Man, this is summer at Nvidia.
I mean, they're on fire on everything.
These are unprecedented levels of CapEx band and now we're forecasting them to keep going for four or five years.
What are we discussing this week?
GTC, what happened with Nvidia, Angelo's $20 billion contract.
Then finally, why 50 to 100 million seed funds could be the worst performing size fund of this vintage.
I think Travis Uber would be a trillion dollar company today, because it would be five years ahead of where it is today.
Wall Street is simple.
If you give them growth, they leave you alone.
If you don't give them growth, you better give them profitability.
And if you don't give them either, they're going to bust your chops.
And today, compute eats jobs.
You do not need to be technical to win with AI agents in Q2 of 26.
You do not need to be even 1% technical.
The bigger your fund size, the more you have to be a power law junkie.
There's no investment opportunity so good that excess capital won't destroy it.
You're going to get laid off because you're not going to matter.
Ready to go?
Guys, I'm so excited for this.
We were just talking about where to start.
So much news.
And Jason, I think you are absolutely right.
It's very important to start with GTC and Jensen and data centers in space.
Obviously, Rory said, no, not going to happen, but maybe it does.
How did we think about the data centers in space and last night GTC, Jason?
To me, I mean listen, the interesting thing which you don't even have to watch anything, you just have to look at the Twitter stream is the sheer sense of energy and momentum and confidence there and the confidence to do things.
Not only talk about data centers in space, but launch things like Nemo Claw, which are their version of Open Claw, to launch a partnership with Thinking Machines and others for their own open source LLMs.
I mean, they're just going for it, right?
And you can just smell that.
I mean, obviously, NVIDIA is a pretty good stock and a pretty good company at the center of AI.
But you can just smell the companies in decline.
You can smell the companies struggling.
You can smell open AI struggling right now.
You can just smell it.
You can smell the code red and the fact that they said yesterday we have to concentrate on enterprise.
We have to stop side projects.
It's not a criticism.
I mean, anytime you've worked with any startups, you see the seasons, right?
But man, this is summer at Nvidia.
I mean, they're on fire on everything and all the things where you see.
And they're at risk.
They're at risk from their customers using TPUs from Google and from Amazon.
But man, everything from already integrating Grok to data centers in space, to crossing a trillion dollars in bookings to NemoClaw.
It just feels like a company firing on about 13 cylinders.
Yeah.
So I'll come back to your misportrayal of what I said later, Jason.
But let's hit the main point, because in the end, it's all about the money, right?
Super interesting kind of counterpoint on something.
On the one hand, you had an extraordinarily aggressive number, a trillion dollars in revenue.
On the other hand, stock moved less than 1%.
Why?
It was already priced in.
Already priced in.
And if you start parsing it out, I think what happened is it's as simple as this.
If you look at the forecast, the company did 215 billion in revenue last fiscal year, up from 130, I think, the prior year.
The forecast is mid-300s next year.
The soundbite was half a trillion dollars of demand over the next two years, and that was the soundbite a year ago.
Now the soundbite is a trillion dollars in demand, but if you listen carefully, it includes 27.
Lo and behold, if you go and check the analyst forecast for 27, it's in the mid-400s.
So it turns out, if you add 500 and 400 and then you apply a salesman's roundup, you get to a trillion dollars.
Another way of translating that wonderful, amazing number of a trillion dollars is the analyst forecasts for the next two or three years.
Look roughly right.
So once the analyst processed that, the stock said yep, no new information here, which is just fascinating.
Because what it says is this is a company.
By the way, for context, four years ago was doing 20 billion a year.
Maybe five years ago now, actually.
Well, yeah, five years ago, because we're in 26, $20 billion a year.
Last year did 215 billion 10X growth over four years.
About under 60 growth last year, forecasting 60 growth this year and attenuating down to 20-30 growth in a couple of years.
At one level, not insane relative to past performance is predictive.
If you have a company that grows 10x, saying it's only going to go 20 30, 40 over the next couple of years doesn't seem unreasonable.
But what it does imply is a massive level of capex continuing for the next four or five years.
That's fundamentally the bet.
That's the big statement that came out here is we think this level of capex investment is going to keep going for the next four or five years.
We're reaffirming our estimates and none of my customers are going to blink on our spend.
That's the takeaway.
Jason, I constantly go back to something that you said, which is we're going to see inference running 24 hours a day for a larger and increasing number of the worker population.
If we think about that, In 2030, will Nvidia be a $10 trillion company?
Oh, I think 10 trillion in revenue is more interesting, because he's just predicted a trillion, right.
And so... Well, a cumulative... Again, we've got to be precise.
Yeah, it's a cumulative trillion.
So how long does it take to do a cumulative 10 trillion?
That's an order of magnitude.
That's at the limit, I think, of general non-Andreessen level.
Human ability to grok is about an order of magnitude.
So I think five years, it will have a cumulative $10 trillion.
I don't want to take five years to go from $1 trillion to $10 trillion.
That's my bet.
I do think the inference thing, I mean, listen, there's a lot of interesting things in the math.
How fast will the cost of inference continue to fall versus the consumption of inference, right?
Will there eventually be a Moore's law, an inverse Moore's law, where we don't see the dramatic cost decreases we're seeing?
Maybe that's why we need data centers in space.
There's a lot of complexity here.
But even if you think, why the hell does NVIDIA do Nemo Claw?
Why?
Now Jensen said it's the most GitHub stars per unit time, faster than Linux, faster than anything.
But I think the real reason is it uses a lot of inference.
This is why all everyone in china is give all the all the all.
The providers are giving away open claw, because you've got grandma and grandpa lined up on the streets outside of tencent alibaba with their free open claw because it just burns tokens right.
So uh, part of it is jensen saying we're gonna and this is probably part of the um, you know, big part of the rock action we just want, we want you to be burning tokens at least 72 hours a day.
We want at least three agents running 24 hours a day.
So yeah, i mean i think it's got to be three orders of magnitude more inference we run.
In the next five years You could have 3x more tokens, but if the price per token goes down by 6x, the revenue would decline.
Just pointing out the math.
Yeah, but it's going to be like, might be 3,000 times more tokens, not 3x.
But yes, the math, same math issue, right?
Again going back to my comment, as someone unveiled a trillion dollar number and within you know 10 minutes, the stock market process to nothing to see here.
Right.
Just points out the expectation of a, you know, railway boom, internet boom, level of capex investment continuing unabated, growing at 30 for the next four or five years.
It's a pretty heroic assumption.
It's validated by the recent past and there's nothing at this point to say it won't happen.
But it is just worth pointing out.
You know, because you know, When NVIDIA does 200, the capex spend is probably 400 or 500 billion, because they get about half of it.
If NVIDIA is doing 600, the capex spend is probably 1.2 trillion plus or minus.
These are unprecedented levels of capex spend and now we're forecasting them to keep going for four or five years.
There is at least some probability, pick a number, 30%, that it doesn't happen this way.
Is there anything else that you think is notable from GTC before we move on?
The thing that stayed with me, and I think there's a lot of interesting things.
I hit the things I thought were interesting.
But the message behind the message was that open source whatever models, everyone needs gigawatt centers.
They all need massive amounts of data centers with inference, with GPS, with everything, and that it doesn't really matter.
It doesn't really matter that the best models are still going to win, which is where he's made his bet.
He's announced another open source alliance.
Other things will win.
But at the end of the at the end of the day, his main, you know, we're going to win.
We produce the best outputs.
We produce the best We produced the best inference.
We produced the best everything.
And everyone needs data centers.
And that level of confidence that most rolls of the dice lead to NVIDIA winning.
You can take shots at its armor, at its moats, but I think there's a high degree of confidence that most of the roads lead back to Nvidia reaching 10 trillion of cumulative cumulative bookings over the next five to seven years.
Speaking of playing for this game, Jason, you said you can feel energy in rooms.
There are also tough times for certain companies where you feel other forms of energy.
Two big announcements this week were, in terms of layoffs Atlassian announcing 1600 people and then Meta reportedly a speculative 20 workforce reduction, which would be 16000 of 79000.
We've spoken about layoffs before.
Is this really just the start of the dominoes falling?
