Coatue’s Laffont Brothers. AI, Public & VC Mkts, Macro, US Debt, Crypto, IPO's, & more

00:00:00.040 | sometimes you make some venture bets and they don't work and then you're like I just invested

00:00:05.260 | in the wrong trend and in fact sometimes you invest in the wrong company but it is the right

00:00:11.360 | trend and those bad investment cloud your judgment

00:00:15.600 | Bill we're back I think it's the 10th anniversary congratulations Philippe and Thomas thank you of

00:00:33.800 | course we're at Cotuzzi East meets West down here in Los Angeles I think it's an event that founders

00:00:39.440 | I certainly know you and I look forward to every year as I said to you both it's hard to put together

00:00:45.440 | something that has this much durability this much impact you do this incredible overview on public

00:00:52.120 | markets on venture markets and technology that I think you know you publish today online that

00:00:57.360 | everybody should go out and download and take a look at and so you know we've been at this now for

00:01:02.200 | a couple decades having built something like this is really cool so I just wanted to say thank you and

00:01:08.520 | conversations on on on the 10th anniversary and you know Bill and I thought why don't we just go

00:01:13.660 | through you know you had this slide today we got to sit through and listen to you guys commentate

00:01:18.600 | about uh some of these slides we wanted to share it with everybody else so we're all so excited to make

00:01:24.140 | our our debut as a podcast duo the world premiere we've we've done them individually but not as or we

00:01:31.080 | we're announcing we're announcing our new pod we yeah exactly we got bg2 and now we got what is it lb2

00:01:38.040 | lafond brothers too you know let's let's go so we're uh we're squared squared but yeah by the way I would

00:01:43.800 | just add like I think the conference is is kind of a a really amazing gift to the industry and for the

00:01:50.540 | founders to get to come like it it harkens back to the like when I was really young in this industry the

00:01:57.980 | agenda conference everyone would stay for the whole thing and so your opportunity to network

00:02:03.120 | is so much higher and a lot of conferences today people fly in and fly out but you know here you

00:02:08.640 | you've got some amazing people that are around for the entire thing it's just incredible yeah yeah

00:02:13.860 | agreed well I mean let's dive in you have a big budget for smoothies you know your smoothie budget

00:02:18.880 | really keeps people intact and by the way for for people that are listening um this deck we're going to

00:02:24.160 | reference some of the slides the code 2 team put it on their website uh just a few hours ago and so if

00:02:30.560 | you want to download it and have that as as we go through this it might be helpful yeah you should I

00:02:36.020 | mean Philippe let's just start off I mean you and I it seems like we spend most of our time talking when

00:02:40.860 | things get bad in the world and yet this is probably the most optimistic that I've heard you on this stage

00:02:48.560 | in the 10 years that you've been doing this right we talked you talked us through this slide four which

00:02:53.660 | is the AI super cycle slide and and and this slide which I thought was incredible slide six which is

00:03:00.400 | when will AI reach 75 percent of total US market cap which I think is incredibly provocative how you

00:03:07.360 | compare that to industrials and transport because everybody's saying it's so big already it can't get any

00:03:12.260 | bigger so just kick us off you know contextualizing your level of optimism and this slide like can it

00:03:20.640 | really be 75 percent of total cap yeah uh so listen um every time I'm optimistic I'm worried this is it

00:03:30.500 | you know this is the peak uh and now that Thomas and I are doing this podcast together we're guaranteed

00:03:36.560 | to be doomed but I think that at the end of the day that's how everybody thinks first of all so it's

00:03:43.500 | never priced in yeah everybody's worried that it's all the time the peak and yeah yet despite that uh

00:03:49.480 | things tend to work out I think today we've learned from these founders and stuff like that

00:03:54.120 | that AI is probably the defining and biggest tech trend that we're going to see and I showed you the

00:04:02.560 | different waves there's only been a few waves over the last 70 years or so going back to main frames

00:04:08.020 | and one person made the point that the networking we needed the pcs the internet we needed network pcs

00:04:16.900 | sass we needed what happened before and AI is also built so one of the reasons these trends get bigger

00:04:24.180 | they're built on all the on top of each other exactly so I think that's one second part we've tried to do

00:04:30.580 | and bill you've been great at it and brad you've done too is let's always try to look back at the

00:04:36.900 | past I find that this concept that like uh even though we're talking about new trends they've been

00:04:42.900 | new trends you know since the canals and uh yeah uh and uh whale oil and uh things like that right

00:04:49.160 | and so you look in the eight eighteen hundreds and stuff you know we start having a real finance and

00:04:55.040 | real estate industry then uh probably uh at some point especially after the second world war we had a

00:05:02.200 | real manufacturing uh industry and then we've had also a market dominated by energy and right now

00:05:09.540 | it's about 50 tech but um we had the ceo of uh the largest uh power plant uh sort of utility uh with us

00:05:19.180 | we had the ceo of the largest equipment maker for utilities today you're sort of wondering not just

00:05:25.500 | ai is going to become bigger tmt is going to become bigger but there's some sectors that should we

00:05:30.860 | reclassify them as tmt or utilities now like the next semi-cap what's the difference between a nuclear

00:05:38.540 | energy plant and a semi-cap guy they're both there at the beginning to help you create something that

00:05:44.180 | delivers a tech product yeah the you know said another way technology when when we got started

00:05:50.480 | thomas was five percent of global gdp today is 15 percent of global gdp and when we're sitting here in

00:05:56.780 | 10 years i think you're saying confidently while there'll be a lot of noise and a lot of volatility

00:06:01.860 | it's going to be more than 15 percent of global gdp you guys talk about again like what the new class

00:06:09.380 | of ai entrance are so the mag 7 has actually underperformed this year but we have ai power we

00:06:16.400 | have ai related software we have ai semis that are up on the year you guys have diversified out

00:06:23.600 | philippe into some of these other categories you were just talking about it is that the case that

00:06:29.280 | everybody got crowded into mag 7 and now you see all of these other companies accelerating this year that

00:06:35.720 | that are starting to get some of the benefits and i think this one maybe thomas you should take it and

00:06:41.040 | also contrast it to what's going on a bit in the private side if we can add that too because there

00:06:46.200 | was a time where max 7 was a real excitement and now it's changed a bit yeah so it was interesting

00:06:52.240 | seeing that we think that on average the max 7 i mean it was basically flat year over year and yet

00:06:57.840 | tremendous value accretion to the top ai companies right whether it's open ai or anthropic that's right

00:07:03.600 | we're all kind of the following companies but to me my other takeaway looking at this and i was

00:07:09.140 | thinking about core weave that recently went public and you guys are big shareholders in we are and big

00:07:14.560 | fans of the management team and i think a lot of skepticism around that business and that business

00:07:18.760 | model but at the end of the day being an ai pure play there's very few in the public market right right

00:07:24.480 | and so you know i look at this list there's amazing companies on on this list but a lot of them

00:07:30.280 | might have legacy businesses or other kind of right i think of a google as an example right

00:07:35.320 | of certainly has a lot of good ai but also has some disruption threats so seeing new entrants like

