So we start with Anthropics Monster Week.
We may be at the stage where we throw the humans under the bus, not the AI anymore, which I think, at some level, is pretty terrifying.
We move to open AI killing Sora.
I think shooting in the head is even more significant.
Big part of the whole strategic direction of the company was flawed.
Agreed.
You're seeing the economists.
The accountants have wandered into the room and they said we have a scarce resource here.
Let's optimize it.
Let's devote this compute to the people who can pay the most for it.
And then we finish on the man with the biggest balls in tech, Massa.
You haven't lived till you've seen an 85% decline in an index.
This is one where it's just back ass, backwards.
I don't believe there's right or wrong in money, there's just money.
I just don't think raising it five or eight billion when you're at 80 million or 100 million of suspect ARR is the most exciting accomplishment in the world.
Let me be direct, get the over it.
You should conform your company around your customers and your model, not your VCs.
Being mean to a billionaire is actually a feature.
Ready to go?
Boys, welcome back.
It is this week in Anthropic, otherwise known as the Sassogees, which has been renamed.
I want to start with, you guessed it, Anthropic.
Unbelievable 28-day month of February, where they did 6 billion in revenue, which was more than Databricks has done in their entire lifetime.
Do you know what I think was the most interesting news out of Anthropic this week?
It was actually the accidental leak of Claude Mythos, essentially 3,000 unpublished assets leaked.
It's a 10 trillion parameter model.
Apparently that is this next level step change in capabilities that they're not releasing because of how powerful it is.
This is by far the most interesting to me.
Jason, how did you think about this news?
Well, look, obviously it's embarrassing, right?
Too anthropic to leak it.
I actually just think we're gonna see More and more of this accelerate.
The faster we vibe code, the faster we ship, the more corners we cut in general on application level security.
It happens.
I mean, so many folks are accidentally uploading code to insecure githubs, to to database, to super bases that are by default open.
So this is, this is accelerating.
Uh, our data, which is just open on the internet and and you could say, by god it shouldn't happen at the anthropic level, and i'm sure someone will get, will get scolded right, i'm sure it will.
But overall this is accelerating and it's going to accelerate even more as we let our ai agents make decisions.
Our agents are going to decide where to put code, they're going to decide what level of security to use, and this is going to become happenstance.
And you know it's funny.
I mean people were like oh, how could anthropic have a new um security agent and have this happen at the same time?
I think it makes perfect sense.
The anthropic AI security agents, which I've basically used in Replit's very, very good.
And it also makes sense as we rush We're going to leak source code data, PII, right?
I don't know whether it's happened.
It was reported today.
All of Merkur's data leaked.
It's being held hostage.
All of it, every single interview, every single piece of PII, every single piece of humans.
And so we used to mock these.
I think it's going to start happening daily and weekly in the agentic era.
It doesn't excuse it, but it's a reality.
Agents are goal seeking and agents are going to make.
Not only are they going to make the same mistake as humans, they're going to work a thousand times faster.
So even if they make the mistakes 10% as often, Rory, help me with the math.
If they do a thousand times more productive, they're still going to make a hundred times more mistakes.
We're going to see it everywhere.
Again, just for perspective, because there's two things going on here.
Antropic.
Some data leaked from Antropic about their new model Mythos, which of itself is meant to be amazingly powerful in dealing with cybersecurity.
And there was a whole consequence that we'll talk about in a second in terms of how that impacted cybersecurity stocks.
But as Jason pointed out, the level of irony here is acute because it was an inadvertent leak.
So you had the situation where A model that's meant to be amazing for cybersecurity actually leaks via cybersecurity leak.
So we're toggling between the two.
On the cybersecurity leak, it was noteworthy that Anthropic, quote-unquote, blamed human error.
But we may be at the stage where we throw the humans under the bus, not the AI anymore, which I think, at some level, is pretty terrifying.
And you know exactly what happened.
You see this down in the weeds.
You often see this where you know you're about to do a big announcement.
You have your content management system.
You stage all the assets you know, be it their fed press release on the uk.
It happened on the budget.
If you remember howie the budget, you have the press release ready to hit play the minute the budget is ended and someone inadvertently forgets and put it on the public side in advance.
It's the same thing here, so it probably was a human error.
There's a whole bunch of content ready for I don't know.
Pick a date March to May 15th.
Announcement of Mythos.
They forget to secure it correctly and out it goes.
So that's the first thing, right?
So that's the embarrassing part of it.
And then the interesting part of it, and you really do have to do this without sniggering, Despite the fact that it all leaked.
You also have to separately talk about the fact there's some big claims on mythos, right?
And on Tropic, we're making via, again, via this leaked memo.
Reminder, no one else has seen it. at the actual model, at least not publicly available.
Obviously, some people have seen it, but not publicly available.
And even I was trying to get copies of the leaked memo.
There's just a few screen starts at this stage.
It's hard to track it down, at least quickly anyway.
But the statement is it's way more powerful.
Second thing is it's going to be way more expensive for them to serve and therefore it's going to be way more expensive for customers to buy.
And then the third thing is a particular focus on cybersecurity.
It's meant to be, quote unquote, extremely good at detecting cyber issues.
And the result of that was a 4 or 5 decline in the average cybersecurity stock last Friday when this leak happened.
Yeah, maybe just two other things on the leak, just for this trade-off.
You know I'm dating myself, but when I was at Adobe and we were acquired, we were an early customer of GitHub.
And so we were putting source code in the cloud and that was banned at Adobe at the time.
It was banned because the source code was their crown jewel.
It was pretty easy to to make a crappy PDF reader or a crappy image generator, but to do what photoshop or adobe acrobat did all the exceptions, all the corn, the thousands, tens of thousands of corner cases was the crown jewel right of the company, and so everything.
We got the first exemption to be able to use source code in the cloud and pros and cons, but when, when they use this on-prem source ghost management tool, it took a month to do a release.
A month a month okay, now we're doing 60 releases a day right, or even anthropic fastest growing enterprise company of all time is still doing massive releases every month or two and dropping features every day, right.
So we went to something that took 30 days at a tech leader, to something that takes hours.
There's trade, there's trade, hops there and i'll.
I'll take them, but we're gonna see it explode in terms of like, the stuff that was published today.
Going back a few threads on show number 50 to rory, one of the things that i thought was pretty cool in kairos was two things Always on background assistant that works constantly.
Our AI is working with us 24 seven.
And agents that can sleep, wake and self resume without any prompt.
The autonomous agents which I've been talking about, how this is going to consume orders of magnitude more tokens and change our life.
I'm excited to see more is coming.
And you know, Open Claw was just as this brief thing that woke us up to what Anthropic appears to be all in on right.
Truly autonomous agents running 24 seven, hopefully safely.
Hopefully not leaking all of our source code, but it's coming soon, right?
Not these, you know, this whole idea that we've been doing.
When we started this podcast, you went on to chat GPT or Claude.
No one had heard of Claude when we started this.
I was a quirky guy using Claude.
And you'd talk to it and go back the next day.
The next release, it's going to be on all the time.
All the time.
Debating Harry's latest investment.
Was it big enough?
Is he too concentrated in the fund?
Where should he go?
What was Rory thinking on that deal?
Right, why was rory abusing harry by email again for the second time in a day?
But this is the future.
I'm excited to see it coming sooner, when our agents are 24 7, like they're literally around us and we give up all of our personal freedoms and autonomy as part of it.
I hear you on the embarrassment of it being leaked and you know the the human error element.
But while Anthropic has mythos which is supposedly as powerful as it is, you're juxtaposing that with open AI fucking around with, killing Sora kind of ads not really working and people being unhappy with it.
And it's seeming like this massive chasm of the progression of force that is Dario and Anthropic, continuing faster and harder than ever, with a faltering, confused and dazed open AI wandering around the product desert trying to find some water.