Is this a sign of overhiring from 2021 and beyond, and actually we're just relabeling it AI?
How do we think about these very large scale layoffs from the biggest players?
Well, look, I don't know that much has changed from our prior conversations other than that.
You know, everything we've said has come true.
This is every conversation at scale.
Here's the thing.
Atlassian and Meta are both interesting, I think, because, I mean, I guess they're all the same.
It's not really about layoffs.
Neither of these companies has to lay off anybody.
OK, Atlassian has substantial free cash flow.
Neta, I don't know, their free cash flow has dipped, but it's still like in the mid 40s, right?
They don't have to do this.
This is not a unicorn trying to figure out what to do with the last 20 million that Saster, Scale and 20VC gave it.
OK, this is a decision.
This is a purposeful decision.
And what's happening in board meetings and in management teams is everyone's looking at the teams they have and saying I just don't know what to do with half of these.
I don't need half of these people.
I don't need them.
I do need people.
I need people.
I need different people.
And I don't you know.
There was a great LinkedIn post today, this morning, from the ex VP of Engineering of Ping Identity, who said this is going to be a sad post.
I don't know if anyone's going to see it, but what I learned is over.
The craft art of creating code, creating modules, testing it, being creative, figuring out how to do something that hasn't been done before, is why I got into engineering, why my team's joined me right.
That era is over.
Now the AI writes the code and all an engineer does is review the code.
But now the LLMs are doing the code review.
We won't need me anymore.
And everyone's looking at their team and wondering, why do I need that engineer?
And do I need half my sales and go to marketing team?
Do I need to brute force sales and marketing the way it was when the three of us met?
You brute force sales and marketing in the enterprise.
Everyone's looking and they're saying, I don't need to do these things.
And so these are leading to radically different ways of thinking about the future.
And some folks are gonna be very slow on this, but everyone's talking about it.
Everyone's talking about it.
And just whether it's 10 or 40 or 15.
It's just an output of these conversations, of what people do I need in the new world.
And most folks are probably half their teams are not the folks they need going forward.
Do you want to be kind about it like Mike?
Do you want to be brutal about it like Zuck?
Does it matter?
I mean it matters to the humans, but at some point we're going to end up in the same place over the next 36 months.
The pace of change is so fast.
But I do think the block thing, you could argue it's different.
And they're growing 2%, like we talked about.
And I think Marc Benioff said block is different.
But these conversations are in every boardroom, even if the margins are in the 40s.
And we have the wrong people.
And everyone is stressed at AF right now.
Because including OpenAI, including Anthropic, everyone's stressed AF.
And they need to reboot their teams for the future.
And they can't stick with people in the past.
You just can't afford to.
You're going to be obsolete in 18 months.
And layoffs are just one way to re-engineer your company there.
And as brutal as they are, they're just a small piece of re-engineering your company.
We're running out of time.
Everyone knows they're running out of time.
Everyone knows they're running.
Unless you're Legora, or Shinora, or Ladora.
But even them know that they're running out of time.
In 12 months, their current products will be obsolete.
That was helpful because I actually had been thinking a lot about this layoff thing and I came in with four different categories of really what's going on.
Jason's actually added a fifth that I'll come to last.
I think if you try and be logical and use categories, I think it yields more insight.
There's a whole category of layoffs that are really we never should have hired these people.
We got fat, we're using AI as an excuse, but if you run the efficiency metrics, we just don't need these people.
I think there's some of that in there.
Then the second category is the, you know, we used to have a business growing at 20%.
We're now growing at two.
If we were growing at 20, we'd need all these people, but we're not, we're going at two.
I need to give the financial market what it wants and it wants profitability.
Again, you're not making any comment on the labor, you're just conforming to capitalism.
And I think there's a lot of that going on in the SaaS world.
I think that first category Block is clearly an example of the first category and maybe Meta, but I'll come to Meta in a second.
I think a lot of the SaaS world is that second category of, I have to give.
Wall Street is simple.
If you give them growth, they leave you alone.
If you don't give them growth, you better give them profitability.
If you don't give them either, they're going to bust your chops.
Them be the rules.
If you can't give them growth, you got to give them the second.
That's the second category of layoff. and somewhat interesting.
The third category is starting to get into what Jason talks about.
The third category is maybe that you did need these people pre-AI, but now there are AI efficiencies that allow you to do the same thing with less.
That's probably true in coding.
I'm not sure it's true at the same scale across the board.
The for one isn't the one that Jason gave me, but it is the meta example, right?
That's something different.
You spent all your money on computers.
You need operating cash flow because you look you, you got that depreciation hit coming right.
I mean literally.
That's reallocating dollars from humans to computers, right to compute, right.
That's not what's going on at block.
That's not because they're not investing massively in capex, but that is a hundred percent what's going on at meta.
Because you're jason, you're actually wrong in that the operating margins are still 40 percent.
The free cash flow, when you honestly account for the capex, is almost zero right, And that depreciation is going to start hitting and they're going to be firing people because they need to give it to Jensen.
And today, compute eats jobs.
And that's what you're seeing at kind of Facebook.
You literally can't afford to have Nvidia and people.
And then the last one that I didn't have, that Jason's added to me, which I think actually could be more of it than I realized, is this idea that in some cases you actually are going to hire back.
Maybe not as many people, but maybe at twice the salary, but just different people.
And maybe there's a little bit of deck cleaning.
I think you're very right, Jason.
I hadn't thought of it but deck cleaning going on, in that maybe I don't need 20 engineers who all know C and Rust.
Maybe I need eight engineers who are just really awesome at AI.
My aha is if that's not going on, it probably should be in every company.
Even if you don't have any of the first four, even if you didn't overhire, even if business is still growing strongly, even if you don't need to feed Wall Street, even if you're not spending it all on compute, you probably are doing to Jason's point a pretty significant talent reshuffle in real time.
I just wanted to ask Jason, if the people that we want are fundamentally different, the developers that we used to hire we don't because AI writes the code for us, the marketers we don't want, the sales people we don't want, who do we want genuinely?
What is the attractive profile?
Because your anthropics and your open AIs are hiring.
So what are the people that we want in the companies of the future?
Look, I know it sounds trite, but the answer is simple.
It's just the expression each year changes.
We want folks that are genuinely AI fluent.
It's pretty simple.
Now, you know, maybe last year we called them prompt engineers, right?
That used to be a job.
I don't know if you remember.
That actually used to be the hottest job on planet Earth.
Now no one needs a prompt engineer because it's pretty easy to prompt all these tools.
That job died, OK?
And now we need go-to-market engineers.
I think that job's going to die.
Everyone needs so many forward-deployed engineers.
You can't hire enough forward-deployed engineers.
But Palantir just announced in whatever their big event, they've gotten their deployment times down over 90 with forward deployed engineers.
So this wave of disruption for the titles and the specificity, it's also exhaustingly accelerating.
But it's really simple.
You meet anyone for any role, sales, marketing, engineering, product, QA.
They're they're, either they're.
Either they can't keep all of the ways they use AI to accelerate their job from spewing out of their mouth, or they're staring at you.
It's just nowhere in the middle.
And the person that comes in and says it sounds Captain Obvious, but you just had the whatever from Lovable, the marketing head that was super popular on the show.
She's just spewing AI native insights into Lovable.
It's not that complicated.
You hire her, Elena, or whatever it is.
You just hire her.
It doesn't matter whether she's still in college or a junior or a senior, or a middle or a left or a writer.
And honestly, if you interview people, I would say, of all, even of the best startups I've invested in, maybe 30 of the management team meets the standard at best.
30%, maybe less.
And of the interviews I do in general, it's single digit percents.
And in that sense, it's the same as ever.
You either lower the bar in hiring or you hire someone that's actually great.
And someone that's actually great is so far ahead of you in how to employ the efficiencies of AI in their role, your jaw falls on the table.
The difference is we used to need warm bodies.
That's what's changing.
We used to need warm bodies to answer the call to do QA, to do code review, to get the blue pixel to go from the upper left to the lower right.
You laugh, but you literally needed to brute force this with humans.
With AI, every day that goes by, you do not need brute force human beings on your team.
And that's another reason they're shrinking.
Why are all these new companies so efficient?