00:07:40.940 | core weave that are a pure play on the trend yes um i think has been a really kind of positive

00:07:45.500 | development as well another thing today's an appropriate day to talk about this the stable

00:07:50.140 | coin legislation you know passed today which is a major you know we're going to want to talk about

00:07:55.000 | to sax about this later later but a major step forward for the for the you know kind of regulatory

00:08:00.540 | framework around u.s finance you were funny today uh philippe on stage talking about bitcoin you know it's

00:08:07.340 | this category that's broke you know you said it's broken out you lose sleep over it every single night

00:08:12.180 | because you're still not invested from an institutional perspective in it like a lot of us

00:08:16.760 | and yet you you showed this slide 18 where you said maybe the volatility of bitcoin is is coming down

00:08:24.920 | which might put it more into an institutional asset class talk to us a little bit about how you guys

00:08:30.420 | think about crypto maybe at the price you know we all have post-traumatic stress from the 1920 period

00:08:36.840 | i think of a venture investing in crypto is that changing is it now in the 2020 2020 i mean yeah

00:08:42.760 | i like that but i was like the first of the really early days of venture you know i do think it's

00:08:51.000 | actually really interesting to think of bitcoin as a company for the sake of our investing universe right

00:08:56.180 | we do think like the relative market caps becomes really interesting so as you see in in some vardec

00:09:01.940 | especially at the end first thing is awareness we need to include the large ones as we think about

00:09:07.160 | how they're valued versus kind of other things and so how do you think about how do you think about

00:09:12.820 | valuing it i mean listen uh but just touching back on your point so we we're looking at bitcoin it's like

00:09:20.000 | all right the market cap of the world the net worth of the world is like 450 500 trillion equities i think

00:09:27.540 | are like 120 or stuff real estate's probably another 100 150 then there's a value that people have in their

00:09:34.720 | homes uh gold is about 15 to 20 trillion uh above and under uh the ground and then we're like bitcoin

00:09:43.600 | at two and i'm like god so bitcoin it represents you know two out of 500 of the net worth of the world

00:09:50.580 | or 400 whatever it moves a little bit could it be four could it be five and then we're like well the

00:09:56.560 | largest company microsoft today is like three and a half trillion let's say that microsoft i don't know

00:10:01.740 | doubles in 10 years it would only be growing at seven percent per year microsoft will be a seven

00:10:06.800 | trillion dollar company in 10 years and could bitcoin be five or six it's a real asset class right and

00:10:14.200 | then on top of that it's very volatile then on top of that there's a lot of retail people that

00:10:19.960 | uh own it and it almost feels like sometimes you know the institutional investor is wrong and the

00:10:26.720 | retail investment right sometimes it's the opposite retail gets caught in a little bit of a meme stock

00:10:31.820 | and it comes back down and i don't think we can afford to ignore it anymore so it doesn't mean like

00:10:37.700 | we don't really know exactly when and how to own it and then your other point that's really interesting is

00:10:43.880 | sometimes you make some venture bets and they don't work and then you're like i just invested in

00:10:49.600 | the wrong trend and in fact sometimes you invest in the wrong company but it is the right trend

00:10:55.800 | and those bad investment cloud your judgment and there's bitcoin there's stable coins which we should

00:11:04.580 | talk about they're growing incredibly right now and then there's all these out coins and you could say

00:11:09.920 | okay well i don't like the out and the meme coins i don't like necessarily the collectible aspects of

00:11:14.920 | things but i like stable and bitcoin so for us it's more a process where we just need to become

00:11:21.700 | better be willing to change our mind and stay open to the future and those are a lot of the

00:11:26.500 | conversations that you have one thing i'm curious if you agree my one of my biggest lessons looking at

00:11:31.460 | private market investors versus public market investors is the appetite for institutions in the

00:11:37.360 | public market for assets that are perceived to have significant downside i.e. like 70 or 80 percent

00:11:43.440 | that are mark to market i have found is just really low yeah right investors on the public side just

00:11:49.700 | don't want to take that kind of risk right and so versus on the private side you are because you may

00:11:54.780 | have 20 of those they're not mark to market and you're like look maybe five go to zero but my other

00:11:59.080 | 10 go so i do wonder how institutions versus retail may be willing to take that risk i wonder how

00:12:05.380 | institutions will think about an asset like that you know let me kind of telescope out for a second and i

00:12:11.960 | want to get bill's opinion on this as well like i think all of us you know now a couple decades into

00:12:17.920 | this i think one of the most powerful things about this conversation is mental flexibility

00:12:22.740 | yeah right and you know i think when you're when you're maybe a little bit younger in the business

00:12:29.480 | you're more dogmatic you develop an opinion you defend it to the hilt right and if you're wrong

00:12:34.560 | it can be extraordinarily costly and i think crypto was that way for a lot of people and you know they

00:12:40.140 | they carved out these positions they were like this is you know this is a fad and then they they're

00:12:44.760 | proven right at a moment in time because it'll have a 50 drawdown and so rather than re-evaluating

00:12:50.000 | their priors they lock in to that position bill how have you because i find venture particularly tribal

00:12:57.540 | yeah about this point you're locked in you can't sell so i think this is something that you guys

00:13:03.960 | develop more of an instinct for in the public markets right in the private because you're in

00:13:07.740 | you're in you're in forever like with the private companies you can learn lessons along the way but

00:13:13.020 | your windows are really long right whereas i think if you're in public stocks where you can

00:13:18.680 | you know change your mind and and make a decision right away that's very different yeah i mean you

00:13:23.860 | referenced drunkenmiller today you said you think this may be the most valuable attribute of the great

00:13:29.640 | investors i mean listen when he told me i've made 120 of my money on obvious ideas and i've lost 20

00:13:36.100 | elsewhere and then you start thinking of bitcoin and a company being like the fifth largest company in the

00:13:42.780 | world now it's a bit odd what i'm saying i recognize it because you could also say well should we consider

00:13:47.660 | gold as the largest company in the world because it's worth 20 trillion and not necessarily but i do

00:13:54.120 | think like forcing yourself to think differently and at least being at peace okay i thought differently

00:14:00.840 | i came to the same conclusion yeah and being able to do that now as to us being a flexible the fact that you

00:14:08.480 | think that french people are highly flexible people i'm very thankful of that i'm not sure it's true but

00:14:14.200 | we'll take it uh two things that are new about crypto that should should lead anyone to reevaluate

00:14:21.300 | the government's gone from being kind of antagonistic towards supportive that's a big shift because

00:14:27.160 | regulatory risk was a big question for all this stuff and then the stable coin you know based on what

00:14:32.800 | people are talking about this is a high utility use case for people that that is companies are using it

00:14:41.060 | you know as part of their workflow process that's a that's a new dimension as well so

00:14:46.500 | one additional thing just point on that that i think is interesting is

00:14:50.400 | you know when you talk about the u.s dollar you know the the the view is always well what's the

00:14:54.920 | alternative you know i'm not going to go do i want to go into europe you know probably not it's kind of

00:15:00.040 | interesting well what if actually the alternative is bitcoin right um and so that's something i've kind

00:15:05.500 | of been spending time on we you know we talked a lot today about the dollar and interest rates and

