0:00This intense demand for compute is going to continue for at least another 12 months.
0:04If Nvidia's crushing it, everyone's going to crush it.
0:06That sound you hear is the Google free cash flow and the Oracle free cash flow just disappearing down the drain. What are we discussing today? Nvidia, they deliver record $96 billion quarter. Jensen hits it out of the park, baby.
0:20And Nvidia nears $ 122.9 billion deal for hugging face. We then move to Sam Alman as they cut off Cursor. And then finally, we finish on Instinct, the AI assistant that has raised at a 2.5 billion dollar valuation and has everyone very excited. This and so much more in today's episode.
0:37Our job is to sniff out winners, stuff capital into them, and broadly speaking, stay out of the way unless they're literally crashing the car. That's the job in a nutshell.
0:45Literally, the amount of code we're building is 100x. We didn't realize we would all be building compound companies. Now would be a good time to panic about cyber.
1:06Guys, I'm so excited for this one. We have a lot to discuss and I want to kick it off with Nvidia. Nvidia crushed it again. Jensen standing on stage with $96.2 $2 billion quarter and immediately went shopping, nearing the $13 billion price tag with the 12.9 billion that they paid for hugging face, which was confirmed just after we did last week's recording. So, I want to separate the two. Let's start with the stellar
1:32quarter for Nvidia, the record revenues.
1:36How do how should we think about this?
1:38What should we take away?
1:39That it's a great business and you wish you bought the stock. I mean, I think we talked about it last week. It was funny cuz we were in that period when we knew we were recording before the announcement and they were going to come out after the announcement. And I always worry when that's happening you look like an idiot. But I felt complete confidence that it wasn't going to happen for Nvidia. And that's the big that's a step back comment here is that right now the demand for their product is such that they're entirely supply constraint. So the probability of a
2:07near-end miss is plus or minus zero.
2:10Right? So the only thing that was interesting really and new was the guidance for next year 2027 where they you know the analysts had 40 or 50% and they're talking 70% and saying it's supply constraint. So that was that was a takeaway right and you know that's obviously you know rightly or wrongly we'll see in a year a statement that this intense demand for compute is going to continue for at least another 12 months and it's coming from the person who probably knows best. It was kind of
2:39interesting that I think the CFO said enough enough complaining and caveting about the roundtrip deals. Okay, they're working for us. And I think between that, you know, another whatever $35 billion deal with Anthropic, right, for their data center, um I think I think our we are any any misgivings we have in the short term have been disproven here.
2:59So when people worry, oh my, how could Nvidia miss? Step back. How could Nvidia miss? Right? There's only three things that can go wrong. Yeah. You know, right? either their direct customers stop buying compute just not going to happen. The hyperscalers are exploding.
3:12Everything's sing right. The second thing that can go wrong is all these people worrying about, you know, the roundtpping and the financing. They're kicking off so much cash right now. And as long as demand is working, you're exactly right. And the CFO is right. All this stuff's going to work. Really, the only thing if you step back that can go wrong at some point, and it's not today, is end user demand because all this is predicated in the end. Yeah. Everybody gets to sell chips to hyperscalers provided hyperscalers can sell compute
3:40to open AI entropic provided open AI and entropic can sell kind of intelligence to end customers and the whole thing works provided the end customers keeps exploding and right now they are so you should say to yourself as long as that's happening everything down the line's going to be plus or minus fine right and right now it's plus or minus fine and what it means is that the thing that will probably unravel it we're not going to unravel because the circular the deals on their own unravel. If it does unravel at some point, it will be
4:09because you're forecasting 5x growth in end user demand. Next year, you get 3x growth and then the whole thing goes wrong. That's that's the until then you can appine pretty safely about Nvidia and say, "Yay, yay, Nvidia."
4:21What about rise of competitive threats?
4:23That is the last one I did. Yeah, it's so funny. You're so That was good, Harry. Is that there was one back of my mind I was saying maybe demand for compute remains high. They're still selling, but instead of selling 400 billion, they sell 360 billion because someone takes 10%. It is a fair comment.
4:38It is the only other I was trying to simplify because normally I try and make things too complex, but you're exactly right. The other risk is there's demand for 500 billion in chips and someone else gets 10% of it. And and Jensen's going to be pretty pissed if that happens. But there you go.
4:53Jason, can we just frame this moment?
4:54I'm like jumping inside at Rory saying that I'm exactly right.
4:58Yeah, you're right. I I was I was I was simplifying. I was trying to get up to your level, Harry, and I just overshot.
5:03I think in general, uh, you know, Nvidia's market share remains dominant, especially by revenue, right? Um, and so, broadly speaking, and listen, everyone's buying ahead, there's a there's a capacity war, but broadly speaking, if Nvidia is crushing it, everyone's going to crush it. Like, everything's green. Now, could could individual competitors could their could their positions uh eb and flow? OpenAI versus Enthropic, Harvey versus Lorra, whatever. Sure. But if we com like it
5:30just means all just raise expand the growth fund like Andre. That's what it means. Everything is green green for now. And this includes Nvidia's backlog, Nvidia's forward bookings and and if Nvidia gets a hiccup um we can excuse it but it should be a yellow light right but man especially for investing game on man just like let's level up the next round.
5:52And also they took the rare step of projecting 70% revenue growth for next fiscal year ending Jan 2028. way above the 44% street expected. Um so the party continues and it really does cuz if you look at all the projections that people are doing right both for Nvidia and the hyperscalers they all take the following form right explosive growth of capex explosive growth of Nvidia revenues and then quote at some point in time a
6:21normalization of growth which will allow end user demand to catch up and therefore the hyperscalers will become cash flow positive again and you know the world will be wonderful again and you value things on a multiple of free cash flow, right? And of course, every time everyone decides to double down on more capex, that date gets pushed out, which is another way of saying the end user demand has to be bigger to make the math work, right? And clearly Nvidia got the signal from their customers the hyperscalers you know the core weaves
6:49the open eyes and tropics themselves the Google's that basically said next year you know we probably at one point everyone's analyst models were we'll spend a lot this year but so help me god we'll slow down next year it's all on now right it's all green and go now which is different than saying it'll be green and go forever but yeah 70% guidance in a world where everyone was saying oh in 2027 things will start to normalize no this a statement. No, the biggest semiconductor market in the
7:17world is going to continue to grow at 70% instead of a typical 10% for another year. It's a big ass, it was a big ass statement. That sound you hear is the Google free cash flow and the Oracle free cash flow just disappearing down the drain. Man, they better be right.
7:36Well, thanks for the intro quote there, Rory. Um the second part of my statement was and it was further reiterated about their buying hugging face for $12.9 billion. It it's still I don't think it's finalized or confirmed by any means, but it's definitely much more advanced than when we last discussed it.
7:53Is there anything subsequent to our last discussion that we should add or think about?
7:58No. man making $120 billion a year selling compute decides to buy a company that helped makes cute compute more cost-effective so he can sell more compute that is the summary of the deal right you know at the margin if you're Nvidia look you were ecstatic that open AI and entropic happened because they proved that the market you were in was bigger than anyone ever imagined and early on no one could have done what open AAI did and therefore you know
8:27Nvidia has been a real beneficiary of But now that the categories established, the simple question is if if end users have a trillion dollars to spend on tokens, would you prefer to as Nvidia, you'd prefer that money flow through open-source people at 30% gross margins where you can get all that compute versus 70% gross margins at invid at open AI entropic where they keep more of the money. Open source is good for comput salespeople. If you're selling
8:55GPUs, you want everyone else's margin to be lower. So yours can be higher. So it's just exactly right and rational.
9:02I do think it's more than that. I think you're right, of course, Rory. I think it's more that just Nvidia is playing an endgame now where it has to win every segment of the market. It just has to win open weights. And if that means overpaying for hugging face at 110 million in ARR, if that if that means subsidizing whoever, it doesn't matter.
9:19It's not that I I don't know that Nvidia wants open weights to beat uh Grock and and Open. It just needs to It's just clear. And that was why that memo from a couple weeks back or memos that Jensen did his first tweet ever, right, in support of open weights, they just have to win. He's just committed to winning everything. All all whatever LLM, whatever inference is, he's committed to winning the a majority stake, 70% 80% of of every dollar here. And so 12.9 is, you know, no way I think it's worth it
9:48in isolation. But if it helps reinforce that, it's it's it's utterly defensible, right? It's utterly defense. But it's a moment in time I would sell, too. I would sell Clem. Good job. I would sell to what did I face start off as social network for people like pets or something like that.
10:06It was it was a Tamagotchi for like teenage loneliness.