They're just not brute forcing things. with humans.
They're just not.
They're choosing not to.
And so these teams, all the brute forces out there, everyone talks about how bloated teams got in 2021.
I don't agree with that.
I think they got as big as they needed to be when growth was high and you needed humans to do everything.
You look at these teams that doubled.
Well, if growth continued at 60, like the rate in early 2021, for five years or you can help me do the math and every single thing a software company did required a human, you are understaffed by your 2021 headcount.
You'd be sitting here in 2026, every office in Soma would be triple packed and there wouldn't be enough humans to staff your company.
It's just the world changed.
Jason, you live on the bleeding edge.
I think me and Rory see that and I think the world sees that when they hear you every week in terms of how you run Sasta.
For all of the CEOs and execs who listen to the show.
What would you advise them in terms of determining whether someone is AI fluent when they meet them for jobs, for talent?
Here's I realized I was just asked this.
I just did a review with a super fast startup growing, just crossing 100 million.
And I was asked this question.
And one of my favorite executives, I thought his answer was pretty dated.
And because he gave me an answer that was about six months old.
The answer six months old is I look for folks on my team.
I look for, you know, what tools they play with.
Okay.
That was a great answer in like summer of 2025.
Okay.
I tried lovable last week.
Okay.
The answer in 2026 is what commercial AI tool have you brought into your organization this month?
That's the test.
Anyone that is on the bleeding edge that you would want to hire now.
There are so many great products in the market.
There is no excuse in any role to have not brought one tool a month into your organization.
Now there's going to be better and better tools and better and better products as the year goes on.
What's the one you did?
And you will see folks with their deers in the headlights. to this question.
What sales tool?
What marketing tool?
What product tool?
What engineering tool?
What did you bring in?
Why did you pick it?
How is it working?
Because if you're remotely at the cutting edge, you're all over this.
You're looking for the next agentic tools that will radically improve how you do.
Everyone thinks SaaS is at the bleeding edge, right?
You know what we do is we're just looking for the tools and trying them.
We're one year ahead of everybody else because we did the simplest thing in the world.
We tried the tools early, and we trained them.
We trained them for a month.
You want to hear a horrible example from this week?
Super hot AI company valued at $6 billion.
I'm not going to name it.
This week, yesterday, told us we had to quadruple what we spent on their product.
Their agent told us.
And why did this happen?
Well, at this $6 billion company, no one had trained the agent on its pricing properly.
No one had tested it.
They said, well, we've been in beta.
And we said, well, when did the beta launch?
A year ago.
OK, these are people asleep at the wheel.
You want somebody who the instant this comes up, they exactly know what the issue is.
And hey, when I was at Loveable or Replit, we trained the agent.
This is how we did it.
I brought in this tool.
I brought in this tool that Rory invested in last week.
It solved all these issues.
That's what you want to hear.
And if they haven't brought in a tool in the last 30 days, at least deeply evaluated it.
I don't really care whether they bought it.
But gone so far down the funnel, they can tell you, pick whatever tool.
Fixer, Reggie, AIGC, I don't care.
You went through it.
You looked at it.
You can tell me the eight ways it would improve the productivity of your business, and three you didn't.
Just don't hire that person because they're going to run your company in the ground.
This is the job today.
The job today is not to screw around on ChatGPT and to be a prompt engineer.
The job today is to bring the best AI and agentic products into your organization and leverage all the hard work that the engineers have done building those products.
That's your job.
You don't have to screw around.
You don't have to be a prompt engineer anymore.
You have to be an agent deploy expert, A-D-E.
This is the new job we're making up today, an agentic deployment expert.
That's your job from C level to junior, agentic deployment expert.
Don't hire anybody else.
You're going to regret it.
They're going to stare at the camera.
He's good.
Stare at the camera.
He's honorable.
We could probably just, I could slip away and get a coffee and come back.
No, I sound exasperated Rory.
And I.
But the reason I am is I can just see.
I can see my best companies doing it and I can see some companies I've invested in not doing it.
And I want to cry.
I just want to cry when they have no ADS on their team.
I just like you're flushing your years of your life down the toilet by not approaching your how you're building this coming this way.
Yes.
And at the risk of being positive, it's worth pointing out two things he didn't say.
Well, something implicit why I said Jason didn't do the only hire.
You know, I didn't commit the employment law.
I think it's a civil penalty of saying only employ people below x who get the new new thing, because he implicitly said anyone can do it provided you're willing to learn.
And I think that's the big aha, that's one of the positive statements to make here.
Right look, and I think it applies.
I'm always wary of being hey, coming across.
Hey, this is the things that you all have to do.
I think it applies to everyone, including investors.
Right.
I mean, I will say I have found that unless you're willing to invest the time learning these tools, you actually shouldn't be investing in them.
One of my partners Andy, had this expression you know, if you decide you want to stop learning new things, you probably should retire within six to 12 months and never write another check again.
Maybe that's down to three to six months at this stage.
I actually had a meeting with mine and Jason's biggest investor the other day.
I am pretending he's not here.
I said, I think he's the most equipped investor for this generation of investing, because I don't think anyone quite sits at the bleeding edge like he does on the investor side.
In terms of using the stuff, yeah.
Yeah, in terms of using the stuff, understanding bottlenecks and constraints.
For sure.
But can I just add one point?
Just because it's so important, if it helps people, OK?
We are, and thank you, Harry, we're going through these phases, OK?
And when AI started to blow up for real for us call it early 2024, maybe late 23 I wasn't equipped.
It was too technical.
I wasn't gonna go in and figure out.
I wasn't smart enough to figure out how to deal with a massively hallucinating LLM API and turn that into something magical.
Kudos to investors and others that got it in early 23, 22.
I mean, I remember, I guess it was maybe Saster Annual 23.
I was with David Sachs, and I did a Q&A.
And I said, how are you thinking about AI at Kraft?
He's like, well, we're all in.
We want 80% of 23 of our investments to be AI.
I'm like, great, but show me the great ones in market.
He's like, they're all prototypes.
They're all proof of concepts, but we're all in anyway.
That's where you kind of had to be in 23 if you weren't investing at the LLM level.
I wasn't smart enough.
Then we went through this weird ass prompt engineer era where you could torture these products to do something good.
But you had to torture them. craft these crazy things that make no sense.
Now we are in the era where mere, ordinarily smart generalists can make these tools do magical things.
And literally I go to these meetings and people be like I don't know how to like this is so scary.
I don't know how to do this.
And we show them our back ends.
Do you know how to do a workflow generator?
Do you know how to do a decision tree?
We've been building these since software in the 90s.
I can show you all of our agents.
How they work is novel.
They do have to be trained.
You can't be LAF and have these agents work.
But honestly, the UI, the UX, the way we interact with them, it's just software.
And so my point is, Pick yourself off the ground.
This is your time now.
If you felt lost in the AI era, if you felt like you're behind.
You don't understand what all these people are saying on X and Twitter and their claws and talking about all the 46 point nano point.
It's not your world.
This is your time.
This is your time for the generalist that knows how to use software tools really, really well.
And this is my last point, but it's so important if ever in your recent life.
And this is why you could be all you need to be is young at heart.
To Roy's point if in the last three to five years you have successfully deployed a piece of enterprise software of any sort, You yourself, not some agency you hired but if you have deployed it, you can deploy any agentic tool any, and you can become the hero in your company and you can become the hero in your functional area.
But I watch folks, I'm literally helping a company now.
They're adding hundreds of sales folks this year with the new pre-AI CRO.
He hasn't brought in a single tool.
He's scared of it.
OK, it's not that hard.
Did you use SalesLoft?
Did you use Outreach?
Did you use HubSpot?
You know these tools?
If you can deploy these tools, you can deploy a world changing AI agent.
And so this is the time for people.
Like the folks that were shut out of the AI revolution, right now, the generalist folks that know how to deploy software that don't even know how to build software.
Like vibe, coding for me was folks who knew how to build software, but you didn't have to be an engineer.
Now you just need to know how to deploy software to win with AI agents.
That's all you need to know.
So many people have these skills, and they're petrified of AI.
How did you do that?
How did you deploy an AI BDR?
Well, we bought a piece of software.
We figured out how it worked for a day.