You're just being mean.
I mean, again, as I said last, I'm sorry to repeat.
Is that not fair?
Yeah, again, narrative is overdone on both sides, right?
So I think some parts of it are true.
Obviously, you're true in a bunch of different things.
The decision to shoot Sora in the head, right? almost certainly a good decision.
Look, it's obviously embarrassing to say something is going to be amazing less than four or five months ago and then shoot it in the head.
But if it's a mistake, give him credit for at least saying it's a mistake.
Move on.
Right.
And yeah, that relationship with Disney again, I think I'm going to give.
I, it wasn't me, i was sneering at it on real time when it happened.
I think someone else in this podcast said it's really significant, just saying right, it's quite, i think it's massively significant.
I think shooting in the head is even more significant.
Um, i think it's saying that the a big part of the whole strategic direction of the company was flawed.
Agreed the whole that we are going all in on consumer?
From what i read, sorum made single digit millions of revenue right, and was consuming a million a week, which actually sounds way too low.
Right, it must, it must have consumed billions and made single-digit millions.
It makes no sense as a product, either in the short term or long term.
But if you want to own the whole consumer experience with ai, you they decide we have to own image and video and anthropic never even attempted to do it right.
So It's a massive retreat.
It doesn't mean it's the right.
It's probably the right decision to your point.
In fact, almost certainly is.
But man, that's our strategy was wrong.
Like this is a huge own goal.
Our strategy was wrong.
Agreed.
And I agree with that.
But I still think, as I say, I still think Harry's kind of over-agging it a little bit.
Because look, you made a comment about ads that I think is effectively implying that the ad strategy hasn't worked.
That's a bit of a bigger leap.
I mean, sora hasn't worked, they've killed it.
I think i'm with jason.
I think that's smart, because i think one of the things you're seeing right now is in a world of scarce compute and astonishingly, despite all the investments that we've seen in terms of actual available compute for people to sell AI on, we're in a scarcity mode.
You don't devote compute to things that are highly compute-intensive and low revenue-intensive.
And Sora was almost the definition of that.
Video generation is extraordinarily compute-intensive, relatively speaking.
And the revenue is almost minuscule.
Conversely, you know Cogen, while it is compute intensive, it's orders of magnitude less compute intensive and there's real dollars attached to it.
So you're literally What's happening right now.
I actually think at a higher level it's actually very healthy.
You're seeing...
The economists, the accountants have wandered into the room and they said we have a scarce resource here.
Let's optimize it.
Let's devote this compute to the people who can pay the most for it.
So that's the SORA comment.
On the ads comment harry yeah, it's early days for you know chat gpt ads, but again i cite that quote that brian kim, that i thought was really good.
Of course they're going to run ads because there's no other way to build a mass consumer business and they've no choice right, because you know their consumer conversion rates run roughly five percent.
It gets them to a, i think, a roughly 10, 15 billion dollar consumer business right and out of their 500 million uniques or whatever it is.
So one of two things has to happen in the consumer business.
Again, I'm going to leave the enterprise business out.
On a consumer business either.
A they take that conversion rate to a number we've never seen before from a typical consumer business.
I think that's unlikely.
I don't think most consumers are going to pay $20 a month for this.
Or option B is you make an ad business work.
They've got no choice to make it work.
And by working, I don't mean $100 million.
People are kind of ragging on the $100 million.
It's in the noise.
It's scale.
Big picture here.
Facebook and Google each do 200 billion plus or minus a year in digital ads.
If these guys aren't doing 20 billion, within a couple years they're not even in the game and to get to the market cap of i mean remember facebook has a 1.7 whatever it is trillion market cap doing 200 billion alphabet slash google has a 3 trillion market cap doing 260 billion plus thing if they're going to grow into the market cap on the consumer side 20 billion is not enough they have to do 50 billion 70 billion of ads so So unlike Sora, this is not going to be a try the ads and then fold.
There's only two existential bets for this company.
One of them is ads to make the consumer business work.
And then the other is, oh, my God, we should have done coding all along.
Let's get a competitive coding and enterprise model out there and compete with Entropic on that side.
So those are the only two things they're doing, and they're the only two things they should be doing.
It's straightforward.
I mean, I actually see this as good news.
Like, at least we've gone from the let's wander around the woods feeling cool, building shit, to there's only two things to do.
Let's get them done.
Net, it's a positive.
Better late than never.
Man, dude, they had the Wall Street Journal this week.
They had a story of why Dario left...
Did you have a story?
Yeah.
Yes, I did.
The amount of tension at OpenAI, the fact that Greg Brockman recruited them and no one would work for him.
He and his sister would not work for Greg Bachman, would not talk to him.
They would not allow him to be part of the LLM or GTP groups.
Then Sam had to constantly tell each of them that they were in charge, right?
Told Dario he was the boss.
Then told Ilya and Greg they could fire him at any time if they wanted to fire Sam, right?
Then begging Dario to come back.
Then Dario saying he would stay only if he directly reported to the board and nobody else the level, and then firing Sam and then bringing him back, and then Sora and de-Sora, and we're not doing coding.
It's just, I mean, I'm exhausted.
Maybe I'm wrong.
I have to think at least someone like me would feel much more comfortable in Anthropic, where it appears there's a much more consistent process and leadership right.
Same founders, same thing, same goals.
I have to think a company organized like that's just going to out-execute someone with that level of drama.
I almost can't take it.
You're going to kill me for this, Rory.
Is the best thing for OpenAI not to buy Sierra.
Incorporate that as a customer support product and have Brett Taylor come in as the day-to-day CEO.
And Sam can be fundraiser, Sam can be master of.
I'm not in the boardroom, so you know I hear.
Look at the end of the day, the end of the day, i think you're right harry, and i would favor that as a board member.
But i'm not going to say that publicly because i don't want sam to break my balls.
I am too unimportant for sam to even give a about right, so i don't worry about that at all.
So let me say this delicately That amount of board level and senior team level turnover over an extended period of time is probably the highest warning signal that you could have as a board member about how your CEO is doing right.
And if it was anything other than a founder let's put it this way if it was anything other than a founder-led company and this level of drama was going on, you'd probably be having, you'd probably be sitting down with the CEO and asking how's it going, at least.
And what are you thinking of doing about this?
I don't think you turn on people just when things go to shit.
But you probably want to cut down the drama from here.
Build a team and try and call a shot and play it for more than six months at a time when you've worked at or observed startups where the CEO is spending so much of their time load balancing talent that can't work together, versus when you've worked at one or with one, where the talent's rowing in the same direction.
To say that it's night and day would be an understatement, right.
It's like the backside of Pluto and the front side of Mercury.
And it's just, and I think Sam, Well, you criticize him.
Actually, when I read the everything I've seen and then when I read the Wall Street Journal, it's like my God, this guy has spent so much time load balancing the drama of these extremely brilliant personalities that just, oh my God, that can consume most of your time as CEO, most of your time load balancing.
You're exactly right.
It is the drama of.
You know.
We're not dealing with a bunch of people just trying to crank out some b2b software and make a paycheck.
We're dealing with people who are angsting about whether this is going to change the world, who have fears about the technology, who have Desires to be seen as credited for the technology despite their fears about it.
This is, I mean, as is often the case, extraordinary talented people come on an extraordinarily high bandwidth.
A demand on attention and care and feeding.
It's been a real slog, I'd say.
Okay, the man with the most balls in investing, Masa Sun.
SoftBank gets $40 billion bridge loan to buy OpenAI stock.
How deep can Masa go?
He'll go as deep as they let him.
I mean, that's the one thing we know.
If they give him another 20, he'll borrow that too.
I mean, look, this is a high.
I checked the SoftBank.