00:15:09.920 | what's going to happen and sure um so it'll be interesting to see whether that becomes a legitimate

00:15:14.920 | alternative to you know the overspending of governments and when you have a stable coin right

00:15:20.360 | how long is it before a new regulation goes through that allows a stable coin to pay interest

00:15:25.840 | sort of odd stable coins can offer rewards but can't pay interest and when you have a stable coin

00:15:33.020 | with interest how long is it before the government creates a one-year stable coin a five-year 10-year

00:15:38.300 | 30-year stable coin which will allow every single person around the world to invest in the usa so the

00:15:45.200 | government is going to have an incentive to not have these bonds be sold through these like weird

00:15:50.240 | dealers and this and that right the government should go direct to the consumer just like

00:15:55.100 | just like companies do so i bet you that in the not too distant future people will be able to

00:16:02.340 | automatically invest in bonds and so that's yet another example on top of what you were saying tom

00:16:08.300 | about the the bitcoin and stuff that i think it's uh anyway we need to switch topic otherwise i'm gonna

00:16:14.560 | really pull the few hairs that you and i have left okay back to back to ai one one of the topics you

00:16:20.700 | guys had an incredible audience here you had andy jassy here you know talking at lunch kevin weill from

00:16:25.880 | uh open ai and one of the topics was consumer ai and i thought one of the most incredible pieces of data

00:16:31.260 | that you guys shared was looking at the impact that chat gpt which is now scaling to you know kind of a

00:16:39.400 | billion users is having on on google and you did this by conjoining a couple pieces of data that you

00:16:46.380 | guys had so thomas you want to talk to us a little bit this is slides 22 and slides 24 uh and and and

00:16:53.240 | and slides 26 i'll i'll pass it to philip for this chart but okay i think bill and i were chatting about

00:17:00.260 | this earlier it anecdotally it certainly seems to be the case right uh the more people i talk to

00:17:06.420 | the more i ask them um do you feel like your google search has been impacted by chat gpt and and

00:17:12.600 | resoundingly i i almost everybody at this point now agrees that that's the case right and we can argue

00:17:18.820 | whether the queries are commercial or not i think the queries are getting more commercial yes every day

00:17:23.580 | but without a doubt it's having that impact we could not prove it numerically it felt intuitively true

00:17:30.580 | obviously google is telling you it isn't right so i think we went about seeing is there is there

00:17:35.680 | a numerical assumption that we can make that would kind of prove this out and i think you should

00:17:40.720 | introduce the work yeah and and by the way as we you know all these platforms have some businesses that

00:17:47.960 | get threatened and other businesses and google could still be an amazing company by just saying listen

00:17:54.500 | maybe search is on the threat but youtube is with all this new ai content gonna explode and

00:18:01.360 | potentially threaten netflix and maybe waymo is gonna also do incredibly well so our judgment more

00:18:08.240 | is around what exactly happens i mean the assets of the android phone and the gmail and and the google

00:18:16.020 | docs and like that's a nice set of complementary pieces they have so many great assets it'll be very

00:18:22.080 | interesting to see how it plays you know for me if i were ceo of google that would be way above my

00:18:26.560 | yeah basically i would have no idea how to put it all together but god is it just fun to be alive and

00:18:32.080 | just see how what's amazon gonna do what's google gonna do what all these guys so what we try to do

00:18:37.520 | here is as part of the data science that we do we process probably a hundred million credit card

00:18:43.880 | receipts a day so we have a very fine view of what the u.s consumer does and we have another data set

00:18:50.640 | where we know what consumers do based on their email receipts and the trick was to try to join

00:18:56.160 | those two data sets and in general in data science my only lessons learned is data is useless unless you

00:19:02.900 | can join data sets that don't speak to each other that is the unlock and so we did that and what you see on

00:19:11.120 | that uh chart is that absent chat gdp uh chat gpt maybe uh google page views for particular user growing

00:19:22.320 | four percent per year so we are consuming more google then we get a subscription to chat gdp which we uh

00:19:29.040 | chat jesus christ i confused gdp and gpt we get a subscription and now we're like ah this guy's paying 20

00:19:37.040 | bucks a month yes and then we track once he started paying the 20 bucks a month

00:19:42.240 | to open ai what happens to the usage and you can see peak to trough it's down eight percent year

00:19:49.520 | over year peak to trough it's let's say down 11. so clearly page views are going down and that's over

00:19:56.400 | almost two years right so it's not like it's immediate it's not like it's an immediate gigantic

00:20:02.480 | threat but one thing we've learned and thomas and i repeat that to each other all the time is

00:20:07.200 | these major shifts they just start one little step at a time and that one little step becomes

00:20:12.720 | a gigantic move quickly so you can't underestimate these small moves and i i think this confirms

00:20:18.640 | something that we all know anecdotally as as we're talking about well and i think that you know even

00:20:23.520 | slide 24 you know when we were talking two years ago about chat gpt we knew it was off to a good start

00:20:29.920 | but the question was what's going to happen when meta you know gets its game going what's going to happen

00:20:34.560 | when google launches gemini what's going to happen when elon launches grok what's going to happen when

00:20:40.240 | you know claude gets better we all thought that when they got into the game that this line would

00:20:45.440 | start to flatten out but the fact of the matter is chat gpt has been radically more resilient and the

00:20:52.240 | engagement has increased much faster than i think any of us would have thought with that level of

00:20:57.200 | what's interesting about that is that's true in the us it's true internationally yes it's true

00:21:03.280 | whether you look at it on downloads it's true whether you look at it on engagement it has blips

00:21:08.320 | here and there the deep seek moment and others but the resiliency to me bill it does remind me a little

00:21:14.400 | bit of when uber got started right and it would just they established that market share and you know it was

00:21:20.720 | just incredibly difficult to disrupt right yeah for listeners that don't have the slides we're looking

00:21:25.760 | at chat gpt adoption against twitter instagram facebook and tick tock and it's just you know

00:21:33.760 | you know straight up and way ahead way ahead of those against by the way those apps had inherent

00:21:40.160 | virality as you know i mean you're kind of the expert of that this doesn't right this has no virality to

00:21:45.440 | it it's just value to the consumer correct driving adoption although i would say that we're starting

00:21:50.720 | to see network effects right on the data side we're starting to see switching costs with permanent memory

00:21:56.800 | as you and i have talked you know starting to see what's amazing is you have this level of adoption

00:22:02.720 | even before those things begin to kick in but it confirms what we kind of know to be true we saw this

00:22:08.320 | with google right we saw this with facebook yeah and now we're seeing it again with chat gpt

00:22:13.520 | kevin who was on stage after you guys talked made an interesting comment which i mean it's it's

00:22:18.720 | tautological but it it still kind of resonated with me he said look this is products going to get better

00:22:25.280 | so you have all of this adoption with that's what's scary you know the product's getting

00:22:32.720 | yeah it's not even three years old we could show the or maybe we did show the stat about also the usage

00:22:38.160 | in terms of minutes yes right right that more maus more weekly users more daily users and then more

00:22:45.360 | time per day which is a lot which is also consistent with all of our personal lives right yeah um we're