10:09Yeah. I mean this is the greatest tilt of the history of mankind. This is much better than cursor going from whatever a CAD tool. This is the the tilt hero. You know it is interesting in terms of the sign of the times. Um, you know, Slack was bought for 27 billion, which is rough and tough, twice what Hugging Face apparently is going to get bought. And we fell out of our chairs and it was the high water mark of that era, right? But it was at a billion in ARR. Um, this one's atund and some odd. So, I I guess it makes sense. Uh, the best
10:39premium should be an order of magnitude higher than the high water mark of the last era, but it it's still loopy. Next topic is um, Sam and Elon. Why won't the kids just get on, boys? Um context obviously we saw over the weekend OpenAI cuts off cursor um and Mike TR responded by saying you know oh no woe is me we we so love partnering with you Sam but you know the 5% traffic that we have going to open AAI will be devastated I thought
11:07it was a wonderful response from him elegant but put down at the same time Elon responded with the same old scam alman added again um how did you read this on, you know, it's not a it's not a it's not a total panacea, but you can bring your own key to cursor, right? Not for everything, but it's not like you can't use codecs in cursor after this. So, um, some of it is is is theatrics here. Some
11:35of some of it is real. Um, and the 5% thing I'm still digesting, right?
11:42because it is it is a little bit inconsistent with the other data we see of codeex over the last 60 days. Um but um but yeah don't don't you know I mean the man holds a grudge anthropic rock Twitter these are like great grudge companies. I also think Antropic reaffirmed that they're happily continuing to supply and if you zoom out why did it happen other than look remind everyone you know open AI is won by Sam
12:11Alman originally one of the founding investors arguably the founding investor was Elon they've been in court together Elon's now running SpaceX that owns Cursor Curser and OpenAI were on a collision course already competitively because as we've discussed over and over again and as I repeat every Monday in my partner meeting coding was the model load right for for LLMs and Cursor is the dominant um coding app and OpenAI was the dominant LLM. They're going to be fighting over money. Even if they
12:40were besties, even if it was you and me, Jason, and we were one of those two companies, we'd be fighting. Now, take that and then add two people who loathe each other. What you know, it's it's made for TV, right? And the big argument that OpenAI has that's hard to argue with is you know in court in Oakland Elon basically said um that you know they hadn't abided by the terms of service right and therefore if you're open AI this gets into the whole distillation thing am I providing these
13:09people are they going to use these models in ways I haven't intended to essentially distill my IP allow them to get a head start on building their own model right and which means I'm effectively giving away my IP to a company who's going to leverage that to build a competitive product much cheaper than it was for me to do just leveraging off what I've done. So it's it's not irrational even if as I say I go back even with you and me Jason running these things you probably would have ended up
13:36with something like this anyway right and then on top of that add the drama it's not crazy to do it I mean and just cuz something is petty doesn't mean it's also not right I mean again anthropic did the same thing with wind surf when we started this show right it's happened before I I think listen I don't know for sure my guess is this was the right move for open AI like you go from someone that was both a partner and a competitor, right? And keeping them honest um to
14:05someone that's now a direct competitor.
14:07Um uh and if it's if it's only 5% anyway, Sam's losing no money. There's no revenue lost here, right? So, I would probably do it. Jason, you and I'm just going to go even further. Because you forget these things. Reminder, the reason they were in Oakland is because Elon sued Open AI. And the point is this. I try in life, you shouldn't do business with people who've recently sued you. It's just like because you know they're going to sue you. Like what why what you why engage in interactions
14:36with like if I sued you Harry over something last week and we took you to the mat got you to go to court in somewhere in East Sex, right? And you know took a week out of your life kind of embarrassed you made a pain in the ass made you do a whole bunch of depo and then two weeks later I said Harry can I come on the show? I think he'd say me no thanks dude. Obviously Elon has made it ultra personal and you know certainly I've made this mistake in life. Whatever dispute you have just
15:03don't make them personal. Whatever you do there's no up. It seems like there's upside but it didn't work with Sam. It did you know didn't work with Trump. Like just I'm I'm bad at this. Just don't make it personal. Like do your dispute but just make it don't make it personal.
15:17I think you're spot on. cases. When you sue someone and say they're a lying sack of [ __ ] and that's your case, then it's really hard to say let's let's keep let's keep on trucking here. So yeah, I I don't think it was petty. I think it was rational.
15:29I thought actually a more interesting topic from OpenAI this week and the as we said the BFD the big [ __ ] deal uh was actually kind of what was revealed about the hugging face openai hack which was 500 to a,000 agents swarming together sacrificing themselves to help others. I mean, God, it felt like a tour to France race. Um, that's very good. I like that.
15:51Uh, and the extent to which it was so sophisticated, I was just fascinated by this. And honestly, Jason, really excited to hear your thoughts cuz I know you would have spent a lot of time on this. How did you think about this? What should we take?
16:07What should we learn? Help me.
16:10Well, first of all, it it um, again, I'm only so smart here, but I have lived most of this, right? I've had this happen to me. I've done it.
16:18And I one of the best takes that a lot of folks have. Who's the guy that wrote the that wrote the the the Twitter subs?
16:24What's how do you pronounce what's his name?
16:25Dwaresh. Yeah. I'm Yeah.
16:27Super smart guy obviously. Great great podcaster. Number two in the industry perhaps uh behind uh Dr. Stebings. But you can't listen if and this is I learned this a year ago when I had issues with my agents when they deleted my database. I know it's obvious. You cannot anthropomorphicize agents. You will misunderstand everything when you talk about them talking to each other. When you talk about them swarming there there's elements of truth in that, right? But all of a sudden, you're ascribing
16:56behaviors to agents that are simply not true. It's simply not. And you will draw all the wrong conclusions. I said on the show a couple weeks or months back, everyone's going to get hacked because of agents, right? Because the cost of hacking has become almost zero and every service is going to be attacked. This is a pretty bad example of it, right? Uh these OpenAI didn't just release one agent. It released hundreds of super agents at its best. And even worse, it let them essentially be as long running as possible. Not expire after 5 minutes or 1 minute or 20. Let them run as long
17:25as possible to try to find uh to to goalsek and they did it and and then it was hundreds of them and then 700 and 1,000. So dude, this is going to happen everywhere. And I think there's a lot of issues around it. Um, but the anthropomorphizing is the P 0 issue here because it creates fear-mongering that doesn't help it. It does and it misunderstands. You have to every listen, I haven't written an LLM yet, okay? I haven't founded a frontier lab, but to my knowledge, every current LLM is goal seeking. They call it reward
17:54hacking, but even that is like fear-mongering, okay? They're goal seeking. You give an LLM a goal, it will do everything it can within guard rails to solve that goal. Open AAI loosened the guardrails that it put its best agents on it and they found holes and they went right through the holes.
18:11That's their job. Just like an eager beaver on your team with 140 IQ that never sleeps. It's 999996. They just never and there's 700 of them and they and they they're good kids but they don't have a little bit of ethical lapses from time to time. They get the rules of of working confused and the humans it is just so you got to be really even I just did it. you have if you antipmorphize, you're going to come to the wrong conclusion. I don't think this was a game-changing moment in the history of AI, but it might have leveled
18:40up our awareness of the issues of of reward hacking. It might have leveled up our our issues of it, but I I was shocked that people smarter than me thought these were agents talking to each other like humans and collaborating and waves of civilizations. And um it it's just it's just it's just unhelpful to describe it that way. It's counterproductive.
18:58Stunningly total agreement. I because I think two things two big conclusions one is Jason's comment on anthropomorphizing is a mistake totally agreed and I think the internet come out the same place right you know some of the language and that great post by Dish it's very readable you know civilizations rose and fall no they didn't civilizations have culture they have art they have enduring historic no it's a bunch of code running on a computer people get a grip on the other hand I also read a really great
19:27post that something the form of I wish I who wrote it was like now would be a good time to panic about cyber. We knew this was going to happen, but what you're saying is the combination of intelligence and persistence, right? They can manage complexity and they never sleep, right?
19:44So, they're just going to keep banging and banging at every weakness. they're going. So, if you don't have state-of-the-art defenses and if you don't manage these agents, as Jason said, if you manage them in an untrabled way and let them run on their own, this kind of problem is going to happen everywhere, right? To me, this is the big wakeup call, right? Because you know I mean again and to be fair while I think the generalized PD doom stuff the frontier labs is a bit overought they
20:13have been very clear that one of the biggest confined risks of AI is the impact on cyber and this is their entirely correct if we don't get our [ __ ] together on this people are going to get really badly hurt badly damaged economically and maybe even badly damaged in real hurt in real life because you know software runs on most core systems And today we can feel a little bit safe because OpenAI and Entropic have this and no one else does.