We set it up in an afternoon.
And then we did spend 30 months training it. which you didn't do with this old software.
Because in the old days, we just had to manually upload all the data, right?
And there was no training.
The only non-intuitive part is training these things.
And it's just work.
So that's why when I see folks on the management team not doing this, there's no excuse.
You do not need to be technical to win with AI agents in Q2 of 26.
You do not need to be even 1% technical.
Not at all.
So it's your time.
Or you're gonna get laid off.
Or you're gonna get laid off because you're not gonna matter.
You said not mattering there, Jason.
And thank you.
That was impassioned rant that I learned a lot from.
And I love AD.
That's a fantastic, I think you should coin it.
I would say write a book.
But I don't think writing a book is ever useful these days, given the speed of news and money.
Yeah.
Yeah, 100%.
The amount of VCs that write books.
I'm like seriously, what are you doing?
Wasting a year doing this?
Well, you get your friends to go on the book tour with you.
There's something to be said for that.
We're actually meant to add value here.
Keep going.
Okay, Andrew Lan's $20 billion army contract.
The reason I said this is when you said about just mattering.
I remember reading this being like 20 billion army contract, 10-year deal, five-year base and a five-year option to consolidate 120 plus separate procurement actions into one enterprise contract.
It's enormous.
When I read this, I was like, God, the shit I do just doesn't matter.
This sweet little company that's going from one to four million ARR.
How did you guys think, analyze this $20 billion annual book?
First of all yes, it's obviously a vast contract but, as a reminder, they have four or five on.
They only have four or five customers.
So you better get 20 billion from each of them if you want to be a big company, right?
I mean, what it really told me is they succeeded, right?
Because this isn't as much a new program.
This is basically the army saying, look, we got 120 separate contracts with you.
We get it.
You're now effectively a prime supplier.
Why do we consolidate all the paperwork so that people one level down have less process to go through every time to buy your stuff?
Right.
So I guess what a procurement thing.
And also there's a systems lock in here.
The primary product I think they're talking about is the lattice, which is a software connectivity system.
You know, you've got all these different physical hardware products out there, some made by Andrew or some made by other people, right?
And, as it's becoming clear in recent conflicts, a huge part of the problem is making all these systems talk to each other, dare I say it, autonomously and quickly, right.
And connecting all these things in not just near real time, but real time, because You know, as we're learning right now, it turns out if you're in the Strait of Hormuz, you've got literally seconds before you can take down an incoming drone.
You don't have time for a slow connectivity protocol.
You definitely don't have time for human.
So you need this integrated communication system that connects all your different physical hardware offensive and defensive weapons.
And I think it looks like the product that these guys have that Underworld has is becoming at least the primary default for that, for effectively moving information between different systems.
So it makes sense for what the Pentagon's doing.
They're basically saying look, we've gone from trying you out in a lot of different areas to saying okay, damn it, you're the dominant provider of this layer, so why don't we just systematize the contract?
It kind of picks them as the clear new prime.
I'll tell you to answering Harry's question, and this may be wrong.
This may be a flaw in me.
I completely concede this.
But part of Harry's question was hey, am I investing in things that don't matter when Andrew has a 20 billion contract?
My version of it, I feel that.
And my version of this is I have given up on an investment thesis I had for 10 years because I was a B2B founder, which is that a smallish TAM is OK with a great founder.
Start small.
But you know what?
We can all point to small things.
For me, when I started in eSignatures, the TAM was $2 million.
It was $2 million.
Obviously.
If you just look at Rory's investment in DocuSign, it is doing more than 2 million today.
I haven't checked the latest quarter.
But even with some challenges, the TAM certainly grew.
So as soon as I realized that I'm like I'm investing in areas that are going through phase transitions, with great founders, and they will grow, the TAM.
And for sure, we can show, I hate to do trite things we've done.
Certainly, the legal tech space is one that has shown an explosion in TAM because of AI.
So there's many examples.
In my heart and soul, I can't do any of those investments anymore.
I can't invest in anything that is midsize or smaller.
I just can't.
This is the Anduril problem.
And this is also why I think a lot of funds are going to have terrible returns, because a lot of early stage funds are gonna swing so hard for the fences that they're gonna invest in the number three or the number four and get just zeros after zeros, because there isn't a chance to stair-step your investment.
There isn't a chance to go from the $50 million TAM to the 150 to the 500.
So I think there's gonna be a lot of zeros, but I can't help myself and literally I can't even.
I don't like that.
I can't even bring myself to take a meeting with a startup where I don't believe the TAM will be utterly massive.
I just can't take the meeting anymore.
Jason, there's a lot of in there.
I want to unpick it and frankly be more precise, right?
What you're saying, I think you're saying two things, just to be clear.
When you see what a big time feels like and, let's agree, being the comm system for the army probably is one of those big ass Tams right.
You're saying you just can't get excited by super small Tams.
That's one statement.
And the second statement you made is, if everyone's thinking like that, they're all gonna swing more aggressively at the big Tams, but in the third or fourth player in those Tams and probably lose.
Is that what you're saying?
I didn't understand the venture.
And even worse, they're going to pay up 100 pre for these seed investments because, as the best accelerators tell us, it doesn't matter in these big outcomes.
It doesn't matter whether you pay 60 post or 100 post at a top accelerator, because when it's 100 billion outcome, that's a better return than a unicorn right.
Mathematically, it's true, but I think it's going to lead to a lot of zeros.
But Jason, do the best markets not start small?
What's that?
To your point, do the best markets not start small?
I don't believe it anymore.
Rory correct me if I'm wrong.
I still think defense is the number one largest segment of our spend in the country.
Maybe health care is number one and defense is number two, right?
No.
The defense isn't, shockingly, the defense isn't that large.
We just spend a little over 3% of GDP on it.
And turns out most of that, not most of that, a good slug of that, almost half is people.
It turns out the actual amount of, because I make a comment that's not counted there.
I think Arnold's going to do amazingly well.
The Pentagon budget for New Shed is fairly finite and I think there'll be five or six big winners in defense.
I'm not sure there'll be 100.
But isn't that the game of venture is four or five, not 100? what but that's the game of venture is to find the four or five that's my point is that you know the thing about power laws is they get in your head like it's getting in your head and you can over project from nothing matters except 100 billion dollar outcome well if you want 10 of 100 of a billion-dollar outcome and you are a $100 million fund, that's a one-act fund.
I hear you.
I understand what you're saying.
The bigger your fund size, the more you have to be a power law junkie.
At some level you want to be a power law junkie because in the end, even if you have a 100 million fund, wouldn't you prefer to be in the trillion-dollar outcome than the billion-dollar outcome?
The question is when does that focus on the power law?
Could it become overly myopic and and lead you to swing?
You know, you know where gamblers can go on tilt, where they're so desperate to earn.
You know their money back that they start swinging at anything right.
And you know if you're like, oh my god, i just gotta get, I wish I'd done.
I mean, if someone's saying I wish I'd done OpenAI or Entropic therefore, I'm going to fund eight next-gen foundation models because maybe one of them will be like that right.
That's another failure mode that, as you said- But we might be seeing that happen right now, right?
Yeah.
That's my point.
I'm not sure I fully.
I hear you on the small.
No one wants to be in a small TAM.
But almost as important as TAM size, there's two other things.
TAM velocity, for lack of a better word, your ability to dominate that TAM.
There are small and mid-tier markets that are wildly profitable software markets for the winner and you can make really good coin in a four or 5 billion market with a great outcome.
But not if your entry point is what they are today.
The thing is, now that YC has productized a $60 million post, right?
Nothing wrong with it.
I'm not criticizing it.
More power to them, right?
But as a seed investor I mean.
Harry made this point that all these classic seed investments can't make money right,
Agreed.
You can't go into a game paying power law prices for mid-tier market, outcomes for mid-tier markets, because you're exactly right.
That's the game today, but that's the game today.
That's a fair comment.
As a combined comment, that's why I was trying to unpick what you're saying.
As a combined comment that's fair is that if you price every deal like quote-unquote, it might have a 2 billion, a 20 billion contract.
Most of them won't.
Harry wouldn't do this.