00:22:51.840 | going to keep forging ahead here we're going to get crunched on time slide 27 bill is i know a slide you

00:22:56.880 | wanted to talk about when we talk about these new hyperscalers and what you did here is you were mapping up

00:23:02.320 | cloud revenue market share to the share of nvidia gpus so bill why don't you i'll just describe this so

00:23:08.720 | people and that are listening can follow along and then we'd ask you guys to talk about your takeaways

00:23:15.200 | from it but they they the co2 team mapped out cloud revenue market share and you have oracle five percent

00:23:22.240 | amazon 44 because of the success of aws google 19 and microsoft 30 and then you show right next to it the share of

00:23:30.960 | nvidia gpu allocation microsoft and google are about equivalent uh 30 and 20 to what they have in the

00:23:38.640 | in the cloud revenue market share amazon notably 44 of cloud revenue market share but only 20 of nvidia

00:23:46.720 | gpu allocation and then oracle jumps from 5 to 19 and core weave comes out of nowhere to be 11. so tell

00:23:55.600 | tell us why you guys put this together and what are your big takeaways i mean for me as a um i'll go ahead

00:24:03.040 | and then you go as a as an as an analyzer of companies this might be my favorite slide because

00:24:09.920 | it shows like the competitive dynamics at work and whose strategy will win out you know i mean i look at

00:24:15.840 | this and and one obvious takeaway is that amazon has half the share of gpus than their shave aws so

00:24:23.680 | that could mean one of two things either aws is behind an ai that could be one or they're pursuing a

00:24:30.000 | different hardware strategy than it's uh than its competitor which andy spoke specifically about so that

00:24:36.720 | could be or a combination thereof right so that's one and number two it shows the reinvention of oracle

00:24:43.280 | mm right i'm incredible incredible left for dead in this left for dead in the 2000s left for dead in

00:24:49.840 | the sas era left for dead in the ai era now coming back and then also i give corey a tremendous amount

00:24:56.080 | of credit of just entering the market as a pure play had difficulty raising capitals none of us ever

00:25:01.600 | believe there's no ip you're just buying gpus and reselling them just by being in market and being focused

00:25:07.680 | right started to build that relationship with nvidia and now it's punching way above its weight

00:25:12.640 | so it's a by the way the third theory could just be that nvidia would prefer not to have a dominant

00:25:20.880 | customer like they wouldn't want this to be the customer though it hasn't seemed to impact

00:25:26.160 | microsoft and google so yes do you want to add anything yeah i mean listen i would say the one thing on

00:25:32.240 | that chart is damn hard to get the numbers right so there we have to explain the viewers like we could

00:25:38.400 | be off by you know five or six percent up or down but i think where we're not off is the concept that

00:25:45.200 | some players are getting more gpu chips than others and so then the question is are nvidia gpus

00:25:52.400 | a prediction of future cloud revenues and i think the answer is like and uh we haven't even included

00:25:59.040 | stargate which is going to start coming up here right and what if what if anthropic also becomes

00:26:05.520 | its own hyperscaler you could have a world with more like a dozen hyperscalers than like the two or

00:26:11.600 | three that we've had before the overseas the sovereign then you're going to have the sovereigns for sure

00:26:17.760 | you're going to have some telecom operators more traditional operators in europe is that so there'll

00:26:22.640 | be more right but i think what definitely is going on now is there's sort of a battle between uh people

00:26:30.240 | that want to standardize on nvidia pay the nvidia rent yeah and get the supply versus people who also think

00:26:40.320 | like hey i'm bringing a lot of software i already have a lot of the data and i can afford a different

00:26:47.200 | strategy in the internet era almost every startup started with oracle and sun and five years later

00:26:53.840 | they weren't on it so there is some precedent there is and i also think like uh the other one that

00:26:59.200 | surprised me i i even have a hard time believing that those are the numbers is i thought google was

00:27:04.240 | more skewed to tpus than nvidia so there's some people who are going exclusively with one chip there's

00:27:11.920 | some people who are going to go in a hybrid way google both as a nvidia and tpu i think amazon is

00:27:18.800 | also choosing a path of like hey we're still making a ginormous bet on nvidia but we also would like to

00:27:25.600 | have you know our own bet and i wouldn't be surprised if maybe someday an anthropic or uh maybe even an open

00:27:33.440 | ai would say uh maybe we should design our own chips and then frankly you might have uh some very

00:27:39.520 | expensive model with enormous reasoning that runs on nvidia and maybe a super cheap model just for some

00:27:46.240 | very local applications maybe that could run on a custom chip so i think a lot of it is going to morph and

00:27:52.640 | change uh over time but at least what's fun here is let's go revisit this chart in like five or seven

00:27:59.360 | years and be like okay different people play chess the different ways what's happening and i think to

00:28:05.040 | me the thing that stands out most about this slide again slide 27 microsoft you know you talked about

00:28:10.400 | the explosion in terms of token production you know we we might be a hundred million tokens a month

00:28:15.920 | already out of microsoft microsoft is open ai so you got chat trillion hundred trillion i know you knew

00:28:22.320 | that you know for the so it's a yeah so what's really driving inference and and this token explosion

00:28:28.560 | like consumers first and foremost and google's got gemini right microsoft derivatively is supporting

00:28:34.960 | chat gpt as is oracle and core weave on the slide amazon doesn't really have a big consumer application

00:28:41.440 | right so their need for those gpus uh may also be a little bit lower correct uh in this

00:28:46.880 | slide very good one of the i want to jump ahead a a few a few sections because i want to i want to

00:28:53.280 | get to the private side the venture side of this but i want to end the public side with the the macro

00:28:59.280 | backdrop philippe you're one of the best you know we've been at this a long time we know that you know

00:29:04.560 | we invest in companies that are doing extraordinary well we look at fundamentals but you can't ignore the

00:29:09.920 | macros dan loeb says if you don't do macro macro does you um we found that out the hard way too

00:29:15.520 | many times in our career but if you obsess about it it can also uh be your undoing one of the things i

00:29:22.240 | thought was so interesting we're at this moment in time where we we've heard from elon and the guys on

00:29:27.600 | the all in pod david friedberg and others who are saying you know we're in this debt spiral there's no way

00:29:33.040 | out of the debt spiral you know and yet if you look at the tenure the tenure is still at three four three

00:29:39.920 | four four right despite the calls that it was going to be at six five or seven we haven't got anywhere

00:29:45.920 | close we've been in a band between three five and basically four eight now for two years and you

00:29:51.840 | presented an argument on slide 45 about the productivity cycle that may come out of ai right

00:29:58.240 | that may drive faster growth in the economy much like we saw in the 90s with the internet

00:30:03.840 | that could in fact lead to lower inflation and lower rates on a permanent basis it's kind of this

00:30:09.760 | backdrop that would bring the deficit to gdp below you know uh four percent i know you guys work

00:30:16.880 | closely with with larry summers you know and others and so as you think how important is believing this to be

00:30:24.160 | true in our overall kind of public uh investing today so your original question philip should we be worried

00:30:33.360 | that we all think that ai is a big deal right the counter to that is to say okay well what if we're

