind of just laugh at it.

Powering Amazon's pharmacy, like it's still a, it's still a product in the world.

I think his ability to have seen the inside of one of the biggest companies in the world and then operate there, which he also found funny, I think gives him this unique insight as an investor to really have a top down look at the healthcare system and a bottoms up as you built a startup by competing against the world and then sitting inside of Amazon, you got to see sort of the world operate at scale. I think it's a unique perspective.

Did you see Business Insider's new list of the 100 best early stage dream.

In 26 to be on that list.

Do you feel like you got snubbed?

They went to him and they said, David, we know you're really number one, but you got to pay us seven figures.

Well, it was ultra competitive this year, as I don't know if you saw, but Peter Thiel just barely made the list. He's at 6:67. Marc Andreessen didn't make it at all. So you're in reasonable company.

I mean it's a data driven list and nothing is more truthful in venture than data. It's hard to argue that random pitchbook and crunch based data isn't the correct outcome for rankings.

Yes, yes, exactly. A Lot of snubs on here, but a lot of great people.

It's sad because I got this. This inbound. I got this inbound spam email saying that I could buy a plaque for being on the list. And then I didn't make the list.

Oh, you didn't make the list, But.

I bought the plaque already.

Oh, damn.

Yeah, I mean, I'll share this with you. This year we're thinking about doing our own version of the Midas list of the top 100 venture capitalists. Not just seed across everything.

On what?

Just the top venture capitalist. TBPN's version of the Midas list, but on Criteria Vibe. Well, I mean, mostly we're putting out a simple call if you want to be included in the list. Packages start at 100k and go up from there. So you can reach out to salesbpn.com if you're interested in being included. If you're a venture capitalist and you're listening, we'd love to include you in the list of the best venture capitalists. We accept. We accept credit card and wire transfer.

And everybody was worried about how you guys are going to monetize it.

Yeah, yeah, exactly, exactly.

Figured it out really quick. I mean, year, year one, you. You crack the code.

Yeah. I mean, this is like the old, like million dollar webpage. Do you remember that? Where you pay $1 per pixel? What was that?

You accept equity.

We'll take a stake in your management company. We'll take a stake in your life's work to be on the list.

This could be a secondary market too. There's a lot of opportunities here.

Potentially. Potentially. Anything else? Top of mind, Jordy.

Oh, I was going to go through the timeline.

Let's do it.

And so I have a post here. I want you to react to it. David.

I thought we were going to go through the top hundred.

No. Yeah, the top. We'll go. Yeah. And you can go long short. You can go on the record and go long short. Every single top hundred. That'd be great for your brand.

It's a list of the best venture capitalists. And Marc Andreessen didn't make the list, but Marc Benioff did. And he's not a.

Anyone from Sequoia did either.

Oh, no, I like. Pretty sure.

Not that I read Sorry, Andrew or anything and thought about it.

Sean and Andrew, he got Alvord has.

Never funded any good seed companies, to be fair.

Yeah, notoriously bad. Those guys just can't make a buck, you know, those guys just. Just scraping pennies through the couch cushions to, to pay.

I don't think anyone on that first round, mate. It was a great list though.

It's great. It's great. Yeah.

I mean not bitter or anything.

Okay. I have, I have a post, this post from M. Stanfield. I'm just going to read it out loud to you, David. Me, I'd like to invest in this brewery. Sec. No, dummy, you're not an accredited investor. Me? Cool. I guess I'll just teach myself some double broken wing butterfly trades by watching TikTok SEC. Yeah, I mean for sure. It's your money. Do whatever. What do you, what do you think about it? Yeah, yeah. What do you think about accredited investor laws?

Oh, I didn't know where this is. I thought we were gonna. That I have to fund a brewery. We funded a nicotine company. So it felt like in the same vibe, similar accredited investor look like I, I, you know, I think the challenge of having credited investor rules is that you have it in one area of like the country and not in everything. And that's the challenge to me. Right. You, you have of like scams left and right throughout the economy and yet in this one area it's like, no, there are a lot of rules here and so I think that feels unfair. So to me you're either going to sort of clean up the ability to invest in things across the board or you should have sort of everybody operate at your own risk.

It's like a level playing field generally. Right?

Yeah.

And so I feel like that's the issue. And then there's all these like gray areas of like getting around it which feel like you're not holding the bar properly. So I, I don't know.

What's your reaction to the new news that Elizabeth Holmes is advising her husband's AI medical testing startup which can conduct diagnostic tests using a small sample of blood from prison?

I mean we were saying this when we, when we, I think she's. So when she was in the news, you're saying like the real way to be vindic. Vindicated is not just get out of prison, it's to come back, run back the same product, but actually it's real.

Yeah.

My first question is what are we gonna do with the blood? Right. Like, like where does it go? Like the collecting is step one, but then what?

So yeah, I think send it to prison. She should be doing the titration in her prison cell.

Right.

Is this about like the young boy plasma thing in that direction?

Yeah.

Anyway, what do you think? Klarna CEO says His pursuit of cost cutting, fueled by advancements in a I has gone too far. When you have a Port Porco that's later stage that says they're, you know, cutting everyone due to AI, do you get, do you get worried? Are they?

No, I think there's, there's like a timing and sequencing here.

Right.

When you overthink state the present, you may be also underestimating how soon the future will be here. And so it feels like a nice mid cycle story for the eventual outcome as you guys alluded to before. But it like does 90 plus percent of customer service get solved by AI? For sure. When you look at like E Comm customer service generally like 65% of the questions are when am I getting my item? That feels like you can automate that.