You've got SoftBank Holdings.
I have to be careful.
There's the Telco Group, which is reasonably levered at the Japan level.
And then SoftBank Group is around 2x levered.
1.5 to 2x levered in terms of equity.
What that means is a 30%, 40% decline wipes them out.
It's a very aggressive stance.
It would be like me taking our 900 million venture fund, borrowing 18 billion and investing at all, and if you know if it works, i make you know.
I really juice my return, but if it goes wrong by 30 i'm done right and it's just it's.
It's super aggressive.
I mean, i suppose his lesson is massa survived 2002 when, i remind everyone, the nasdaq went down 85 percent.
You haven't lived till.
You've seen an 85 decline in an index right.
And obviously, if that happened to anything like it, you'd just be way underwater.
Right.
So it's a it's a fairly high amount of leverage for an investment fund, to say the least.
Yeah, I mean, for sure.
It's dramatic.
Having said that, you know real estate investment funds get the maximum leverage they can by design right there.
That is how they work.
I would imagine if venture had access to more debt, we'd all we'd all load up on it.
If we all could do the growth rounds in your hottest company and maybe we could get all the carry from it.
And the worst thing is we leave the keys to fund seven on the table, we might load up too.
I'm not sure, but certainly real estate funds load up as much as they can.
But just pushing back again because real estate funds load up, because the cash flows are predictable.
But at the end of the day, I mean, they can't, but they can because the cash flows are predictable.
They can load up great, right?
You know, it's just harder for my little fund to go to Silicon Valley Bank and borrow 200 million against, In the continuum of risk, I would argue, the SoftBank portfolio, not the telecom company at the subsidiary level.
But I would argue the SoftBank portfolio is more like Jason's fund than it is a real estate fund.
I think it's a high level of risk.
Well, Plessy, what did he lose on WeWork?
$12 billion?
He knows what it's like.
The two big assets from memory are um, obviously the open ai position and, i think, the arm position, which i still think is in.
Um the the in the holding company and yeah, but i mean amazing companies, world-class companies, easily imaginable.
I've bought them with a client 30, so yeah, it's a hell of a way to live.
Speaking of declining 30 and being in the hole, we touched on it earlier, but obviously Mythos leak hammered cyber stocks.
Crowdstrike, Palo Alto, Zscaler all down 6%, Octon, Netscape down 7%, Tenable down 9%.
Was this a justified dip? or is this an unjust reaction to anthropic news?
I was listening carefully to the names, and there's different aspects of security.
Some of them I can say, yeah, maybe that overlaps.
And then someone I go, that's just a different thing.
Right.
And when you listen to all the names being thrown out, you say that's just you know.
Baby with the bathwater, because step back.
How does how does on topic, you know, make security better at the code development stage?
They can look at code and find security flaws.
So there are companies that, up front um, do something like that, and you know application security companies, and you could argue that this is a different way of doing that.
Maybe some of those guys will be impacted, right?
What they're not doing, for example, is real-time perimeter defense.
They're not in a run in a real-time basis, you know, blocking people like a firewall.
Nor are they doing what, for example, Okta does, which is single sign-on and authentication.
That's simply not what they do.
It's a different thing.
And the fact that those kind of stocks sold off says it's just a kind of knee-jerk reaction rather than anything thought through.
It will have an impact.
If you were doing application security or code review.
For security code review, You're probably going to have to either incorporate how this works in your analysis or you'll be redundant.
Just as the coding companies anyone kind of just have GitHub had to roll in complete models and figure out how to adopt it.
Right.
So for some of them, this is really going to matter.
And then for others, it's like it's just a different thing.
Stepping back, I think we're in the panicky stage.
I think we're in the stage of because these companies are doing so well, because they're private, no one sees the numbers.
Because AI is so sexy and so potentially amazing, we're at the stage now where anything can cause a panic.
Robinhood was down like 10 because Elon didn't potentially give them the tender and was going straight through E-trades.
And that alone was like a massive hit for them.
Obviously, there's a panic in the market.
And the question is, is the panic justified, right?
The panic is that this revenue is not durable, right?
That's the panic.
The cybersecurity one's really interesting.
In my experience and opinion, this is one where it's just back ass panic, backwards.
Um, because if you're in the agentic world, this is the golden age of security.
The number of security threats and issues is going up orders of magnitude.
Claude leaking its source code.
It doesn't matter the number of of apps exploding, the number of like there's so many mobile apps that app store is like.
It's like a month to get your app reviewed versus a week.
It is Everything is exploding.
These apps are being built by agents.
They're being built in unpredictable ways.
Folks aren't looking at the code.
The pace of features being shipped, products being shipped, corners being cut.
This is a golden age of taking any mature category and acknowledging good news for us.
There's more threats, good weather i don't care whether it's application level, perimeter and like.
The good news is, threats are exploding and that the whole shtick of cybers.
I'm not a real cyber security expert, although i'm doing another investment right now for just this reason.
The whole shtick in my whole lifetime has been Look, you've got to constantly buy new products because new threats keep emerging.
There's been a golden goose of cybersecurity that has allowed new entrants to come into a conservative category.
Someone like Wiz will show up and say, guys, we know how to do this on the web.
And people are so terrified of new threats, they'll take the meeting, right?
This should be the golden age for new and existing investors, because the threats are terrifying and you can't stop the rogue engineers that vibe coded, something that accessed your data.
This, this should benefit everybody, like everyone, should be a rocket ship like everybody, built like everybody.
Monetizing gpus is a rocket and the fact that the market doesn't see it shows we're, in my opinion, we're in a true panic, which is hard to predict the bottom, but I don't get it.
Everyone should be benefiting when you see an explosion in application production and a change in the paradigm.
The change in the paradigm is good for everybody except know windows defender from 1996 like it probably doesn't help that product or whatever the hell they have.
But anyone, everyone with engineers should benefit.
I broadly agree with jason.
I mean that might there are more than windows defender 2006 that might be impacted.
As i say, some of the application security code review stuff could be.
But big picture, jason's right, instead of having People trying to get into your firewall.
Everyone is now downloading an agent giving it full root access to their computer and telling it have a go.
And as Jason just pointed out, work overnight.
It's funny my colleague Aaron, who does a lot in the security side.
We've been looking at a lot of these companies.
No one yet knows the exact approach that we're going to have to take to defend against agents running within the organization.
But everyone 100 understands that this is an emerging megathreat because of the velocity, adoption times, the power of the solution.
So i agree with jason it it mightn't be the old guard that takes advantage of it, but there's no, but they tend to be.
One of the things i admire about the security companies is the crowd strikes, the palo alto networks of this world, is they know damn fine that when a new trap emerges and a new solution emerges for that threat, When an earlier winner comes out, you better spend your 300 million, your 500 million and just swoop up the winner and add it to your product.
So I think there'll be a ton of fast acquisitions as agent security solutions emerge.
And people will be doing, if they're smart, I think those two companies are extraordinary smart.
They'll be doing acquisitions long before it's quote certain, because you're going to have CIOs come and talking to you, right.
One thing what mentioning on that is.
It was interesting.
Again, i and somebody leaked information from anthropic.
They're masters at selling fear.
One of the things they're doing is they're releasing the mythos model, first to sisos within companies.
It's kind of like, oh, it's so scary.
We're going to give you this model and give you time to figure out how to use it.
Of course, part of that time will involve giving a million bucks to Anthropic, So it's just great marketing.
So they're actually leaning into that and saying to the CISOs you're going to have to figure this out.
This is the new terrifying weapon we've invented.
Please give us a million dollars and we'll let you defend yourself with it also.
Great marketing.
But it speaks to the perceived, to Jason's point, it speaks to how correctly afraid Every security for CISO should be, given the pace of agentic AI adoption to the enterprise.
