0:00Speaker A:All right, everybody, welcome back to the all in podcast, the number one podcast in the world. David Sacks and Gavin Baker are with us this week. We got a short crew but a long docket, and we are going to rock it. How are you doing, Gavin?
0:15Speaker A:Nice to see you.
0:18Speaker A:You're still in that SpaceX afterglow. This is the biggest win of your career, correct?
0:24Speaker B:You know, it's. SpaceX was a magical moment. There's, you know, there's only one SpaceX, but to quote Bill Belichick, you know, it's on to Cincinnati.
0:34Speaker B:And there's a lot I think I had for SpaceX. So the SpaceX story isn't over.
0:39Speaker A:Yeah. And you're. You're only as good as your last investment in our business. I guess everybody's like, what now?
0:45Speaker A:Sachs, you're back. How are you doing, brother? How's the summer wrapping up for you?
0:48Speaker C:Good. I'm looking forward to talking to Gavin.
0:51Speaker A:Oh, fantastic. Well, I'll.
0:54Speaker C:I'll try to putting up with you.
0:55Speaker A:And not step on you. You missed a really great discussion we had on the all in interview show with your guy, Rahm Emanuel.
1:02Speaker C:Rahm Emanuel, how's that go? I heard actually it got kind of spicy.
1:06Speaker A:No, it got super spicy. Rahm came in like full guns blazing. But it's a really great interview and we'll take anybody who wants to do the interview show who's running in 2028. Did you catch it?
1:17Speaker A:Gavin, by chance, did you catch it?
1:18Speaker B:I haven't watched it yet.
1:19Speaker A:Okay, got it in the queue. Beautiful.
1:23Speaker C:And basically the verdict on Rahm is that he's kind of a throwback to the Clinton Obama dnc.
1:29Speaker A:I think, if you were thinking about.
1:31Speaker C:It, which means he has no chance whatsoever in the Mamdani DSA Democrat Party.
1:37Speaker A:This is the great irony, and it's a very similar moment, I think, to what happened in your Republican Party where you had this sort of civil war internally. And I'm hoping the mods, the moderates have a chance here. But, you know, who knows what's going to happen with these lunatic Democratic socialists. We don't have too much.
1:55Speaker C:Do you have a take on that? On that Democrat Party?
1:58Speaker A:I'd say his first of all, he's got incredible amount of experience, having worked for Obama, Clinton, been mayor of Chicago and ambassador to Japan. So he was awesome on foreign relations, et cetera. Yeah. And to your point, he thinks hard.
2:17Speaker A:No. On Democratic socialists. And the socialist policies are a road to nowhere. So he just went totally hard at it as hard as you would Sachs.
2:25Speaker A:In fact, I hope he has nothing would be greater than to have a moderate or more moderate candidates. I think we can all agree on that. So we'll see. We'll see.
2:35Speaker A:It's worth checking out. All right, let's get to the docket. Breaking news at the time of this recording. For those of you who don't know, we record on Thursdays publish on Fridays.
2:44Speaker A:Anthropic targeting a $2 trillion IPO. According to the Financial Times, this would obviously break the record setting $1.75 trillion IPO by SpaceX. FT reported Wednesday night that investors expect the company to go public in October, which is like six to eight weeks away. This lines up with the poly market.
3:10Speaker A:The Sharps at Polymarket saying 80% chance of anthropic IPOing this year. And Brad Gerstner, our fifth bestie, he also was signaling that this would happen sooner rather than later. Annualized run rate we talked about this Sachs. A bunch will end the year between 100 and $120 billion.
3:32Speaker A:This is an extraordinary ramp up of revenue that we have never seen in Silicon valley at a $2 trillion valuation. Obviously you all can do the math, but it's 16 to 20 times sales, which is a fraction of what SpaceX and Palantir and some of these highly valued stocks went out at. So pretty interesting revenue growth over the last year. 10X anthropic still has AI's top model, but Grok and we're going to get into it today is catching up quickly.
4:00Speaker A:And OpenAI not too shabby as well. Polymarket says 67% chance that at the end of the year Anthropic will have the top model breaking on Thursday. Anthropic is in talks to buy an AI startup called Descartes for 6 billion. Their software lowers the cost of AI training and inference by making chips more efficient.
4:21Speaker A:I'll stop here, Gavin, if you could comment and I don't know if you're a shareholder Anthropic or not, so it'd be great to get that out of the way. But what's your take on just straight up the revenue ramp we're seeing here and then what to expect from an ipo.
4:40Speaker B:So a few things.
4:41Speaker B:I'm not currently an Anthropic shareholder. I would say the anthropic SpaceX detente probably came a little too late. I. I don't generally invest in Elon's competitors. I don't think it's a wise course of action.
4:56Speaker A:That tracks. And the detente was obviously Elon decided when he had so much extra compute with Colossus that he would rent it to Daario and Anthropic.
5:09Speaker B:Absolutely. And I think he almost probably more importantly got comfortable with Daario's morals and that Daario is a good person and like all humans, you know, to be human is to err. So maybe he's made some mistakes in the way he's handled government relations, but he got comfortable that his morals were in the good place. Elon said, they don't set off my evil detector.
5:33Speaker B:And he has a pretty good evil detector. He famously cut his conversation with the SBF short. So a couple of things on Anthropic, the rumored numbers are exceptional. We've really never seen anything like this.
5:47Speaker B:I still think those moments in April and May were some of the most extraordinary moments in the history of capitalism. And what's wild to me is that probably on the margin, Anthropic is losing share to OpenAI, to Open Source and to Grok, and they're still growing so fast. The numbers are still exceptional. So I think that speaks to the strength of.
6:14Speaker A:And why is that? This is an important thing for people to understand. The pie is getting ginormous. So even if on a percentage basis, Anthropic is losing on a percentage basis the real number.
6:29Speaker A:And we talked about open source being dark tokens that aren't tracked anywhere. You know, this is a major, major pie growing moment. That's what you mean there.
6:39Speaker B:That's the point. I think AI broadly accelerated in the month of July, which was kind of crazy to contrast with the public stock market action. Now we have a higher resolution view of what was happening. But a few things on the Anthropic ipo, listen, it's an exceptional business.
6:53Speaker B:They've executed really well. And they haven't just executed on the model. Their products are amazing. I always think about Eric Fisheria.
7:00Speaker B:I don't think you've ever had on the pod, but I think he'd be a great guest. He's a good friend. He said has a thought experiment nearly two years ago that he thought OpenAI and anthropic would still have a lot of value even if they lost at the model layer. Because the product, the harness, the user familiarity, it's all so important and I think there's an element of truth to that.
7:26Speaker B:But as far as the ipo, listen, the first thing I would just say is the 2 trillion. I am a little skeptical. We saw this with SpaceX. Everybody's jockeying to be lead left, philanthropic.
7:38Speaker B:And if you lose that, first thing you want to do is make whoever's lead left look bad. So you leak to the press and you say, hey, we're in the room. The bar is a $2 trillion IPO.
7:51Speaker A:You said on a previous episode 3 to 4 trillion.
7:55Speaker B:Absolutely. But I think that's probably where it could. Where it might trade.
7:59Speaker A:So they're sandbagging now.
8:01Speaker B:Yeah, we haven't seen the S1. I do think if you're bringing a company out responsibly, like you do, you want to price it in such a way that you can absorb the lockup, because you don't want to price it really high, create a lot of volatility that's, like, very disconcerting for employees. You do not want anyone distracted at this moment. So I think that they'll price it smartly.
8:22Speaker B:Maybe that is 2 trillion, maybe it is 2, and it trades to 3. But you just got to remember, these leaks are always coming from the bankers who probably lost lead left, and they want to make lead left look bad. So if it comes out of 2 trillion, it probably means that the testing waters and the roadshow just went incredibly well. And people, they do want to own this.
8:44Speaker B:We've never. You know, these numbers are unprecedented.
8:47Speaker A:So are you saying the road show probably occurred already or quietly occurred?
8:52Speaker B:No, definitely not. I'm saying if they price it at 2, it means, like, the testing, the waters went well, the road show went well, and they've got a lot of confidence about where it's going to trade.
9:03Speaker A:Sachs, in the history of Silicon Valley, you pointed out multiple times here during this podcast in 2026 that we've never seen a revenue ramp like this. Can it continue? And if it does continue, what would that say about the value of AI to corporations and enterprises where Claude is the definitive leader?
9:24Speaker C:Well, I think it can continue, although it is a legitimate question, because if you're ending the year at, let's say, $100 billion run rate up 10x plus year over year. And by the way, they've grown 10x year over year for the last 3 years. So it's growing exponentially. If that rate of growth were to continue, they'd hit a trillion dollars of ARR by the end of next year.
9:47Speaker C:And then the question you have to ask is, well, is the TAM big enough for that? But also, is there enough. Compute. Is there enough energy?
9:53Speaker C:I think you start to get into physical constraints. I do think the TAM is big enough. I think the demand is going to be there. There's so many new applications of AI, agents are just taking off now.
10:03Speaker C:You saw that with the launch of Grokbot, all these other companies are going to keep extending the uses of AI into more and more contexts. So the demand for tokens is going to keep growing exponentially. I think the question is whether they can physically meet that demand. And then also Gavin's point about market share.
10:20Speaker C:Other companies are seeing what they're doing and they're competing more effectively to take share. Remember, Anthropic made this huge bet on coding and that ended up being a very prescient bet. I don't know if it was because of ideology. They thought that was the way to get to recursive self improvement first.
10:35Speaker C:I don't know if it was because they saw Cursor.
10:39Speaker A:That's the reason.
10:39Speaker C:Building on top of that.
10:41Speaker A:Yeah, they watched Cursor's utilization and they said, we're going to take that business. And that's such an important note for.
10:48Speaker C:You to make vertically. Yeah. So they've started moving into verticals where they see their own users building successfully on top of their platform. So that was, you know, I think that definitely was a signal to them to get into coding.
11:04Speaker C:Nonetheless, they got into it first. They got into it very successfully. That led to a boom. We hear that OpenAI now, they've basically pivoted to coding.
11:13Speaker C:They're doing a better job with that now with GPT 5.6, we've heard their growth rate is accelerating. They used to be growing at 3 to 4x a year. I've heard that over the past two months, that growth rate is now over 20% month over month, which, if you extrapolate it out, over 12 months would be a 10x growth rate. So you're now seeing OpenAI growing as fast as Anthropic.
11:35Speaker C:Having made that pivot, we can talk about whether we think SpaceX AI may be able to get there as well. But in any event, look, I think that regardless of whether Anthropic is able to grow 10x next year, I think they're going to grow very fast. And then the question is just what does the market share look like relative to their competitors?