Right.

And then you start going to the next chunk of things and there's like 3 to 10% that feels like you actually need to think about how you respond here. And even in those situations it's typically some version of a save. And so I think as you get to customer service across most companies that becomes relatively automatable sooner versus later. I just. The idea that we need to announce that we're going to let go of a lot of people because AI is magical. Today might be a stretch.

You thoughtfully informed us that the iPhone is made by Apple. Do you have any reaction to the news of the new Apple products that are launching? They're potentially a curved iPhone without any cutouts in the display, new meta Ray bans competitors, new Apple glasses, and then Apple intelligence developments. Are you, are you the type of person that lines up to buy the latest Apple product? Do you like all these weeks, big.

Line, big line guy over here.

I want to stay, I want to stay focused on being a vc.

Sure.

Smart home, right? You didn't mention the screen that goes in your house, which I think for every VC is just like a pipe dream to have screens everywhere. And so that is another one of the products that is rumored to be coming out. A new Apple tv. We're at like six years later, new Apple tv. So there's a lot of opportunity here to spend a lot of money. The foldable phone confuses me.

Yeah.

I don't know.

I don't need to fold it.

Well, I feel like there's an iPhone. There's like a baby iPhone for little hands. Then there's the big iPhone for bigger hands. Then there's a little iPad.

Yeah.

And a big iPad.

Yeah.

So the foldable phone is like you.

Have you seen the demos In China, where it's three phones stacked together to the size of one phone that you unfold and you get a tablet. That's pretty cool, right?

So then I have a iPad.

Yeah, but in your pocket, I just.

Want to be able to, you know, you can put a newspaper in your back pocket. You pull out the newspaper and you unfold. You pull it out. That could be just kind of a cool. This is.

This is interesting. They said Apple's pushing into robotics, which will include a tabletop machine with a robotic arm that would feature.

What does the arm do?

I don't know. Assume it can, like, juggle for you or something. Yeah.

Or it gets you. Or it gets you beverages. I feel like that's the other, you know, VC pipe dream. The robot that just brings you stuff.

Yeah. Beer me, Siri. I like it. Anyway, this is a fantastic conversation. Thanks so much.

He's going to hang out for a minute to say hi to TJ.

Okay.

I just want to see what TJ's facial hair looks like today.

I have one more. I have one more post from a former employee and, and a friend of mine, Josh Harris. He says American oligarchs be like, this has over 100,000 likes, by the way. American oligarchs be like, oh, I founded Bluber. European oligarchs be like, yeah, my family owns the trees. Have you. Have you found much success on the LP side in Europe? Do you go, is this Josh Harris from Apollo? What's that?

Is this Josh Harris from Apollo?

No, Josh Harris. He was an EIR at Paradigm.

I was afraid of. I was afraid of Apollo, so I didn't want to say anything. Just clarifying. You don't mess with private equity people ever. Real cardinal role. We have a great, mostly domestic lp. Big.

Okay.

Damn. Big tree.

TJ Matrix.

Yeah.

Never know.

Big, big, big tree. LP base. Yeah, big trees.

I talked to a lot of VCs that are raising new money from LPs in Pyongyang, getting North Korea the final frontier, and Antarctica.

That's why they're there in the summer.

Yeah, exactly, exactly. Anyway, let's bring in TJ and. And we can all chat. Hopefully the. The layout works here. Tj, how you doing? Good.

He made it. He finally made it. Let's hear it from the crowd. Yay.

Welcome to the stream. Tj, how you doing?

It's great to have you.

Great to be here.

And David just had to join, too. He's just so proud of you. Not only the company that you built, but your transition to venture Capital, which is the highest and best use of any but any genius's time.

We were trying to assign credit for your success, and we kind of broke it down like 80% David. 20% you. Does that sound fair?

Yeah.

I mean, 70, 30, maybe.

70, 30.

Okay. Got to give yourself a little credit. How's your. What was your first impression of David back in the day? I gotta ask.

Ask.

You know, it was pretty good. I talked. First time I ever met Dave was a phone call where I'd already told like, five investors around was closed, and somehow weasel his way into the round anyway, so he must have been. Made a pretty good first impression.

I think it was Skype. Was it phone.

Well, I was like, at some conference, and we kind of met at Skype on. On a Skype, but then we actually talked like the next day on the phone, and that's when that happened.

You remember that?

I do.

I feel like your memory is more shot than that.

I know. It's a rare. It's a rare memory for me.

Thanks for. Thanks for letting that stick. Is that important for you?

Yeah. Very meaningful in here on drug prices. Get this conversation started. Very exciting.

Were you. My last question for David. Were you worried that TJ would sell secondary at the B and get too caught up in Porsches in that whole world? Or did you know that married at.

The BE and I bought a new 63 wagon? So it didn't.

There we go.

There we go. There we go.

I was worried about tj, my daily driver.

Actually. I still drive that car.

So I was worried about TJ selling drugs at the be. Honestly, that was. That was amazing.

That's great.

Thanks for having me on, guys.

Awesome.

Thanks for joining me later.

David, great to see you.

Cool. Yeah. Tj, take us through it. What was your reaction to the news? How would you actually summarize what the proposal is? Because a lot of these press releases get written kind of aggressively, and then the actual implementation is very different. How are you processing the news and. And. And what's your. And are you really taking.

Are you getting some of that context directly on True Social, or do you wait till it hits other parts of the Internet?