The golden age of cyber.
It should be.
I mean, it's just, how hard is it to get a meeting?
Whoever you are, if you have any established brand, we've got a new agentic product.
We're gonna help protect you from this.
You're gonna get a meeting that afternoon.
Right.
Wish I bought them over Figma.
That's a depressing chart that I'm looking at.
You need to let go, Howie.
You need to let go.
I'm down 30% in a month, Rory.
It's hard to let go after 30% in a month.
Okay.
No crying in the casino.
Move on.
I do want to discuss revenue kind of questionability.
We've got anthropic recognizing revenue in a very different way to open AI.
And then you also have questionability around emergent labs.
And is it okay if error is kind of questionable in sorts of how it's accounted for.
How do we think about that?
You can choose which one you want to take.
Let me just, can I just maybe Rory can dig into it, but I'll tell you, there's one startup I invested in that's over 100 million ARR.
And I own just enough to get the investor updates.
I'm not on the board.
And I get three numbers every month, three revenue numbers.
I don't know what the hell.
They are over 100 million, but the smallest one is ARR.
Now i invested at seed.
I don't really care, i'm in the money, i don't.
I have a choice.
But i i can't understand.
This company's doing great, but i can't understand, for the life of me, i cannot understand these three numbers.
And there's asterisks and daggers and there's charts.
They go everywhere but they keep going up and to the right, which I think was on this emergent thing.
We could talk about our next.
I think that's what some of the investors said.
Who cares?
But I can't tell the hell the difference what an ARR is in 2026.
What I always get is like pipe, which is complete bullshit, contracted, and then there's live.
So, first of all, stepping back to be fair about Entropic and OpenAI, they have a very clear and sensible approach way they define ARR.
What they say is they take the last, the average of the last four weeks, to smooth out times 13, because there are 13 four-week periods in a year, which is more sensible than monthly, because you have these varying months.
So they're basically what they're saying is realized revenue for the last four weeks averaged, you know, the average of that four weeks times 30.
That outside obviously, if it's the average, it's times 52, but basically it's actual gap revenue.
What did we build for the last four?
The average calculated across the last four weeks to take into account holidays, that's their run rate.
So it's actually pretty To be fair to them.
It's not committed to any of the bullshit kind of higher level stuff.
It's actual money flowing through the system.
And Tropic is roughly at 19%. billion based on that kind of trailing four-week metric.
And OpenAI is around 25.
But now let's talk about your thing.
There was this whole meme of OpenAI reports net on their partner revenue and Entropic reports gross.
And what they're saying.
There is if OpenAI sells through Microsoft and Microsoft takes some money off the top, OpenAI only reports the net amount.
If Entropic sells through AWS and they sell 100 worth of revenue, they report the gross amount and then they give 20 back to Amazon as a cost of sale.
So there's two different methods for what look like the same revenue, kind of mix, same revenue approach.
I thought you were going to extend that.
I thought part of where you were going was to.
Michael Cannon-Brooke's point on the show was that a lot of this revenue is getting double or triple counted because of how it's being recognized.
And not only does this happen, then Cursor's selling it again and recognizing the revenue, right?
People keep reselling these tokens again and again and recognizing them as their own ARR.
How many times do we get to resell these poor little tokens?
I think that's actually a great point, Jason.
I hadn't got to, but you're exactly right.
No, it's like everyone's got amazing revenue growth because it's the same little token going.
I mean, if we all agree to have essentially 0 gross margins, an infinite number of us can keep reselling tokens to each other, can't we?
This is our new 20 VC scale saster demo day.
We all resell a million tokens to each other on the first week.
So everyone in batch 001 has a million ARR its first week because we just resold our tokens to each other.
So it's completely fair.
The VCs don't mind, and you're exactly right.
And the sentence that you added in passing is the key one until we all have to get profitable, all this, you know, can continue, and then, at some point that's why i said i think you're starting to see it someone's going to have to say, assuming we want to have a net present value and a cash flow, what's going on here and then, And then all this becomes more clear.
I didn't comment on the emergent labs fastest 200 million.
Jason, you actually you tried it, didn't you?
You thought it was good.
I did.
I thought, I mean, listen, it's hard for me to know the criticism, right?
You know, some folks in the press in the India B2B environment tried to make this some sort of scandal, right?
Because and in a sense, fair enough.
If you go to emergent labs and emergent labs is sort of an Indian competitor, replete and lovable, which I'll show you what i learned in a minute right.
And if you go right now to the home page, they say zero to 100 million.
I think in eight months it's right there.
It's the biggest banner.
So, in all fairness, if you're going to put yourself out there, not not just as a tweet, but if it's going to be right there on your website, one would expect 70 to 80 accuracy in that number, ideally higher, right.
So if it's lower than that, I think it's fair that some daggers came out.
But I was curious, but I don't actually know what happened.
Is it triple counting?
I can tell you one thing that I learned which I don't love, which is that and a lot of AI startups do this
So this is not unique to emergent.
They kind of hot.
Instead of getting used to free version, they try to get you to immediately do a free trial.
Instantly, that says it's 0, and 20 a month thereafter.
Now, so many folks do this.
It is not unique to them.
It's probably best practice in most accelerators, but I'm pretty sure that means they recognize 240 in ARR, that first month when you're paying zero.
And they trick you because you don't even.
Yeah, you do have to click on the Stripe link, but you almost think you're just using the free product.
So is that if I do a 0 a month product that's discounted as a marketing cost and they churn after 30 days?
Does that count as $240 of ARR?
I think for a lot of startups, it does.
Okay.
So that's a fair criticism.
I'm not saying this is what emerges, but a lot of startups will instantly recognize that as 240 in ARR, which is how they rock it.
If you're self-serve, that's how you, otherwise you can't get there that quickly.
Right?
So so they clearly did that.
I will say what was interesting is i, overall i think the criticism is probably unfounded because i thought the product was pretty good, much better than make, like an order of magnitude better than the disaster of make.
Um, because i i do a five-part test, a six-part test.
The first part is awareness test, so i ask it to redo the sastrai homepage.
Uh actually, of all the platforms that did the best job, it beat it, beat it, beat all of them, all of the leaders, because I redid this recently.
I redid it and and they're all good at it rep it, lovable v0, they're all good at they all pass the test, but it actually, it actually was probably the best and it passed a bunch of the other tests.
So I'm not going to switch to emergent labs, but i would say it's in the top 10 of vibe coding apps.
That's pretty good.
So that tells me it's a legit business like they did.
They did the work and a lot of these.
They're just.
The truth is, if you play with a lot of these, even from leaders like makes, not the only one that's crappy.
Okay.
Because they're basically relying on the fact that Claude code does 90% of the work for you.
Right.
They're just putting the simplest wrap around this.
And so they did a good job.
But I really didn't like the way they do the billing.
But we'd probably have to shoot half our portfolio companies that do like PLG AI, because I think it's a sus practice.
I just don't like tricking you with the zero dollar for the first month when you think you're using a free trial right.
That's the sus part.
I don't love that kind of gray art, but the product's pretty good.
You know what I don't like when it comes to confusing?
I was wondering whether to go off on one in this show, and then I thought fuck it, let's go off on one.
It's been a long day.
I'm pissed off by these tranched rounds.
I see them all the fricking time.
The amount of Sequoia rounds where it's like, oh, X raises money from Square at 5 billion.
Trust me, Sequoia got in at one, but they just club it together and then announce the sum and then the latest valuation.
And it's just very misleading.
The tier ones get in early, a tier two, tier three instantly marks it up same day.
Same as crypto, isn't it?
For years.
What's the difference?
Well, i think, crypto fund uh the, you know, essentially 80 off the, the token.
What's the?
