Ep11. Coatue Conference Recap, Tesla & ISS Controversy | BG2 with Bill Gurley & Brad Gerstner

00:00:00.000 | He implied, do you tell me if I got this wrong?

00:00:02.280 | He implied that in the modern era,

00:00:04.960 | you need to be $10 billion to go public.

00:00:08.100 | - Yeah.

00:00:08.940 | - Market cap.

00:00:09.760 | - Yes.

00:00:10.600 | - Which, if it's 10 billion or bust, that's a bitch, man.

00:00:14.680 | (both laugh)

00:00:16.140 | (upbeat music)

00:00:18.720 | - Hey, man.

00:00:29.880 | - What's going on, bruh?

00:00:30.700 | - It's good to be here.

00:00:31.540 | It's like a destination podcast here in Santa Barbara.

00:00:34.500 | - This is our first destination podcast.

00:00:36.660 | We're coming to you live

00:00:37.720 | from CO2's East Meets West 2024 conference.

00:00:42.720 | - Indeed.

00:00:43.560 | Were you up or down last night?

00:00:44.680 | - I did okay.

00:00:45.520 | - Okay, okay.

00:00:46.340 | - Hey, you.

00:00:47.180 | - Ah, it was a good night.

00:00:48.520 | - Yeah.

00:00:49.360 | - It was a good night.

00:00:50.180 | - Hopefully they don't think we were the ringers,

00:00:53.000 | you know, at the time.

00:00:54.240 | - Well, tell the audience a little bit

00:00:57.400 | about what is East Meets West.

00:00:59.160 | It's a really gracious invitation.

00:01:01.040 | - Yeah.

00:01:01.880 | - You know, we've been doing this for years

00:01:02.700 | with CO2 down here.

00:01:03.920 | - Yeah.

00:01:04.760 | - Why don't you tell us a little bit about it?

00:01:05.600 | - Yeah, so Philippe and Thomas Lafont,

00:01:08.640 | who run CO2, started a conference,

00:01:10.920 | I'm gonna guess about eight or nine years ago,

00:01:13.880 | titled East Meets West, and at the time,

00:01:16.700 | it was really about bringing together entrepreneurs

00:01:19.480 | from Silicon Valley and the West

00:01:22.080 | with entrepreneurs from China.

00:01:23.960 | And some of my best relationships

00:01:26.700 | with some of the smartest, coolest,

00:01:29.740 | hippest Chinese entrepreneurs came here,

00:01:33.020 | and the access was just unbelievable.

00:01:36.140 | - Yeah.

00:01:36.980 | - It's literally a once-in-a-lifetime opportunity,

00:01:38.500 | and they've kept the conference up.

00:01:41.020 | It's on my list of must-attends.

00:01:43.180 | - Yeah.

00:01:44.020 | - You get a combination of incredible founders,

00:01:47.440 | some great CEOs, Satya Nadella's here,

00:01:49.660 | Dara's here, Andrew from EA is here,

00:01:52.500 | and it's one of those conferences,

00:01:55.140 | like when I entered the industry years ago at Agenda,

00:01:58.820 | the Agenda Conference, which Stuart Alsop ran,

00:02:01.920 | you know, Larry Ellison and Bill Gates

00:02:04.220 | and Scott McNeely would stay through the conference,

00:02:07.100 | so they're around. - Incredible.

00:02:08.980 | - Today, most conferences, the keynotes come in and go out.

00:02:12.920 | Here, everyone stays, and so it's more intimate,

00:02:16.340 | you learn more, you get to talk to more people,

00:02:18.620 | they do a lot of these one-on-ones,

00:02:20.700 | where they set it up so that you can maximize

00:02:23.980 | an individual connection, it's just incredible.

00:02:26.540 | Anyway, I'm super thankful to them for having us down

00:02:31.080 | and for letting us do this here.

00:02:32.200 | - It's a big investment, it's a big investment by them,

00:02:35.580 | and I think one of the things that's underappreciated

00:02:37.540 | outside of Silicon Valley is there's this view

00:02:40.740 | that this is all zero-sum, right?

00:02:43.500 | That I win, you lose, you know, we're all very competitive,

00:02:46.580 | we all like to win, whether we're playing poker,

00:02:48.300 | whether we're playing hoops, whether we're doing this,

00:02:50.640 | but really, I think this is a demonstration

00:02:53.660 | of positive sum.