Wait for the delay? For sure. I mean, I think maybe helpful to like, level set, like lay of the land for folks that are kind of less please familiar with the category. So, you know, I think probably the problem I've been most focused on be to, you know, beat a dead horse on. On Twitter is this rebate issue. And I think in many ways that's the most Interesting part of the executive order and it's the thing I'm most excited about. So today if you're a normal consumer, you go to the pharmacy, you need to fill a branded prescription. So like a higher cost prescription, maybe you need an EpiPen and it's January and your deductible just reset, or you want to fill a GLP1 at the counter and it's not covered by your insurance, you end up paying something like three to four times order of magnitude what that drug actually costs in the U.S. i'm not even talking about like what it costs in other countries, but what it costs net in the us. So for like in Ozempic as an example, you're paying a thousand dollars or so, which is the list price, the gross price in the US but the net price is actually $250. That's the price of the PBM the pharmacy benefit managers negotiated. And you've effectively paid $750 more than that drug costs. And that money is getting captured by either the pbm, the insurance company or your employer, usually some combination of all of those things. And everyone's always bemoaned pharmacy benefit managers, obviously they're kind of everyone's favorite punching bag, the middleman in healthcare and they're capturing all this margin. And to some degree that's, that's true. But no one has come up with a solution that could be an alternative path that could work better. Right. That's the sort of fundamental issue is like you can hate how the mechanics work today, but without an alternative, without some alternative, it doesn't matter. And so I think what's most interesting about the EO is that there's a specific call out around requiring that pharma companies have comparable direct to consumer prices to list prices in other countries. Right. So you take that as epic example in the UK, that's a 150 to 250 drug. Actually not that different from our net price. Right? It's sort of similar, it's a little bit less, but it's like not that different. They're basically requiring pharma to have that sort of pricing available if the consumer is just paying cash, kind of paying out of pocket. And why I think this is so interesting is if you start having these things get priced in somewhat of a rational way for consumers, all of a sudden the need to negotiate these rebates and have all these kind of backdoor negotiations and these fees and all this stuff that creates the complexity effectively goes away because you have some version of rational pricing for consumers. So there's a bunch of other stuff in the eo and I'm happy to get into some of the more nuanced complexities, but to me that's pretty exciting if you actually have like normal reasonable cash prices for the end customer.

So just staying on prices. Is this confounded by the fact that in other countries they have of larger government sponsored health care plans or. So when we talk about Americans paying higher drug prices, are we saying American consumers versus European consumers or are we saying that the same pharmaceutical company actually makes more money from a single dose in America versus Europe?

Yeah, so both is the short answer. But I think what's happened in the press that is really been challenging is that everyone always talks about the list price as the price in the U.S. right. And so the narrative if you listen to like the rhetoric over the last handful of years is like we're paying 10 times as much for Ozempic or we're paying 10 times as much for insulin. We're not. The list price is 10 times as much as the list price in the UK we're paying. And it says this in the EO. This is definitely the truth. We're paying two to three times the net price.

Yeah. The Wall Street Journal here said that the list price for diabetes medication Jardiance was $611 for a 30 day supply in the US versus $70 in Switzerland and $35 in Japan. That's what you're talking about being not entirely accurate.

That drug is probably actually like 100 bucks net in the US. 100 bucks.

Okay, got it.

Yes. More expensive.

Yep. But not 20x.

That's interesting. And so I think you're hearing and like, you know, I think you're hearing a lot of the dialogue like be about like all the downstream implications of R D not going to be any investment if these prices come down in the US because really one's willing to pay. That's an interesting conversation. People should have that conversation. It's, it's pretty complicated and nuanced but I think everyone can agree consumers shouldn't be paying 10 times as much when they get stuck with the full bill.

Yeah.

And certainly shouldn't be paying three times as much as the PBM is paying or their employers paying. That to me is what's most interesting is you could come up with it. There's a real credible solve here potentially for that problem, which I think is much more. Yes. Compelling and interesting.

Cool.

What are your thoughts on the market's reaction? I Think everybody expected this massive sell off in pharma and biotech. And maybe it's because there was other news announced this morning. We haven't seen that, but.

But biotech markets went up by like three.

Yeah. Do you think people are processing this? We have.

We heard earlier was that it was kind of like. Like the, like a really, really bad scenario was priced in and this was less bad, so it popped. Do you buy that narrative or what? What are you taking away from the kind of. The market reaction? Yeah.

So the PBS and pairs have gotten whacked, which makes sense if you think about the dynamic here. I think there's a lot of skepticism about how, how much this can actually be implemented in the success that the have. If you jump back to the last administration, they tried to repeal rebates, which is solving the problem I just described. It's. It's sort of getting rid of this excess margin that's invisible to the consumer. And they failed. They got it pretty far along. It was like an admirable effort. But ultimately CBO shut it down because rebates do contribute to lowering premiums. And there's things that made it difficult to get rid of rebates. They also had an MFN approach on Medicare Part B. Drugs. So like drugs that are dispensed if you're in office, things like that. And that failed in the last administration. So I think my sense is it's some combination of. If the real punchline here is that effectively this is a backdoor way to get rid of rebates, it doesn't. It's actually not that big of a deal for pharma. Like they're still getting their net economics. It's just bad for the middleman. Right. So that's like one interpretation from the market. And then there's probably also just some skepticism about whether this will actually get implemented. And I think that's fair skepticism given the, the historical track record here.

What does this mean for pharmaceutical R and D, the way it's done? We talked to Zach Weinberg a little bit about NIH funding getting cut. There's debates about how research gets done in, you know, the Ivy League universities spin out a lot of drugs. There's so many moving parts to actually get us what we want, which is probably just like a cure for cancer or just great new drugs. Right. How is the actual pipeline evolving through all these different changes when you stack them all up?