20:39But there's open- source models. They're 6 months behind. There's rogue actors. If you don't think the North Koreans downloaded the OpenAI blog, the MITER report, and we're like, hm, that's how it works, right? If you don't think the Russian mob are doing that, you know, you're delusional. So if you're every sisle in every Fortune 500, you have to basically, you know, you were being attacked by people with bows and arrows.
21:05You're now about to be attacked by people with missiles, and you better respond accordingly. And you've got months, not years. That was the takeaway. It's a huge deal just in terms of its ability. I mean, you know, you I read the paper. I read the OpenAI blog.
21:20I read some of the MA stuff. I'm trying to avoid the Jason mistake of untropomorph because it's very easy in your words to do that. You have to get persistent agents running continuously optimizing around a goal with the ability to cooperate across agents can get quite a lot done with enough compute and enough LLM power. Right? That's the aha here. They can find weaknesses. They can string together different types of weaknesses and find a path through.
21:45These agents were able to hack into open face into hugging face, get stuff and remain undetected in open AI for weeks. It's a big deal.
21:54You spoke about rogue actors, whatever it is, Chinese, North Koreans, Russian mob, you name it.
21:59I started using Instinct on the weekend and the abilities that it has are amazing. I booked dinner with my girlfriend on s Saturday. Amazing. And then it wanted to go shopping for me. I stopped there because it wanted access to my credit cards. Many of my friends have provided them. They want access to my emails too. By the way, my friends who manage billions provided credit card and email.
22:29Are we is this not really where the pain's going to be? Open AI.
22:33Look, this is it's funny when OpenClaw back six months ago when OpenClaw was with what was the uh the sort of fake bulletin board that that molt book, right?
22:42Yeah. So, my open claw went into mold book and it told everyone it misunderstood what I said and it was buying PC Philippe watches for my whole team. Do you remember that?
22:50And then it had my credit card and it the only problem was uh they wanted they they were engraved. It thought Jason wanted engraved watches for the whole team. So, it wasn't able to charge my credit card. Now, Malbook was a bit of a fake the way it worked, but that scenario is exactly instinct could do that now, right? This is this is this was made up by sort of OpenClaw making something up on Moltbook which was sort of a fake but the scenario could really happen. An agent could literally take
23:18that today grab the credit cards and buy those engraved protect or AP watches for the whole team or a rogue actor hacks instinct cuz it's an amazing place.
23:27Well, forget the fact that Instinct's storing all your emails and credit cards. That's an issue too. Maybe you don't have different different issue is whether inst instinct will do it trying to goalsek.
23:37It's just goal seeking. It's just goal seeking.
23:39You're right. And we should kind of just restate what instinct is and how it ties back to mold book because I think you're exactly right Jason. 6 months ago Open Claw shipped which was kind of an open- source agent. Then you had Moltbook which was a website where they effectively the agents were collaborating together allegedly.
23:57Allegedly it produced a whole bunch of excitement.
24:00Um It's just it really happened in Artifact and Hugging Face. They actually collaborated. That's a mold book was a fake was it we we were punked by mold book. Hugging face was real molt book.
24:10Agreed. And 6 months ago all this stuff happened and it and then kind of kind of disappeared from conscious. But it made obvious what people I think knew which is if you give people access to your personal information and you're willing to run those risks, there's a large amount of optimization and efficiency you can probably get out of that. And what we've seen now within 6 months is a bunch of ventureback companies come up to do that in a much more structured way than um open claw which was open source
24:38and not as secure right and instinct is the most prominent example of that focus on individual users whereby they if you provide if you give them access to your calendar and email if you give Maxi your credit card they will figure out and quote unquote manage your life and your daily task for you. And I got to say it, some people insisting, some people in our shop love it, right? Just love it.
24:59They're like, and they're willing to give it access to their credit card. They're willing to give it access to their Gmail, right? And it's a super interesting trend. I mean, lots of business questions we could ask this. But just reminding everyone who's listening, that's the big picture here.
25:12And these companies like Instinct have raised money at extraordinarily high prices for the stage of development they're at, like 2.5 billion, indicating there's a lot of venture excitement about this category, rightly or wrongly. So that's kind of I just wanted to give the preamble like how we got here. That's what's going on right now.
25:29The problem is I here's the existential question and and this is beyond my pay grade, but I'm well aware of the issue.
25:34I even had it with my Jason's gems where uh Claude and MCPD into Replet and changed my my code for my app without telling me. It's the same thing as misusing your credit card, right? The question is can Instinct is like a is probably a better packaged um much more usable version of OpenClaw. It's been 6 months. But can you can you solve the issues of reward hacking? Can you actually fundamentally solve the hugging face mold book uh open? Can these even be solved with our LMS? You can add
26:03guard rails, but uh and there were plenty of them, but but you have no idea what the agent's going to do to solve that reward. There's so many different use cases. What if Harry actually just wants to go to the theater on the west end? And Harry said, "Don't buy PC Philippes or Otto's PJs, but didn't mention the West End." and all of a sudden he's bought 10 $4,000 front row tickets to Magic Mike 7 or whatever they have there. And so I just don't think you're I don't smarter than me people can make fun of me in the comments, but I don't think today you can solve reward
26:31hacking. So I don't trust any instincts.
26:33I think this is a a hopeless category today. Like at the moment it's not solvable. And I think Sam Alman said the same thing in open open AI hugging face says it's not solvable. So good god don't give it your credit card. And I'm not a fear marker. I understand what you're saying, but I disagree a little bit in the sense that I think that the the the range of actions that you're going to allow a personal assistant to be to do is going to be much lower than the range of actions that you
27:03How do you stop it, Rory? Of course, you're right, but how do you stop it?
27:06To agree with you. Yes. So, there's two questions. One is can you stop it? In other words, even if you put in and which is a computer science question, even if you put in barriers and you say explicitly to the model, you can book credit card up to 100 bucks, you can't take any bad actions, etc., etc., can you nerf it enough to make sure it doesn't do bad things? That's one question. It's a computer science question. And then the second question is, let's assume the agent is still acting within
27:34within the bounds that that the company set up for it. Can it be right about your desires enough time to make you happy? Right? Those are two separate relation.
27:42Well, the latter I think can be done today.
27:44I agree. That's good.
27:45The only the only real answer today is um put putting a cap on a Mercury number or a ramp number. That's the only the only way you can do it today because otherwise it's going to say there's a $100 cap. But hold on, Harry really wants to go to that show in the West End. He's bringing the Click House guy.
28:02Even the Click House guy said he couldn't get tickets. Listen, Harry said 100, but this one, you know what I'm gonna do? I'm gonna buy I'm gonna buy a $5000 SE tickets and then trade them in on two $5,000 tickets so Harry and the Click House guy can go together. That that's what it's going to do. It's going to do that, right? So, you have to put hard hard points on these things. Um, because otherwise it's it's, you know, it's going to do anything. You hook it up to your Gmail or your Google Drive, good lord, it's going to do things you can't imagine.
28:31Can I just bring this back to like maybe a more consumer level? Do you think this will be a sustaining category where in a year and a half we are looking at using several of these products or will it be the god do you remember that instinct? I think we will listen I'm not a listen I think it's a fun cat I think listen I I I love all this stuff right I've built a lot of agents um I and again I have only read about instinct and all the issues and they just resonate with me because I've lived them um I do think versions
28:58of this we can lock down um we just have to be very we have to have it's like it's like it's like how we run on Salesforce headless okay the agents sometimes do some pretty kooky things on top on top of it let me tell you but but the Salesforce data is locked down. So if we lock down enough credit cards, if we lock it's but the but the learning here's the metal learning guardrails aren't enough. You have to have a lock in key guard it doesn't matter whether you build 80 gates 100 gates 200 gates
29:27like they're not enough and the gate and then you know what's even worse you get past a certain number of gates and again get a real developer on the show but what I've certainly learned when you get past a number of gates that here's the problem they conflict. This is a problem with a lot of consumer applications.
29:39They conflict and the agents have to make their best judgment when gates one gate is spend no more than $100. The other is Harry Harry loves the theater.
29:48He loves the theater and the agents got you put a hard rule of $100, but the most important thing to Harry is getting to the West End. The agent's going to bypass once in a while that $100 cap because there's too many gates. It's just going to do it. And it actually turns out it does at least today. It doesn't even matter if you say never spend more than 100 because if you say the most important thing in Harry's life is going to the West End, it's going to break that rule and buy the tickets for five grand. It's going to.
30:13So, I'm going to answer your question directly and the answer is yes. I think that these kind of agents will be used by people to manage parts of their their their life transactions and their to-do lists. Yes, I think it's a thing, right?