It's the same thing, isn't it this that you're paying for the pain for the signal, i think, if you break it down First of all, just so everyone's on the same page because interestingly, neither Claude nor GPT was on the same page and didn't know what a tranche round was.
And they gave the old conventional venture trunch around based on performance milestones.
You know BS from back in the day when we actually ran businesses, right?
So didn't have a clue about this.
So let's be clear on the practice here.
The practice here is when a company, a hot company, raises around where there are effectively two different prices per share a first let's call it a first close and a second close, even if they're at or near contemporaneous, where the first one might be at 250 and the second one is at a billion pre, and the headline is they owe Waze at a billion pre.
There's two impacts of this.
First of all, let's do the simple one where there's just a single participant in the round, right?
That's where if I'm the new investor, I want to pay 600.
The company wants a headline of a billion and to win the deal, someone says okay, let me put some money in a 250, some money in at a billion.
I can do math because i'm paid to do math, because i'm an investor, so i know my overall basis is a billion i'm sorry, 600 million.
So i'm getting what i want And the company is getting what it wants, which is a headline number of a billion, right?
It's silly, but that's all that's happening in that case.
That's the single participant tranche deal, right?
And if a company wants a headline, that's what they get right.
Generally those things come back to bite you because, by definition, if you're the company, just as the investor can do matt, presumably you can do matt.
If you accept that combined deal, you're implicitly saying i know i'm only worth 600, but i'd like the optics of a billion.
You better be damn sure that your next round you're at one and a half billion, otherwise you'll have the optics of a down round, and if you're an optics believer that's probably worse than the uptick, right.
So that's kind of the single participant version.
The much more annoying version that Harry clearly was getting on his high horse about is when you have the same structure but access to those rounds where the lead investor maybe does all of the 250 pre-round and only half of the billion round and then some new investors just get to do the billion round.
So, literally at the same time, the lead investor is investing at 600 billion And the follower investor, less marquee investor, is investing in the same asset at a billion.
And I don't believe there's right or wrong in money.
There's just money, right?
That's where, at the minimum, you have to look yourself in the mirror as the other investor and saying wow, that's the price of being cool.
Right, that's the price of access.
I'm paying 50 more because i just can't access that deal.
Right, and that feels like pretty invidious thing to.
I mean again going back to the comment that the prof i mean you've got to remember If you think about it again, trying to avoid morality and saying oh, it would feel shitty.
I mean, you really would feel like a loser if you did that.
But let's play it out in a situation where the lead investor let's say it's Sequoia, because everything good and strong should be Sequoia.
They are admitting it's only worth $600 on average, and they're just doing this fakey transaction.
The company is admitting it's only worth 600 on average because they're taking the money at a blended cost of 600.
So what you're saying doing it at 1 billion is you're either saying either I have a lower cost of capital and I'm willing to take a lower return than everyone else, Or the only positive spin you can come up with is the company thinks it's worth 600.
Sequoia thinks it's worth 600.
But I am smart enough, even though I don't have access.
I am smart enough and clever enough to know that it's really worth a billion.
And I should do it at a billion, even though I can't get to 600.
And I'm willing to put up with the upfront tax and foolishness.
Look, because I think six, 12 months from now, it'll be obvious that I bought at a great price and maybe I'll look like a genius.
Yeah, but we've well, we've entered an era, though.
I think the meta thing.
Maybe this wasn't exactly what you were queuing up harry, but it is tough.
We've entered an era where so many founders are obsessed about headline prices obsessed they're obsessed.
Coming out of demo day, they're obsessed.
They're obsessed once they cross a billion, which think should be a moment to take a pause, because of the m?
A options.
They're obsessed about driving to 11 billion and 9 billion and one-upping.
Their competition and the numbers have become a joke to many founders.
Right, they just don't make jokes the wrong term.
They don't think through the any of the ramifications of the valuation they're hiring.
They don't, And I'm not even saying that's bad.
I mean, I think burning the bridges is a good way to have a big outcome, but it's become utterly gamified on many levels, right?
It's just become gamified.
And so this 11 team tranches in a round is just part of gamifying it.
Right.
It's been true of YC since I started investing there.
There was always a cheaper price before demo day.
If you're reasonably hot, a higher price of demo day and then a 20% or 30% after demo.
So that version is just become institutionalized, and so be it.
If it's what the founders want, if they want to gamify it, so be it right.
I i just don't think raising it five or eight billion when you're at 80 million or 100 million of suspect arr is the most exciting accomplishment in the world.
Like i'm not gonna like, i'm gonna send a few thumb emojis on the email, but that's about it, That's about it.
They're all fake anyway.
They're all just bets, right?
These are not public companies.
It goes back to your point though, on emergent labs and the graph during the eight months to a hundred million, the gamification of like the race to a hundred million.
I'm not choosing emergent labs.
Listen, I think they built a good product.
I think I'm sure they've been overly lambath, because whether it's a hundred or 80 or 60, I don't care.
It's pretty damn good, right?
Whatever it is.
But if you're going to, if you're going to, if you're going to do that, you deserve the daggers to come out when it's not a hundred percent.
Right one.
That i thought was fantastic exciting.
I always like to see a potential ipo or to ipo shortly um.
I thought this was fascinating.
It's been an incredible journey.
Actually from, like you know Scandinavia, these founders building this business has had a couple of CEO changes.
The business is actually in incredible shape, both actually in whoop announced today that they raised I think it was 500 million at 10 billion fitness and health data.
Do you know what actually Rory?
Jason's annoyingly right again.
I don't know if you remember his predictions, but he predicted, if I'm not wrong, that 2027 would be the year for human healthcare, data and longevity.
Yes, and it looks like it might even be 2026.
And yeah, the great thing about both stories is very I mean, you know, Johnny Iverside very defendable from, and this is not an AI envy story.
I mean they use AI in what they do, but these are fundamentally standalone products with a clear consumer value proposition.
And they're not gonna be cloud coded on Friday.
I totally see it.
And they clearly have had critical mass in terms of revenues.
I think it's awesome.
I think the question, listen, the interesting thing for these products, Obviously, it's exploded.
Going back to the topic of ARRRR, these are recurring revenue products, right?
For the most part, right?
Fairly expensive subscriptions.
And they're exciting until like Peloton when they aren't, right?
Now, there's not a $2,000 cost here.
Um, but, um, and I'm not being critical.
I think that they're exciting, but there's also a faddishness ism.
People can switch.
So the RR, the ARR, the pirate are, um, uh, what multiples do these companies deserve?
What it is?
I'm not smart enough to know, but the, but the acceleration is a force of nature, right?
I'd love, I'd love to be a seed investor.
Don't get me wrong, think there's a faddishness in the same way.
I think we, i think you can switch from then.
Harry, you're into fitness, i i'm.
I'm not so much, but i run 360 days a year, five miles a day for 10 years.
So if they're a better treadmill, a better device, a better thing, i would switch.
And you know, whatever you're, you're fairly fit harry, like if you're, if you are or and you love it, but whoop, is is better and you care, you're gonna switch.
So it's not, it's not service now error right, it's not, you will, you're loyal, you're loyal, but but but there's just some disruption, rip like, look at peloton when peloton blew up.
But actually, as the world changed, even though people love Peloton right,
Super high MPS.
Remember the Peloton addicts of 2020 on Zoom?
They loved it.
But when the world changed, the simple answer to Peloton is they just switched.
They just switched uh, whoop is different than aura, and there could be a whoop or whoop, aura and uh, maybe one is your ankle and it has your ai rock from johnny ivan, and then we'll switch.
Two comments on this one disclosure.
We are lucky enough to have a small investment or to the acquisition of one of our companies.
So I don't have a ton of information.
So I'm not going to breach any confidentialities, but just an abundance of caution.
I'm not going to comment on numbers at all.