Yeah. So if you jump to the other, other components of this, beyond the consumer implications, that's where I think these questions become more relevant. Right? So if there's really, you know, an MFN for the net price that we pay compared to other similar situated companies or countries that that would have of potentially some of the impacts folks are concerned about on R and D, I think we're so far away from that and that's so difficult to imagine truly getting implemented on face value that I'm skeptical that that's really the thrust of the CEO. I really think it's a potentially a better way to eliminate rebates than historically. I do think if you kind of play out, let's assume that all of a sudden ozempic does cost 200 bucks at the pharmacy counter, which I do think is a credible path here and it will be reflective of what the true net cost. And all of a sudden consumers are sort of just paying for most of these products out of pocket versus like bothering to use their insurance. And then you have pharma companies competing on price to win the, to win the transaction. That's actually I think how net prices come down ultimately. Not because there is going to end up being some true kind of dead net MFM that, that they're able to execute against. So I think the. But the debate about R and D is sort of, to me just from a practicality standpoint kind of two clicks away from where we are today. And I'm pretty focused on can we just get to a place where consumers are choosing these products based on price instead of PBMs and other middlemen trying to determine price.

Why is the market for Ozempic so competitive? On day one you hear this whole narrative around patents and you know, the whole idea is like, yeah, you should be able to incentivize this like this heroic Herculean research effort because you'll generate all this value over the long term. And that certainly happened with Novo and their share price. But at the same time it feels like the GLP1s came out, there were like every major pharma company had one around the same time. Then there was compounding going on. There was. So it felt like they were already generic almost, but I know that they're not. But, but why, why did the market play out in this way is just because it's such a dominant technology, everyone was thinking the same idea or something. What happened there, because it was originally.

Approved for diabetes, not weight loss, and that weight loss was a byproduct that they figured out was a, was a, not a side effect, but also an effect of the, of the products. So when it caught, you know, the public's eye, it was already much farther along in its life cycle than a traditional kind of new indication, new drug.

Got it.

That being said, like the, the price Dynamics with GLP1s are not that anomalous. Like if there's a successful product and there's a known pathway, there's going to be other similar products that get developed in the current ecosystem. Supply chain, current structure that does drive down that price. That's why these things don't cost $1,000 anymore. And so their net price is 200, 300, $500, depending on the how new the GLP1 is. So like the system actually kind of works okay right now. Like the price does come down based on competition relatively quickly. It just doesn't work particularly well for consumers in these instances where they're paying.

Out of pocket, everyone else is wearing a hat. So I wanted to put on.

Can.

You comment at all on Europe's existing solution? They have some complex system of price controls where they tell us drug makers what they can charge is what we heard from an earlier guest.

But yeah, somebody else was saying that this EO is like Bernie Sanders dream. Is that true at all? Are we in left wing or right wing territory? I can't even tell anymore.

Yeah, I mean that's going to depend a lot on exactly what's being contemplated here.

Right.

I think if the extreme interpretation is these are literally price controls at the government setting, like, yes, I think you're kind of in the Bernie Sanders extreme version of, of managing these prices. I think if you take the other extreme and it's really focused on consumers and they say, well look, either you can set reasonable prices for consumers that are somewhat comparable to list prices in other countries, or consumers can just buy these drugs from other countries and import them here. Yeah, that's not particularly, that's not a price control, that's just actually opening up the market to more competition. So really I think it depends on the exact, the exact implementation and what's being contemplated.

Yeah. Where are you seeing opportunity in startups in healthcare to kind of carve out value or deliver value in healthcare broadly right now?

I mean, as you can probably tell from my, my tweeting, I'm, I'm quite interested in how you pull forward shopping and pricing into healthcare. Like to me that is the linchpin to make the category work better. And it's a lot of the work that we did at Amazon, as far as I know, was the first time you could actually see an insurance price for something before you bought it, healthcare, which is pretty insane. And so, you know, I think being able as a consumer to understand what your options are, how much they cost, what's available and ultimately like transact in a very seamless way, I think is the most interesting thing. Now that could be like literally what feels like a marketplace.

Right.

I think that's a very interesting opportunity. And different categories, it could be utilities that make that possible. So like super clear, like APIs for pricing. There's a bunch of permutations of things that enable that. But that's what I'm still.

How are we talking about APIs in 2025? Like it's the age of AGI, ASI. Like how do the insurance companies not have APIs? This is insane.

Yeah, I mean, what's going to end up happening? Because you know, similar to faxes, we still send faxes, but really it's just two digital interfaces on both ends. You're like, with all these like phone agents that are talking to each other. But it's basically, I swear to God, I don't know. This isn't hyperbole.

Like this is crazy.

Insurance companies are like, okay, cool. Like you want clear pricing and you're bombarding us with phone calls with your AI bots. We'll just give you like a dedicated AI bot and you guys can procute this and figure it out.

11 labs. Yeah. This is going to be like voice agents win everything instead of just building an API. Are there any places where AI in healthcare makes sense or is exciting for you? There's like the super frontier research going on at DeepMind. There's protein folding is solved now, there's stuff like that. But then at the same time I can imagine the use cases you described being very real business cases.

Yeah, the voice agents specifically feels like an area that's experiencing somewhat rapid growth. But the nature of that also means that it's probably, you know, it is hyper competitive. So I'm curious if you think categories like that are even investable.

It's tricky, right? I think I. So I buy that there's going to be a bunch of administrative efficiency in healthcare.

Right.