11:55Speaker A:And I guess, Gavin, it would be worth double clicking on two points there. The first point, is there going to be a market for these tokens and can the growth keep up? In other words, is there a demand? I think all three of us agree.
12:09Speaker A:Yeah, sure, of course there's demand. But the next two pieces which Sachs mentioned were energy Data centers. And that is a question I want you to answer. Can they get to 1 trillion in revenue?
12:22Speaker A:And let's slow down here and actually try to do some back of the envelope math. And this is your wheelhouse. What would it take in terms of infrastructure for them to go from $100 billion a year in revenue and 10 exit? And is that humanly possible in the next year?
12:40Speaker B:So a few thoughts. I think it's the right questions. First, internally Anthropic is very confident. I have been told by multiple people I trust that Dario has said that Anthropic might be the only private company in the world at some point.
13:00Speaker B:Think about that in this vision, Anthropic, maximalist vision. There's Anthropic and then there are governments and that's it. So there's a lot of confidence. I'm sure they have more advanced checkpoints than Fable up their sleeve.
13:16Speaker B:They've executed really, really well. I would probably take the under on them being the only private company in the world. I think it's going to be a long time before they, they, they land a rocket are there, you know, and.
13:30Speaker A:They deliver your lunch. I don't know, there might be other businesses in the world. Zipline might want to bring you a burrito. Uber might want to take you somewhere away, might want to drive you home.
13:40Speaker C:But sure, Dario, I might interpret that as a negative signal because it's so hubristic, you know. Yeah, this is getting into SBF land a little bit.
13:50Speaker B:I would certainly discourage Dario from saying that ever again to anyone.
13:56Speaker A:So you don't. So AI Jesus should not claim that he is AI Jesus. Okay.
14:01Speaker C:Pride cometh before the fall.
14:03Speaker A:And that will be a long fall if they, I mean.
14:07Speaker C:But no, but look, I have heard from other people at the company, I heard that when they were at about 60 billion of ARR that they thought they could get to 600 billion in one year. So meaning they thought they were on that 10x ray ramp from the middle of this year. Now they're at over 80. Doesn't seem to be slowing down.
14:26Speaker C:So I think, look, I think this is the big question is how fast can they grow next year? Does it go all the way from 100 or 120 to a trillion dollars? Look, if they merely got to 4 to 500 billion, that would make them the biggest software company.
14:40Speaker B:If they get to 200 billion, that's an amazing outcome.
14:43Speaker A:Where does that put them versus Microsoft's Office franchise like, or Google's search franchise like we're starting to become a peer to those two companies.
14:53Speaker B:100. Absolutely. And so just to break the question down, it's a good question into demand and supply. So demand, depending on how you count it, there's 25 to 65 trillion in knowledge work.
15:09Speaker B:25 Is kind of a number I've used. I was told by the head of the AI Institute at one of the three largest investment banks that it was way low. So this is the TAM that they're going after today before we have robotics. And then it's a question of is it labor substitution or accelerating growth.
15:29Speaker B:Thus far it really does look like it's accelerating growth. There are more job openings for software coders today than there were a year ago. There's more demand for coders and that is kind of in the epicenter of the blast zone. There is some evidence that for very young people coming right out of college that maybe there's been a negative impact.
15:54Speaker B:But broadly speaking, it has to come from one of those two. And I just think it's better for everyone if it comes from accelerating growth. And, and these companies are now at a scale where it's going to, if it's going to come from accelerating growth. We will start to see that in the national accounts over the next 18 months.
16:15Speaker A:I am going to. Okay, you want to go to the energy part supply.
16:20Speaker B:And listen, this is where kind of the rubber meets the proverbial road. The people who build these data centers. The best way to understand it is go watch that series Landman. And it's like you need like Billy Bob Thornton's out there, you know, Permian Basin time.
16:41Speaker B:The Permian Basin. You're in the patch. You know, you're actually worried about narcos. You know, it is, it's the tip of the spear.
16:52Speaker B:It's like 110 degree heat. You have to orchestrate thousands of people in these remote locations.
17:00Speaker A:It's atoms, it's atoms, not bits.
17:02Speaker B:It's, it's atoms not bits. And it's really, really hard. Now America, we're actually really good once we gear up for something like that. America and capitalism, we're very good at solving those problems.
17:17Speaker B:Everybody talks about like the ultimate constraint are these turbine blades. And you know, they're only made in like two facilities in America, in Europe and like each facility is like, you know, a giant building and there's some 40 ton press. But you know what? Now they're running, you know, 24 hour shifts.
17:37Speaker B:They're getting, you know, they can afford it.
17:39Speaker A:Electricity is in fact the mother of innovation. And nothing like capitalism will make that happen. In fact, boom. Supersonic.
17:46Speaker A:Making a new jet for, you know, supersonic. And Sachs has one on deposit. Those jets. He's like, you know what?
17:53Speaker A:We're going to build a turbine business first because we have so much demand. And then, Elon, I understand there was a news report that he bought a turbine company and he did it personally because that speaks to me that he just wanted to go fast. Right.
18:06Speaker B:And on top of that, you know, you know, residuals for private jets are like, extremely strong these days. And a big, a big part of the reason is people are taking jet, jet engines off old planes and repurposing them. Has turbines to power data centers 100%.
18:26Speaker A:That's insane.
18:27Speaker B:It's crazy. This is, this is like a big business and growing really, really fast. And then, you know, you have Caterpillar, you have Cummins, you have ge, Vernova, you have Siemens Energy. They are all expanding capacity fast.
18:41Speaker B:So I think the supply question, you know, the, the Billy Bob Thortons here in America, you know, are going to work with, with those companies and get these turbines on the ground. It's politics and it's regulation. And the fact that Texas, you know, has kind of announced, you know, what.
18:57Speaker A:I think is probably an energy audit is what you're referring to. Governor Abbott announced this week he's going to do an energy audit. Not that he's going to slow things down, not that there's a moratorium, but that everybody has to go through an energy audit. If you byoe, you're going to be fine.
19:12Speaker A:But if you don't have a solution for that and you want to tap the Texas, the great state of Texas's grid, you're going to need to maybe pass some audit because we don't want the whole grid going down here, which it does every January when things freeze over.
19:28Speaker B:Yeah, and it's like right now the narrative on AI is not good. It's that a data center takes all the water because someone made a mistake in a book three years ago and they're off by, I think, a factor of 100,000 in the amount of water a data center uses. So it's just wrong. They raise your cost of electricity, which is just wrong.
19:46Speaker B:They lower your cost of electricity. The Wall Street Journal just written a story about a town called Ellendale where it was a dying town. A data center got built, it's revitalized the town. Tax revenue is 10x.
19:57Speaker B:It's been the best thing that's ever Happened. But nobody's telling those stories and people need to. And I think we've discussed on the show many times the Chinese Communist Party. They do have a very active anti AI, anti data center campaign because that's what's good for them and bad for America.
20:15Speaker B:And someone needs to tell the truth about AI. One of the best phrases in the Bible is the truth shall set you free.
20:21Speaker B:Can't set you free if nobody tells the truth.
20:25Speaker B:Yeah, yeah.
20:26Speaker C:I mean, the data center panic is a testament to the power of the media to create hoaxes and hysteria over literally nothing. Every single aspect of the data center story is wrong. It's a lie. Like you said, they don't use up a community's water.
20:46Speaker C:The water use is quite manageable. Less than a golf course. The water recirculates, it brings down electricity costs. Assuming that you have the data center stand up its own power generation because they will sell the excess back to the grid and they pay for grid upgrade costs.
21:03Speaker C:The real reason why electricity prices are rising in blue states is because of decarbonization and all the other, you know, green type regulations they have that make power generation more difficult. What are the other accusations? They create pollution.
21:18Speaker A:Yeah. Noise pollution is legit. So there's nobody in their right mind.
21:22Speaker C:They don't actually put it in anyone's backyard.
21:24Speaker A:Yeah, nobody in their mind is doing that today. Yeah, people did do that for a bit.
21:30Speaker C:If we just use common sense.
21:32Speaker A:Yes, common sense.
21:33Speaker C:You just use common sense and there's no problem. The idea that you have to have a complete ban on data center construction is just silly. And the communities that are embracing them are seeing they have better schools, they have better services because they're making a lot of revenue.
21:48Speaker A:Well, and then to your point, Sachs, when, you know, entrepreneurs get on something, we're all of a sudden seeing solar batteries, nuclear and more clean energy being tapped to power these. And that demand will lower the prices of those services over time. Solar panels will get cheaper, batteries will get cheaper because they're going to be scaled much faster, which is good for humanity. This is basic, folks.
22:11Speaker A:It's very basic.
22:12Speaker C:The green stuff can't scale in the short term. It's all gas powered for the new data centers. That's the only way to kind of get the amount of scale that you need in the next year or two. But, but in any event, look, you.
22:23Speaker A:Agree with that, Gavin, that this, I think solar is more like, you know, it'll be viable, but, you know, it's obviously not as fast as Popping up NAT Gas.
22:32Speaker B:Yeah, I largely agree. I will say, you know, Elon's building a $10 billion new solar manufacturing plant in Texas, my home state. And you know, I think solar, the world will eventually run on sunlight, but we're going to run on natural gas for a while. We have a lot of natural gas in America.
22:48Speaker B:It's a clean fuel. It's the greenest carbon fuel. And just this media hysteria about data centers, it is doing such a disservice to low income Americans, to small town Americans, often to minority Americans. It's just, it is, it's so good in every way and the media is doing such a disservice, but no one's taking the other side and someone needs to take the other side and tell the truth.
23:17Speaker A:Yeah, well, it's, I don't know who's relying on the media for their facts now, but I think there's a reason why we were number four in the world last week is because, hey, listen, we actually are part of this build out. We know about it and we can explain it to you a little bit more succinctly. Noise pollution, that's an issue. Pollution of the air, that is an issue from NAC s. Keep these things far away from people, as Sacks just said.
23:42Speaker A:And you, you don't have as much of an issue. There is a minor issue. If you put these at scale in a certain location, you can raise the temperature of that valley or wherever you put it a couple of degrees. That's something worth monitoring.
23:56Speaker A:These are all absolutely manageable issues. And if you really want to get obsessed about water, please for the love of God, stop eating almonds. And maybe the golf course doesn't have to use a billion gallons of water every year. I will say on the demand side and on the pricing side, if you pull up this quick note I have here.
24:18Speaker A:I think Anthropic's growth rate is going to slow considerably next year and it's been obviously on a tear. There's no way they get to a trillion in revenue next year. I think maybe they could triple get to 3 or 400 million. And the reason is watching startups and then also watching some of the large Companies now embrace GLM 5.2 and Zuckerberg, which we'll get to in a moment, releasing really great open source models.