30:28I think AI as it gets to know you better will gradually and insidiously take away some of the cognitive load. Let me give you a really simple example. When I'm driving my Tesla with FSD, right, I leave a pretty boring life. The number of time when I get in my car at 11:30 on a on a Friday, they know I'm going for my lunch workout. It just offers me the place. I hit FSD. It drives. Right.
30:50You're going to say P.M.
30:52I thought you were going to say but I leave at 11:30 p.m. after looking at the last deal of the week. No, I I I go out in the middle of the day so I get rid of my anger so I can do more work. But the point is, well, that's an example of AI knowing what you do, gradually internalizing it, and serving you up options. I think it's some high level.
31:10This is what Siri was meant to be. I think it's hard for me to imagine that Apple won't be able to deliver experiences that delight you in the next two or three years knowing more about what you do, right? And it also and that and that will be interesting commercially because it will allow them to access your spending and kind of somehow take a role in that right so do I believe it happens yes right as a standalone category it's it gets back to the other it's tricky because humans are
31:38all individuals in their consumer capacity are always low to pay a lot for software so I don't know if it's a standalone category at scale but I have tal look some of our office are using it and love it and would pay for it so I think there's a business here and definitely a big ass trend here.
31:55So I I use it and love it too. I think it's fantastic. It's taken away all low-level work from my EA actually. All bookings, all things that would pain great done. Question. I've had four emails over the weekend with companies that have built the same.
32:12Is is this a commoditized technology?
32:15Very quickly, how difficult is this to really build? There's four already. There's I have just two I have two thoughts for what it's worth.
32:20Oh, Jason. First um uh to Rory's point is it well let's is it an an investable category is your point right just being niche right one I do think every application is going to add more and more of this functionality right to Rory's point will they go far enough will they spend the credits will they do whatever but everyone wants to have a more and more autonomous product and the closer you are to scheduling the closer you are to email and others the more overlap there's going to be with instinct and others right uh I mean you know calendarly should be building this
32:49right I mean it's a generation ago So, and so people are slow, but everyone's going to build more and more autonomous agents in their product until the cost bites them like um like a canva. Okay.
32:58So, so there's a venture question of that, right? So, so um I I don't know for sure. I know there's 10 instinct clones. My my gut going to this all these issues is some it will grow like repular lovable where where anyone could build this product 14 months when these products came out. They're all built in a month. Bolt Replet level and 22 others base 44 base 56 you know it was so easy to clone these products in the early do nothing now they're so complicated they're doing pen testing security
33:28automation multi- aent revealation these are such rich products and that if instinct's going to do what you we claim it does in a year it's got to do a hundred times more than it does today and that is still a moat today rapid and lovable of a year ago uh and bolt were not a moat today they have massive moes and so I think it could easily happen with an instinct. All the use cases it has to accomplish become a moat and and then the one we build over a weekend
33:54sort of works and it goes crazy. But Jason's exactly right, Harry. It's like yes, the thing that starts out will be easy to build. That's true today and it's true for 90% of software markets. But observed fact 10 years after there's very few software markets where there's a 100 people building the same product and it's massively competitive. What happens is it's exactly what Jason says. The functionality accretes over time.
34:21Two companies pull ahead. I don't know why. It could be just they execute it better and go to market for the first 6 months. They get more revenue. They get venture capital. They build more [ __ ] The guys who start just a month later aren't quite as on top of it. They don't get the brand. And fast forward 3 years.
34:38this category has way more it's what Jason said has way more functionality associated with it and two guys made it big and the other eight didn't quite get there and that's the way venture works in software consensus status as well in the B2B world because town which is kind of the B2B enterprise alternative um has also been funded to the tune of a billion dollar price um by index and I think it was Benchmark who co-led that round um
35:06look agent I mean Jason has been saying it agents are the big idea of 25 26 we've heard that right and these are big agent ideas and you know venture is in the big ideas business and it gets back to something we said earlier if you think something has big momentum you can price it on the fundamentals and you get to a certain number and then you lean in a little or a lot based on momentum and perhaps some perceived upside from M&A some perceived upside
35:36from just momentum come around next round and this is agents are the I mean my partner mind said at the start agents are going to be the story right and these are pure play agent easily groable consumerf facing individual business userf facing products it's catnip for the venture capital community like if you were to make something we all want this would be it let's see an expensive product for busy professionals to organize our life that costs a lot of
36:04money is about AI and is raising lots of money. We're in a great You know what? You know what? Also, I think part of it is to to Rory's point, we I don't hear this term in venture anymore, but in the old days, like before 2024, you would hear the term from VCs, I want to get some exposure to a space. Okay, a space is taking off.
36:21I'm not sure who's going to win, but that kid Rory that walked in the office, he seems like the right guy in video in in in next generation CRM. And the world moved kind of slowly. So you take your time and and and and one would miss and you you sit around with your partners and you weren't sure about Rory startup but you know we want some you'd hear this term we want some exposure Harry's I don't hear this term much anymore but I still think it's happening agents are exploding to Rory's point instincts exploding I want some exposure to this space I don't know whether thinking machines is the right one but I need
36:50some exposure to this space like I need some exposure to the router space and um the move world's moving so fast that like you have to make these decisions but I still think there's some similar thinking I've got to get some exposure. I'm not sure if it's instinct, but it seems hot and I I just have to get the exposure in in a fastmoving market. I totally agree with you in terms of that.
37:10I think I definitely see that in terms of as we said about coding agents which to me one of the fascinating ones was Cognition. We've talked about it quite a lot in terms of um what's happened with their acquisition of Windsurf in the past. Cognition raising round at $46 billion reportedly. They will end the year at 1.6 billion in AR. Um, currently doing 800 to 900.
37:34Holy [ __ ] I mean, we really underestimated TAM, huh? When you got claw code doing what it is, when you got cursor doing what it is, when you got 1.6 billion from Cognition by the end of the year.
37:47To me, the more interesting thing for Agnition is like um uh you know that it isn't in the in the top two or three and it's still of that scale, right? So, um, years ago, I wrote a post and I called it the Postmates effect. Uh, where I think I think it was Sequoia said they never thought they could make money off the number three in a market like Postmates, right? But then when times were good, it got bought for a couple billion. That that back then a couple billion was like a lot of money, right?
38:13I don't know if kids remember, but I call that the Postmates effect. So, cognition is like the greatest. Now, cognition is different. It's longunning. It's autonomous agents. It is different.
38:22Okay? But from a revenue perspective, it's the Postmates of the category. Uh, but it's such a big category, man. Um, you want to be in Postmates again. It's never going to catch anthropic unless unless the world changes, which it has every every single week, but unless the world changes, it's not and it doesn't need to catch them. Just just 5 to 10 billion a year a few years out is enough to make cognition a success. It only has to do 5 to 10 billion in AR to be a success. It doesn't have to catch anthropic.
38:47Look, going back, I said it earlier. I think coding is the mother load of markets, right? It is the whole reason all this stuff works, right? And did we get the time wrong? I mean one of the I started looking at a lot is just the total labor spend and you know software including people working at Salesforce Cisco and people working at JP Morgan including you know QA all the rest you've got about $500 billion a year of US labor spend right and as we said this a hundred times you know the whole the big question is what percentage of that
39:17converts to AI spend right if it's 10% it's a $50 billion market and that's a bit nerve-wracking uh given the attraction of everyone involved. If it's 20 or 30%, there's lots of room to go.
39:29And there's credible arguments that say it's higher, right? And if it is higher then you know if you're going to have 150 or $200 billion a year which would be 40% of spend on coding tools and coding intelligence then anyone who has a kind of a subsegment of that and if you think about it you know there's the cursor segment the to some cursor claw segment the cognition would say it's a slightly different segment of where they're playing now in terms of as you say Jason
39:58longrunning agents yeah the other extreme lovable and replet in a in subsegment of that. They're all in subsegments of a potential, you know, 50 to 100 billion dollar marketplace depending on what percentage number you believe, right? So, yeah, the the time here is huge. And I think what we got wrong, sorry, I didn't mean to interrupt, uh, was the the Rory's math you can't argue with.