Things like phone agents and prior authorizations and other kind of very laborious work, straight like workflows. It's much less clear to me where that value accrues. I think that's the tricky bit. Like there's is an argument that it actually accrues to the service businesses. Like that's historically where the value accrues in healthcare. And so maybe the most Effective service companies can accrue that value by just being good at implementing AI. The place where I'm pretty convicted it will be valuable and will drive real venture returns is companies that are good at compounding those as differentiation for consumers. So as an example of before, it would have taken a human $40 to book you an appointment to see a specialist. If you can use an AI bot to do that for two bucks, that unlocks a new consumer experience too, right? It's not just like an administrative efficiency. And there's lots of these examples. That's probably what I'm the most excited you mentioned.

Compounding. What's your take on drug compounding?

Oh God, I'm quite vocally anti drug compounding.

Why? Is it a quality issue or is it just a market dynamic issue?

It feels like he's an IP respector.

Whatever the right nomenclature is. It's twofold. I mean, I do think there are, there are real safety concerns. Last time there was a prolific compounder compounding a commercially available product at scales and like a compounding center and they killed 100 people with meningitis. Like happened reoccurring. Like not, not claiming that's going to happen here, but that is like the overhang from compounding. It also just it. It sort of outside of these temporary shortages very much violates IP law. And to the. Totally to the conversations before about whether there's any incentive to do R D. Well, if someone can immediately just copy, there's certainly no incentive to do R and D. It's much worse than some kind of price.

Is it kind of. Is it kind of beneficiary? Like is. Is there. Yeah, the other in compounding because of the Internet or like is there a. Is there a market force that's driving the increase in compounding or is it just like no one ever thought to do the loophole before?

Well, the funny, the funny dynamic was that. Jordy, I was just going to say it's not like people are compounding and then you know, hey, we didn't have to do R and D. We're just sort of like going to compound to this and then we're going to pass the savings on to you. That's been like a big part of like the message messaging online. And it's like, no, like you're gonna pay the same and like you're gonna like it and just like be happy that you're getting the drug. It's been seemingly.

I think the market dynamic is rebates, right? If we govi or oz epic Was the net price for consumers because these are now out of pocket drugs. And they were 200 bucks, 300 bucks. Is there like much of a market for compounding, which are also 200 bucks and 300 bucks? Like the reason that there was so much demand for it is because of this disconnect between list prices and net price. Right. And so if that dynamic goes away, all of a sudden the opportunity for compounders to really gain share is minimized. Right. Because like, I can understand why someone would really not be willing to or could afford paying a thousand dollars a month and they can get the compounded product for 200. But if we're talking 200 versus 100 or 150 for a compounded product versus the real product is a very different calculus for the consumer.

Yeah.

What, what percentage of doctors do you think are using Chat GPT on a weekly basis? And should there. Is there a big wrapper to be built there just giving them a more HIPAA compliant version of Chat GPT? I can't imagine. Shouldn't be legal.

I bet it's like, like using it at all on a weekly basis like most doctors, I would imagine at this point using it like as part of their workflow all day. Probably still a smaller subset, but definitely in the double digits.

Is that good?

Is Chat GPT HIPAA compliant?

He's just asking the most obvious.

You don't want to be dropping like specific patient information into ChatGPT, but like you can certainly do.

And generalized. You can do generalized.

There's other ways to do that. But certainly generalize like workups and notes and like we're using it a bunch and one of the companies I'm involved with to help, you know, automate the questionnaires or the, the notes or things that happen downstream for efficiency. Like makes tons of sense. Should. It absolutely happens and we'll continue.

Yeah.

Some of the biggest, you know, I think everybody has this idea in their head that you're going to be able to go to. It's like AI doctor. I don't know what that looks like. Right. I don't know if it's embodied. I don't know if it's a screen. I don't know if it's a doctor's chatgpt.

Roughly.

Yeah, yeah. But I don't know. I don't necessarily know what the form factor is. But as an investor, are you. Is that a category? How do you think about that opportunity? Right. You know, at a high level, is that one company that's just gonna.

Yeah, we've seen that for lawyers. Is there gonna be.

Yeah. Or is it more of like a copilot approach and it's just less exciting than it sounds? It's just more doctors can see more patients and deliver better service. But. But how do you see that category? Because it's just one of those areas that people always bring it up in the context of, oh, yeah, everybody's going to have an AI doctor and it's like, okay, well, what does that actually look like?

Yeah, I mean, I think for sure the first step when you're trying to deal with symptoms and figuring out what's going on is going to be going to ChatGPT or another similar CX. Pretty confident that's going to be the first step. It's not that dissimilar from the first step today, which is people were googling symptoms and trying to figure out, like, what's going on, and it was just much less efficient, but ultimately like a very similar kind of flow. So I think that's for sure going to happen. I think the interesting question is, are the vertical players actually going to have a better differentiated product than the foundation models? That's a lot less clear to me. Like, I still think the found, like the core foundation models in my personal experience are better at diagnosis and better at figuring these things out still, even though there are dedicated other models.

And that's the. That's a big issue. Right. You could have a wrapper that's specific for diagnostics. Right. That you can message and say, hey, I have this like, you know, skin thing, like, what's going on? But that's like, so infrequent. You're not paying $20 a month for something like that. If ChatGPT can do it, but 80% as well, and, you know, it can kind of get you on the right path.

And so I don't think ChatGPT eats WebMD.

Yeah, sure.