00:30:39.120 | right on the ai but we're wrong on something else and we actually analyzed three things we analyzed are

00:30:44.800 | markets expensive and the answer is yes but they were markets were expensive the 90s during the pc and

00:30:51.600 | internet era and the market did well so that's number one number two we said well are tariffs a

00:30:56.800 | big deal and we said yes they're important and maybe they haven't gone through inflation yet but this

00:31:02.400 | doesn't feel to us like i like to say that the tokens trump tariffs yeah right basically and so we're

00:31:08.960 | basically left with this deficit first thing that's on deficit is having doge and having people like elon

00:31:15.040 | say that we're spending too much it's useful yes and we should repeat that every day it doesn't hurt

00:31:20.640 | but what i was wondering is since it's so obvious that it seems that we need more doge we need to spend

00:31:28.160 | less and stuff like that who are the people who every day are buying bonds 30-year bonds at four and a half

00:31:34.400 | percent and i'm sure you're uh the listeners know that but a one-year bond at four and a half percent

00:31:40.800 | stays and gives you four and a half percent a 30-year bond at four and a half percent on its way to six

00:31:44.960 | or seven you could lose 60 or 70 percent of your money yes you know once you have a 30-year multiplier

00:31:50.640 | on a change in interest from four and a half to six right and our basic instinct was to analyze what

00:31:57.920 | happened in the internet in the pc days where we had exceptional productivity gains when the internet and pc

00:32:04.480 | really took off in the 90s and to say hey what would happen yes if we had similar exceptional

00:32:11.280 | productivity gains and basically the answer we were trying to solve is in essence today we're at

00:32:18.160 | 100 percent debt to gdp on our way to 140 and we said what would it take for actually debt to gdp

00:32:24.480 | to stay at 100 or maybe even bend the curve and go down to 80 and what's really surprising i think if

00:32:30.240 | you just show maybe the next slide or or so yeah uh i think if we move forward yeah just a little bit

00:32:36.880 | you'll see that if productivity for the next decade or so was about two and a half to three and a half

00:32:43.840 | percent per year right we could achieve substantial reductions in this key ratio of debt to gdp and i'm

00:32:51.920 | not saying we're there but i'm saying that at least we've been able to bookend what would productivity

00:32:58.400 | need to be to achieve an 80 100 instead of 140 debt to gdp this is slide 51 just for the people uh

00:33:06.080 | following along which is you know again an incredibly important point we know there are people buying

00:33:12.480 | bonds every day at four and a half percent so the question is why are they doing that and one of the

00:33:17.520 | answers may be exactly what you're saying what if they're right exactly what if they're right and we're

00:33:23.040 | wrong and in fact uh one funny part is in 1993 debt to gdp was supposed to go from 40 to uh or 60 to 80

00:33:32.320 | by expert and it in fact went from 60 to 40 yes so experts can be wrong by a lot right and so i'm not

00:33:40.320 | uh good enough macro guy and if tech guys pretend to be good macro guys you know it's the beginning of the

00:33:46.800 | the end but at least we have a little bit of analytical thinking around what it would take

00:33:52.240 | and bill and thomas you guys are much better placed than me in terms of your discussions with all the

00:33:58.400 | privates which i think we're leading to now and all these amazing new products and you're telling me that

00:34:04.880 | that's not going to create like massive productivity i really think it is and and and drawing from that you

00:34:10.960 | would end up with with gdp growth more like the five percent plus maybe even six which by the way

00:34:17.440 | that was the case for many of the years in the 90s then sort of product uh you know uh and by the way

00:34:23.680 | the six would represent four and about real terms whereas in the past you know most recently we've

00:34:30.400 | more be at like you know two or three which is more like the one in terms of real terms so you know

00:34:36.080 | just to wrap up your flight path for the public markets i think it's fair to characterize as you

00:34:42.800 | know tariffs fairly much being under control multiples are you know pretty full but like they

00:34:49.120 | were in the 90s they can stay full that the backdrop is okay it's like the the bond market and rates are

00:34:55.840 | still in the fours and we have this ai super cycle with that on the public side would you characterize

00:35:02.320 | your exposures to the public market philippe as in the top third middle third or bottom third of your

00:35:08.480 | you know kind of average exposures you know brad i knew you would ask me that and you know i'm not

00:35:14.080 | going to answer that but nice try i tried nice try i try okay let's nice try let's shoot over let's shoot

00:35:20.480 | over to privates i think one of the things that was a consistent theme if you look at slide 60 and and 61

00:35:29.360 | is this idea that the private economy uh thomas right we've had three or four years of really uh

00:35:37.280 | nobody getting out of the chutes these companies have all stayed private um the percentage of of of

00:35:43.840 | unicorns as a percentage of the public markets has gone up but now we're starting to see an unlock here

00:35:50.800 | both in terms of mna and in terms of ipos so talk us through the big themes from the slide 60 and 61

00:35:58.720 | today about how you know ai has reignited this deployment and x and and exits are starting to rebound

00:36:06.480 | yeah i'm curious to get bill's view here because he probably thinks about this as much as i do and

00:36:12.240 | i'm curious whether he'll draw the same conclusion i i think by and large we all agree that the

00:36:18.480 | environment of 2021 was incredibly unhealthy both for companies and for lps too much capital going in

00:36:24.000 | not enough coming out a kind of a broken cycle if you will um you could see that's in so many measures

00:36:30.880 | amount of dollars going in no money coming out historically low ipos even worse than post-financial

00:36:37.600 | crisis which is kind of incredible to think about so on almost any metric you looked at we were kind

00:36:44.720 | of in the danger zone and i would say more or less that's been true over the past two or three years

00:36:49.840 | this is the first year and this is the crux of the the view i'm curious if you share where the

00:36:57.120 | signals are going from red to i would say yellow and potentially green we're seeing first of all a

00:37:04.080 | rebound in ipos we're seeing ipos perform better we showed uh basically the performance of the cohorts

00:37:11.680 | and how they've improved substantially since 2021 one of the data points that shocked me re-looking at

00:37:17.760 | this is that the 2021 cohort within one year of going ipo was down 40 percent and five years later is down

00:37:26.480 | 50 percent i mean just pause on that for a second that was a shocking slide that here we are five years

00:37:33.200 | after those companies went public and basically the market has gone vertical but that's correct on the

00:37:38.560 | relative basis they're probably down 71 75 i know you're right slide 71 i think i i brand i didn't

00:37:45.120 | believe this so i actually i i went to look at every single company on this as by this does not include

00:37:49.760 | specs so that which is even more extraordinary this is just traditional ipos so um it's not dollar

00:37:55.680 | weighted no no it's correct yeah so um so there's a lot of scar tissue there yes right but i think we

00:38:04.240 | have signs to see things improving so we just talked about the ipo market we've now seen some really

00:38:10.240 | strong ipos that have performed well core weave circle hey thomas remind me what does zerb say sorry

00:38:16.320 | to ask such a dumb question but what zero interest rate oh zero yeah that's how do i know but we're

00:38:23.600 | also seeing companies like one of the things that really impressed me about core weave we had a slide