24:44Speaker A:You just look at the pricing here of GLM2 versus clotopus and it is 90% cheaper to use these products. I'm using them, the founders I invest in are using them. And increasingly corporate America is going to embrace these solutions. It's just a little bit harder to set them up.
25:04Speaker A:And if it's coming, folks, and if you think it's not that corporate America is not going to embrace open source, you have not been paying attention to the last 20 years when they did exactly that. And 20 years ago there was a big argument, oh my God, corporate America will never trust open source. And corporate America said, we don't want to get rug pulled or have some large tech corporation hold us hostage for their technology, which they're experts at doing. So open source is the safer bet for us.
25:31Speaker A:And that's what's happening in corporate America today and inside of startups, this is going to be very real. Gavin, you're like, you're jumping out of your seat.
25:41Speaker B:Yeah, no, no, this is, this is a larger point. Like, like, for sure it's good for corporate America. For sure open source is good for the world. For sure it's good for America.
25:50Speaker B:But you know, Dwarkesh posted something. Doorkesh, who's a podcaster, thoughtful guy, close to the AI scene. He, he posted something that really resonated with me and he said, at the end of the day, Anthropics, AI and their constitution, it is wired to do what Anthropics thinks is best for humanity. And let's, let's take Elon's judgment as gold plated.
26:13Speaker B:And he's right. His don't be evil detector did not go off. And they're genuinely good people, which I actually believe them to be, who are doing what they think is good for humanity. I actually believe that the problem is like, you know, there are always unintended consequences and the world is chaotic and unpredictable.
26:34Speaker B:And I just think what's great about open source is it means that we're going to have a rich variety of AIs, we're going to have diversity of AIs. And that is a good world for humans in America. We do not want one, two or three dominant models. And that's why, by the way, not to don't want to always talk about Grok, but it's great.
26:55Speaker B:I think history will judge Elon kindly for having rock dedicated towards the pursuit of objective truth. Objective truth Talk.
27:07Speaker A:That book you made a. The whole point, Gavin, is if you made the bet, that means you used your intelligence and your savvy to pick what you think the winner is. That actually is, I think, super accurate. And I think Elon explicitly believes in open source and he believes that this is a technology that should be shared for the good of it.
27:28Speaker A:And in fact, that was his first foray into this, which was backing OpenAI. And OpenAI's manifesto was rewritten this week, Topic 2, by Mark Zuckerberg, quite paradoxically or ironically, in a 6,500 word essay. It's titled the Future is for Everyone, the Path to a positive AI future. He laid out an extremely optimistic AI worldview where he would, as now OpenAI 2.0, Facebook, he would release open source models, he would create an agent for everybody, he would make it free, he would provide everybody in the world with their own tutor and unlimited abundance.
28:10Speaker A:He has picked up the abundance crown, which Sam Altman dropped when he went for the private company. And he says superintelligence is invention, not automation, and that AI safety should be based on the balance of power. No singular centralized intelligence. I'm assuming, Sachs, you read or scanned or got the coverage of Zuckerberg's manifesto, and do you have any thoughts on his positioning?
28:38Speaker C:Yeah, I mean, I read it and I found myself nodding in agreement with much of it. I really like the point he made pretty early on where he pointed out that a lot of the doomers. And I think he was kind of taking a shot at the effect of altruist and anthropomorphism. Dario, he said, look, why are you guys rushing to create a future that you don't believe in that is so dystopian?
29:01Speaker C:If you think this is such a bad future where everyone's out of work and AI goes rogue and creates all these safety issues, why are you so excited about creating it? So I think he does point out a fundamental contradiction. Now, there is an answer to that question, which is actually there's two answers. One is they could be trying to create a future they don't believe in for, let's call it mercenary reasons.
29:22Speaker C:It could be lucrative. Although I don't think that's the real reason. I think most of those guys are missionaries. And what they believe is that that future is dangerous and only under their enlightened control can humanity be protected.
29:35Speaker C:It's right out of the Vulnerability Vision of the Anointed, which was a book Thomas Sowell wrote 30 years ago, where intellectuals throughout history have thought that if they're maximally empowered, then they can engineer society in a more benevolent direction. And this has always backfired. It's always led to not just empty or broken promises, but also it becomes an excuse for totalitarian schemes and state power. And actually, Zuckerberg goes on to say something that I think gets at this so right after he kind of made the point about, you know, why are you rushing to build a future that you don't believe in, you don't want.
30:15Speaker C:He says the notion that AI is so dangerous, that the only safe path is an extreme concentration of power seems inherently problematic. Historically, hoping that an absolute power will benevolently provide for humanity if sufficiently enlightened has not led to safer, positive outcomes. So I think the point he's getting at here is that a major frame on the whole AI debate, it's not just about open or closed. It's also about centralized versus decentralized.
30:45Speaker C:And whether you think a centralized outcome is the right outcome or a decentralized outcome. I'm on the side of decentralized.
30:51Speaker A:I mean, how could you not be on the side of decentralized? I mean, it's like the most obvious argument ever.
30:57Speaker C:The EA types are not. And by the way, they're delusional. Well, I experienced this when I got to Washington and all the former Biden people had just moved over to Anthropis government Affairs. I also dealt with think tank people who are part of this clique.
31:12Speaker C:And their frame on AI was that it was inherently dangerous and that we had to centralize control over it. In the government. There should be just two or three companies and they should essentially work together. It should be made into a cartel.
31:26Speaker C:Remember, you know, Marc Andreessen had a meeting with those Biden officials.
31:30Speaker A:Don't bother.
31:31Speaker B:Don't bother.
31:33Speaker C:They dispute that characterization. Maybe they didn't use those words exactly. But I do believe that Mark was correct in his interpretation of what he heard, because I heard similar things. And they really believe that the way to control what they essentially thought as of being malign or at least very dangerous was first you limit it all to the United States.
31:55Speaker C:So you don't export the chips, you don't export the models. It's basically you retain total control over it in the US which frankly is a pipe dream because the rest of world is going to get AI the idea that you can. But anyway, but that was sort of part number one, and then part number two was you form like an Atomic Energy Commission or something like that to cartelize the industry. And.
32:15Speaker C:And then you have a deeply embedded with the government. You effectively have a merger of sort of corporate and state power. So it was this extremely centralized vision of the future. I think they still believe in that to some degree.
32:29Speaker A:Clearly Zuckerberg listens to the all in podcast, and clearly I think we have a seat open next week. Mark Zuckerberg could somebody reach out to him? Come on. The pod next week, Thursdays, we'll tape at about 10, 11am your time.
32:40Speaker A:Whether you're in Hawaii or in Tahoe. We will get a starlink to you and you can do it from your efoil, guaranteed. But it would be great to have Montana. Let me get Gavin involved.
32:52Speaker C:Well, just to wrap up though, I think where Zuckerberg goes with this, that I agree, is we want maximum empowerment of the individual. That's the way to solve this problem. We want decentralized outcomes. We want open models like you're saying jcal, we want data sovereignty.
33:08Speaker C:Look, there can also be these proprietary frontier models from Anthropic and OpenAI. But we want to create a decentralized, empowering outcome for individuals. And I think that's the side that Zuck is on. And I very much agree with that.
33:21Speaker A:Gavin, I assume you read it. Yeah. Or did you just get the. You didn't read that?
33:26Speaker A:You didn't have time for 6,500 words?
33:28Speaker A:By the way, if he writes nine more, he's got the average nonfiction book which is right around 60,000, 70,000 words. So Harper Business. Hollis, go call Zuckerberg and get the other eight parts of this manifesto going.
33:40Speaker B:I read it, I agreed with it, and I would just super agree with everything David said. And I would boil it down to I think anthropic and people in the effective altruism movement believe that this technology is too dangerous to distribute. And what Mark Zuckerberg and I think Elon and Jensen believe is that this technology is too dangerous to centralize. And history is spoken.
34:06Speaker B:And when given the choice, it is always better to distribute and decentralize. There's really no counter example that I can think of and just forget as an American, but as a human, I want an AI that looks out for me. Looks out for me. The individual be the individual.
34:30Speaker A:The sovereign individual was a sovereign individual. Yes.
34:33Speaker B:Yeah. My conception of what's good for America, I do not want Dario Amadei or Anthropic deciding what's in my best interests. I just fundamentally don't want that.
34:44Speaker A:You don't trust AI Jesus?
34:46Speaker B:I don't. I mean, AI Jesus seems like, he seems like. He seems like a great guy. You know, although it is funny.
34:52Speaker B:Somebody said he was cursed with resting, smiling face and it is a like minded army to listen to him talk about this terrible vision for humanity while he's smiling happily. It's hilarious.
35:06Speaker A:He's literally got that grin on while he explains to you the Terminator scenario and that only he can save us and that even he doesn't know that, like there's a 20% chance that he might not be able to save us all.
35:18Speaker C:Gavin, I love that framing about it being too dangerous to centralize. And I think one other closely analogous point is what you think about competition. So I think that the EAs think that competition will create a race to the bottom and will create a lack of safety. Whereas what I believe is that competition brings out the best, and so they think it brings out the worst.
35:39Speaker C:Now, look, there are examples of probably both, but fundamentally they want to centralize, control and have less competition. We want to decentralize and have more competition.
35:50Speaker B:I want in the Constitution, I have the right to bear arms. And I think that's, that's important. I grew up in Texas. I think it is kind of like when you come home, defense against tyranny.
35:59Speaker B:I love Texas. When you're coming home, I'll be back soon, I promise.
36:03Speaker B:But I want the right to have my own AI. I want the right to my own AI where I, you know, its values are aligned with me, not. Not by the way, someone as good a person as they might be.
36:18Speaker C:The right to bear arms is a good analogy because we do allow you to have a gun, even though you might misuse it. Guns are used to kill things. Right. Whereas AI has a much more creative use and much more salutary uses.
36:30Speaker C:It's beneficial. Fundamentally. It's a consumer technology that everyone's going to want to use. So if we allow you to have guns, I agree, you should be allowed to have AI.
36:38Speaker A:Well, let me correct you there, Sachs. Now that you're in the great state of Texas with me, guns also help you feed your family and defend you against evil forces in the world. So those are virtuous uses of a gun.
36:48Speaker C:Yeah, I get it. They are that self defense. But I'm saying you'd still use the gun to kill the use the. Use the gun to kill or hurt the person in self defense.
36:58Speaker C:I get it. I'm not against guns.
37:00Speaker A:I think this is the delusion of Dario. If we think about it with these effective altruists. You can look it up, folks, but they think that basically they're going to make all the money in the world, create the one company, the money printing machine, and then they're going to save all of us. It's massive delusions of grandeur that, you.
37:16Speaker C:Know, is the technology is going to diffuse anyway. This idea that you keep the genie in the Bottle is absurd. But by the way.