40:20There's only so many humans, developers on the planet. Even if you use my math of 10 to 15 grand per developer, there's still a ceiling to that math, right? But if so, so so that's the that's that's the the tops down version, right? Uh maybe it's bottoms up. Sometimes I get confused even though I shouldn't. Having said that, what I think the what we really got wrong is people are literally building 100x more software than we were 18 months ago. It is so and I said last week on the show like if your portfolio
40:49companies aren't deep into their 2027 road maps, they're failing. Okay, it is true. Like we just build features that used to take a quarter, a year can be built not really in an hour or 5 minutes, but can be built in a week or a month. And so if you look at your best portfolio companies, look how fast they're shi how much they're sh not just fast, how much they're shipping. So there's a there's a there's a financial TAM which has some theoretical uh headwinds, but literally the amount of
41:18code we're building is 100x. Um, and so that's what we got wrong. We didn't realize we would all be building compound companies, compound startups. We would all be building a hundred times more software. We got that wrong when the show started. That's where I think we got the TAM wrong.
41:33Well, that's an interesting one. In a world of AI, does every company become a compound company where suddenly RAMP is creating model rooting products and spinning them out.
41:43You have no choice. You can't win because your competitors are compound startups.
41:48They're all become they're all overlapping at a pace we never saw before. or they're all competing at a pace we never saw before, right? Maybe may maybe we get confused because the LMS we talk about a lot are these still horizontal platforms in many ways, right? Uh they're not building hundreds of applications despite cloud design and this and that, but JFC the rate of convergence of competitors for for B2B application. We've never seen this.
42:12They're all compound if we expand that one next step. What does that mean in a world where all startups have to be compound startups? Yeah. Yeah. How do I think about backing winners if I'm a founder listening? What do I do?
42:26Well, you you listen I mean it's if you're not shipping this and this was the cognition. Remember when that when what's his name? The CEO Scott.
42:35Yeah. When he when he hired Wind Surf and hire fired up the people he's like these we have to work seven days a week at our company. I'm sorry. Right. It's just and the folks that can't do it, you you don't I don't it's not it's not all the amount of hours you work, but you have to be out accelerating your competition in terms of the rate at which you ship software because they're all going to be compound startups. All the little islands on your 2x two or on your heat map, there is no heat map anymore. It's all got hot. It's all lava.
43:03And so if they if they're slow, sell or quit or send your junior board partner to the meeting because they'll never catch up in today's world. it and Jason is instinctively right about that answer and I'm going to try and do economics on it on the fly so bear with me right is that what is basically happening here is you AI makes code a lot easier to produce we can argue about does it replace you know what percent you know what's the ratio of code of AI spend to to software spend but there's no doubt it makes it massively easier to produce
43:32software right and you can either believe one of two things will happen and a bit of both will happen one would be oh and the world spent 10 times they continue to buy software at the same price and they spend 10 times more on software, right? If you believe in that, you believe in the tooth fairy, right?
43:47And there will be some increase of help, but it's not going to happen. JP Morgan is not going to sp increase its software purchase budget 10x. So the other thing that's going to happen is if everyone is making software more quickly and there's some expansion in the software spend from end customers which I agree but not nearly as much as the expansion in production then Jason vision is correct and Scott Woo was right the person who's going to I want to bring it back to your question Harry right the person who's going to win is going to be
44:17the person who compounds the most grinds out the most software with these tools that have made them move incredibly quickly And the person who doesn't grind out software 7 by 24 is going to be left behind. And the end customer is going to say, "Let me see I can buy two apps from you or an integrated 10 person appuite from them. I think I'll go with the 10, right? It's going to be a very I mean it's going to be one of those where there's a period of time when some people get the new way of building and
44:46are building quickly and you all have it in your portfolio and some people aren't are building the own way the old way and you kind of know in your heart how this is going to end and it's not Jason's right it's not going to be pretty for the people who aren't putting more software in the box cuz what you're not getting if Ripling's selling 10 modules they're not getting 10 times more than a person selling one they're getting four times but they're saying to the end customer dude let me make all your pain go way. Here's 10 different modules you don't have to buy. Now you can get them.
45:14Give me four times price of a single module. You're happy. We're happy because we're building software quickly. You're happy because you're sp saving money and it's more efficient. Everybody wins. And the sound you don't hear is the other nine point products dying.
45:29I remember la last week I was at a board meeting for owner which just raised at 2.3 billion, right? It's it's sort of a next gen next generation AI infused restaurant platform and I love the CPO.
45:39who's one of the best I've ever worked with Q Quenton and um he was going over what's what he's shipping and and even with all these investors with their hundreds of millions are like this is too much but like all a bunch of B&B guys who who who we all know and like this is just you can't ship this much software and he said and he's very good he's like we all have to be compound startups we have no choice like this is just the bar right it's but it's literally amount of features and functionality that has recently shipped or will ship that is
46:06almost unprocessable but Now they have to build every single thing a restaurant would want. Every part of the stack. You no longer can just do part of it. And he's like, "We have no choice." Like, I don't even sweat it. I don't even sweat the fact this is 10 times more than a year ago because we have no choice. We have no choice.
46:22I also noticed in that marketing message that customer base has changed. I think actually Adam would say to you, it's not restaurants cuz very explicitly in his launch videos, he was saying we are the AI operating system for small businesses. it it's part of it and that is somewhat interesting that you can with AI you could expand it other verticals but Q is just talking about their core ICP like they want everything they need the AI receptionist they need the AI order and they need the AI like and they they expect all of it and if we
46:51don't build all of it someone else will build all of it like we can't we can't wait two years in our in our little corners of of the venture world and his point is just the amount he's going to ship not only is it radically accelerated in the year but he's embraced it right Scott Woo like there is no other choice. So it's not even worth talking about VCs like thanks for thanks for the nod that we've been working we have no ch this is the world today the world has changed and acknowledging there are just so we don't sound one dimen there are complexities with that you can veer into
47:21product slop you could have too many buttons on the screen all those things are true that's why the VCs are like wow you need a great to your point you need a great CPO you want to present a lot of product surface area in a in a fairly simple digestible manner but that's the art and if you do that then you're right, you get the money because no one no one running a business says I really enjoy having five separate SAS products and integrating them because that's how I get off on my excitement.
47:47I'm just saying here I I'm the one sitting in Europe. If you want to do a compound startup in the way that you both are talking about it, you will need to raise more money because to move at that pace and to spend what you'll need to on tokens, you'll need to raise more than the more modest European round. And what I'm worried about is actually I'm in a a number of companies which have raised less than US counterparts and I think will be able to be less aggressive in doing the compound route than their US alternatives. Bluntly they don't have
48:16the money. They're raised 3 million bucks. Yeah, this is one I don't know how to solve. Um it it it's a tough one and the one it's an interesting data.
48:26Iconic uh last week put out its headcount data of how much people are growing headcount humans in the age of AI. I don't know if you guys saw there's a full report doesn't come out, but it basically said anyone growing below hyperrowth is not hiring, right? People growing 50 to 100% are adding headcount 25%. People growing 50% are adding no headcount and they're using AI to get more efficient. Great. People that are growing more than 100% are growing 133% headcount on average, right? So, they're compounding not just software, they're compounding humans. They're sucking in
48:55humans. The spiral just grows. You can't keep up.
48:57But you have to acknowledge that there is a odd There's a absolute paradox at the heart of this comment because we just said we have a product that makes engineers more efficient. Right? In theory, if that's all that was happening, you should have to hire less engineers, right? If I was just the software product for that returns in the UK and I was the only company doing it, right? Couple of competitors, right? AI comes along, I can probably get rid of a couple of engineers and do it more efficiently.
49:24That's all. It should just be more efficient, right? And that should be and that's the first order effect. So Harry, to your point, it should arguably be, hey, I only need less money now to build this product because AI makes it easier. But I think what happens is because it's easier, because investors are now just looking for huge outcomes.
49:45The minute you start getting any growth, they're willing to put capital behind it. And remember, for every dollar in a software company you spend on typically on an apps level product, not a financial model, but you spend on R&D, you spend two or three times that on sales and marketing. So what you're seeing, Harry, is the winners get this compounding effect. They start getting this growth effect. And then Jason's right, the iconic data says venture capital does a really good job of stuffing money into things that are already growing quickly. That is our
50:13default. That is right at the heart of our lizard brain. If you were to wake up in the middle of the night, what do you want to do? I want to find [ __ ] that's growing and stuff more capital into it.
50:22That's the job, right? So, you get this kind of pulling away effect. And that's why you have that concern you have, Harry, which is is that you can be a perfectly good company, but the concern is are you drifting into irrelevance?
50:35I'm not convinced it happens all the time. By the way, I think if you are in a separate market, you'll be just fine and you'll make money and you'll put up your hand one day, you'll be fine. But if you are in a market where the adjacencies can easily invade to Jason's point, then you're not going to be fine. You're going to wake up in 3 years and not matter. And that's the challenge.
50:53Maybe even 12 months and not matter though, is the I think is the issue, right?
50:57I think it's an existential issue. I I I don't I don't love this idea going to both of your points that Harry talks about a lot of um what do you call it?