00:38:27.680 | on this i can't remember what the what the number is but like people are starting to understand how public

00:38:32.000 | market thinks and i do think they executed incredibly well on the timetable in terms of how they release

00:38:37.440 | information how they explain the business model this is kind of slide 75 for people at home so we have

00:38:45.520 | better ipos yes that are being rewarded and another thing that struck me is we looked at the cohort of

00:38:52.080 | ipos right and by and large you can see unsurprisingly that growth and profitability yielding a rule of 40

00:38:59.760 | was kind of the average of the cohort so um i i thought that was bullish for the ecosystem and then finally

00:39:05.760 | um you've talked about this on the pod before but the m&a environment coming back different types of

00:39:12.320 | structures zuck's bold move right to pay a hundred percent of a company to only get a hundred percent

00:39:19.440 | of the price 49 of the company by the team urgency is now i need you tomorrow uh alex to help me fix my

00:39:26.800 | business right i thought that that i thought that was the best description of the scale deal that i've

00:39:32.240 | heard and maybe just click on that again for a second so you know as you know for the audience most people

00:39:38.720 | know that you know meta has has done this interesting structure deal they're buying 49 percent of the

00:39:44.320 | company um they're paying a 30 billion valuation so they're paying effectively 15 billion they're

00:39:50.560 | avoiding regulatory scrutiny uh the ceo of scale is going to help lead efforts uh at meta and all the

00:39:58.000 | customers have left right and so they're leaving kind of a shell company behind also we don't know

00:40:03.600 | if that avoids regulatory scrutiny exactly we're gonna find out we're gonna find out right right

00:40:09.760 | so uh i don't know what the if there's a breakup fee or not it'd be interesting to see yes i i don't i

00:40:17.040 | don't know that either but i mean i think one of the things it shines a light on is the speed at which

00:40:22.960 | everything is moving right here we are and we can all say that that zuckerberg's in beast mode

00:40:29.520 | meta is one of the greatest companies you know on the planet he's extraordinarily focused uh on getting

00:40:35.920 | ai talent but why do you think he was willing to pay a hundred percent of the value of a company and

00:40:42.240 | only get 49 is it that the imperative to have talent today is so important because two years from

00:40:48.960 | now you may be so far behind given the rate at which ai is moving yeah i i tend to think it's

00:40:53.760 | related to two factors right one is the size of the prize yeah so i think he clearly sees that this

00:40:59.680 | is the biggest prize in tech right in the world frankly and so i think relative to his while 15

00:41:05.760 | billion to all of us is a massive number probably in the scale of the multi-trillion opportunity that

00:41:11.280 | he sees he might just think it's a bet i would make all day long so i think you get it as a

00:41:15.440 | percentage of your market cap and you say like a one percent right correct right so he so i think

00:41:20.640 | that's number one scale of the opportunity no pun intended and i think number two is how quickly the

00:41:26.480 | ecosystem is moving under some data point i mean people had this view already that that llama wasn't

00:41:32.800 | quite at the top but this is somewhat confirmatory of that that he's fixing a problem right we've seen

00:41:38.880 | anthropic we have data in here that i think it took him about a year to get to their first billion in

00:41:44.000 | revenue it took him three months to get to the next billion and then it took him two months to get to

00:41:47.920 | the one the next billion after that right so he's probably seeing how quickly chat gpt is growing

00:41:54.240 | social users how quickly um anthropic is growing business users through their api and thinking i don't

00:42:01.920 | have two years to wait in european regulatory uh purgatory i have a question for you thomas on the ipo

00:42:08.640 | so so so simultaneous with seeing more ipos which is awesome there there has been a trend for companies

00:42:16.320 | to stay private longer i think the collisons used to hint maybe and now they're more kind of maybe never

00:42:22.720 | and and some investors in the ecosystem are encouraging that behavior what what do you

00:42:28.400 | think is different about the people that choose to go out now that the windows quote open i think um

00:42:36.000 | i mean they each have different reasons some may have uh just view from the financing opportunity the

00:42:41.760 | ability to tap the public market both on the equity and the debt side to be simpler right as a public

00:42:46.480 | company i think that's the big piece of it second look it could be a brand defining event for a

00:42:51.760 | company right for for your product for your employees giving the level of transparency to your customers

00:42:58.320 | that you're well funded that you have a fortress balance sheet you know all of that you can with

00:43:03.840 | withstand the regulatory scrutiny that comes and even just the um the scrutiny from investors right that

00:43:11.120 | you have the discipline and and with everything that comes public people looking at your numbers so all

00:43:16.800 | of those things right i happen to believe that all these companies should go public um i also think

00:43:23.680 | by the way there's there's a democratic element to it where i think the wealth creation belongs to the public

00:43:28.480 | market um i think you attract different types of investors not just frankly a public market versus

00:43:34.320 | a private market but also the retail investor what can you learn from the retail investor either

00:43:39.440 | positive or negative about your business right i mean i think it's a it's such an important point

00:43:43.600 | and i've made this case to everybody at open ai i think they're the most important company of the era

00:43:49.520 | i think it's hugely important from a regulatory scrutiny and from the democratization of finance

00:43:56.080 | it needs to be a public company the idea that we're going to have trillion dollar companies

00:44:01.840 | and the only people who get to participate are the people sitting around this table right i just think

00:44:07.120 | is unhealthy for our capital markets yeah and the fact the fact of the matter is you know we call

00:44:12.240 | these companies venture-backed companies but you we all know there's a whole new market that's evolved

00:44:17.120 | here that i call quasi public these are companies over five or ten billion dollars in value they would

00:44:22.800 | have all been public 10 or 15 years ago why because the the private markets just didn't have the depth of

00:44:29.760 | capital to serve these companies and their voracious capital needs to do you know this is happening as

00:44:35.360 | we speak in private equity right some private equity companies just go from a private equity owner to

00:44:40.560 | another then you have continuation funds right big second transaction this is happening in the private

00:44:46.320 | credit market where now you have a huge private credit as an asset class not just so this sort of healthy

00:44:52.720 | tension between public and private is important i just think that these super super large private

00:44:58.400 | companies if you're not willing to submit yourself to sort of the sunshine and the and the ray of light

00:45:07.040 | the public markets you're going to get it through a regulatory agency so pick your poison and be

00:45:13.120 | careful that if you think you can live in the public market purely to sort of live in the shadows that's

00:45:18.800 | not going to work as you become a large company you'll be regulated and so that's why maybe even more

00:45:25.680 | correct that's why i really hope that these companies will choose to go public uh you make the democrat you

00:45:31.680 | know retail investors should have access to these companies but i just think in general the concept

00:45:39.520 | of mark to market it's not perfect and there's increased volatility but every day we learn something

00:45:45.920 | and every day we know it's the it's the price you can get today by the way i thought one of our best

00:45:51.360 | speakers who made this great point of just because i'm public doesn't mean i need to change how i run my

00:45:55.200 | business well maybe maybe we talk about app loving on slides 91 and 92 you had the 91 is has microsoft

00:46:03.680 | reach peak employees and 92 was about how app loving has gone ai first and had massive uh you know