But if a founder came, a classic founder came to me with a structure that made sense and I believed in them, I might still take the bet.
But it's 60 post for a precede investment, right?
You can't risk that it's not Anduril or better.
You can take risk.
It doesn't happen.
But you have to believe the opportunity is so large.
How else are you going to get your 100x with dilution?
That's 250x in today's world post dilution and everything.
Help me.
What's 250 times 60 million post?
Like lots.
13, 14 billion?
Yeah, so let's round up to 20.
How many public tech companies they have market caps north of 20?
Not as many less than when we started this podcast.
The math is grim.
Yeah no, i have that count somewhere sub 50.
Yes no, i mean, i think that if you look, if you take this mindset though, Like genuinely, when a deal comes through the door, what is big enough?
Because, you know, you've talked about your qualifieds and your artisans and your monikers, Paul.
Are they big enough?
Like, SDRAIs?
You know, I'm seeing like constant call center replacement for healthcare assistants for auto manufacturers.
What is big enough?
Well, well, listen, there's there's there's arguments.
They are right.
If you look the but, but what?
I think it's why the growth fund is the winning strategy at the moment because they wait for the proof.
OK, it's easy to take any.
I mean, I'm getting bored of talking about the same companies, but to have a thread through our conversation, certainly I wouldn't have believed that, being in this space, having made so many investments, I wouldn't believe that Decagon and Sierra now granted, the revenue multiples are very high, right.
I wouldn't have believed they would be doing what they're doing.
I'm not even sure I would have believed to Rory that Intercom would have reaccelerated as it has, or others.
I wouldn't have believed it.
But the beauty to doing the deal when Rory did it, is he gets the proof points.
That's why it's such, but hoping that a slide and a vibe-coded website proves it is tough.
But Harry, going to your point, like there is a bulk, like this is, I'm not saying I'm right.
Like here's the counter argument where I'm wrong, right?
And this is Captain, but like the reason and like I mean I barely know Decagon, but they just talked about it this week and Owen talked about it last week.
All these spaces are converging.
So Owen said there's not gonna be any difference between support and sales in a lot of what we do.
All these agents are converting to a meta agent that does more, replaces a lot of humans and is worth a lot okay.
If that bet comes true and it's already happening then your tam.
But here's my what your tam explodes right, your tam explodes, right.
The question is will you invest in a space where there's no evidence that the tam is exploding due to ai?
That's, that's where it's tough right, will you invest in?
And it's kind of the question that you're asking uh harry, i don't understand what actual, the actual, what you're actually articulating.
I mean yes, it turns out.
Yeah, seed investing on a deal-by-deal basis is harder than A and B, which is harder on a deal-by-deal basis than C, D and E growth investing.
I'm just saying you can't take the smaller, the stair-step risk.
The classic VC seed, stair-step the TAM risk.
Take something that starts small, that has a nuclear core, that's strong, and then build, add TAM layers over time.
Right,
But Jason, if I go to like Rappler or Lovable at the seed, Vibe coding at the time was a very new and nascent category.
I don't think you could say that TAM was particularly massive.
I agree.
It was a small market.
Well look, first of all, I started this conversation by saying this is not necessarily a good thing, that I'm criticizing myself.
I've changed.
I've changed my perspective.
I used to stairstep everything.
And even the investments I made that weren't stairstep.
I would invest in something that had a terrible, terrible comps, because I believe they were being remade by the space and would be much better.
I just don't feel that vibe anymore.
Like the Replit round.
That blows my mind when I think Kraft and some other folks did it at a billion in Replit and like 21 pre-AI.
They did Replit at $8 million in revenue pre-AI.
I would have not have been that omniscient.
It's not that I wouldn't have bet in on Amjad.
I mean, he's a force of nature.
But pre-AI, this weird web ID that doesn't do much and doesn't finish any software.
I ain't that visionary.
But, but, but...
I think if you ask Paul Graham or David Sachs, they would say Harry listen, revolutionizing how we do software development on the web is massive.
This is going to.
I know you don't see it today, but I actually think you could argue that TAM is very large.
If we really believe Amjad is going to take this kid out of the wonder, kid out of Facebook who brought the guy that created React with them to co-found the company.
These two guys, they just might change how we build software.
That's a big tam, right?
Now, where I struggle is when I meet founders doing little niche things in vibe coding.
That's where I'm struggling today.
Oh, I've got a little thing that does a hint of security on these platforms or makes the objects prettier.
Design is terrible in Cloud Code.
It's unacceptable in OpenAI.
And so there's a lot of folks trying to tease at design.
But is it big enough?
And will the models just take it over?
You better show me something hyper disruptive, like my jaw falls on the ground, or I just don't believe.
Replit, I might have believed.
But this little nit fixing the fact that the icons all look like cloud artifacts, I just don't believe.
But you could say it's bigger than Figma.
But what am I meant to do with all this?
I'm just trying to understand how I do my job differently tomorrow because of this info.
Genuinely, Jason.
Yeah.
You raise a growth fund like all of our friends do.
You raise a multi $10 billion growth fund.
And you just wait until you have extreme product market fit, right?
But again, I think you should assume that Look, the great thing about American capitalism is money fills any void.
It's the Barton Biggs quote I've made very often.
There's no investment opportunity so good that excess capital won't destroy it.
You're right.
There's a period of time.
Look, I think you'll look back and go.
The growth investments in 17 and 18 were awesome because they sold in 21.
The growth investments were 21, because they priced in 21 and then they were shit and because the revenue slowed down and the exit market died.
The growth investments from 23 on that were LLM centric, were amazing and, from the growth investor perspective, needed more capital than was easily available.
There was a period of two or three years where the capital needs of Entropic and OpenAI were unprecedented, as were several of the other companies.
And when capital needs are unprecedented, the people selling the capital can do actually better at the market.
Take that and have some insights as well about the future.
You can make money.
Now the wall of money has come back in and I'm sure growth will go through the same thing again, which is everyone will pay 100 times one rate revenues for late stage stuff they think is growing quickly, just as in 21 people thought they were growing quickly.
And fast forward.
Someone will work and make people look really smart and someone won't.
Right, whenever you're investing, you have to have some marginal insight, more than the other guy, about why this thing that is, at whatever stage it's at yeah, can outperform and be bigger over the next x years.
Once it becomes consensus and the capital arrives, then it's just very hard to have excess returns.
And look, one of those ways of non-consensus is finding these small markets that can expand.
Because I don't agree that one of the things we often think about stepping back is because the stage we invest is early product market fit.
The highest level rule of thumb has been the big aha is.
We want big picture trends and near end traction.
We don't want to compromise between the two.
We want something that's working right now. which could be something small that's working right now.
You want something that's actually a thing right now at early product market fit.
But you're right, Jason.
What you are correct is you don't want something that's a cute little thing now, but could converge and there's just no white space.
And you're taking that and saying the Android example.
If you had done a post-product market fizz investment there in 2018?
Unfortunately we didn't.
It would have been their near-end product.
Half the country can get mad at this.
What right now was watchtowers for the US border.
That was the near end traction.
They had really good traction on that, and that's the near end product.
If you applied the lens of how big is the market for watchtowers on the US border, the correct answer is bigger than you think, but goes up and down every four years, depending on random exogenous events.
The US Defense Department has purchased things on cost plus for 40 years and is wildly inefficient.
And Andoril is going to let them purchase things on a Silicon Valley.
We build the product up front and then we sell it to you on a per unit basis, right?
That's the big picture trend.
From the A on, you have to have both some near end traction, something to hang your hat on.
But then, to avoid the risk you're talking about, you gotta be able to articulate an expansion story.
Now the trick becomes, anyone can use words.
Take your replicate example, you're right.
If you squint one way, in 2021, it's a tiny little tool for a niche case.
If you squint another way and use big highfalutin words, it's the future of software and democratization of software.
And it turns out, the trick in investing is to figure out which of those words is bullshit and which is not.
I do want to talk about Travis Kalanick.
Came back in force with Atoms.
To be clear, eight years in stealth, 1000 employees rebranded city storage systems and cloud kitchens, which is more well-known, into this new company Atoms building gainfully employed robots, food mining, transport.
He came out with a pretty...
I don't know if you'd say skating, but an opinionated piece.