I think the more interesting problem to solve. Right. Is like, at some point you get through most of that conversation, you're pretty sure you figured out what's going on. You still need an intervention of some sort if there's anything moderately serious going on, like you either need a prescription, you need labs, you might need some physical intervention, like you need some something. And that's where nothing in healthcare has actually been digitized. Right. Like, if you think about this compared to other retail categories, which I do think is the right mental model, like CHAT GBT is now implementing, you know, Shopify checkout, right. In CHAT GPT.

Right.

So you can go from that, what should I buy straight through to a checkout flow? No one's built that checkout flow in healthcare. Like you don't have a product catalog, you don't know how much stuff costs. You don't know like what's available to you based on your insurance. Like, I think that's actually a more interesting problem for startups to go wrestle through because ChatGPT is gonna be pretty damn good at the things you use Google for before and it's not gonna deal with any of this stuff. And so the stuff I'm working on and spending a lot of time on is much more. And like, how do you build the equivalent of product catalog in healthcare? How do you ultimately make it easy to transact? How do you make it easy to shop? Because that infrastructure still has to get built regardless of where the kind of front door is into that experience.

Shopify for health, something like that. That. Can we do overrated, underrated telehealth? Broadly, how are you feeling about telehealth?

I am bullish on the sort of usage of telehealth still. I'm probably bearish on most of the existing business models and monetization. It's probably the short bit.

What about overrated, underrated existing business models?

Have you been surprised to see like him's almost second act in the public markets? Do you think they would even have had a second act if it wasn't for GLP1s or is there some underlying unlock that they have?

I mean it's sort of like commenting on any MEM stock, right? It's a tricky thing to, to have a strong opinion on it.

Well, I think that's, that's enough commentary.

Overrated, underrated. GLP1s Underrated, underrated. What about some of the foundational AI applications coming out of DeepMind, protein folding? Any of that stuff moving the healthcare markets or how you think about healthcare?

Not intelligent enough to have an opinion on that. Yeah, too complicated.

Too complicated. Get out of it. Anything else?

Did you, when you were a pharmacist, did you, was there a world, did you imagine a world in which you retired as a pharmacist, you know, at 65? Or did you like cars too much from a young age that you, you knew that you'd need to figure out another way to build a collection?

I think it was pretty clear that the working behind the counter was going to be a short lived endeavor for me, if that's the question. Are you asking. Is that what you're asking?

Yeah, basically, yeah.

I think that was pretty clear from the jump.

How much do you love being a venture capitalist now? Is it just the best?

I love it. I sort of like the second I took the job, I became an expert at everything. It was so convenient.

Yeah, yeah.

Maybe instant. It really is almost take us on.

A little world tour of all the geopolitical conflicts, how we would resolve them really quickly.

I'm just really happy that my first conversation on here was political in nature. That was what I was looking for.

Yeah, yeah, yeah.

The last question I have just generally curious given you guys are, I'm sure do multi stage, but I imagine given like are you like trying to pick like are you investing in a couple companies a year? What's the goal for you? And I'm assuming you meet a lot of companies all the time that you like but don't end up investing because you're not like you just more of. From a conflict standpoint, if I do this deal and you know, somebody a better company comes around and in six months or a year, I'll be conflicted out. Is that accurate?

Yeah, I mean certainly the first bit's accurate. We're, we're, you know, doing concentrated early stage investing, kind of classic venture. So I'll do two to three deals a year in any given year is probably a pretty standard standard year for, for me and for the other partners of Matrix. I mean, I certainly think about the conflict thing. I think that pre assumes that I'm constantly liking things and wanting to do all of them. That's probably not the. But the dynamic, it's really like finding like really interesting things that I want to spend a bunch of energy and a bunch of time on versus seeing like a lot of different things that I'd love to kind of be less involved in. So yeah, it's certainly a dynamic, but we're, you know, we're doing a couple deals a year.

As you do deals, when do you start using the term we to describe how the company works?

It happened pretty quick too. It was like the same as my.

Expertise such as just immediately write some small check and it's we, we are building the future. Dropping a we as a venture capitalist strong. Let's see now. Hey, I'm on the board. Yeah, I'm part of the team.

Otherwise you're not allowed.

What, what last thing before you take off? What should people be paying attention to in the days and weeks from now around the actual implementation of the, of the eo? What are you looking out for? I think it's obvious that you know you're not going to walk up to a pharmacy after work today and see lower prices. But what are you looking for?

I personally would be focused most on how much this is really about. The difference between gross and net prices. Right. Which we talked a lot about or whether it's really about true competitive net prices with other countries because those are pretty different paths.

Right.

And have all sorts of different implications. So I think the more this feels like it's about solving the consumer problem and less about solving the, the kind of payer problem or the fairness problem, the better for me personally. And the more it feels like we're trying to do some true price setting kind of net MFN against other countries, the more I'd be a bit, little bit nervous. So that's where it pivots for me. Is, is this about consumer or is this about net mfm?

Great.

Do you think the mission E makes it to production? Do you think Porsche goes a different direction with this next supercar?

You know I, I know so little about like new modern Porsches unlike the the furthest from an expert but good luck. No idea. It's a short answer. Ask me about something old and I, I'll talk about it for, for a long time.

Yeah.

Well we'll be coming out your way. We're working on putting together the Amman rally so more news to come there. You'll be one of the first to know.

This is fantastic.

Awesome. Thank you for coming on tj.

Yeah thanks so much.

This is great.

We'll talk to you later.

Appreciate the insight. Cheers.