00:46:10.880 | margin expansion or revenue per employee i i tweeted about this the other day i called a game the golden

00:46:17.360 | age of margin expansion right if you look at the mag 7 over the last three or four years they've grown

00:46:23.840 | over 20 percent compounded but the number of employees their opex is growing at two percent we've never

00:46:30.560 | seen this yeah in the history of technology you know that we've covered so why don't you talk a little

00:46:36.160 | bit about it you know well are you guys can you describe this yeah i loved this chart on 91 and

00:46:41.920 | previously what we had is we just had the chart without the blue lines right right which basically this

00:46:46.720 | chart for those listening tracks microsoft employee count what we realized when we after we did this chart is we

00:46:53.360 | realized wow there's actually three distinct chapters that are um kind of uh being told

00:46:59.920 | here chapter one is the zirp era it's covid software is everywhere the only way these companies think

00:47:06.240 | they can grow is by hiring more people exactly reflex big opportunity i got which by the way made sense

00:47:12.400 | because if you grow by producing more code you need more people for more code so i think it was

00:47:19.040 | completely logical we gotta hire more okay so that's the zirp era then ironically just as github copilot

00:47:26.800 | comes in brad familiar with the term the get fit era this is like time to get fit hold on we need to

00:47:33.600 | get fit we've gotten too big right and then you can see stabilization of headcount down in a lot of other

00:47:39.280 | companies now we're entering the ai era and i do think it's kind of a provocative provocative question

00:47:46.880 | which is that has microsoft reached the peak employee and while they never cross that threshold ever again

00:47:52.720 | right i i you know i i had conversation with the cfo of a major company recently and they said thought

00:48:01.120 | experiment what if our headcount was down 50 percent in three years right those questions have never been

00:48:10.800 | asked for companies that are growing and thriving and i do think what i get excited about from as a

00:48:16.800 | public market investor philippe it's not just that we're seeing a re-acceleration and top line growth

00:48:21.680 | for all these companies every one of these companies literally from uber they're growing their top line

00:48:26.640 | without growing their headcount all the way to the largest of the mag seven but apple oven has done as

00:48:31.840 | as good a job as tell everyone about this slide you put yeah so this is another one of my my favorites

00:48:37.920 | right and what this slide does is it will track app loving a public company run by a brilliant in my

00:48:44.160 | opinion generational entrepreneur um and it basically looks at two things one it looks at uh the revenue of

00:48:51.600 | the company annualized uh since q2 2021 so that's uh the blue line and second the um employee count

00:48:59.920 | over that same period right and basically 2021 big opportunity i gotta hire tons of employees

00:49:06.880 | to kind of try and capture it what else can i do right then realizes oh my god my company's gone too

00:49:12.160 | big i've lost control of my culture we're not innovating fast enough too many layers of bureaucracy

00:49:17.120 | we're not set up to capture the opportunity right sizes the workforce at the same time as ai comes

00:49:23.680 | in now the company's lean and mean innovates out competes companies like google and meta doubles the

00:49:30.640 | size of the company as the employee count is down over 35 right think about this we just showed the

00:49:36.400 | the slide of chat gpt going parabolic google losing right page views google has 187 000 employees open ai

00:49:45.120 | 2700 we're not going to be a company of 20 000 employees he didn't say we're not going to be a

00:49:51.280 | company of 187 000 employees right he's saying we're going to leverage our models our agents our capabilities

00:49:57.920 | which is exactly what jensen huang said to us last year he said brad i'm going to 3x the company

00:50:03.040 | and our head count may not grow or only grow a little bit i said how he said because i'm going

00:50:07.360 | to have agents who are reporting to me i'm not going to have employees who are by the way i'll tell you

00:50:12.800 | what this made me think of so back to the app loving slide so in five years four years they doubled the

00:50:18.800 | revenue per employee and now you know a company with a high growth rate that's profitable that's thriving

00:50:26.320 | is lowering head count um because of ai it it it really struck me that there's a level of confidence

00:50:34.800 | in a company's use of ai if they're willing to actually reduce head count and a lot of companies

00:50:40.160 | give lip service to their using ai but a willingness to reduce head yes is a different level yeah and by

00:50:46.560 | the way one point adam would make if he was here and i think it's important to state he's not doing

00:50:51.440 | this because he's a masochist that loves to fire people right the reason he did this is he believed

00:50:56.720 | that that's the shape the company needed to be in to win and out compete yeah right so i think that's

00:51:01.920 | really important it's not like oh my gosh all of a sudden i i want to be much more efficient and i think

00:51:07.200 | that you know i can create so much more value it's i believe this is what the company needs to look

00:51:12.080 | like so i can win this market we need to make decisions faster we need fewer layers right i think the

00:51:18.080 | motivation is really important um and this is just kind of an output of that and and the final thing

00:51:23.200 | i would say about this philippe the thing that should give us confidence about this productivity

00:51:28.240 | explosion in the economy is at the end of the day our economic productivity is just a combination of

00:51:33.840 | all these companies so if a lot of companies are doing this and you could you pile them all together

00:51:38.640 | right you're going to get more output for a fixed amount of labor and capital right that's

00:51:43.840 | going to drive economic productivity the last thing to say on that which is really important is someone

00:51:49.200 | is going to then say my god what's going to happen to employment yes if we have all these companies

00:51:53.920 | that become so efficient right and i think today someone brought up the concept of jevons paradox yes

00:51:59.920 | and i'm going to actually use my chat gpt to study a little bit more over the next week or so but it is

00:52:06.080 | the concept that uh sometimes as uh you have less employees and the cost of employment goes down

00:52:14.320 | actually the unemployment rate will go down not up and i'm really summarizing it in terrible terms

00:52:20.400 | but i think it's really important to say um that uh it's possible that companies need less employment but

00:52:28.000 | more companies get created because it's much easier to create a company smaller companies

00:52:32.960 | vibrant companies get created jobs become more interesting and so i think there's going to be a

00:52:38.480 | big debate around okay all this ai is it going to increase or reduce unemployment and i'm not 100 sure

00:52:45.520 | what's going to happen but if you force me into an answer i have faith that it might actually create

00:52:50.640 | more jobs more interesting jobs with more responsibility versus the other way around

00:52:55.600 | um yeah we have two more slides we want to cover that i think maybe we're going to end with the best

00:53:02.960 | because you guys had a couple powerful things um the first was slide 98 right after all of this you know

00:53:10.080 | covering you know uh what's happening in public and what's happening in adventure thomas i think you

00:53:15.840 | summed it up well which is okay so what does this mean for me if i'm a founder if i'm a

00:53:20.560 | a ceo what does this mean for me or or my company so bill why don't you let me let me describe what

00:53:26.400 | thomas did and then thomas you can do the analysis from it but he created a quadrant you know and on

00:53:32.960 | on one access he has a growth rate above 25 or below 25 and on this access you have profitability

00:53:42.080 | either you're cash flow positive or you're not and so walk us through kind of your recommendation for

00:53:49.360 | companies that find themselves in each of these four quadrants yeah and philippe chime in too um