37:21Speaker A:Well, they're treating it, I think Sachs, the way they view it is they view this literally as super intelligence and the nuclear bomb. And if you convince yourself that you're building the nuclear bomb and you're building the Terminator that you yourself cannot control, and it's super intelligence, that will make a billion terminators and, and a billion bombs. They literally have diluted themselves while taking P O Day or LSD at Burning Man. That this is the reality.
37:52Speaker A:It's not the reality. You could unplug it at any time. They're suffering from delusions of grandeur, period. Full stop.
37:59Speaker A:This is not the nuclear bomb.
38:02Speaker C:Well, you're right about that. When I first came into Washington, that was the dominant analogy that they and their sort of related think tanks, their people in their group had promoted this idea that AI was like a nuclear weapon and we needed an atomic energy Commission, a global one, to regulate this. Total pipe dream, never going to happen. But you're right that they were using that analogy.
38:22Speaker C:And I think the reason why they were using that analogy is because you do not have a right to basically have a nuclear weapon, to build your own nuclear weapon. You can have. You have the right to a gun, but not a nuclear weapon. So they wanted to put AI in that bucket.
38:35Speaker C:But as Jensen has said, no individual, no consumer needs a nuclear weapon. And every consumer, every business needs AI. It's fundamentally different. This is a consumer technology.
38:44Speaker C:Yes, it's a. It's a consumer technology before it's a military technology. And this idea of that, it's like primarily like a nuclear bomb is just kind of absurd.
38:54Speaker A:I mean, in fairness. No one's really saying that in fairness, Gavin. Cyberdyne Industries, they also thought they were building good technology. So science fiction has literally polluted people's brains.
39:06Speaker B:If we're going to have a Terminator thing, I want my own Terminators who like me. Okay.
39:10Speaker A:Open source. The Terminator.
39:12Speaker B:Yeah, but like just very simply just boiling everything else. Like, I'm an American, I'm a patriot. If we ban open source, if we let this control be centralized, we will lose AI, we will lose geopolitics, we will lose everything to China. It's just that simple.
39:28Speaker B:So if you're an American patriot, you should be for the distribution, democratization, decentralization, individualization of this technology. Hey, jcal man, what are your thoughts on. What are your thoughts on the essay?
39:42Speaker A:Well, like you, Sacks, I found myself. I found myself nodding the whole way because I think he took. He Kind of like ran in front of the parade and grabbed the baton and was like, I agree with the best takes here. And the best take is open source empowering the individual.
39:58Speaker A:And this isn't nuclear technology. I just want to point out two other points that I think got buried because he did try to cover a lot of ground. The first is I want to give him credit for his view of specifically job displacement because he says, hey listen, you know, that is possible job displacement. But he says people fear that automation will outpace individuals capability growth leading to job displacement, followed by a difficult period as people learn new jobs.
40:25Speaker A:I think we can all agree that that is a concern. But there is no rule that AI must increase automation faster than it increases individuals capabilities or demand for new skills. Recent statistics suggest it may be more likely that individuals capability growth could match or outpace automation. I thought this was like a really good framing and is just another way of saying what Jensen said.
40:49Speaker A:Hey, you're not gonna lose your job to AI, you're gonna lose it to somebody with AI. And that's the game on the field right now. You know, I, every time I use this technology, three new business opportunities open up and I create two more job wrecks and people are doing five or ten times as much work if they embrace the technology. And that's a big if there and if people will do it.
41:08Speaker A:The second thing I thought was pretty interesting was he makes a play on having the right to index anybody's content and learn from it. The quote he says here is, all AI models are derived from human knowledge. Okay, fair enough. It's pretty plain vanilla there.
41:25Speaker A:Some have tried to frame distillation as harmful, but I think it's important to protect the principle that you can learn from anything you can observe. In other words, he's preemptively saying, I want to scan the world's data. Well, I have a message for him which is, Zuckerberg, please explain how this concept is compatible with the fact that you have sued every startup, many of which I've invested in, that has ever tried to index or use the social graph at Instagram or Facebook. They have hundreds of lawsuits where they have sued people for trying to distill, you know, who are the top influencers on Instagram, who are, who's in my social graph and they lock that whole thing down.
42:05Speaker A:So there's a bit of hypocrisy here that reminded me, Sachs, of our discussion on previous episodes with Claude ripping apart old books and distilling.
42:15Speaker C:Had the distillation debate many Times. Yeah. Let me just go back to this point about. There's a huge irony in the fact that Dario did not get his way in Washington for the most part, during this administration, because I think if he had gotten his way, if he had realized his dream of this highly regulated AI apparatus, I don't think that company would be set up for a hugely successful ipo.
42:39Speaker C:Why? Because their whole right to charge this massive premium for tokens, which jcal, that's the point you were making before, is you're wondering how sustainable that is because of all these open models that are coming up and are offering tokens for much less their whole pricing power, that premium they're able to charge is because they're six months ahead of those open models. And that six months be eaten up in the blink of an eye if they were subject to regulatory approval. Dario himself keeps writing these blog posts where he says, we did an FAA for AI.
43:10Speaker C:You know how long it takes the FAA to certify and approve a new model, in this case for airframes? Minimum of five years.
43:18Speaker A:I mean, if you want to change a table in your plane, it takes eight, eight years.
43:23Speaker C:You know how long it takes the FDA to approve a new medicine? Years. Okay. You're going to apply that regulatory framework to AI model releases.
43:30Speaker A:Game over.
43:31Speaker C:Forget about it. Your six months will be gone like that. Your model will be commoditized to Gavin's point. The Chinese competitors will catch up.
43:40Speaker C:And that's bad for the United States, it's bad for our competitiveness, it's bad for the AI race. I mean, obviously we don't want China beating us, but aside from just the geopolitical dimension, it'd be horrible for Anthropic as a company because again, all their pricing power depends on them remaining in the lead by six months. If they ever slip up. Hold on.
44:01Speaker C:If they ever slip up and lose that six months, what does that do to revenue? Exactly. So now look, I actually think that their pricing power may be quite sustainable. Cause I think people are willing to pay.
44:15Speaker C:Not the whole market. Not the whole market, but a decent subset of the market is willing to pay a premium for True Frontier intelligence.
44:23Speaker A:So as long as if the top 20% sacks. If the top 20% is willing to pay 10x, they're golden. Right?
44:29Speaker C:Like, just like I said before, it's Apple versus Android. Right? Most of the market is willing to go with Android is cheaper, but there's a significant subset of the market that's willing to pay a huge premium for Apple because it's a better experience. Same thing if you're a company that's in a competitive market and you want the absolute best for competitive or other reasons, you're going to pay a premium for true frontier intelligence.
44:52Speaker C:But Anthropic and OpenAI are on that hamster wheel. They have to stay in the lead in order to justify that premium. And by the way, I think they can and they think they can and they think in fact their elite is growing because they're on the way to recursive self improvement.
45:06Speaker A:I just want to make another point about the going direct movement. Zuck has had his Twitter account since the beginning when he tried to buy the company at finkd F I N K D, which was his handle in college I believe. And in the last 30 or 60 days, Nikesh from Palo Alto Networks, friend of the pod, he started tweeting and doing long form. Jensen opened an X account.
45:29Speaker A:He started going long form. Thanks for the follow, Jensen. And then Zuckerberg has activated his account and he's going direct. And I want to just point out that Zuckerberg previously, I think, was letting other people craft his message and send it to the market.
45:49Speaker A:And I think he has matured and decided I am going to write my own missive. This missive I believe was written by him, probably with some help, but I ran it through an AI detector. It's 100% human crafted bespoke human words. I think it's fantastic that he's now getting ahead and saying these are the potential problems in the future and it would have been so great if he had done that with teenage girls and the impact of social media on kids and addiction with Instagram and Facebook earlier on.
46:18Speaker A:I give him a lot of credit for deciding. I will go direct. I will write my essay, I will speak my truth. And man X is getting exceptional at these dialogues and these missives now.
46:30Speaker A:It's fantastic.
46:32Speaker B:Yeah, so I profoundly agree everything you said. And I want to come back to a couple of things that SAC said about the computation, about how open source actually makes anthropic more valuable and computational efficiency of humans is the bull case for humans. But I think what you said is like really important. If you are a public figure, if you were the CEO of a company and you do not have your own voice on X, you are at risk, it's just that simple risk of unpacking you ultimately in the same department as the truth shall set you free.
47:08Speaker B:The only person who can tell someone's own individual truth is themselves in their own Authentic words. And obviously Mark Zuckerberg has super voting stock. He's never going to be thrown out of, out of Meta. But there's many CEOs who think, oh, you know, my corporate PR department's keeping me safe.
47:27Speaker B:They're my voice. Well, guess what, you know, maybe you retire, maybe the next CEO doesn't like you and you get called in front of Congress. And I do think, you know, at some point, you know, the Democrats, you know, have talked about how they're going to have an accountability agenda and they're going to go after everyone. And I mean, I'm not sure that's like a good message for the Democrats.
47:48Speaker B:But be that as it may, if you do not have your own voice and your own brand on X, you are at risk. And having your having your own voice, it is protection, it's power, it's armor. And I think it's a sigil.
48:04Speaker A:Yeah, it is a superpower. And I don't know about you, Sachs, but I am loving Zuckerberg's Jeremy Strong era. Much better than the Jesse Eisenberg.
48:12Speaker C:You see him doing this MMA stuff. There was a video of him on like a barge or something.
48:17Speaker A:On a floating barge. What is that? A barge in Lake Tahoe? Yeah.
48:23Speaker C:I'd be careful about saying bad things about him. Jake. Al.
48:26Speaker A:No, no, no, I am, I'm. Listen, I have to have turned over a new leaf. I am, I am, I'm. I'm into Zuck 2.0.
48:32Speaker A:I hope he likes JK 3.0. Come on, the pod Zuck.
48:36Speaker B:I want him on the E foil with the American flag every fourth of July. And I want it like live streamed. And if he falls, that would be aura maxing for him. If he gets back up and records again, it does it live.
48:49Speaker A:Yo, he's got to do that in Kawai with the bull sharks. Let me see some fins chasing him. He is aura farming times a thousand. Way to go, Zuck.
48:59Speaker B:And like, we need more of this, like, authenticity.
49:02Speaker A:CEO, go direct, man.
49:05Speaker B:Protect yourselves. Yeah, and be yourself, man. And he's being himself. He's a good guy.
49:11Speaker A:All good folks.
49:12Speaker B:There's two points that I think are really important. Open source makes frontier tokens more valuable. So like, let's just say. Let's, let's.
49:19Speaker B:To use an example, let's say that, you know, anthropic OpenAI and Grok, they're at like a 250 IQ or 200 IQ. Well, if you have a 200 or 250 IQ intellect, that can orchestrate these open source 150 IQ intellects like that. That's actually more. That makes the 200 and 50 IQ intellect more valuable is because it can farm out tasks.