I bled, but I did not perish.
He wants to be more aggressive than Waymo.
How did we read this, guys?
I thought on the merits of what he said about robotics that he's correct and was pleased because it's something we've believed.
So as again to remind the viewers obviously, Travis Kalanick, the wildly successful founding CEO of Uber, famously terminated by the board, enduring feud with Bill Gurley which can cycle back to the antropic pentagon discussion, because travis's number two is now driving at the pentagon and also showing an ability to maintain a grudge, which is just one of those things you've just got to admire in people.
But anyway went away.
Founded cloud kitchens surfaced last week and basically said it's not about cloud kitchens anymore, it's about Robots and Atoms.
Is building robots for a variety of industrial use cases.
And he has an investment in Pronto, which is an autonomous driving company founded by Anthony.
I always mangle his last name, my Polish sucks Liborowski, who was with him at Uber right.
So it's basically coming back and saying, I was doing cloud kitchens.
I'm now using that information to build robots.
And I'm also thinking about autonomy, which obviously cycles back to Uber.
So that's kind of the background.
I thought he was spot on. on the robotics call.
And let's be clear what he said.
He said he didn't fundamentally think humanoids are the answer.
He thinks robots on wheels are the incremental next step.
And the big aha that Travis had was it's not clear, if you're building an industrial machine for a lot of use cases, that you add legs?
The humanoid robotics that we all see.
They have these legs.
They consume a lot of battery life.
They're pretty unstable.
Most of the time in factory work or logistics warehouse work.
You don't want someone using, you don't need legs, you just need wheels.
They're a lot more efficient.
I think it's a big picture inside of Travis to say, this is the direction things are going.
Worth pointing out is he's effectively making a call against a whole bunch of the humanoid companies, not saying it's not going to happen ever, but saying it might take a lot longer than you think.
And the path to humanoid robotics might be true.
Specific purpose, non-humanoid type machines may be expanding over time.
So big ass call on robotics that for what it's worth, I agree with.
It's interesting.
Just one more comment is Sunday, which just raised recently, which is another one of these robotics companies focused on the home.
If you actually look at the form factor, they've gone with wheels too.
If you look at it, it's very cute.
It's a really cute robot.
It's kind of nice, happy plastic.
But you look at the ground and it's actually running on wheels because they too have recognized that spending the money to give feet to many robots is just a waste of money here because you don't need them.
So I think actually on trend is correct.
The main thing.
When I saw the TBN interview, the main thing I thought was if he were running Uber today, it'd be a trillion dollar company.
To me, without question in today's world.
It's his time.
Uber is a $160 billion company with massive free cash flow, and it is epic.
And I think the...
His hyper-aggressiveness which, in a different era, led to his downfall, which I come back to, but it worked.
It destroyed Lyft.
So his view that if you're not as 57 on the 1 to 10 scale of hyper-aggressiveness, you're not going to win this.
And this is the era we're in today.
He was just too early.
And there was toxicity to him.
And there were elements of treating women and other things that are probably terrible and not OK.
But putting that, and it's hard to, but putting that aside, He was just early for his time.
And look at Uber today.
Despite that, wildly successful, but mostly been engineered since then, right?
Acquire, get into food delivery, which is huge for it.
But a lot of that's through acquisition and managing his existing fleet.
And when Travis was CEO, all he wanted to do was get into autonomy.
He said from the beginning, our business is dead at its terminal state.
No one was going to be driving cars around in Uber.
And now they're years and years and years behind where they could have been.
When I look today, the trillion dollar companies are becoming commonplace.
I think Travis Uber would be a trillion dollar company today, because it would be five years ahead of where it is today.
And that's all I thought.
Do I actually think this Cloud Kitchen's eight years out in the winter land?
Do I think it's going to make it?
Probably not, right?
But that guy, that guy would be running a trillion dollar company today if Gurley and Buddies didn't force him out.
That's what I thought.
I disagree and so, picking apart the argument, would you push them out?
I'll come back to that at the end of this conversation.
I will answer.
I will answer that question, but first of all, it's interesting you made you made a comment here cloud kitchens.
I don't know if i believe in it, but uber would be a million dollar, billion dollar company, as we said right.
Implicit in that statement is a repudiation of the logic of it, which is you're saying the great founder is everything, but what you're saying is the great founder can't make this company worth a trillion dollars.
So implicitly, what you're saying is it's a great founder plus a great opportunity.
It's not quote unquote.
Well, he has to start from scratch now.
Yeah, but yes.
Starting from 80 market share in ride hailing is a pretty good platform to start from.
If you know everything about the industry, every inch, every inch of this industry, you know it cold.
So now let's talk about that.
Dara had to drive Ubers to learn it.
And bless his soul, he's great.
But he had to drive cabs.
Travis didn't have to drive any cabs to learn how Uber worked.
He already knew how it worked.
Let's have a question here.
OK, so let's talk about that.
And I want to leave aside the personal behavior stuff, where I frankly don't have visibility.
And I'm genuinely not going to try and make a call on that.
The hypothesis that Uber, instead of being a 160 billion company, would be a trillion dollar company, implicitly has to be.
The only thing that could bridge that gap would be autonomous driving correct.
Well, no.
You would be five years ahead of autonomous driving, which is now taking off.
And I think you would dominate food delivery more than it does.
Because you already had such a head start. ahead of your competition.
You wouldn't dribble-drabble into it.
And you wouldn't then go buy or do this and that.
You would just dominate.
And you would use capital.
And you would use weaponize.
And you would use implicit.
And you would use some dark arts in your mobile app so that the competition would get blocked and all this crap.
But you would dominate it.
You would just go for 90% market share in food delivery.
Because it's a better market than autonomy in the short term.
Maybe not in the long term, but it's a better market in the short term than ride hailing.
For what it's worth, I agree with that.
Two separate arguments.
They had to get public.
They had to get them cash flow positive.
Hard-nosed comment.
Another spin on autonomy is you could say yes, we need to do this thing, but we can't afford to spend at the level they were spending in 2015 on something that reminder, 10 years later, is still only now finally doing a meaningful number of rides sub-economically in San Francisco.
It's a trend.
It is the future.
It was 10 years away.
They had to get public and they had to have a plan to cash over, even to get public, to dominate Lyft.
It wasn't an option then, as perhaps it might be today, to stay private longer.
Do you think they had to cut back on their autonomous spend?
Maybe not to zero, which I think probably was a mistake, but dramatically focusing on getting cash flow positive, giving Wall Street what it wants to get public to have the acquisition currency to do the food things.
And growth at all costs had reached its limits there.
And maybe a different manager was the right person for the next stage of that journey.
Listen, I think in this universe, outside management, just like many companies, performs as well or better through early 2022.
Remember, it was a decade where no products changed.
Even Uber didn't change much.
Uber seemed feature complete about two years after it launched.
Great, they added UberX now.
Now, for five bucks, i can get to work and nothing changed.
Okay these, this app was frozen in time for a decade, right.
That's why outside management can run it, and i believe what it would probably look like is that is as late as two years ago both.
Both they might have led to similar outcomes or maybe even a better outcome with outside management right, but today it'd be a trillion dollar company.
My point is now would be his second time, because he wouldn't have quit.
He wouldn't have stopped building.
And one of his best friends is Elon Musk.
Maybe he would have owned autonomy with Tesla in a way that you can't.
Who knows?
But good God, it would be a trillion dollar company today.
I actually think now I would agree with you.
I actually think there was a period of time where they needed to conform to that reality of the market at that time, get cash flow positive and run it like a financial engineer clearly was unwilling to do it.
Actually, it turns out, in retrospect, they should have done the Steve Jobs thing.
They should have swapped them out, got it public, got a cash flow like crazy and sometime in 22 should have got them back and said now, now is the time to do autonomy.
So I do agree in the last two or three years.
It's still unproven, by the way, whether or not Uber needs to own the technology to still make autonomy work.
But I agree.
I like your framing that there was a period of five or six years where the best manager for a lot of companies was a professional executive with a financial bent.
And I can see why they made that change.
If there was no more private capital to be raised and if your CEO just was unwilling to focus on convergence at the expense of long-term projects, You had a risk of going bust.