But great products.
Right.
But to your point, Jason, on It's not ARR-like service now.
Let me be direct.
Get the fuck over it.
Not every business on the planet has five-year design debt.
If you're running a bar down the street, every night I can go drink at a different bar.
If you're selling Coca-Cola, every day I can switch to Pepsi.
If you're running Amazon consumer every time, every day i can go and search and go on walmart, right?
Not every business is going to have enduring kind of long-term lock-in and that's obviously you prefer to have lock-in, right.
But there are lots of businesses that have been around for 50 years where every day they have to earn the right for the consumer to go to them Right.
And I think there's no doubt in my mind that any kind of consumer hardware software combination product has some residual asset from the subscription.
But then, yeah, that every new device has to be awesome.
You're in competition with other awesome products.
It turns out, capitalism is hard, you know, if you want to make 10 billion in value, you've got to deliver value for your consumers and i think, for what it's worth.
On peloton, i actually think what really happened to them it's a little like the zoom story is demand.
That should would have been wonderful.
It would be the greatest stock ever.
Had that demand been spread out over five or six years, increasing at 20 a year, we'd be talking about the peloton compounding machine instead.
Everyone bought the damn thing.
At the same time they staffed up to kind of meet that demand.
The market was wildly saturated and then the stock went down and broke the narrative.
So i, i do agree, you know i i yeah, there's nothing you can do to make a market bigger than what it is.
But i, i think they got whiplash by virtue of the covert demand spike, followed by demand fall off.
No, I think the meta question.
Listen Aura, as Harry said, I guess I called it.
These are great markets.
They're large markets.
They're markets where people will pay actually relatively high subscription fees for data, right?
A lot of trackers.
The meta question for venture is, you know the classic Peter Thiel zero to one, only competitions for losers is what Dr Thiel said.
Competitions for losers.
Competition destroys profits.
Monopolies drive innovation.
You want to invest in monopolies.
And so that's just my meta anxiety is if these are un-monopolizable markets, are they good ones for venture or not?
And obviously there's two sides to it, but I would feel more comfortable investing in things that become monopolies.
I mean, it's a better landing place than investing in bars.
And you can't ascribe the same durability of revenue to this as you can what day?
As much as I love it.
But on the other hand, you can ascribe super high growth and you can ascribe big time.
Look, if there were enough monopolies to do even one good monopoly a year, I'd be in, right?
And you know yeah, speaking of the founders are about to get the all-time prize because they invested in the space monopoly and 20 years later, they're going to cash in their chips.
Right, monopolies are better businesses than competitive markets, but i do think you can still build billions of dollars of value from a high good consumer product right, and there are lots of prior examples of that.
You know, and yet we all understand the dynamics of I think it's much less, I mean, actually for what it's worth.
I think if you look at consumer products that flame out, like the GoPro, it's much less and I'm doing this on the fly but it's much less a competition issue.
It's not like GoPro died because the competitor to GoPro emerged, right?
It's that saturation is as big a problem as anything else.
Well, DJI might disagree with you.
I mean, there was a whole step function in the industry that they got left behind, right?
Yeah.
Would you prefer 2 billion in consumer hardware revenue or 2 billion worth of five-year contracts?
I'm like Palantir.
Yeah, I'll take the contracts with the 90 gross margin of the five year lock in place your starter for ten.
But you got to give a lot of respect.
I think maybe the more interesting question, Rory, that you brought up because so much has changed.
This is our 50th show.
So much has changed, right?
When we started the show Public, durable public company revenue despite slowdown, and the top line was the gold standard right.
It was the best revenue out there.
Fast forward to today.
Do we or going public?
Do we give a crap what type of R?
It is because the durable software stuff is trading lower than the SP 500.
Maybe I'd rather have ring revenue with a somewhat suspect customer lifetime value because the software value is so low.
Maybe I don't care where my R comes from.
It used to matter.
It used to matter.
We were.
So we'd be in board meetings where you would torture companies so that they would have more arr and that they would have less variable revenue.
I mean that seems like archaic today.
Yeah, and i remember doing that.
I remember telling people not to do that because i'm a big believer is you can't make.
You should sell your product the way the customer wants to buy it.
Now, one of the things i hated about venture was when people would say oh, make it all recurring revenue.
And then the fun one that's actually really relevant right now is you remember everyone would say oh, you know, it's a hardware product, but all the values in the software, so we're really like a software company.
And now hilariously, everyone's going oh, thank god i've got hardware, because hardware is defensible, not software.
Right, and i think it's A big picture.
Comment is you should conform your company around your customers and your model, not your VCs.
Because I agree with you.
This kind of pretend it's ARR, but then next year we hate ARR.
It's just a total waste of time for entrepreneurs.
Things are what they are.
And you do best in business if you actually say what they are and just live and die by that.
Most consumer products have high volatility associated with them.
You better have a damn good R&D function and continue to build great products.
This week, they also talked about how I think Allbirds, was it acquired for less than $30 million?
Yeah, I was literally about to bring this up, Jason.
It was acquired by Amex for $39 million.
So my question is if a company like Ora goes public and you see weakness in a quarter, should you dump this thing instantly, like Allbirds versus forgive a little bit of weakness in a sales force or service?
Now,
I'm going to avoid any specifics.
Genuine comment here, right?
Because it's not appropriate.
But I would say something.
Unlike the other two guys, I've run a textile manufacturing company 30 years ago.
The technology required to make an all birds or a shoe is not the same as the technology required to make a modular electronic device that sits on the human finger and measures blood, either of these kind of consumer electronic products.
They're not a monopoly in the same way NVIDIA is, but it's pretty rare number of companies that can do that.
Go down.
Put it this way, Jason.
I'll name a wearable, you'll name a wearable.
And then I'll name a sneaker, and you'll name a sneaker.
We'll be done with wearables long before we're done with sneakers, because there's a lot of different sneaker companies.
And yeah, it turns out, sneakers are easier to make than wearables, which are easier to make than NVIDIA GPU chips.
Speaking of like, do we care?
What do we actually care about?
There were two that I don't know if you guys know this, but I have wonderful partners and one of my partners is much more intelligent than me which rory, you're going to make some form of gag about but he helped me put together some of the schedules too, and he was like whoa.
I had no idea about this.
He was like whoa epic games laid off 25.
I didn't even hear about that yeah, and then i then i had her had mark andreessen on your last pod, sort of laughing about how we all over hired in 2021.
Mark Andreessen was very clear.
He thought that we were all using AI as an excuse and that we were all overstaffed by 50 or at least 75.
Did any of his portfolio companies do that over hiring?
Just logically, it would be 75% or at least 50% overstaffed by 50% or at least 75%.
This doesn't make any logical sense, but keep going.
Just picking up on the arrows here.
Rory.
He's pissed now.
He's pissed.
I would love to see you do a day of my life.
Give me a fucking break.
That's actually fair.
You've been cranking all day.
I will give you two hours sleep for six hours a day running two companies at once.
Now I'm feeling guilty.
Move on.
Don't worry.
But point being, like... went completely under the radar.
They didn't try and do an AI bullshit story.
They basically said you know active daily, active use of their Fortnite game and their games is down.
So your revenue is down.
So you take your expenses down.
It was struck me as a no bullshit layoff announcement.
It's like, you know, we sell less stuff.
We have less people.
It sucks.
And again, I really do try never to be cavalier about people losing their jobs, because every one of those has to put food on the table.
They're not earning the kind of money we're earning, and now they've got to go out and find another job in a shitty job market.
It sucks.
But the lesson is and that's why I respect them it's like we're selling less, so we got to do what we got to do to keep the company profitable.
Guys, we keep talking about these layoffs and these big numbers.
I mean, it was over a thousand people laid off in this layoff.