49:46Speaker B:And just in the same way, if we're going to use the Manhattan Project analogy, everybody talks about Richard Feynman and who's the guy who ran it all? And there's these 10 really smart physicists. Who's the guy who ran it? Who said, I become death?
50:02Speaker B:Who's the guy who ran the Manhattan Project? Come on, somebody else. Albert Eiber. You know, see, at Oppenheimer, and you had 10, you know, effectively Nobel laureates, maybe 30 of them, but they needed like the 2,000, you know, merely, you know, top 10,000 in the world, physicists.
50:19Speaker B:So having more, having more affordable intelligence, it actually makes the frontier even more valuable. And I think a very plausible outcome is one in which frontier tokens are 65 to 85% of the economic value. Open source tokens are like 80% of the volume. And that's good for everyone and everyone wins.
50:42Speaker A:Tell me the revenue. Gavin Baker of Anthropic, by the end of 2027, what is their 2027 revenue? If 2026 ends at exactly 100 billion, what is their 2027 revenue, Gavin Baker.
50:56Speaker B:I will take the over.
50:59Speaker A:Over what?
51:00Speaker B:A lot of estimates. I'm not going to take the over on a trillion.
51:02Speaker A:Okay, I'm going to put 500 billion over or under Gavin Baker.
51:07Speaker B:How about this? I'm going to take the over 500 billion. No, I'm going to take the over. Whatever the Wall street consensus is for 27, which I don't know, I'll take a 25 to 30% over on that.
51:22Speaker B:Assuming that this regulation campaign does fit,.
51:24Speaker A:Are you basically going out on a limb here saying that the underwriters are going to sandbag revenue? Okay, congratulations, Gavin. Yes, give me my answer. Over 500 or under?
51:34Speaker B:I think 4 to 5. I think 4 to 500 billion, you're under within the zone of like realistic and achievable. Can I just say one other thing?
51:44Speaker A:Hold on. For under 500 billion, Sachs, I actually.
51:47Speaker C:Was going to say 4 to 500 billion as exit ARR for next year. Seems very comfortable.
51:53Speaker A:So right under. Okay, right. Two unders.
51:56Speaker C:Yeah. And the only reason it's not higher is because I just, I do think that somehow you get into physical limitations at that point. Yes, but maybe not. Maybe there'll be enough compute.
52:07Speaker A:I mean, also there is competition. We all believe that they're going to hit 400 billion next year and they're going to 4x. 4X 100 billion.
52:18Speaker C:Like just let it be at 120. So I guess that's, you know, implies, you know, 4x would be more like 500x.
52:25Speaker A:Yeah, that's kind of.
52:27Speaker C:I think the over under really is, you know, I think the over under really is 500 billion exit ARR for next year. And I think they think they'll, they'll do the over.
52:35Speaker A:We were talking about them at 10 billion 10 months ago. 10 Billion to 400 billion is 40x, by the way.
52:42Speaker C:Gentlemen, are they going to thank me for preventing Dario from shooting himself in the foot?
52:47Speaker A:I think that's what I'd like to know. He literally was like, he put two guns on two ankles and he just emptied both clips. And you had taken the bullets out. They should give you 1%.
52:59Speaker B:I actually don't think the bullets were taken out. I think he had the pointed in his temples.
53:02Speaker A:Oh, you're saying, did he. Mao, he did deer hunt.
53:05Speaker B:Sachs and Sacks pulled him down and like he just shot himself in the foot.
53:11Speaker C:This is where their hostility to open models comes from, I think, is that if they're going to slow down, they have to slow down the open models as well. Well, otherwise they do get commoditized and their business goes away. However, the United States does not have jurisdiction over what happens in China, and China was not going to slow down. That was always, I think, a huge flaw in this, in this whole conception.
53:32Speaker C:These EA types thought they're going to institute global compute governance. Somehow they're going to like some global agreement with China, total pipe dream, never going to happen. If we slow down, China is just going to race ahead. It was, I think, always going to.
53:45Speaker A:Create the powers 2.0 and that didn't work. So, yeah, slow your roll, kid.
53:50Speaker B:Can I just say one thing that I think is also important about open source and just like, why I think AI is going to be good for humans, it's going to be good for Americans. It's that, like, if we are short compute, we are talking about compute slowing down anthropic growth. Because literally we're just, you know, we're running out of energy. We can't bring on.
54:09Speaker B:We're running into physics and like, you know, planetary scale limitations. And I think this is like, this is a reality. Just think about how energy efficient we are. All of our brains to approximate our brains, you need to have a data center that consumes the power of a million American homes running for probably six to nine months.
54:33Speaker B:And then you get our brains. And then every time you want to answer a question, you need the power of 1,000American homes to operate at the level of our minds. We're smart and all those figures are going to get better. But we're so energy efficient capitalism, there's going to be a use for the most computationally efficient intelligences on planet Earth.
55:02Speaker B:And, and those are human intelligences.
55:04Speaker A:It's so well said. Because if you look at what Cerebras and Grok and Nvidia are up to, they're making inference ten times, five times every year. And you're the chip master here, Gavin, but they'll be five to 10 times more efficient every 12 to 18 months. Then you look at the models and by the way, congratulations, you got Zuckerberg on your ass.
55:25Speaker A:Go ask MySpace, go ask Snapchat what it's like to have Zuckerberg in the rearview mirror. That's literally the T Rex coming at the frontier models. He is a beast at copying, mimicking and competing. He's going to be the open source hero from America.
55:42Speaker A:He is going to have the best open source model in the next year. I guarantee it here on the.
55:48Speaker B:I might take, I might take the under and just there's another, there's another American hero, okay, Jensen Wang and like, okay, Nemo Tron. You might see Nvidia at the open source.
56:01Speaker A:He doesn't like us talking about that. I got the back channel. He's like, we're not in the open source business. I mean we do have Nemo Tron and we can't give you a full stack.
56:10Speaker A:But one of the hyperscalers, by the way that we know, Gavin, one of the hyperscalers told me they just did a nine figure double Lindy reverse where they went from doing a frontier model on $100 billion in infrastructure and they're like, Bing, it's going to be open source, not frontier. So people are looking at this saying it's time to Bing, maybe move over to some open source models. All right, listen, the All In Summit is coming September 13th, 15th in Los Angeles. We told you about the Giants last week.
56:47Speaker A:Jensen, Satya, Jared, Gwen. I mean this is all first name club, but here we go. Steve Hilton running for governor of California is going to come. Spencer Pratt and talk about his failed LA run, but successful in terms of capturing people's imagination.
57:04Speaker A:Abigail Schreier, author of Bad Therapy, a fantastic book is going to be with us with a very special surprise guest. And hey bestie. Gavin our guy bestie Gavin might even make an appearance on and my guy Blake Shoal CEO of Boom Supersonic who I mentioned earlier in the program. And this year we're going to turn the outside of the shrine into a festival like experience from you for you.
57:35Speaker A:A frontier tech hub featuring AI and robotics demos and a gifting suite. The gifting suite like you're a celebrity. Merch.com has made an incredible all in swag suite for you Wellness suite with red light therapy, facials and IVs if you hey you stay out a little too late Saxy poo that sometimes happens. Don't miss these important conversations.
58:01Speaker A:And by the way we're going to announce all the DJs and parties which is the reason Freeberg does this. Going to blow your mind. The AllandSummit.com to apply today. Go ahead and apply.
58:13Speaker A:Hey speaking of our guy Jensen sixth best to hear on the pod. Nvidia is partnering with Goldman, BlackRock and others to raise 500 billion in AI compute. Jensen laid out his vision in an X article. As we mentioned, Jensen is now on X titled Nvidia AI Factory Compute is becoming an investable asset class.
58:37Speaker A:The firms will establish independent financing platforms raising third party capital. The idea is to treat GPUs like a financeable income producing asset. Like maybe mortgage backstory is or hopefully not with the same outcome. Here's how it works at a basic level.
58:52Speaker A:Instead of a company paying billions to buy chips upfront, they borrow money. They buy Nvidia based systems and use them to start generating revenue that is renting compute and then they can use the cash flows to pay back the loan. Nvidia's role is matchmaker, connecting customers who need compute with lenders. Obviously gm, Ford have their own finance divisions.
59:14Speaker A:Gavin, what do you think of this announcement vis a vis round tripping and the hand wringing concerns we talked about on this very podcast a year or two ago?
59:27Speaker B:Well, I do think what's important here is what is. What's essentially happened is like Blackstone, kkr, these firms, Goldman Sachs, they would not have done this, they would have not have done that CNBC episode with Jensen if they did not believe that Nvidia GPU compute was a financeable asset. And so what's really smart here is you're getting some of the smartest asset managers in the world who charge 2 and 20 for many products to essentially validate this market. And Nvidia is being a matchmaker.
1:00:03Speaker B:And what they're basically saying is hey, our computer because it's so flexible is going to have a long enough life that you can finance it at lower rates than other kinds of compute. And I think that's smart, that's good for everyone. And it is interesting. If you look at the underlying architectures of the three, what I call big Chinese open source models, maybe even throw a few or four, if we have Quinn, if we have Kimmy, if we have DeepSync and then we have GLM, they're actually evolving in very different ways.
1:00:37Speaker B:And that architectural variation works in Nvidia's favor and in GPU's favor because it means that you do need this more flexible compute to be able to finance it, to be able to think that you can have a long life. But what Nvidia is doing that I think is really smart is, is they're saying, hey, we are going to help create this market, grow this market, but they're going to provide two very important functions. They're going to say, hey, Blackstone, Goldman Sachs, kkr, Apollo, blackrock, I'm leaving someone out and I'm so sorry. There are six of them.
1:01:19Speaker B:Come to us if you have a deal, you can bring it to us and we will give a residual value guarantee. And I think the way that that residual, which will further lower the cost of financing these and that residual value guarantee can then be incorporated into those companies underwriting. And what that basically means is they're saying that after three years, four years, we guarantee that these GPUs can be rented at a certain rate. And then the risk that they are bearing is the risk between that value and wherever the market rate is.
1:02:01Speaker B:And right now everything's going straight up. Nvidia has better telemetry than almost anyone into the supply and demand of compute. So they can put that at a very, very smart place, further make it financeable. You're risking, you know, they're only bearing 25% of the risk.
1:02:23Speaker B:Some of the world's smartest underwriters, you know, in terms of reputation, what could go wrong?
1:02:28Speaker A:Gavin, I mentioned mortgage backed securities, et cetera and obviously the lifespan is the key issue here. The different hyperscalers were saying, hey, four, five, six years, Amazon and the big debate happened. But what we've seen is to your point with the open source models is they can be tweaked to run on the oldest hardware. So maybe we get year six, seven, eight out of these.