I can see why you made the change, but I agree with you.
Now you can say in the last two or three years, the financial management game is out and the product innovation game is back in.
It's accelerating.
You said you would answer the question which Jason posed.
Would you have made that decision and switched him out?
You should be very, very, very wary of ever swapping out a founder.
I tell people it's like open-heart surgery and 50% of people die.
It's a shitty business.
Occasionally, I've done it for a bunch of reasons, and it's hell on earth.
Forget morality.
Forget, am I a good guy or a bad guy?
It's just the most exhausting thing you do.
It is easier to just lose money, right?
So I hate doing it.
There's only two reasons why you do it.
If the business decisions they're making is literally going to bankrupt the company right, if you feel that you know they're investing in.
To take a concrete example here, if they were investing in a way whereby there simply just wasn't going to be any more private capital and we could run out of money and they were unwilling to change course, then at some point you have to consider that, and then we finish.
And then the second option is the thing we said we wouldn't discuss, which is if and eternal behavioral issues rise to the level of a really systemic problem with a high bar right.
If one or both of those things is present, then wildly reluctantly you have to do it, right?
And you have to take the heat.
Would you have done it?
If one of those two things were the thing, then reluctantly you would have.
You'd move heaven on earth not to.
But if it's the former, at some point you've got to say we're going to run out of private capital.
You're not doing what it takes to get profitable.
We need to focus on profitability.
Give Wall Street what it wants then yeah, you might have to.
You'd hate doing it.
Again, I hate this positioning.
Nine times out of ten.
I'd be like sell the company, get a president, get therapy, be better, all the other things.
My logic is this what it's like in those board meetings and knowing, if you're a founder friendly firm like I would say BenchRock would like themselves to be, you don't do that lightly.
So you got to believe that some one or two of those issues was on the table for them to have to do that.
And they thought it was necessary.
I think you obviously see that, with Adam and WeWork being the first there in terms of just the fiduciary responsibility, in terms of how they spent money and the financial profile,
Totally get you there.
Are we bullish on Atoms now?
Do we look at this and think, this is exciting, this is going to work awesome?
Jason, you're the fanboy.
What do you think?
Look, I don't know.
I get the big bet.
And certainly making this bet seems to be a lot more, make a lot more sense than betting on the WeWork founder right, who just is not as deeply product and software focused, you know, building coworking spaces and then having everyone figure out the finance.
Listen, I can only use if I were a huge fund and he wanted my money, I would give it to him.
Don't get me wrong, but my smell test.
From watching the interview, Some of the things he said felt like I was back in 2017 when this happened.
The world is different now.
And so I've just got to use my G2.
And the question is, do I think he's past it?
Right.
And not being, not being able to execute, but being able to, at some point you, you, you do lose it.
You lose the ability to create and you're better off amalgamating.
And this is in the middle, right?
This is a combination of amalgamation and creation.
So you just asked my opinion, what I invest based on the interview.
No, I wouldn't.
It's so funny the way you answer that question, the way we, because I the same question.
I didn't process to any kind of internal analysis of Travis's calling soul.
I literally found myself thinking, do I kind of come from the market side?
Do I buy the market?
I think there's two businesses going on here.
One is the atom slash robot business.
As I said, I like the approach of more bounded industrial robots versus general purpose humanized.
So I think it's on the right broad track.
But I think all those markets tend to be very different and trying to do one robot for all of them is hard.
So I think that's a hard road and will be less amenable to any kind of quote unquote blitz scaling.
And let me finish then.
The autonomy thing is interesting.
I think we are at the stage now.
The other company that he's invested in is Pronto.
I'm sorry, I should remember the name.
Yeah, pronto.
Pronto, yeah.
That's super interesting because we're now at the stage where autonomous driving in freeways is kind of hovering on the edge of being a thing with Waymo.
But autonomous driving for mining and for industrial equipment is a category now and there's some players in that space.
So I buy that that market is there and doable.
I'd have to do the next level down.
Why is our technology different and better?
Credible market and focused for autonomy.
Believable market, but lots of sub segments in industrial robotics to really play there.
Would you invest in 20 billion posts?
That's probably what he's looking for.
That's what Claude thinks he's looking for in the round.
He's fundraising.
That's why I did the interview.
He's fundraising, right?
Dear God, no.
Yeah, because the last round was at 15.
Claude thinks he's looking for a flatter up round, so up to 20 billion.
No.
Absolutely.
He's got the personality.
Absolutely.
You do that every day of the week.
You'll put in your own 20 VC money at 20 billion?
I'm absolutely not.
If I'm General Catalyst raising $10 billion now, or I am Cotu with the multi... 100%.
Do I want to chuck a couple of hundred million into Travis, one of the greatest founders of our time?
Yes.
I have to move hundreds of millions of dollars a month.
Rory, I completely agree with you from our fund side.
This is so everyone's a victim of their fund.
If you're a seed stage fund, you assess the guy.
If you're a growth stage fund, you assess the opportunity to put quantities of money to work.
And if you're in the middle, like us, you're looking at the market, trying to be intelligent and maybe overthinking it.
It's funny.
Drive have $9 billion in their growth fund.
Putting 250 million with Travis here, 100% I would do it.
Okay.
Good to know.
Would you not agree with that rationale, Rory?
I always struggle with the, oh, just have a go.
Let me put it in another term for you.
You've got $4.5 billion a year.
That is 400 million a month.
You've got to move, i understand, but whenever you find it, i'll give you an honest answer.
If you find your logic being reduced to, i've got to get rid of this much money this month and this entrepreneur is amazing, so i'm not sure about the opportunity and i don't like the price.
But have a goal.
If that's your logic, let me give you some advice have your fun size and that's why you're not playing the aum game that's right now And look for what it's worth.
I'll say one thing.
I wrote this on Quora years ago and I had to write so many disclaimers about it because I was going to get hazed.
But I wrote that the question was, who's the best entrepreneur you've ever met?
And this was a few years ago.
So it was before I met more folks.
And I wrote Travis Kalanick, best one I ever met.
I met him when he was at Red Swoosh.
His startup that um mostly failed right, his his uh whatever for the record made money for his investors.
I remember the deal he made money for his investors.
Yeah, i went by his office in san mateo he was down to two employees, i think, yeah and had lunch, and this was before even youtube had launched.
OK,
Sat down and I never met a founder that explained the entire future of video on the internet to me with the clarity and insights that he did.
It was the first time I'd met a founder that could see the future and all the elements and how it all came together and explain it in a way that kind of blew my mind.
And if I look at my investing mistakes, it's when I've invested below that line, when a founder has not come in and utterly blown my mind for the future of voice right.
The future of sales in the age of eight, blown my mind.
And I took some meat, but I'm like I'd never had.
That was the first time in my life I met a founder where I walked out of the my jaw was just on the ground because he explained the whole future to me.
That's why I go to Harry's point.
I guess if I was general catalyst, I'd do the bet, right?
Unless I thought it was washed up. unless I thought it was Washington.
I got to give you shit Jason, because basically you're in the category of I.
Jason wouldn't invest, but I'd be delighted to let you.
I think, John Carlos, you should stick 400 million in, because earlier on you were like I don't know if it's data.
I just think for me to invest at 20 billion for me, I have to believe he's not he can still do it.
I have to have 100% conviction he can still do it to justify it.
I think General Catalyst does not have to have 100% conviction.
Or Harry's math destroys me.
Or I end up with a 1x fund if I invest with anything less than 100%.
And I make conviction at all levels, OK?
Not just believing in them.
I have to know Travis is 1,000% in for doing this for 20 years at 51 or whatever he is, 48.
I have to believe it.
We're back again to Kelly Betting.
Inadvertently.
What you're basically saying is the percentage of your bankroll that you play.
You know it's edge over odds or whatever it is.
I have to think again.
And what you're saying is for you.
I mean, this is where someone who said it's fund size is strategy.
Right?
On every dimension.
My maples.
Yeah, it's just so true.
And what you're basically saying is you wouldn't because you don't have the edge and the return and the odds aren't great.
But if you have a different kind of fund where instead of being 20 of your fund, it's 1 of your fund, maybe you do.
I hate that.
No.
No, no, no.