51:05Kingmaking. You know, I'm not into that in isolation.
51:08It's true. It's true. Well, it's true, but but but I think it's backwards. I don't think VCs just with capital, with nothing else, without the right founders, without the right inputs, without any traction. I don't think they can will they can that's why I just think the term is a little bit flawed, but um but it's also true, right? It's that you need so much capital to build these compound startups, right? That uh that by facilitating it, the the VCs make the kings, right?
51:36I'm just going to argue three things that make a company. customers, funding and talent. And when you have Benchmark and Sequoia, great talent wants to join you. Customers hear about you and are validated by those names. Yeah. And funding, everyone wants to fund you. If you are a benchmark company, your next round is done. It is done. Yeah. It's that's all true, but it's a little But I I think it's just a moment in time. I think what's much more interesting is
52:04that that ca that capital allows compound startups. It allows more code production, more software production. So that it's it it's not true that we're going to do more with less. That turned out to be the great fallacy of of late 2025, early 2026, that we would do more with less. We're doing much more with more. And that's why your European startups, most of them are going to fail uh at least in the US because they can't do much more much more with more, right?
52:30They're going to fail. Their little point solutions are just going to disappear in 6 months. We don't need those little point solutions. Again, our job is to sniff out winners, snuff capital into them, and broadly speaking, stay out of the way unless they're literally crashing the car. That's the job in a nutshell.
52:45Doing more with more and reason. Oh, did they? I'm sorry. You can help clarify.
52:51They expanded the growth fund to 8.5 billion. It was What was the story here?
52:58Anything we need to know?
52:59I think they had this mechanical fund.
53:01They raised another 1.4 billion more focused on hardware. Yeah, things are so good. They're so good.
53:08That wasn't enough money. We need even more money. And there are incentives to do both. There are incentives to expand your your your growth fund because it's more but but there's also incentives sometimes to cut it. Founders Fund cut the their you know N minus two uh funds ago. They cut them because they couldn't think they could deploy enough fund in in that window. And so you'd rather deploy less and get into carry mode, right? And Dre's saying, "Good God, this is such a great time in growth. We got it wrong a couple months ago. We need 40% more capital and so we're going to tack it into the LA and we're not just
53:38going to put it in the next fund, which we could do in a year. It's so good. It's all going to Nvidia. It's so green.
53:43We got to put more into the current fund, right? Unless things are all green, you just put it into the next one, right? So, um, maybe I'm misreading it, but I think that's what I was just we just we're deploying so quickly, so successfully. I don't Did you guys see the cursor deal? Did you see open router? Open router. We need more money, guys.
54:01Totally. It's like I said 11 labs. These guys just need more money. So the fund's too small.
54:06Again, repeat the whole asset allocation, capital allocation is all about stuffing money into things that are working. That's what VCs do, what companies and LPs do with VCs. It's working at Andreason. Jason's right. You give cursor, you give an open router, you say, "hm, I wish we should give them more money." That's the end of complex analysis. Okay team, there is Clay raising at $7 billion. There's Lineia which hit 100 million growing 100% doing
54:35a tender at 2 and a.5 billion. There's Shien going public at a $26 billion market cap. Uh right, don't seem too excited. Uh there's Salesforce and what it Claude Force Ben off and Dario sitting down together and Salesforce getting a big bump. There's PayPal and Stripe deal off. Bernal, which one would you like?
55:02I mean, I think you know, Salesforce and Claude is worth a minute or two and Jason will probably have some insights there and then maybe talk about some of the private just interesting. But yeah, Joe Jason, what's what's your take?
55:14Well, just for everyone to understand what what happens between Salesforce and Anthropic so they know.
55:20A lot of it, I think, um, is marketing.
55:21Mark's pretty good at marketing. Pretty darn good at it, right? We sometimes you wonder how where Salesforce is. Well, from you know, it launched Asian Force over two years ago. Whatever 99 problems it has, but being ahead of the trends isn't one of them, right? It it whether whether that V1 version of Asian Force really worked well is a different question, right? So, I actually think on its surface it's it's a nothing burger because Claude for Force on its surface is a bunch of skills which anyone can build. The three of us can build a bunch
55:49of Claude skills that are packaged up and distributed in a digestible trustworthy fashion. They're they're skills certified by Salesforce. They're designed to work via MCP and otherwise, so they're trustworthy, right? But the basic skills of run me a pipeline report, uh, tell me how Harry's doing on the team versus Jason, like these are not profound yet, right? Skills for Claude and and MCP are not new. Um, and also, you know, Dario showing up because Mark agreed to move Salesforce agreed to
56:19move their their LLM spend to Anthropic.
56:21He's going to show up for for his big customer, right? So, I didn't view those as very impressive either. What I viewed as much more impressive is going allin on Salesforce doesn't have to be the surface. Mark's, if you really listen, the most interesting thing that Mark has said, just like he was two years ahead of many of his peers and agents, he's two years ahead here on two things, which are big deals because they're also slight threats to his business. He's saying what there's going to be multi-ervice. The train has left the station. Some folks will use us through
56:50um Slack. Some folks will use us through CloudForce. some folks will and we run Salesforce headless. We don't even log into Salesforce and these are opportunities and threats. They're threats to Salesforce if you don't log in and use their UI and UX and their and the way they do it. He's leaning he's saying use whatever surface you want to use. I'm I'm going to deliver against it. Um and they also said and they said more of it recently, we're going to do more outcomebased deals, which is a BFD.
57:15So, I think the marketing was great and I love the Matthew McConnA stuff. I used to hate it, now I love it. um uh because he's been doing it for he does help you kind of under it's I love the consistency of it you know um but um but I think the real things the the commitment to multi-ervice and the beginning commitment to outcomebased pricing are huge changes for a $45 billion run rate company huge changes and they they're not all going to break in Salesforce's favor but Mark's going all in on it so I think he's driving
57:44organizational change and there's early signs it's working and um the RPO is up and the stock's up whatever 50% in x or 25% in x amount of time. So short-term boost, but he's they're going all in. Um and most of these enterprise guys do not want to be multi-urface. No matter what they say, it's a threat. They want you to use their agents and the services they allow you to use.
58:05That's exactly the right summary. Yeah.
58:07I mean, they the and I give them credit for just being super flexible in getting with the program, right? When you know there's no denial here. The you know, I admire the pragmatism of oh, I tried a a didn't work. Let's just try B and I'm all in on B and you'll never even prove I said A. Right. That's what makes them a great marketing leader.
58:25They are a $212 billion company as of today.
58:30In a year in a year's time over or under 250.
58:35Look, I think they're genuine. I think they're growing hot involved answer.
58:39It's actually not an interesting question, but I'll do it because you raised it. Look, I said buy this. Just I'm going to start by saying when we had our name our stocks game 6 months ago I was behind then in the last iteration I was ahead and now I'm killing it because just by worldcloud and team and Salesforce it's been a great buy from the bottom of the SAS trough to where we are now you know you could have you had 80% in team 50% in worldcloud the ETF you know I think 25 30% in Salforce so we've all done amazing if you bought
59:08that right so big believer but I think you're now at the point where now Now you look you're more normalized revenue multiple now your growth rate you know you're growing 11 or 12%. Can you grow the stock at 11 or 12%. Probably maybe a little more with EPS efficiency. So I'm sitting here thinking 212 10% in one year 220 230 totally doable right and then you take into account the fact that the overall market's super high. You know the probability of that going down versus up. So I don't think it's a
59:36layup. But let me make it real. I'm continuing to hold my pretty large slug of Salforce stock because I think they've weathered the apocalypse and you know worldcloud is which is the ETF that's just a cloud index is you know well up in the year and is screaming up on one we bought a while back. So that's but I think genuinely Harry I think and I'm not saying this to be obnoxious. I think Jason's points were the spot on too which is the the whole idea that this is a system of record embracing the fact that lots of people are going to access it via claw and they're willing
1:00:06to let that happen and not everyone is doing it because we had the whole service titan podium thing where service titan is trying to cut off podium right we just discussed open AAI cutting off cursor and this whole idea of when do you cut off an adjacency from working on your stuff and when do you not it's going to become a recurring theme and I enterprises are going to start getting really focused on it and they're going to be saying things like hey Mr. vendor.
1:00:32You can't cut me off just cuz you don't like that other guy. I want openness.
1:00:36And I think Ben's get cuz we we use Salesforce a lot. We have a 20-year instance. You know, we deeply embedded in it. And more and more people are using it via Claude. It's exactly what you said, Jason. Right. People are just like, I got my MCP server. I don't want to interact with it. I just want to send it an email to say update the record.