1:02:52Speaker B:That's more than that. Corewe said that they are renting amperes at economically profitable rates today for 2029. So an ampere that came out in 2020 is going to have a nine year life. And I think that's what Nvidia sees.
1:03:11Speaker B:You know, it's like old American cars, they get sent overseas. Like just the idea that these.
1:03:18Speaker A:Where could it go wrong? That's.
1:03:20Speaker C:I'll tell you where it could go wrong. In theory.
1:03:22Speaker A:In theory. Just so we're steel manning, the biggest.
1:03:24Speaker C:Risk is to me is not on the demand side. The biggest risk is that you get a glut of compute and you get an overbuild. And the same way that we had dark fiber after the dot com crash, if you had dark GPUs, that'd be a disaster for everyone. Especially if you built out your compute infrastructure expecting a spot price of 30 to $50 a watt.
1:03:46Speaker C:As you know, Elon said that they were expecting. Right. So if all of a sudden there are too many people racing to provide this compute and now there's an oversupply and the market crashes, that'd be the risk factor. In a weird way all the political headwinds I think ensure against that outcome because it is so hard to build data centers for all the reason we said there's a whole moral panic slash hysteria hoax going on that actually it's those political headwinds I think will almost guarantee that there's not an oversupply relative to the exponentially growing demand.
1:04:21Speaker C:So in a weird way you're protected against that.
1:04:24Speaker C:Jcal, could I shift gears for a second?
1:04:26Speaker A:Absolutely.
1:04:27Speaker C:Tell you what's so brilliant about what Jensen did.
1:04:28Speaker B:Here's one other part. In return for that they get a revenue share above that floor.
1:04:36Speaker A:Who gets the revenue share above the floor?
1:04:39Speaker B:So they. I think the way I think the deals will work is hey, we're willing to guarantee offtake at you know, nowhere near 30 or $50 a watt. We're willing to guarantee offtake at a very low risk level that with our really high resolution view of like productive capacity and future model trends we're comfortable with and, and in return we get some revenue share above probably a higher level. And Morgan Stanley wrote a great note, I think two days ago, Nvidia could become, and these are effectively royalties, these revenue shares, they could very quickly become a very large cloud with a capital light business.
1:05:19Speaker C:Let me tell you why I think what Jensen did was so brilliant. It's because the numbers are getting so big that the TAM is getting constrained by the ability to finance this build out. And what he's doing is alleviating that finance constraint so that he can grow as Big as the TAM actually is. Right.
1:05:37Speaker C:It's removing that constraint. So just to take one example, Elon wants to add somewhere around 6 to 8 gigawatts next year. We know that that would cost 3 to $400 billion of CapEx. The company just raised 100 billion in its equity and debt offerings.
1:05:54Speaker C:So obviously they would have to go out and finance that somehow. And as we talked about on our previous episode, the simplest way to finance it would be to get seller financing from Nvidia, especially given that the payback period could be as quick as one year. So now Jensen is creating the, you could say the line of credit using these big banks, using these big private equity shops. And he's making that available and that's going to now benefit all of these downstream purchasers.
1:06:21Speaker C:I don't think it's circular. This is not a circular situation like Gurley's worried about. This is, I think Wall street banks and private equity firms providing financing based on the expected cash flows that will be delivered from these GPUs.
1:06:39Speaker B:In some ways, Nvidia is kind of becoming the central bank of AI, the Federal Reserve of AI. That is like a way to kind of conceptualize what they are doing. And in the same way the Federal Reserve, like a lot of monetary policy, works through private banks. Here you're going to have, and probably more banks will opt into this.
1:06:59Speaker B:You have private markets who are charging fees underwriting these deals and Nvidia is helping to facilitate that. So I don't think it's really circular financing.
1:07:11Speaker C:Yeah, I watched that CNBC special as well. One point that really stuck with me was when the private equity guys said that this was a little bit like what they do for plane financing where when an airline buys airplanes, they're able to finance it not just based on the creditworthiness of the airline, but rather because the airplanes themselves have value. And that makes it much easier to finance because you know that even if the airline gets in trouble, you're protected. Right?
1:07:39Speaker C:You have asset backed financing. And that's what they're basically doing here with GPUs. Now in order for that to happen, Nvidia has to standardize. They have to create essentially reference designs and so forth and so on so that it can all be standardized enough for these Wall street guys to now package it up and securitize it, turn it into securities.
1:08:01Speaker C:And that's basically what they're doing like they. With mortgages.
1:08:04Speaker A:Yeah, I'll say there's two. There's a reason why I'm not worried about this build out. There's two, there's a governor like a throttle, Gavin, if you will. There's a governor on this, which is the physics of the real world that we talked about in building data centers.
1:08:20Speaker A:There's also a deadman switch on this which is, you know, the switch that you have to hold down to run the train. But if you have a heart attack, your hand comes off the switch. Which is Anthropic and OpenAI. These are the two biggest customers.
1:08:32Speaker A:One of them has scaled back OpenAI their ambitions in this regard of their build out from like 1.4 trillion to like but 600 billion. And then there's Anthropic, which we just said, okay, they're gonna go to 400 billion in revenue next year, something like that. Or they'll end the year at that run rate. If they don't need the compute or compute gets so efficient or open source models create a headwind, whatever it is, they're gonna take their hand off the buy button and that deadman switch will then slow everything down so we don't get a mortgage backed security.
1:09:05Speaker C:Well, that could lead to a car crash. But actually this is why I think it's the Anthropic IPO is really important for the market is getting those quarterly earnings and be able to see their numbers, profitability order. I think it'll become probably the most important signal for the entire industry has. Why?
1:09:21Speaker C:Because you got all these people out there saying that AI is a bubble, this capex is not justified. There won't be an ROI and everyone's going to be looking to Anthropic's quarterly earnings as the pace car. Not just them, it'll be them and OpenAI and SpaceX. But you'd have to say that Anthropic right now is the pace car.
1:09:39Speaker C:And they're going to be looking to them to see if the demand signal is there and if there's a hiccup or a wobble, you know it'll show up there first.
1:09:48Speaker C:If Anthropic slams on the brakes, there'll be a pileup of companies behind it because anthropic, they're making 100 billion billion per gigawatt. Okay. Of compute. That's why they're able to pay SpaceX say 50 billion a gigawatt, you know, spot price for compute.
1:10:06Speaker C:That's why SpaceX is then able to pay 30 billion to Nvidia for chips for the build out. That's why Nvidia is able to pay TSMC and Micron and SK Hynix and all the way down, it's the entire food chain. So if there is like a wobble,.
1:10:22Speaker A:If somebody slams on the brakes, if.
1:10:24Speaker C:The pace car slows down, the whole gonna feel it. But it's still better for those numbers to come out on a quarterly basis. It's such in a vetted gap compliant way.
1:10:34Speaker A:So Gavin, as we're sort of saying here, there's a kill switch, there's a brake, whatever you wanna call it, is there enough space, is there enough distance between the cars to not have a pile up? In other words, if Dario does slam on the brakes, if there are headwinds, does everybody go slamming into them or is there enough for the entire industry to say, okay, yeah, we're going to go 20% slower, we're going to go 30% slower.
1:10:59Speaker B:It's very simple. If he's slamming on the brakes because there's demand, there will be a pile up.
1:11:04Speaker A:Okay, there's a pop, there's not enough room between the cars.
1:11:08Speaker B:Yeah, if, if it's because of demand. Now if Dario is Getting passed by SpaceX or OpenAI are an American open.
1:11:17Speaker A:Source champion,.
1:11:21Speaker B:There won't be a pile up. But I do think the anthropic S1 is going to be really important and I think it's going to break a lot of people's brains. And the reason is, I think there are a lot of macro and value investors who are very confidently making these prognostications about AI with the assumption that tokens are subsidized. Anthropic is generating cash.
1:11:44Speaker B:And this fact is, I would say, kind of known in the world. And I've actually never really spoken to Anthropic, but it feels like there are enough signals that if you're to read the tea leaves of what has been said in public, they're generating cash, they're profitable. Open source tokens are profitable, anthropic is profitable. OpenAI, if they're not generating cash, they will be imminently SpaceX, same thing.
1:12:14Speaker B:What I hear these macro and value investors who are ignorant, they're very smart, but they're ignorant of the facts and they're making an assumption that tokens are subsidized and this is all going to collapse in some circular financing bonfire. They're just wrong. The overwhelming majority of tokens are profitable for everyone in the chain. Everyone.
1:12:41Speaker B:And I think the anthropic S1 is kind of going to make that clear. But when I listen to these macro and value investors talk about AI It's a little bit about me saying I'm very bearish on the world economy because oil is at $500 a barrel. And you know what? If oil was at $500 a barrel, that'd be a good reason to be bearish.
1:13:03Speaker B:It's just not like they're just wrong.
1:13:10Speaker A:They're paid in some ways to be doom scrollers and merchants of doom. I can tell you one framing of this that I've been working on, which is the number of people employed in the United States, like 150 million, 160 million, which what their collective salaries are 10 trillion, 12 trillion, whatever it winds up being. There is no world in which I don't see corporations and people in the economy spending 5 or 10% of the salaries of their employees on the equivalent in tokens. In other words, somebody makes $80,000 a year on average, they're going to.
1:13:48Speaker A:You will spend $8,000, 10% of their salary, or a minimum of $4,000 to make them more efficient. But we have an analogy for this. It's SaaS, software and compute computers on their desktop, mobile phones, et cetera. Just their general use of technology.
1:14:01Speaker A:If you put those numbers together, you're looking at a trillion dollars in AI spend just in the United States. It's obviously going to happen. And if, if I'm wrong and it's half and it's 500 billion, well, that's kind of where these companies are trending. And that's not even talking about the rest of the planet.
1:14:18Speaker A:I think we're going to be fine, folks. All right, let's. Yeah, let's wrap up here. I got two more stories I want to get to.
1:14:26Speaker A:We'll go lightning round here. Very interesting story coming out of New Jersey and New York around Amazon. New Jersey's AG has sued Amazon last week. They're arguing the company is cheating basically by hiring drivers through subcontractors.
1:14:43Speaker A:This has been well known. It's called dsp. This concept of Delivery Service Service Partners is a very clever, perhaps too clever of a way for Amazon to shield themselves, according to these lawsuits that are starting to pile up. Because if an Amazon driver crashes, there is liability and it gets you out of some, you know, things you might have to pay for if they were Amazon employees.
1:15:08Speaker A:On Monday, New York City mayor and friend of the pods, the Zoran Mondami, jumped into the fray. He is throwing in support and he did one of his Big Grin Socialist, Democratic Socialist videos that he's now becoming famous for telling and demanding through municipal laws that will require Amazon to hire the drivers themselves. Quote, corporations like Amazon build billion dollar business models by insulating themselves from accountability through a system of exploitative subcontracting. This has been an issue for a long time.