Did you, were you able to clock his watch something on aquanaut? Well if you're looking for an aquanaut like tj, head over to bezel. Your bezel concierge is now available to source any watch on the planet. Seriously, any watch. I think I already did actually. And then of course we gotta tell you about wander find your happy place. Book a wander with inspiring views, hotel grade amenities, dreamy beds, top tier cleaning, 247 concierge service. It's a vacation home but better. But better hit me with some soundboard.

What do you want John? I got options.

Ashton hall. You know it's my favorite the the movie trailer. We also have some poly markets up that are tearing up the news. The odds of Donald Trump eliminating capital capital gains tax this year are surging. It's now looking more likely than not that they'll be eliminated 57 chance unclear if that means they'll be taxed as income or not taxed at all. But they will be eliminated.

We eliminated capital gains tax.

It was. It's now 50, 55% or 0%, who knows? Also the odds of Larry Ellison buying TikTok have doubled this morning. One in five chance now that he buys it before July he's up at 18%. Someone knows something. Someone's going in with size. But of course this it's phrased as who will acquire TikTok. Big question about whether that's a whole co acquisition or a minority investment from an American company. Could also be the data is hosted on Oracle's cloud, their servers could be that the algorithm is run on Oracle servers but that doesn't necessarily mean that Oracle knows what all the weights do know that they're involved in the training of the algorithm. And so that's a big question is that hey, if, yeah, you're inferencing TikTok's algorithm but the weights have been trained in China to, you know, be favorable to China. That still doesn't really resolve the issue. So I'm sure we'll be tracking that. Anyway, let's run through some timeline and then get out of here. We're doing four hour shows now. Have you noticed that? It's just grown.

It's crazy, John.

We're just doing longer and longer.

We're too addicted to podcasting.

The pope was chosen in two days. Your wrote your remote hire needs. Doesn't need five rounds of interviews. I said what I said. So funny that this got 5000 likes on threads and then 350,000 likes on X as a screenshot. That's what's going on here. In the screenshot do you see this?

350,000 likes. I haven't seen that on anything. That's but an Elon post.

And you would think remote hire about interviewing. That's not that big of a niche. That's very, it seems niche but 5 million views here, 31,000 reposts. It's also funny Squared is just the banger God.

Yeah. I mean the, the she put that in banger archive.

Seriously.

Now the funny thing is the counterpoint here is that if you're meeting somebody for the first time, it's not like the cardinals were meeting the Pope for the first time and they were just like, you know, oh, we just decided in two days. Right. There's a lot of past history there. If you're talking to a remote hire, hiring the wrong person is just so painful. It really is the worst for everybody involved. Right. The person who got the job who ended up not being the right fit company who hired the person and has to invest all this time trying to ramp them and then unramp dramp let them go ramp.com Switch your business. No it's just really painful and so if you're four interviews in and you're not yeah confident do the fifth one can avoid a lot of pain.

So what's the right number of interviews for a remote hire?

50.

50.

Have each of your 50 interns as.

Long as you in person workouts in that pro in that interview process. I think you're gonna be good. Anyway, I wanted to highlight Jesse Pelton. Interesting new account. Hadn't seen this guy before. Elon Musk's been amplifying him a bunch and he's been posting about solar energy and energy a lot and just has some great posts and seems like a newer account. I don't know, he might be on there forever but seems to be blowing up. Most recently he said if God wanted to build us a type one if God wanted us to build a type one civilization, a Kardashev Type one civilization, he would have one put a giant fusion reactor in the sky emitting black body radiation around 5,800 Kelvin, which is exactly what we have. 2. Made 28% of Earth's crust out of a semiconductor with a matching band gap gap 1.1 EV or so, which is exactly what happened and then three filled the oceans with an alkali metal we could use to store limitless quantities of energy sodium or something similar and he says that would be a crazy coincidence and he's basically super long EV battery energy production and I just think there's something about this account where I just saw a few of the posts. A lot of them were lightly technical but but for coming from this very optimistic techno perspective that I thought was I thought was interesting. Hadn't seen the account before so I wanted to highlight it here. Thought we I mean we should honestly have him on the show at some point because it seems like he knows his stuff. But I want to dig in deeper there. The other interesting post that I want to highlight was from Mike Noop who's been on the show, founder of Zapier and Arc AGI and he said we are targeting at least three orders of magnitude instead of 3x with Arc AGI 3 but directionally a lot of useful insight on AI benchmark development in this thread. And so Ophir Press posts I have a post where I talk about how to build good language model benchmarks. I've had to edit the part where I talk about how you should think about making your benchmark hard multiple times now. And so the first time, he says you have to make your benchmark challenging to evaluate language models. The accurate if you, if you drop your benchmark and the accuracy at launch with the best language model is 80%, people will see your benchmark is already being solved and they won't even try to build models to improve performance on it. So you should think about launching a benchmark at between 1 to 35% accuracy for the best model in the game. So take gemini or take OpenAI's best model. And if you, if you can get your benchmark to 1 to 35%, you're good to launch. Then he edits it In January of 2025, he says due to the extremely fast development, I now say that you should do 0.1 to 9%. Take that way down. Anything higher means that the benchmark is too easy. And then he says, May of 2020, sorry, I have to make another edit due to the speed of development, I'm now asking people to think. You can't just think your benchmark has zero percent at launch. You have to imagine that your models would achieve negative 200 human.

The smartest human ever.

Yeah.

Should get a negative score on the test.