I'm saying if I smelled some risk, Travis is- Yeah, I know what you're saying.
I'm translating it into math.
He might be a little bit in the past as well as the future.
That's a flag for me at the rate that I have to win.
Okay, we can choose one final topic.
We can go for adobe.
They beat earnings, their stock tanked and, as a result, ceo leaving.
I bet 10 shot news stepped down in 2026.
That's my bet 10 shot news.
I think the interesting comment and I want to hear Jason's comment because he's worked there be precise in your sequencing.
They beat earnings.
At the same time, the CEO announced his resignation without a successor, and the stock tanked.
It wasn't a stock tank, and then they whacked him.
It was.
The two were announced together, which is odd, and in response to one or both of those events, the stock went down.
Correct?
Correct.
Yes, correct.
Over to you, because I think your take is right here.
Well, look, we don't really know exactly why he stepped down without a successor.
Other than that, it's odd, OK?
It is odd because a lot of folks on the internet are saying David Wadwani, who runs Creative Cloud, is going to be a successor.
But this is David.
He quit Adobe and went to AppDynamics and VC when he was passed over for CEO the first time.
Then he came back to be CEO and then shot new steps down and he isn't made CEO.
So that suggests to me the odds that he becomes CEO are less than 100%.
Because certainly the most elegant thing is to hand it off to your president of your largest business unit.
Then to say the board's going to do a search while I step down.
There's just no way that's confidence inspiring.
So I don't know what happened.
There could be multiple things.
To me it suggests he left the keys on the table after 18 years not five years, not was fired quietly by the board.
I don't think that.
For a million reasons, I don't think he was fired.
Very competent right, very insightful.
I think he calmly and respectfully left the keys, maybe after a quarter of discussion, and now they're gonna go recruit somebody.
And it's not a good sign, and I think, We're going to see a lot of these.
I mean Duskin Moskovitz quit his own company Asana, in a hiss and left the keys, threw the keys on the ground.
No successor, no anything.
And these are not fun times to run most public companies.
There's a handful.
I mean, Alex Karp seems to be having the time of his life.
Moved to a $50 million mansion in Miami.
He's crushing it.
Yeah.
Yeah, because he's winning.
But who else is having fun that's public?
Not too many are having fun.
The correlation between winning and having fun is pretty high.
Pretty high.
Pretty damn high, right?
You're not having fun if you're the CEO of Adobe and you're not having fun if you're any CEO who realizes going back to.
I think you're spot on going back to where we started this conversation.
Oh, the only way to make my I have an obligation to my shareholders to make the stock go up, and the only way to make the stock go up, given my growth rate's gone down, is to sack 20 of the people I've spent the last 10 years hiring.
Now, you might know it's the right thing to do.
You might even be willing to do it, but it's not going to be the best week in the office.
I agree with you.
It's tough.
I don't know if 10 quit this year, but I can totally see more than 10 saying should I quit this year?
More than 10 are thinking about it.
I think it's 10.
Now tell me exactly why you're doing this, right?
And to the specifics of- I gave you 18 years.
You know, we've all been on boards where we've had to do CEO transitions and no matter what's going on underneath the surface, right.
Provided you've good relations and you've reasonable level of trust, you always go for the.
Leave the person in place, find the successor, announce an orderly transition.
Look like you have your shit together because at the margin you never want to show you don't have your shit together.
So that's not what happened here.
And there's only, to Jason, to your point, there's only two ways that that occurs.
The first is if the board decides they want to make a statement, right?
We, you know, and I've been in those meetings where sometimes you're like you got to go right now because there's crimes of moral turpitude.
You're out.
We've totally lost confidence in you.
I'm much more likely the team's totally lost confidence.
You're out.
That doesn't feel like what had happened here, right?
Because he's been staying on as chairman.
If they've run the damn thing for 18 years, you probably should let them run it for another quarter or two while you line up the successor.
So I don't know.
I wasn't in the room, but it may well be some version of what Jason's saying is right, because you just go in as the CEO and say My heart's on it.
It was a weird outcome.
It's interesting.
Now, someone wrote this, pointed out that Adobe had a great run, right?
But now it's aggregate returns. are just below the S&P over the last decade or something like that.
So when you look at that after 18 years and you're not really excited about a gentic change like it's not you're not waking up each morning and saying I'm excited about my agents.
This is a good time to leave the keys on the table.
And to be clear, hang on.
Actually, one thing I was assuming something.
I mean, he's continuing the role until you get a new CEO.
I just didn't check that.
I think he is.
Is that correct?
I think so.
In which case, it's not keys on the table.
It's more making an announcement before you have the answer.
It's a little less herky-jerky.
I mean, just to be clear.
It's leaving the keys on the table, but still grabbing a drink at the bar in the kitchen.
Yeah, no, I'll do the right thing.
I'm leaving the keys, but I'm hanging out in the house until dad gets home, or whatever.
The extended version.
Yeah, metaphors never work.
You should just say the thing.
Where is Adobe in five years' time?
A massive installed base.
You have a set of core.
Here's the meta issue.
Got someone on Twitter.
The guy you just had.
Who'd you just have?
The super smart guy.
What's his name?
The last one.
What's his name?
Sorry.
Yeah, off the chart smart.
He made this thing on Twitter, and everyone got it wrong, I think.
Because they misinterpreted.
He basically said there's no threat to companies like Intuit and Adobe because it's so hard.
But SMB is so hard to nail the price point and the motion That, whether it's Adobe or Intuit, which are still largely self-service businesses, right.
Or whether it's a sales-led motion.
These are almost immune from competitive threats, because they're just so hard to get right okay.
And so let me answer, here's the thing.
There is a lot of truth to that, as we've all seen.
I think it's true in all software.
But it doesn't mean you grow just because it's hard to churn.
Here's the mistake so many people are making right now, in the age of ai just because your gir stays high, just because your nominal churn is low, does not mean you're going to grow, and i see no evidence adobe will grow.
I see no, no products that show they'll grow Nothing.
I want to come on here with three things and then we'll wrap.
One is, I just checked, he's actually staying on as CEO until the new successor.
So it's more kind of an announcement without an answer.
In which case changing my opinion here, It may well be the board also felt they wanted to send a statement.
They felt the results were disappointing.
They didn't want to have, they didn't want to attract a whole bunch of.
Oh, you need to make a change.
Activists could show up.
Maybe they thought that, given these results, they actually needed to state now that the change was happening.
Maybe they felt they needed to pull it forward.
In other words, please don't call us, Elliot. and give a shit, Elliott Capital.
We know we need to make a change.
Shantanu wants to make a change.
Here it is.
That would actually fit the facts pretty well.
You are right.
If you've been the number two who've been passed over a second time, because you know if you need to make a change and you have a good number two and you feel the activists are circling, I tell you what you do.
You hire the guy.
But be that as it may, going to your second comment, The Adobe Intuit, I really want to key on that because in my less than amazing I think Intuit has pretty durability over the next five years because I think the thing they automate, which is accounting and tax, has some AI impact, but it's not infinitely large and I think they can adapt to it.
We can argue that another day.
I think the challenge for Adobe is what kills you as a software business is if the work that you're automating gets done in a totally different way.
Right and adobe and you know what we've seen is one of the areas.
Ai it's a really good post on this.
I can't remember who wrote it.
They said most of the ai traction so far has been individual users creators Individuals, even within the enterprise.
It's not yet an amazingly great workflow tool.
Not all of it, but most of it.
Adobe is the classic creator tool.
There is a whole new way to create.
By definition, they're playing catch up.
So, more than most companies, they are under the gun to figure out how to meet their creators in a totally different way.
So I think the disruption risk on those guys versus Intuit is a lot higher.
Five years from now, there will be some disruption, but we'll still be moving money around.
We'll still be producing quarterly accounts.
And I tell you, we'll still be paying taxes to the US government.
I don't know if we'll be doing pixel by pixel removing on Photoshop.
And therefore, I don't.
So I think the Adobe AI risk over the next five years is pretty large.
And that's actually probably should be fair going into that search.
We didn't cover much, did we?
No, we had more left.
Bit of a materialist show, wasn't it?
Guys, thank you so much.
That was fantastic.