A thousand numbers are relatively meaningless and we've had so many of these conversations.
What happens to the labor markets?
Well, one thing on on the Epic thing, if you, um and the wall street journal did a good article on this one to this week on the a permanent decline of Hollywood employment.
It's permanently in decline.
It's not there.
It's on.
It's in decline because fewer movies and TV shows are being made.
Tiktoks and YouTubes are doing it, and it's in permanent decline because every other country provides larger subsidies.
Right.
And so there's this permanent decline in Hollywood labor.
I think entertainment shows us the future.
Epic Games is entertainment too, right?
And they will absorb as much AI and technology as they can to adapt.
And it's just early.
It's just early.
They've had to adapt to YouTube.
They've had to adapt to social gaming.
And I think we talk about these, you know, a thousand people at last year or whatever.
But I think Epic Games is just it's I think it's a more interesting view of the future than block.
We talk about folks might vibe code a B2B app, but content's already being massively disrupted.
And some part of that is, as you pointed out to me when I got it wrong a few episodes back, AI related in terms of recommendation engines.
But I think a lot of it is just a very competitive attention economy.
You're right.
Fortnite was the game everyone talked about.
Now it's not.
It's the nature of the gaming industry.
So yes.
What does that mean?
It's the Fortnite circle coming for everybody at the end of the game.
The Fortnite circle has come to Fortnite itself.
It's surrounded itself.
Poor Epic Games is in the middle of its end game of Fortnite.
It's just hidden content creators shooting it out at the very end.
It's coming for all of us.
The Fortnite circle is coming for all of us.
The other one that kind of relatively was, I think, maybe a little bit overlooked is reports of Manus founders.
Manus, obviously, for context, being bought by Meta recently.
Manus founders trapped or kept in China.
So just again, give people context and then put out one question mark there.
Manus was a company originally based in China, had some Chinese investors.
Then we domiciled to Singapore.
Benchmark invested effectively.
We found it as a US-Singapore company.
Meta acquired it.
I want to say and I use the word past tense acquired, because my understanding is the transaction's closed and the money's moved.
Though, interestingly, neither Chachi P nor Antropic were clear on that.
But my understanding is that's what happened.
But then now the latest thing is two of the.
The Chinese government takes a dim view of this because they don't want Chinese talent leeching overseas and going to the US and effectively not being Chinese anymore, and they feel it as a brain drain.
So they did something that was pretty coercive, in the sense of two of the key founders of Manus, I think, were either in China or someone to China, and they're no longer able to leave.
So that's those are the facts.
Yeah, of course you care.
I mean, I think that Well, starting from scratch.
I mean, that sucks.
I wish him the best because that's not a pleasant place to be.
I mean, I think you've had the Jack Ma thing of you know at Alibaba, of effectively going, as it were, under the radar for a few years when you kind of incurred the displeasure of the administration.
You also have people who've had significantly worse consequences than that.
So let's start with the basic.
You wish them all the best, right?
I don't think another deal like this would happen to you.
I think this whole Singapore-Washington thing is over.
It's over.
I totally agree.
That's where I was going to go with that long preamble.
I'll tell you who didn't notice.
Maybe no one in America spent any time thinking about it, but every Chinese founder who was thinking about doing this is going.
Hmm hmm, I don't know how I feel about this.
I don't know if I can do this deal.
I do know if I do this deal, I am never going home again.
But I'm with you, Jason.
I think all these other China-Washington deals they're put on pause or they're put on reevaluation or next thing is going to sound harsh.
It's a fairly coercive regime.
If your family is not out of the country, do you have exposure there?
Right?
I think it puts it just shows.
I mean authoritarian governments can take pretty dramatic, drastic steps to impact our citizenry if they want to.
And I agree, Jason.
It makes it really hard to imagine Doing another one of these deals.
Would have been worried about this consequence.
And hopefully they'll kind of go, nor do you pay 50%.
Like, you know, California makes it hard to leave, too.
But if you pay them 13%, they'll let you go to Nevada.
Hopefully it turns out to something like that.
And please, God, it's not something more coercive.
But I agree, Jason.
Wouldn't do another one.
You know, in venture you take risk right, it's part of the job.
So we've all had deals where there's some rule, some corner that was cut and we talked ourselves into it's okay.
Right, this is, this is companies.
Something weird about this company, but and we convince ourselves, as as As talking to some mediocre lawyer or asking an LLM today, that it's okay.
So like the Singapore washing must work, right?
They've moved to Singapore.
It's got to work.
And you convince yourself, you talk to a few people and you take the risk and it bounced.
It appears to have bounced the right way for benchmarking friends, right?
It appears they've gotten their money, but you don't do the next one. right and there's 242 millionaires in singapore the majority of the inflow is chinese you don't do the next deal and maybe maybe other capital does the deal and that's fine right capital is fungible but you just in venture you just don't you just can't do the next one like this it's too risky what do you do if you're meta part of the asset you're requiring is the team two billion is not a lot for meta and they have the product Yeah.
What are you going to do, Harry?
What would you recommend?
Getting angry at the Chinese?
That'll work well for them, right?
I mean, I think it'll be yet another acquisition that looked clever but in retrospect wasn't amazing.
Well, listen, for Meta, I'll just say one thing.
I only have a tiny bit of information, but it appears to me Madness is running mostly smoothly, as as an application and a company.
Now I don't know if the founders are working on it.
You know, i i certainly feel strongly.
When you lose your founders, you lose your heart and soul of your company.
But in the short term i i don't think it's a big deal for meta outside of the founders, because it's running smoothly.
Right, that that's my in the short term.
It's not down.
The team's functioning, they're running and um, but it's crazy and at the risk of being pollyanna but also wanting to assume the best of people, i would hope that the meta management team and board, to the extent they do have any influence, can help these guys come to an amicable end and if it requires a tax settlement or whatever, you know just, you don't want to leave.
You don't want to leave people you just acquired in limbo at some zoom out level.
When you listen to the rhetoric on both capitals, you just have to realize that trying to tread between these two countries is pretty hard right now.
We have China hawks in the US government.
They obviously have a whole ton of US hawks or whatever the equivalent is.
There's a real perception of competition.
You know, we don't let them buy the Nvidia chips, et cetera, et cetera.
You're playing with fire and that thing, and sometimes it bites you.
I just think overall, it's natural, in given the outcomes and given the growth, that I think it's tied to taking the highest levels of risk we've also taken because the payoffs seem to be there.
And when this deal happened, folks kind of thought this was aggressive.
Benchmark's never done a deal like this.
Why are they doing a deal like this?
It's not even very cheap, right?
It seems a little crazy.
And they're like, well, we've never seen anything grow like this.
And the team's incredibly talented, right?
So they took a little bit of risk and they made their made their profit.
We're all taking more and more risks.
Folks that, you know, now it's a week of revenue at a demo day.
I did a million dollars my first week.
It's amazing.
What about the second week?
I don't know.
But as long as it all works out in the aggregate, And I think this is why nobody cares.
To Harry's point
I cared about madness.
I added it to the list.
I don't think anybody cares.
We're all focused on getting a million dollars our first week.
Just good realization that the worst thing that can happen is not just, oh, you lose your money.
There are worse outcomes.
Speaking about calling their shot on making billions of dollars, Steve Jurvetson.
He's tied his career to Elon very smartly, so that's not in any negative way in terms of the investments that he has.
Ploughed trebled doubled, quadrupled.
Everything in between leaves california.
Buys most expensive home in incline village, and these were jason's notes.
Will anyone with liquidity be left in california?
What if california is structurally bankrupt?
Well, i mean yeah, it's not a great sign when they keep leaving, is it?
It's not a, it's not a positive, But Rory's staying, Jason.
I mean, look, first of all, you're exactly right.
All credit to Steve and more power to him.