Find benchmarks that are so hard, find questions that are so hard that even if the models improve 3x they still get 0. Just building a benchmark where models get 0% today might not even be enough anymore. You have to look at how the models have been improving over the past three to six months, try and predict where they'll be in the future, and build benchmarks that would not only make the current models fail, but benchmarks that would make the model of next year fail. Anything easier than that might get saturated much more quickly than you expect. So I just thought there was a funny, funny interpretation. We've been talking about benchmark saturation and the death of the, of the benchmark. But, but, you know, it's interesting to hear someone in the industry kind of put it, put, put it in such hard terms there. Anyway, Palmer Luckey is advocating that the United States should immediately expand our naval base on Guantanamo Bay into Liberty City, an American Singapore of the Caribbean. Shipbuilding, arms manufacturing near equator, space launch, energy refining and more in beautiful paradise. Any Cuban who can escape there by running, swimming, boating or biking gets asylum and a work permit to help build this mega project by robbing the communist of their worker, the Communist Party of their workers in critical areas like power generation and military might, we accelerate regime change. Liberty City will be the first domino. I like how he's thinking out outside the box.

Liberty City.

Liberty City. GTA reference.

Yeah, that's great.

Anyway, we talked about Apple's new product launches. It's going to be a big 2027 that they're lining up for and a bunch of new iPhones coming out. What else is interesting to tell us in the news? Orb. But what else?

Yeah, this is interesting. The Apple foldables thing is so funny.

They got to do it. But Foldables, it was one of those things where, you know, like, it was an interesting idea, but the first iterations, even from the top tech companies, not Apple, not named Apple, were bad and everyone kind of knew that they were bad.

And so funny that it used to be. It really used to be much more of a thing to text like this horizontal. So I was thinking the foldable phone, you bring it back. But I think people just got pretty fast at typing.

Yeah.

Oh, swap it on new hat.

You gotta do all the different hats. This one's a little tight. Anyway, worldcoin. Or launched the Orb Mini. Designed to make human verification more accessible. It's transportable and seamlessly accommodates your lifestyle. The Orb Mini, it goes.

And I guess there's a bunch of Or World stores, showrooms throughout the US now. We're gonna hopefully have the founder of World on tomorrow, Alex.

And so anyways, because so my take on this is like, I understand the main pitch, which they put out this infographic that said like, 80% of gamers online say that their online gaming experiences are being ruined by bots. And that makes sense. Like, there's a cheater, there's a bot, there's AI. Like, no one really wants to go and play chess against the hardest AI possible. That's just not fun. They want to play against humans. Right. And so if you play against a cheater, it's just less fun. Right? You want to play against real people. So like, verification makes sense there. But what's odd is like, if you play out the AGI ASI thing really, really far, you would imagine that at some point the AGI figures out how to either steal or grow eyeballs, right? Yeah, like. Or assemble them.

That's really dark.

It's really dark.

But like stealing the eyeballs. I've hit a world coin he human verification checkpoint. I should just get a human.

Yeah. The future is the a. The. The terminators cages and make us do arc AGI puzzles and then scan for the world coin. And it's just like this Arc AGI puzzles all day long because we're just like being scanned. Brutal. But, but final job.

UBI is just.

Yeah. You believe in the nanobots and you believe in the, the, the paper clipping. If you could turn me into a paper paperclip. You can turn a paperclip into an eyeball. Right. And if you can turn a paperclip into an eyeball because just matter that you're reconstituting, Right. You're just assembling atoms and molecules.

Matter reconstitution.

Yeah. So I mean, I guess that's farther away. The, like the bot crisis is here almost today, right? It is in the sense that like, there's a lot of spam out there. We need a better version of CAPTCHA. RKGI is maybe like 6 months after being cooked. And so the orb kind of makes sense in that case. But it is, it is an interesting, like intermediate step. But I don't know, it's, it's an interesting story to, to follow and interesting to see how it rolls out. And I'll be, I mean, I'm, I'm excited to see, you know, there, there will be gamers who sign up. They will test it and they will let us know if their COD lobbies are cleaner. You know, if they're on, if they're on rust and they're having more fun problem.

Something you can solve at the software layer. Like, like obviously if you could get, you know, a device, you can get.

A device that does that. I know exactly what you're saying. Yes. You can get a robotic arm to move a physical mouse and press buttons on computer vision boards. Yes. And use computer vision just to look at the screen. And you can cheat that way. It is possible. It's not perfect there. It's obviously better to just go into the code at a lower level and then, and then see. Okay, I'm not even getting pixels.

I'm getting more like screen view.

Exactly. Yeah, but, but screen view is a, is a viable cheating strategy form of botting. Yes, yes, yes. And so obviously it's much better to just interface with the, the net code that's coming across so you can see through walls and you can understand the full map and there's no fog of war, all that type of stuff, but you can cheat just by camera at the screen and like that's, that's almost impossible the, to detect until, until the, the, the front facing camera turns on and it's constantly scanning your eyes to make sure that there's a human on the other end, which I mean face ID is pretty secure. It does does kind of make sense that there's be something here. You got to build it in the next Xbox I guess or something. I don't know.

Well, before we go, we should talk about Figma. Figma is our latest partner. We talked about this a little bit last week. It is the design tool that we've used to build the TBPN brand. Every single asset that we create for the most part comes out of Figma and it's a tool that I've used for my entire career. So very excited to partner with them and be on the extended team. We were at Config last week they launched a bunch of new products. Our takeaway is the Figma for Figma is Figma. I've said it before but the new product they launch is Figma sites, which sounds simple but is really exciting. Basically you can turn whatever you make in Figma into a website. So if you're not using Figma already, go check them out. And thank you to the whole Figma team for supporting the show.

Fantastic. And thanks to you for watching and listening.

We'll see you tomorrow and making it this far.

Enjoy the bull market day.