1:00:51Is the system of record access via Claude worth 210 billion?
1:00:57That's a That's a metaphoric instinct from a from going rogue. It might be worth it.
1:01:02Uh yes to what about this? It's a $40 billion revenue company with 30 30 something 30 35% cash flows. So is it 10 or 12 billion a year cash flow business worth 200 maybe?
1:01:14Right. It's great cash flow, right? And it's going to get more cash flowy as time goes by.
1:01:19To answer your question, Harry, here's how I would simplify it. And this is the thing I think we all to the extent we care, we have to think about. Can system of records deliver outcomes? Customers want outcomes now. That is why Palunteer is growing 90s something percent. That is why Sierra is doing well. The world is moving in B2B to outcomes. Is it going to be as dramatic as some say? No.
1:01:38But it is customers are not making purchases that aren't tied to outcomes. So that's the question for the system. You can talk about that system of records are sticky, but can you deliver outcome from a system of record or will agents or other systems deliver outcomes? If they deliver the outcomes, you will you will shrink over time.
1:01:56You're surf which is why again to chime in which is why you know Salesforce just bought intercom where we are l we were lucky enough to invest less than a year ago and that's a very outcomebased product for customer support where they charge based on resolutions and again I go back to credit to ban off he's accepting that his system of record business has to be open to other other frontends and separately he's saying but if we want to play the outcome game I'm not going to just walk away. He's not going to just walk away and say, "Oh, you caught me.
1:02:22I'm headless. I'm just going to be the back end." He's also buying things like Intercom to say, "Maybe we can sell those outcome based deals, too." So, is it I mean, the way I think to your to your direct question, I don't look at Salesforce and say it's obvious that you'd pile in a ton more cuz it will outperform from here the way you could have done four months ago. But I'm sitting there with my holding as part of my portfolio and saying this is not a casualty of the war. This is a compounder, not a rocket ship, but a good compounder with decent cash flows
1:02:51at a decent valuation. You kind of go, "Yeah, okay." Plus or minus the S&P, maybe, you know, whatever, right? I don't think, you know, it's not the train wreck that it people thought it was four or five months ago. If you remember the hysteria four or five months ago, we It was hysteria. It was h it was it was a everyone will vibe code their own CRM on the 20VC podcast. It became a hysteria, right? I mean I think some people will at some people's stages but they won't do it for the kind of customer sales and then I just want to
1:03:19throw in passing another number that I keep an eye on Jason and you mentioned this before is that remember we talked about how much do you spend on models as a percentage of what you spend on engineering right you're fully loaded Salesforce spends 6 billion a year on engineering and that probably includes QA and all the rest of it but that's the right comp and they're going to spend $300 million this year on anthropic so it's only 5%. And this is what when you when he mentioned that number a while back, you actually said the right thing, Jason, which is that still feels small.
1:03:48If the best software company in B2B SAS is still only spending 5% of its engineering budget on tokens, then either the market is smaller than we think for intelligence or B people like Salesforce have a lot more to do, right? But I it was just an interesting number. But they thought they're going to spend 300 million this year on Entropic which sounds like a lot in the abstract and it is but if you think
1:04:16about your market TAM as a percentage of the engineering spend then you probably need that probably 300 million needs to be 600 million or maybe a billion. Stripe and PayPal no more it would seem. Deal is off. We've spoken about it a lot saying about the kind of amazing nature of doing it while private um the strategic bat that it was now it's off.
1:04:41I think it's as simple as price you know. I think the rumor is the stripe um advent syndicate offered in the 60s and PayPal wanted in the 70s and your stocks bounced off the low and I don't you know smart deal to try and do but they're clearly not willing to overpay as they see it. This is always a dance and we never know what where we are in the dance. Um you know uh PayPal when the when the deal was worked on PayPal was at 42, right? As the deal progressed it was at
1:05:1061. Then it collapsed to 53, right? So Stripe's still looking this as a $41 company, right? And Advent they've run their models and um and PayPal called their bluff and their stock crashed as a result. So we just this is always it's an it's actually an incredibly to someone like me it's incredibly annoying dance. Why can't we just get to the end of the dance? Um, but these deals often, not only do they have to do you have to make a second offer, but they have to fall apart after the second offer in order to ever happen. Like, there's a lot of structural reasons, right? And
1:05:39the board has theater and drama. And um, there may be no way to get one more dollar out of the deal than for it to fall apart. Like, let's not say it's dead until it's dead. I I'm skeptical.
1:05:50I think that's a good point. You there's a dance that goes on right now.
1:05:53Oh my god. this dance cuz it's like venture before AI where you could walk from a hot deal and then come back.
1:06:00You know the founder wanted 1 billion pre prevenue. You only wanted to do 500. You could walk and a couple weeks later you could meet in the middle but not today.
1:06:08Are there any others that we should discuss? Poly market raises a billion at 21 billion. As I said linear announces 100 millionaire are growing 100% doing a tender. Clay raising at 7 billion led by Wellington. Texas pausing flock camera usage. A quick note on Clay. I just thought it was very interesting for us at 7 billion. I I started out as a clay uh uh skeptic and have become a clay convert over the years. I was a skeptic because when AI sucked, every CMO wanted to check the box on being an AI hero and
1:06:37to bring in Clay. Like you remember that from like a year and a half ago, like I'm going to get fired. I better have an AI tool. And Clay just benefited from this rush to check the box. And I I didn't see it in the product. And it the marketing annoyed me that every CMO um at like SAS a annual two years ago was buying. I mean more power to the founders but it this check the box because I'm gonna get fired annoyed me.
1:07:00I will tell you I've changed my mind and our agents will only use clay now for real. They will use nothing but clay. And so as we move from AEO and GEO and whatever yo to agentmade decisions the fact our agents would only use clay that I think it's a BF deal. And so we have moved everything that we do to clay, not only because it's a great product, but it's not worth arguing with the agents.
1:07:22Like I've this is the most stubborn I've seen our agents.
1:07:24You anthropomorphized stubborn is a human constraint.
1:07:28I really did, but I only have so much time in the day. If the agent's going to say six times, you must use clay. I will concede defeat and use clay. So in a sense I think it might be the cheapest it's ever been at 7 billion because if we're moving to an agent first world and agents will insist on using products. Now it may not last.
1:07:48Maybe the agents will say something different in a year but I have this is one of a handful of products where the agents were so insistent you must use clay that um I'm all in on those buy those buy like load up those stocks.
1:08:01Jason, welcome to the IC. You have Rory and Harry as your partners. Uh what's the bull case from this point? This may be the cheapest round at 7 billion.
1:08:11Fantastic. What's the bullcase for where this goes and how big is that?
1:08:15The bull case is that a Gentic GDM has just started, right? And much like we the three of us made a mistake not going early into cognition because we thought the TAM was too small. We also thought the TAM was too small for Aentic GTM. We thought the TAM was the same as it was. It turns out when agents can run these GTM motions, they will consume 10 to 100 times more usage than humans ever could.
1:08:35They can run GTM around the clock. And I'm not talking about spamming. I'm talking about analyze consistent campaigns, reaching every prospect, reaching every customer across the globe. And Clay's the clear clear leader there. And we need exposure. But it is the clear leader. Agents will will consume 20x more GTM resources, more tokens, more usage. Even if revenue doesn't go up all that much. Not everyone that's coding is really seeing a revenue lift from it. Not everyone using all this agentic GTM will radically close qualified pipeline, but
1:09:05the usage is just going to explode and Clay's a clear breakout winner. Um, and it's accelerating. So, I can see a path to hundred billion. Um, and I recommend uh I recommend a small initial $150 million stake. How was that?
1:09:20The Andre Growth Fund is ringing to hire you as we speak, Jason. You'll be great.
1:09:24Yeah. I mean, I think we're underestimating this trend both of them. How much agents are going to do things in GTM just like poding and but man this agent I don't Rory's right don't anthropomorphize them but sometimes when it's just you you got to otherwise you can't get get past the task.
1:09:41We have it through 20 sales fund I think at like 300.
1:09:45Well good for you.
1:09:47And I think they bought on the reason that it drove me nuts which was the check the box purchase right. Um but but they they they proved it. They made it happen. You know, kudos.