1:15:41Speaker A:There have been tragically a number of deaths because these subcontractors are put under massive pressure and people get killed tragically when they run into people because of them operating in the real world. And because the drivers are technically employed by the dsp, Amazon claims, you know, hey, we're not the employer, so we're not on the hook and we don't have to get into union bargaining or labor obligations. So Sachs, I'm curious your take on this in terms of the overall surge in people believing in socialism now and believing that corporations are cheating on the margins. Is Amazon cheating here?
1:16:24Speaker A:Is this too clever and maybe they need to roll this back? I'm curious your opinion because it's getting momentum and it's going to be one of the big issues in the midterms and obviously in 2028.
1:16:38Speaker C:Well, I mean, this is a practice that's widespread. It's not focused on New York. I think Amazon's been using these networks of independent contractors as drivers for a while. And what they say is that if you deny them the ability to use these independent contractors, it will raise delivery costs.
1:16:58Speaker C:And there was a study that showed that the average household could pay hundreds of dollars extra. You change this, it would slow down service. It would put thousands of jobs at risk at small contractor businesses. And Amazon says that it could lead them to shift operations outside the city.
1:17:14Speaker C:Also, one thing that this DSP model does is it enables rapid scaling for peaks. So holiday surges, dense urban routing, lower costs. It's a much more flexible arrangement than if everyone was just an Amazon employee. So this is how the market has evolved, is I think maybe when they started, Amazon probably was doing everything themselves and they started to decentralize it to these networks of small businesses, these contractors.
1:17:42Speaker C:It actually ends up creating more jobs. It creates more entrepreneurship. I think these DSPs employ thousands of people in New York City. Those jobs would be threatened if you basically made them illegal.
1:17:54Speaker C:So I think this is a case where.
1:17:57Speaker A:Where do you stand, Sachs? Where do you stand on it?
1:17:59Speaker C:I would just let freedom of contract and voluntary exchange prevail here. And look, this market structure evolved for a reason. The workers liked it, the DSP owners liked it, Amazon liked it. These are mutually beneficial arrangements.
1:18:13Speaker C:I don't see the reason why Mamdani has to insert the city in the middle of this.
1:18:18Speaker A:Gavin, do you have a takeaway?
1:18:19Speaker B:What I would do if I was Amazon and I'm sure they will not do this, I would just put a surcharge. Hey, this is the Momdadi. This is the Zoran Mamdani fee that is being imposed on you. Loads of people use Amazon, not just wealthy people in New York.
1:18:37Speaker B:Lots of people use Amazon and this is the Zoran Momdani fee. As a result of this ill advised policy, I would have it as a line item and every bill because that's what it's going to result in.
1:18:53Speaker C:When you compare Amazon's service to anything government provides, it's insane how efficient Amazon is. You order your thing and it can be there the same day or at worst it gets delivered to you the next day. It's unbelievable how amazing Amazon service is. It's optimized for low prices for consumers and we're going to basically get in the middle of that and have the government get in the middle of Amazon's driver network.
1:19:17Speaker C:What city service does Mamdani provide that remotely is as efficient as what Amazon does, that he now is going to tell them how to run their business. It's insane.
1:19:29Speaker A:If you look at what Starbucks did when Schultz was running it, he gave people a job worth having and he took pride in taking the lowest paid people in the organization and giving them a living wage. And that living wage is somewhere around 20 bucks, 22 bucks. In these cities these DSP drivers are actually paid quite well. 18 Bucks, 19 bucks, 20 bucks.
1:19:52Speaker A:But this was not created in the free market as you're sort of saying Sachs, and it was just what everybody wanted. No, this was created explicitly to benefit Amazon and to take the burden of these employees and put it onto the American taxpayer. And they are getting called out on it, rightfully so, by New Jersey and New York. And I believe, you know, and I'm a long term Amazon customer, I've been, you know, a prime subscriber since the beginning.
1:20:21Speaker A:It would be a de minimis cost for them to make these employees, full time employees. And you could still have some DSPs to scale up and down, sure. But this is an opportunity for them to make those frontline workers part of the Amazon family. It would cost but 25 cents per delivery in New York to move them from this 18, $19 an hour to give them a slightly higher pay raise, maybe 21, 22 bucks and give them benefits.
1:20:47Speaker A:This is an easy thing to do. And what our industry, what our industry has a crazy blind spot for is that they look for efficiencies. And Amazon is the most efficient company in the world to the point of it being abusive to the most vulnerable members of our society and for being against the esprit de corpse of capitalism. And this is a level of capitalism that needs to be self corrected for.
1:21:15Speaker A:And I think the government's going to have very valid arguments here. I think it would be amazing for Amazon to get ahead of this because this will be what the democratic socialists, also known as social media socialist communists. In my mind. This is a very valid argument that will sell with Americans who believe that this group of people is being taken advantage of and that we can easily afford to pay $0.25 more per package delivery.
1:21:42Speaker A:Yeah, Sachs, you're right. It might add $100.
1:21:44Speaker C:Well, why don't we have Uber do that too then? J. Cal?
1:21:46Speaker A:Absolutely, Uber has.
1:21:47Speaker C:Because Uber was basically castigated for the exact same thing. Using independent contractors instead of making them full fledged employees.
1:21:54Speaker A:Sachs, you make a great point about Uber and this would be the equivalent of if Uber had 3 or 4,000 people representing their drivers and they had no exposure. Uber actually has massive insurance exposure, massive lawsuits that they have to contend with for what those drivers do. So it's distinctly different. And they've gone through this.
1:22:14Speaker A:I'm not a proponent of socialism, but I do think that there's an opportunity for Amazon, which is going to be automating along the way, to just take a little bit of a haircut on their amazing business, but then be on the right side of history and not take their employees benefits, unemployment, food stamps and health insurance and give that to the public to do. And these socialists are going to point this out in the next two election cycles to the point of absurdity. And it's going to play. Socialism is playing.
1:22:52Speaker A:Socialism is making inroads and it's infecting people's brains. And it's up to capitalists to say, you know what, we don't need to be as cutthroat and don't need to be as clever. So that's my message as a long term shareholder in Amazon. I have a very big position in Amazon and I keep increasing it every year.
1:23:10Speaker A:They should do the right thing here and get ahead of this so that they can say, hey, we are an incredible employer as opposed to, hey, we really are trying to hide and move these expenses around. That's my only point on it. Not a socialist, not a cuck, not interested in, you know, messing with capitalism. I think they got a little too clever here.
1:23:33Speaker A:That's My only point, and I think they should do the right thing here and treat those the most vulnerable.
1:23:39Speaker C:I don't know why you put this on the docket.
1:23:40Speaker A:What's that?
1:23:41Speaker C:Now I know why you put this on the docket. So you can get on your soapbox.
1:23:45Speaker A:Well, no, no. I put it on the docket cause it's one of the top news stories. And I put it on the docket because we talk about socialism every week and we talk about all the virtues of capitalism and there are downsides to capitalism where we can get too clever and then try to take expenses.
1:23:57Speaker C:I think we spent too much time on this. But let me ask you a question. You said.
1:24:00Speaker B:Go ahead.
1:24:01Speaker C:That you want Amazon to employ all these drivers, by the way. They don't.
1:24:04Speaker A:All of them I think they should employ.
1:24:05Speaker C:I know you said you wanted a bunch to still remain with.
1:24:09Speaker A:I think the DSPs can happen.
1:24:10Speaker C:So how do you decide which is which?
1:24:13Speaker A:I think they could proactively do that. It's a great question. Andy Jassy could proactively decide just like Schultz did.
1:24:19Speaker C:Mamdani wants to get rid of the dsps. He wants to make them all.
1:24:22Speaker A:And I think there's a compromise here, which is there are DSPs to scale up when there's demand during the holidays. Seems like a great idea, but I think he should get ahead of it.
1:24:30Speaker C:As soon as you acknowledge that the DSPs are better because there are more flexible working arrangements that people want, why are you meddling in this arrangement to begin with?
1:24:39Speaker A:That's actually not true. The people who work in the DSPs, the DSPs themselves, the people who own those fragmented, very small companies that go out of business the second they get in an accident to shield Amazon. Those employees would very much like to have Amazon equity. They would love to get RSUs and they would love to get healthcare benefits for them.
1:24:56Speaker C:Some of the. Some of those drivers, they work very hard. I actually can. They toggle back and forth between being a driver for Amazon being a driver for Uber.
1:25:05Speaker C:They like the flexible working arrangements.
1:25:07Speaker A:You're actually misinformed here. You're incorrect. These are people who are working full shifts. They're working 8 to 12 hour shifts.
1:25:14Speaker A:I think it's actually 10 to 12 hour shifts. I don't think you can speak for all these workers. You can speak for them. They can speak for themselves.
1:25:21Speaker A:And they are organizing. And Amazon has been trying to break the organization efforts when they try to unionize. And this is a tool for breaking that by forcing them to be part of the dsp. That's the game on the field.
1:25:35Speaker C:Well, you already acknowledged that you think the DSP should stick around.
1:25:39Speaker A:I think a portion of them should do that. And I think Andy Jassy and the team at Amazon should get ahead of this because it's a bad look. It's not in the best interest of capitalism to be this cutthroat. I think he should do it proactively.
1:25:51Speaker A:I don't think he should be forced to do it. That's my personal belief. The same way Schultz said there's an opportunity here to make baristas have a living wage and have benefits. And it was one of the best things Starbucks ever did.
1:26:01Speaker A:And it's really what capitalism should start thinking about. What is our role? What is our role in driving the move to socialism amongst young people? And this is an example of one of the reasons people are starting to believe in socialism is because they believe that companies like Amazon are cheating a little bit on the margins and maybe trying to take the expenses that they should incur and put them on the American taxpayer.
1:26:26Speaker A:And you know what? Mondami and New Jersey are going to win these lawsuits. I predict it now.
1:26:30Speaker C:Well, look, J. Cal, that all sounds really nice and I want to save capitalism as much as you do. And if Amazon doing that would really save capitalism, then I guess I'm game for it. But I'm not sure it will. What we do know it will do is raise the cost of packages by about $5.20 per package and it will cost families $664 more per year and it puts something like 5,000 jobs at risk.
1:26:55Speaker C:So there are real costs in terms of doing things the way that you're saying. When people are wearing their hat as voters, yeah, they fall for the socialism stuff. But then when they're consumers, when they're wearing their consumer hat, they just want to pay less for packages. They will hate the fact that packages cost $5 more.
1:27:10Speaker C:And like Gavin said, they should put the Mamdani surcharge on their orders. And it's not 25 cents, it's $5, $5.20 per package. $664 Per household per year in New York. That's crazy.