00:53:55.120 | look we we're very proud of the work that we put in this deck but we also want to be mindful that

00:54:01.120 | it's a lot of data and we thought about how do we crystallize everything that we see in the market

00:54:06.080 | from all the data all the smart people that we talk to in terms of generating useful advice for

00:54:12.000 | entrepreneurs right and so we kind of came up with this matrix if you look at the left side which is

00:54:18.960 | basically growing companies growing in excess of 25 right and you might argue this is kind of the

00:54:24.560 | easiest bucket you're growing 25 but we do think the delta is kind of different and and by the way one

00:54:29.600 | thing we skipped over you guys had two or three slides on the fact that growth has become more scarce in

00:54:36.640 | in the public market and there's a and there's a big um delta now in revenue multiple for growth

00:54:43.680 | and for you know and and obviously diminishing multiples for correct so we have seen in the

00:54:49.600 | public market now growth be re-rewarded post 2021 so our advice being to entrepreneurs that if you are

00:54:55.920 | growing over 25 percent you are profitable time to think about whether you should be public yeah but

00:55:01.440 | that doesn't necessarily mean go in public as you well know there's a difference between being ipo

00:55:06.160 | ready and going ipo but we think certainly putting all the steps into place kind of starts to make sense

00:55:11.440 | if you're burning then now might be the time to build a fortress balance sheet we just saw open

00:55:17.360 | ai raise 40 billion right these companies are accumulating massive war chests so you don't want

00:55:23.600 | to lose out time to really kind of built up your strengths i think where i think you're going bill and

00:55:29.600 | what we you and i spend also a lot of time thinking about is what about the companies that aren't going

00:55:34.000 | 25 and you know for philippe and myself we take the responsibility of having invested in companies

00:55:40.640 | really seriously we're on the boards of many of the companies that we are invested in and we don't uh

00:55:48.240 | bail on our entrepreneurs you know when we make those commitments so what do we do kind of in those

00:55:53.600 | companies right i think each bucket is interesting the okay i'm growing less than 25 but i'm profitable

00:56:01.840 | it's kind of an interesting case study because that's where you might be complacent you might

00:56:06.320 | have said look i got fit post 21 you told me to cut my burn yeah i'm profitable now

00:56:11.520 | by the way the reason i think a lot of companies ended up in these low growth situations is they had a ton

00:56:17.680 | of capital we had that mini correction in 2021 everybody said get to cash flow break even they

00:56:25.600 | all ran that way but that meant cutting headcount cutting programs that they might have been doing

00:56:30.560 | yeah and you end up in a low growth situation yeah so we thought that actually this bucket now

00:56:37.360 | we're in a potentially generational transformation and architecture shift because of ai time to maybe look

00:56:43.200 | at and say okay what can ai do for your business is there a new way that you can invest is there an

00:56:49.440 | mna opportunity or something interesting so we think now you can afford to be a little bit more on your

00:56:54.480 | forward foot right you've gotten the business healthy you've shown you can be profitable we have a

00:56:59.440 | generational architecture shift time to kind of see how we can play offense would that even include maybe

00:57:05.200 | becoming unprofitable potentially yeah if if if you have the science and you really start to see the

00:57:11.840 | growth re-accelerate because of it potentially absolutely yeah right a lot of ai companies

00:57:17.360 | are not profitable right now so if you think you can win and you can benefit um i think that makes

00:57:22.960 | sense yeah this is probably the one i had the most debate about both myself with with with with

00:57:29.680 | others is what to do if you're growing less than 25 and you'll you're still burning capital and look

00:57:36.880 | obviously no one chooses to be in this position right circumstances of the business whether it's

00:57:42.400 | competitive dynamics or others have put you in this position and now the question is what to do

00:57:46.480 | and i went through a lot of different um iterations here and the best word i could come

00:57:51.440 | up with is it's time to reinvent and reinvent could mean a lot of different things so let me

00:57:56.000 | pause it that you might have two businesses let's say you were 50 million in revenue and you might

00:58:03.040 | have your 40 million uh core business not really growing the unit economics are tough but maybe you

00:58:09.280 | think and maybe it's an on-premise product and now you think you made it a new sas uh cloud product

00:58:15.680 | that's maybe only one or two million in ar but it's really growing quickly it's putting the company back

00:58:21.360 | on offense the team's really excited might be time to say hey let's go all in on this new product even

00:58:26.720 | though it's much smaller right that's one reinvention so it might be you have a gem of an asset it might

00:58:31.760 | be trying to open source something that previously you didn't right that's kind of what i mean by

00:58:36.080 | reinventing yeah it's it's the opportunity of looking at this moment and thinking what can i do and also

00:58:41.920 | realizing that you as an entrepreneur have an opportunity cost of not doing other things so

00:58:46.240 | the best word i could come up with is reinvent it's going to mean different things to different people

00:58:50.720 | but we thought now was the time to kind of um think about that i i i thought this was amazing and i i

00:58:56.400 | will tell you that i think one of the biggest challenges that these companies in this quadrant

00:59:02.000 | i think there's a lot of them there may be a thousand of these out there one of the big thing

00:59:06.720 | problems i think they have is having survived to this point and having succeeded let's say they have

00:59:13.040 | revenue of 50 to 100 million dollars they feel like they need to protect something and it puts them on the

00:59:19.600 | back foot not the front foot it makes them conservative and i like your word reinvent they

00:59:24.800 | need to increase risk they actually because i i think one of the problems is they don't they don't

00:59:31.200 | internalize the fact that if they stay low growth at this size their multiple could go from five to three to

00:59:38.720 | one right time's revenue and they're protecting something that doesn't exist so that i'll leave you

00:59:44.640 | with this last thought brad you and i've talked about this there's an amazing element of the venture

00:59:49.040 | community they choose them to be tribal and i think there's a lot of benefits to that

00:59:52.800 | but i also think there's a lot of benefits to what i'll call more mercenary thinking right

00:59:57.840 | which is more reinventing from the ground up right and i think that ultimately the combination

01:00:02.640 | of both of those right which tends to be more of a public mindset again because we do have

01:00:07.680 | the ability to sell and venture um don't to us bringing those two kind of strains uh together

01:00:15.520 | in the boardroom you know can yield hopefully some good outcomes awesome thomas thank you for

01:00:20.400 | being with us thank you for having us at the event um it's really incredible the amount of thought that

01:00:27.040 | that went into this is extraordinary um and i would just say on behalf of all the founders uh those

01:00:33.760 | people who partner with you like altimeter and benchmark um what i love about this ecosystem

01:00:39.040 | most people think that we compete like dogs and uh but the truth of the matter is uh you're one of

01:00:44.960 | the first people i call or philippe when we're having when we're trying to figure something out

01:00:49.760 | and and you guys to us and that's why bill and i do this pod because we actually just want to be

01:00:55.040 | smarter and get to the right answer um and so appreciate you having us and uh an awesome job

01:01:01.040 | again okay thank you so much

01:01:02.880 | as a reminder to everybody just our opinions not investment advice

Coatue’s Laffont Brothers. AI, Public & VC Mkts, Macro, US Debt, Crypto, IPO's, & more | BG2

Chapters