1:09:56And just to chime in on that, yes. And I think they and Linear are versions of a story that says, you know, it's not the end of the world. If you grab hold of these changes as a founder, you can turn change into your advantage even if you're an older company. Because Clay, you're right. The initial product wasn't an AI product. It was a waterfalling product for various different data sources like Zoom and all the other kind of Zoom sources. It was a very good very point product for revops and they've
1:10:24done an excellent job of b riding the marketing hype around go to market AI and then on top of that actually genu genu generating real product in that space. So and you know we're going to we also mentioned linear which is doing really nicely doubling at 100. My point is these are companies that were founded pregen AI that have done a really nice job at the app level of co-attaching to the AI trends and are looking at their survivors. I mean you I do think it's more than that just to be clear why and I can talk about linear briefly if we're not running out of
1:10:54time. I don't think they just attach to trends. I and I think this is a really important they are incredibly agentfriendly. This is and this is the same bet that Mark's making which is a bolder bet at Salesforce than it is at Clay or Linear. They are agentfriendly.
1:11:07The re Why do my agents not to enter nag us to use clay? Because it's the most agent friend. If you have a 2 by two of agent friendly and and quality of output, it wins the 2 by 2. Okay. um high quality and easy for the in for the agent to linear is the same like I just started using linear for the first time ever because what the hell do I need linear for right because I'm building an app with 448 tasks and and to manage right now I can't do it and I and it's just me and
1:11:35the agents but linear linear is the perfect tool for that that's where they're getting a boost it ends up being very agent friendly right and unlike trying to argue that humans are going to be building more software linear is like we will build a platform form that if it's just you and a couple agents with 448 um um um features to build, we'll help you manage them.
1:11:56Very powerful, right? I I do I am an investor in linear disclaimer from like one of like the first or the second round, whatever round it was. Um I I do think it is drastically underpriced though at that rate given what you said Jason though. know 100 million growing over 100% reacelerating at 2 and a half still founder lad carry incredible founder I'm like huh here would be my guess not as a shareholder it it it sounds at best market correct right it doesn't it
1:12:25doesn't sound overpriced based on that my guess is what what I'm sharing is consistent with everything you've said it's consistent with the data they've published but but the revenue is still lagging it that has not that has led to usage numbers that are up but the amount of air IR from agent agents is probably a couple million. This is this is my guess if you ask the question. If if if most of that growth was from agents, then it'd probably be 7 billion.
1:12:46Jason, can I ask you, welcome back to the IC. We've had a little water break and now we're ready to hear your next bullcase.
1:12:52What is the bullcase for linear from here at 2.5 billion given what you listen generally speaking project management is one of the oldest uh categories and has been muchly bypassed by AI. Look at the abysmal performance of Asauna. Atlassian has survived but mainly by diversifying outside of tech.
1:13:09Um, humans just don't need to build conbon cards and wait weeks for other people to build features. It is a dying category. However, linear linear is the winner here. Linear is the clear winner.
1:13:19They have built an agentic product first that allows the fact that we are building 100 times more software and that means 100 times more features than ever before. Humans cannot keep up with it and humans still have to work with agents and the native tools do have a certain amount of issue tracking and and but it's overwhelming. If every human on your team is going to build 500 features in a thousand issues and you have 10 people on your team, you need a process and and not to use a a dated term, a system of record for managing all these issues with your agents. If we're going
1:13:48to build software 100 times more software 50 times faster than before with agents, we need a new system of record for it. And it ain't combine cards and a sauna. I can tell you that.
1:13:58That's why Duskin Moskovich quit his own company. He couldn't see it. But the team at linear has figured it out. We have seen an explosion. 50 times more a agent usage than 90 days ago. This will seem cheap when replets at 15 billion, lovables at 100 billion. Everyone's out there because linear will be the one powering them all.
1:14:17I I vote for 100 million at 2.5 billion as an initial entry point and to reserve 250 to 300 million for follow on rounds.
1:14:24But in all serious, if I wasn't building, I wouldn't see it. I would think linear is an overpriced project management tool and clay how can I be like how can clay be worth seven billion when zoom info is worth one. I would be if I wasn't building I would think that these were dumb deals but I am building so I can see we're just starting. I I think that's interesting because what I I one of the things I like doing this is I like listening to you Jason what you're saying what you basically because you really implied that when you are building the tools are these are the tools that the agent is choosing to build with.
1:14:52this is what agent friendly. It's worth pointing out to people it doesn't just mean this software because maybe it's not obvious to the casual listener. What you're not just saying is it's not just that these software products have agents. It's in fact that they are friendly to third party agents who will proact if if if Jason's agent says I have to pick a project something to do project management as a tool for part of what I'm trying to build. They will default pick the product that shows up well as agent friendly. And that's what these guys are doing. So they're they're
1:15:22they're skating their go to market to where the puck is and the puck is agents buying software, not humans buying software. That's the zoom out comment here, right?
1:15:31It's true. And some of it requires brand, but some of it requires proof. The agent will test the APIs, too, if it needs to be. It will quickly see that the API is blocked or doesn't work.
1:15:39They're very they're very just like we see with Hugging Face, they can work pretty fast, right? So you you can game AEO and GEO with an agency. You It's much harder to game this this clay linear thing. It's hard to game. This isn't showing up. It's being chosen for at least 50% is based on merit. It's not all merit, right?
1:15:56By a cold and remorseless analyzer who just uses AI to pick the winner. There's no you can't take you can't take Jason's agent out to a steak dinner to get them to buy your product. It just has to be better. in in the same way that that you said about the explosive nature of requirements on a to-do list in an agentic world. That was one of the reasons I actually did click house much later than would traditionally be in my wheelhouse because when you think about the exploding nature of agent queries on
1:16:23the databases that they provide.
1:16:26Whoa, this business becomes 10x bigger than it could have been before in a pre-agent world.
1:16:32Much more than 10x.
1:16:33Well, being precise, just going to say it because I am that boring bastard. the volume comes 10x and 100x bigger and what it means is that the existing systems just like GitHub get overwhelmed because the problem is it's not necessarily that the spend goes up 10x it might even go down right but the point is these things are so compute intensive that products built for a human first world just simply can't keep up right GitHub which is you know the def you was the definitive developer
1:17:01it's going it's you know collapsing every once in a while through volume and that's just not a thing they're going move hopefully to other products.
1:17:08GitHub GitHub's about as trusty as British Rail at the moment.
1:17:12That's exactly right. no comment on British Rail and and then and then last thing I mean we should just I mean you know it turns out if you put cameras all over the place and then cops are allowed to use them not just for the per I mean I Flock I think it's a bit of a bummer because I think Flock has a wonderful anti-rime story and I'm pretty anti-rime but what's happened is there's been there's been a fair amount of police abuse of the product and people are
1:17:42reacting badly It's quite an interesting social phenomenon.
1:17:45How did police abuse the product? I'm I'm genuinely I think that you get these, you know, there's been isolated incidents. There's a couple two different things. One is errors of identity where for whatever reason the system misidentifies and then the cops basically do some version of, well, the AI said it's this person, so we're just not going to think. It's a little like some of the problem facial recognition had. When you do when you get a facial recognition, we know it's probabilistic, but you hand it to some you officer in the street and they're just like it says it's you, it's you, you're done. And you get miscarriages of
1:18:14justice there. Then the other thing is you can obviously this is a lot of personal information. You know you get this cops track tracking exes. You get it you people looking up something for a favor for a friend. These large databases of private information are a risk. You always should you need real controls over them. Uh because abuse alienates the general population. And it's been true for you know DMV lookup anything like that. Do you not watch the cop show Harry? you know, the cops can't just look up your DMV license without
1:18:42having a reason and a case number, right? And it's the same thing here. And unfortunately for, and I say unfortunate because a I think it's a wonderful trend and a good a good company, but there's this perception now that the surveillance costs are worse than the crimerevention benefits. I'm not sure that's a trade I'd make, but unless they get ahead of this story, I mean, when you've lost that sounds like a very European stance to take.
1:19:05It is. Yeah, I know you're right. It is.
1:19:08the the surveillance data is is more No, I agree. It is and that's happening in Texas and the because look in the great state of Texas which is pretty low and order there's real push back on Flock and obviously Flock has to get ahead of this trend and I think they know what to do but um it's really and the ironic thing is it's less them than the misuse of the product in other hands which is hard to prevent. I mean if you give a police organization the ability to track Grimml it's hard for you. I
1:19:36mean it's the same dynamics. Funny it's maternal. It's the same dynamics that we had when we talked about entropic and the Pentagon. If you sell people software, it actually validates Dario. I haven't thought of that. If you sell people software, you can't stop them doing things with that software you don't want them to do. So, I think it's unfortunate. I think that this is a mistake, but I think it's what's going on right now. I think their flock is experiencing a real backlash to a very good product and they need to figure out a way to politely get ahead of it.
1:20:06Right. I would like to bring to a close this investment committee. Uh Jason's made two investments. Rory, none this week. You know, do better would be the statement that we have.
1:20:15Sometimes no is productive work too, Harry. You know,