1:27:23Speaker C:That's a real cost. Talk about cost of living adjustment. That's a huge cost of living adjustment. JCAL has had Internet issues and we're just moving on.
1:27:32Speaker C:Gavin, last issue. What did you think of Grokbot? What did you think of the releases that Xai made this week? I guess it was Grokbot and Then also it was Grok 4.6.
1:27:44Speaker C:Right. And people were saying that it is close to the frontier, or at the frontier, but a lot cheaper. So I've been maintaining as of even last week that we were down to a frontier lab duopoly with anthropic and open AI. Was I wrong about that?
1:28:01Speaker C:Is this number three, is it more flexible than and fluid than I thought?
1:28:06Speaker B:Yeah, I think it is. I mean, I think it's.
1:28:08Speaker B:Can we show up, show that graph of the Pareto frontier? This is pretty wild. Now on the left, what this shows is kind of like quality or intelligence on the Y axis and cost on the. On the X axis.
1:28:26Speaker B:So you want to be in the upper right quadrant and you can see, or you just want to be on the outside of this and you can just see like how disruptive GROQ 4.6 is pricing.
1:28:39Speaker C:So sorry, Intelligence, if you move right on the X axis, it's getting cheaper and the Y axis is the capability and it's getting more and more capable as you move up.
1:28:49Speaker B:Exactly.
1:28:49Speaker C:They invert the X axis so that as you move to the top. Right. It's better. Right?
1:28:54Speaker B:Exactly. And I mean this is now and this is on cursor bench and xai, you know, SpaceX is, you know, almost certain, you know, they have a right to acquire cursor. They're working with cursor. So maybe this is creating your own homework.
1:29:08Speaker B:Well, right here on the right, this is from Databricks, which just raised money at $190 billion. This is a very real company that is very sophisticated. And you can see even on this, you're well ahead of Fable 5, which I think most people would agree is the gold standard. Like this is you're higher quality at a slightly lower price.
1:29:38Speaker B:So I think GRO 4.6 is, you know, the numbers are the numbers. You know, on X. I think we put it down, people. You, you know, we do have to wait and see the vibes, but I think it's pretty interesting. Dhh, who I think created Ruby on Rails.
1:29:55Speaker A:David Hanmeyer Hansen.
1:29:57Speaker B:Yeah, yeah. He posted something really positive. Base camp. Basecamp, the DHA.
1:30:02Speaker A:David Hanmere has 37 signals.
1:30:03Speaker B:Great, 37 signals. Basecamp, yes. He posted something really positive. You saw the Databricks evaluation, you saw Mercury evaluation and you show, I think the early vibes are really good in these benchmark scores are bearing out in the real world.
1:30:21Speaker A:Elon has caught up, in other words, and if you were to attribute why he's caught up, it would really be two reasons. Number one, he bought Cursor. He's got that team, they're a dialed in team. Number two, he reshuffled the management of Xai and brought in his killers from SpaceX.
1:30:41Speaker A:Yeah, Gavin, those are the two.
1:30:43Speaker B:Absolutely. He brought in, you know, he brought in, you know, the, the SpaceX aces along with the Cursor aces and some new people.
1:30:52Speaker A:And he did that in six short months. Gavin never count Elon out. He's frequently late, he's never wrong and he tends to over deliver when it does come. And that's to his own admission.
1:31:03Speaker A:He's like, I'm always late. But we get it right eventually. Yeah, absolutely.
1:31:08Speaker B:And this is still a relatively small model. It's 1.5 trillion parameter models. A larger model, Grok 4.7 that should be significantly more capable is coming out in a few short weeks. Grok Bot is also seems just as important.
1:31:25Speaker B:It feels kind of like another open claw moment for AI, for this kind of personalization of AI, of making it, democratizing AI, making it the same thing.
1:31:36Speaker A:That Zuckerberg said in his manifesto. He wants to create spots for everybody.
1:31:40Speaker A:And that's what Claude Cowork and Claude Tag both do exceptionally well as well as Ermes Perplexity Computer.
1:31:46Speaker B:And I'm just gonna admit for me, some of those are like. And I try to be very technical, but I like Rock.
1:31:53Speaker A:Too hard to use.
1:31:55Speaker B:Yeah, not too, too hard to use, but it feels much easier to use for. No, no, much easier. It's much easier to use Open Claw and Hermes.
1:32:03Speaker C:You need to be Hermes.
1:32:05Speaker A:Hermes. They're just like the previous if you've ever had that chance channel. It's like that Sachs like our wives order some channel once in a while and they brank birth us. It is pretty amazing that in six months it caught up.
1:32:22Speaker A:But Sacks, this creates a tension. This does create a little tension. He's hosting Anthropic. He's catching up to Anthropic.
1:32:28Speaker A:What do you think about that tension here that he's there? Amazon Web Services, Elon Web Services at the same time is competing with them increasingly.
1:32:37Speaker C:What I love about it is that he's creating these huge compute clusters and that gives him the ability to train a big model, a big potentially frontier model so that you can think of that as like the call option is to catch up and become a true Frontier Lab. But if he fails at that, he's got the put option of just selling the compute at pretty attractive prices to the Frontier Labs.
1:33:00Speaker A:And he has the right Sachs to take that compute back from anthropic. He put that clause according to reports into the anthropic deal so he could take back computer if he wants to.
1:33:11Speaker C:Right. Both sides have a 90 day cancellation, which means that if the spot price of COMPUTE goes up, he benefits. If it goes down, by the way, it could hurt him because either side could renegotiate within 90 days. Right.
1:33:22Speaker C:So basically Elon is able to charge spot minus 90. So that's the risk. But it all, it all goes back to, you know, what we were talking about before, which is do you think that compute will be supply constrained going into next year and the year after? And if so, that's a very advantageous dynamic for Elon because again, he's very close to charging true spot for his compute, but he can also essentially reroute it to his own service if he's able to take the lead.
1:33:51Speaker A:Yeah, and just can I say what's interesting?
1:33:53Speaker B:Sorry to interrupt, but no, no. I talked to a lot of investors about SpaceX. Okay.
1:33:58Speaker B:And what's just amazing to me is everyone will have a nuanced view on Starlink. Maybe they're a skeptic on Starlink direct to cell. I think the plan to use these distributed Starlink effectively almost when club small cells femtocells is interesting. Everybody will have a nuanced view on orbital compute.
1:34:19Speaker B:Whether they're bullish or bearish. They will have a view, they'll have a view on terrestrial compute. Very few of these investors talk about grok at all and it is Pareto dominant on a lot of measures. And we have an existence proof that Anthropic went from whatever it is a billion to 50 billion really fast.
1:34:39Speaker B:And if anthropic is worth 2 trillion per the FT3 or 4 trillion.
1:34:46Speaker A:According to yourself on a previous settle.
1:34:49Speaker B:Out I said I thought that was a market clearing price. I didn't say that's where I thought it was worth. Maybe people should start to consider rock when they think about SpaceX.
1:35:01Speaker A:SpaceX has so many ways to win and I think that's the high order bit here. We're obviously all talking our book here. The folks on this podcast are amongst the earliest investors in SpaceX.
1:35:15Speaker B:I was part of leading a small part of leading the second round of 10 billion. Hey, there is one thing that broke during the show that we should for sure talk about and that's that Silver Lake may be buying workday. Workday is up 17% and if this is true, this is I think a significant moment for the stock market. You know, software has been in a death spiral that really kind of has started, you know, that probably, you know, troughed maybe three, four months ago, but it was, it was in a tough spot for 12, 15, 18 months.
1:35:45Speaker B:And the return of a private equity bid for software really changes the investing landscape. And I don't know what the potential buyers of workday are thinking, but I do know that the rise of open source and the increasing competitiveness of open source is a godsend for the American software industry. It is an absolute godsend. Yeah.
1:36:09Speaker B:If you want to throw up a charter workday like a five year chart, you can just see it. But a world where you have one, two or three dominant frontier models, you can just see the stock went from, we'll call it 300 straight down to 100 in a really short period of time. And even with this bid, you've only recovered a little bit. But a world where anthropic OpenAI and maybe even SpaceX are kind of the only model providers that dominate the model layer, that is a hard world for software.
1:36:43Speaker B:If I were to guess why the private equity bid for software might be coming back, it's because they see what's happening with open source.
1:36:51Speaker A:Pretty amazing. And that is the backstop, isn't it, Sacks? We've talked about this. If nobody in the public markets wants to own these companies and private equity sees away.
1:37:02Speaker A:We talked about bending stuff, spoons, I think last week, a whole bunch. There is now, I think. I don't want to call them bottom feeders, but what would you call them, Gavin? Like sharp acquirers of money printing businesses that want to extract even more revenue from it.
1:37:19Speaker A:Yes, Axe, this is a good turn of events that there is a buyer for these companies.
1:37:26Speaker B:Absolutely.
1:37:27Speaker C:I mean, what Silver Lake is saying, they've been oversold.
1:37:31Speaker A:They've been oversold. Yeah. And so here they go. There must be some value in that.
1:37:35Speaker A:And if you use AI to run these, I think that was the thing. Bending spoons is doing really well. They get rid of 80% of the employees and then put the 20% who are left as AI first employees. And they figure out how to get all of this incredible revenue.
1:37:47Speaker A:There's your breaking news. Gavin Baker. Amazing. Tied right now.
1:37:52Speaker A:Just so you know, I looked at the metrics before we got on today. You're now tied with Brad Gerstner in terms of ratings. You and Brad Gerstner are neck and neck and tied for fifth bestie, which means one of you will drop to sixth bestie if this continues. And we'll see.
1:38:07Speaker A:Brad Garner may be on next week, so we'll see which bestie takes the fifth slot. David Sacks, Great to see you. Hey, maybe we get a round later. Maybe we can get a steak.
1:38:16Speaker A:You want to get a steak later? I'm. I got Thursday night off here. I got a hall post.
1:38:20Speaker C:Okay. All right.
1:38:20Speaker A:Maybe we can go get a steak. This has been an amazing episode of the all in podcast for August 14th. See you next time. Bye.
1:38:31Speaker A:We'll let your winners ride Rain Man David Sachs.
1:38:38Speaker C:And instead we open sourced it to the fans and they've just gone crazy with it.
1:38:42Speaker A:Love you, Queen of Quinoa. Like what Your winners line besties are gone.
1:38:53Speaker B:That is my dog taking a notice in your driveway. Oh man.
1:38:59Speaker A:My will meet me at. We should all just get a room and just have one big huge orgy.
1:39:04Speaker C:Because they're all just useless.
1:39:05Speaker A:It's like this, like sexual tension that they just need to release somehow.
1:39:13Speaker C:Be what we need to get Murphy's our back.