I've known him intermittently for 30 years.
He made a brilliant call to align with SpaceX, been on the board of Tesla and SpaceX.
Tesla for a while and then came off obviously for those back in the day, but space X two.
Yeah, he's, he's put his money in a compounding machine and now he's clearly hit the DPI moment.
Right.
But yeah, going back to the thing.
Yes.
Cap.
I mean.
The truth is this.
That's why we said last week ultra high network.
People have a high degree of mobility.
And unfortunately, if you put the hammer up too high, They can leave and choose to go across the border to Incline Village and save 13 on any realized gains plus, as we pointed out, 5 on all gains if this wealth tax passes.
At the margin, why wouldn't you?
You know, it's not like you need to be in California to be a Tesla board member or a SpaceX board member, given they're down in Texas.
So yeah, actions have consequences.
Well, it's interesting also this week Washington State did pass their 99 state income tax for millionaires.
And the governor said the reason the governor said to sign it because there's a lot of folks who said don't do it right.
I mean, already Howard Schultz left.
He said today, he said, well, they just deserve to pay more.
And that may well be true.
It may well be true.
Like, I don't want to debate that.
This is not political, right?
I'm more concerned about the tipping point when we kill golden geese.
You know, there have been Washington and California and, to a lesser extent, New York have been the gold golden geese.
It's you know, Washington said they're going to lose money.
They're not going to make money on this.
It appears that Most folks that are neutral or right have said California will lose money on the billionaire tax.
Everyone's left.
And the tax itself assumed massive amounts from Larry Ellison, who's been gone a half decade, right?
So it's just I do worry they're all leaving.
Everyone that doesn't work at OpenA, Ananthropic.
On this show, we've done it 50.
And I said in the beginning of this that you'll leave after the series B, And now I see that used again and again by these folks who are on the right on it.
They say all the founders will leave after the series B.
It may happen by show 100.
And one of the arguments I make is because you know the truth is this articulating the argument to the to, you know, the activist on the other side as being you're being mean to the billionaires is a genuinely no interest.
And being mean to a billionaire is actually a feature.
Right.
But I think the real articulation is this if you actually are losing revenue that won't be available to California and the marginal dollar in California probably goes into payment for homelessness, payment for your kids, payment for foster homes, payment for marginal social welfare services that are easy to defund when times are tough right,
And by choosing to obtusely tax without any attention to ability to collect that money, you've actually reduced the revenue that's available to you right.
And that's the argument you have to make to someone on the other side of the table.
You have literally chosen something.
Instead of getting you know 50 million from the Lowry and Sergeys and the Jurvetsons of this world, you went for 200 million and now you're going to get zero.
And what that means in real terms is somewhere down the line, long after all these changes have been made, somewhere in Sacramento, someone will zero out a line item on the budget.
And let me give you a clue it won't be payments to the teachers, it won't be famous the fireman, it'll be marginal services to marginal people that your craft, stupidity and desire to make a political point has ended up costing them money.
And that's the only argument that moves the needle, because it because it's true and you're right, just you're saying is that it will have a net negative return.
How now do you feel good, Rory?
If you were Steve, would you have left?
I think from my perspective, I'm just so glad to be in California.
It's so wonderful.
I've moved around a lot early in my life.
I have my friends who have my life here.
At the margin, the whole point of having money is to be able to do what you want.
And for 3% or 4% or 5% or even 13% of your income, do you really want to leave?
Now I will say that's why you can tax income income relatively highly, because it comes all the time and you can't control timing and therefore you have to uproot your whole life for the rest of your life to avoid it.
And I don't think it's worth it.
So I wouldn't move to avoid income tax.
Conversely, if you have this pending capital event where, literally in one year, you're going to sell quote all your SpaceX stock and realize a 2 billion gain and you're going to pay an extra 13 of that in california just 260 million dollars, maybe you turn to your wife and say honey, for the next two years, why don't we live in china village 165 days, i'll pay for the plane, we'll go back every week, you won't lose contact with anyone and we will save 260 million dollars and you go hmm, that's real coin.
So, and that's the point about you know, that's not the life i live, that's not the situation i'm in, but that's the argument you make.
It's like it's not crazy.
That's real coin baby, that's real.
Is there any?
Is there any story that i haven't hit on?
Guys that we should hit on?
I just have to bring up the ron conway matthew prince one, because it was so.
I highlighted that one on twitter.
It was just the funniest thing in the world and uh, you know, i don't know ron, but for context you want to provide some context.
Yeah, i don't know ron conway, but he's certainly viewed as one of the silicon valley gems, right seed investor in so many leaders, always out there as an advocate everywhere.
Probably could have retired years ago, right.
Very founder centric.
And he wrote that he had helped Cloudflare navigate some very significant issues earlier in the day, I think, on Jack Altman's podcast.
Yeah, on Uncapped.
And they asked Matthew Prince, CEO of Cloudflare, the question.
He said who will?
Well, maybe i don't remember any of that, and it's just, it's not.
And he wasn't mean.
Matthew can be fairly uh sharp, as as harry knows these days.
It wasn't meant mean.
The tweet was not mean.
He literally just meant he couldn't remember getting any help from this beloved vc and i, i think it just said so much to me about VCs adding value, but also VCs thinking they add value.
VCs, possibly adding a modest amount of value, but founders not really thinking that modest value was consistent with the bravado of the VC.
It just...
It just crystallized the whole value add idea to be in a single tweet.
It wasn't mean, it's just I don't remember Ron helping, but maybe he did.
Yeah i, i you're right jason, i i did laugh at that and i think it does.
I think actually, my bigger heart to your point is both, to some extent, are right.
Is that?
You know, as a, we all want to have agency.
We all want to feel we help and, you know, want to be good people and you're looking to go.
Hey, i spent some of my time helping the ceo.
I feel i helped, but from the company's perspective, they're founding a company.
They're doing a million things on one or two things on a 10 year journey.
You helped.
You remember that vividly.
They're like dude.
It just fades into the background of you know a hundred things and you know better than me, jason.
They have to do every day right and the truth is this i one of the proofs of the interesting way to check it is i often read business biographies and business stories of great companies, venture-backed companies and how they're formed and what happened.
And you know what I notice in them?
Every single one of them, very few little mention of VCs.
If you just read them, you eyeball them, say, oh, that's a biography.
Yeah.
And they crop in and come out a couple of times.
Right.
And I think that's right because realistically, in the journey of what's going on, the only significant things we don't.
I said this before in the podcast we put in the money and we put in more money when they need it.
We decide to hire or not hire and fire the CEO.
We agree the broad strategic direction and anything after that is at best an assist.
Right.
And if you read the biographies of businesses, what you generally see is the only time the VCs come in is on some version of those.
Right.
And it's five pages of the journey early on, interspersed around 200 pages in the first five chapters.
And by the time they get to the IPO it doesn't even rise to the level of a thing.
But i was reading, you know the, the open ai biography, the bunch of them, and that's just the way it is.
Microsoft like the same thing, right?
You know?
So don't i mean, and the vc can feel.
Those five minutes of impact were amazing and they feel really good about them and you feel warm and fuzzy.
But you know, The only thing founders really remember, for better or ill, is oh my God, our backs were to the wall and no one would put in money.
And they put in money.
They remember that.
Sometimes.
In my experience, sometimes.
Sometimes they even forget that.
But to your point, Jason.
At least half the time they forget that.
If they forget that, they're definitely going to forget the time you made that phone call to help them connect with xyz and that helped them do something, because that's something that happens 100 times a day.
No, you're right yeah yeah, we're not the stars in the drama, we're.
We're bit players who get well paid for our part.
Boys, as always, the most humbling 90 minutes of my week.
You'll get more tomorrow.
I'd be surprised.