00:02:54.900 | The fact of the matter is we're all analysts,

00:02:56.620 | we're trying to figure out the future,

00:02:58.700 | and what I deeply appreciate, you know, with you,

00:03:01.480 | with the guys at All In, when you come to an event like this,

00:03:04.500 | it's a lot of conversation about this future,

00:03:07.120 | about the consequence on the economy.

00:03:09.400 | We're gonna be talking to Larry Summers tonight

00:03:11.260 | about, you know, about that question,

00:03:13.420 | about the consequence on society from AI,

00:03:16.540 | which we're gonna be talking about a little bit today.

00:03:19.700 | You know, but when you really telescope out

00:03:22.540 | over the last 20 years that you and I have been doing this,

00:03:25.420 | technology's gone from 5% to 15% of global GDP, right?

00:03:30.040 | And we're gonna talk about public markets

00:03:32.160 | and venture markets, but the reality is

00:03:33.860 | there's a very big pie, you know,

00:03:36.100 | and we can all participate in that together.

00:03:38.460 | And so, you know, to me, this is a reflection.

00:03:41.700 | I see a lot of old friends, you know,

00:03:43.540 | this place is full of GPs, it's full of venture capitalists.

00:03:46.480 | You know, a lot of people would think of Altimeter

00:03:47.980 | as a competitor to Kotu, but the fact of the matter

00:03:50.500 | is you and I collaborate with them on a ton of stuff.

00:03:53.660 | Some of it works, some of it doesn't work,

00:03:55.580 | but we trust each other.

00:03:56.980 | We have a shorthand with one another.

00:03:59.040 | So it's great to be back down here.

00:04:00.540 | And like I said, thanks to, you know,

00:04:03.260 | Philippe and Thomas for encouraging us

00:04:04.980 | to do the pod down here.

00:04:06.020 | I think it's a perfect setting.

00:04:08.660 | But, you know, I thought one of the things we could do

00:04:12.300 | is set up for people, like what goes on here,

00:04:14.600 | and just kind of take them through it a little bit, right?

00:04:16.740 | Sounds great.

00:04:17.560 | So as you said, there's a couple hundred founders,

00:04:19.300 | CEOs, and GPs.

00:04:22.420 | You know, the first morning, which was this morning,

00:04:24.740 | we always telescope out, and Philippe kind of takes us

00:04:27.540 | through, you know, the view of the public markets,

00:04:29.660 | if you will.

00:04:30.620 | And then Thomas takes us through this view

00:04:32.660 | of the venture markets.

00:04:33.780 | And so maybe we could just start-

00:04:35.940 | And just to give you in a sense, like, I mean,

00:04:38.660 | it's a presentation I look forward to every year.

00:04:42.020 | And I think they said they threw out a hundred slides.

00:04:45.060 | So they put, they didn't, it's not falling off a log.

00:04:48.780 | They're putting in an immense amount of work

00:04:50.500 | to put this together.

00:04:51.460 | And by the time this podcast is released,

00:04:55.460 | I believe their PowerPoints will be released.

00:04:58.420 | Perhaps people can follow along

00:05:00.460 | as we talk about what happened.

00:05:01.980 | You know, they captured a little of that zeitgeist.

00:05:05.260 | Remember the old Meeker slides?

00:05:06.940 | Yes.

00:05:07.780 | You know, that everybody, you know,

00:05:08.620 | waited to see Mary's slides.

00:05:09.980 | And I think they do a lot of really great content.

00:05:12.580 | And Daniel also, you know, they gave thanks to him

00:05:16.340 | and his team for putting these things together.

00:05:18.440 | So a lot of great content, but they started, you know,

00:05:20.740 | I always like to get a read on where they are,

00:05:23.940 | both as, you know, we're co-conspirators

00:05:26.100 | in the public markets and the public markets

00:05:28.100 | really set the stage for the venture markets.

00:05:30.540 | And he said, you know, his first slide, you know,

00:05:33.940 | he put up this slide.

00:05:34.780 | He said, two big questions in 2024.

00:05:37.660 | Number one, are we in an AI bubble in the public markets?

00:05:41.340 | And then number two, we talked about last week,

00:05:43.380 | is software dead, okay?

00:05:46.380 | And what was interesting is we do these live polls.

00:05:49.240 | So I don't know, there may be 100, 150 seats out here.

00:05:52.120 | We do these live polls.

00:05:53.320 | They flashed up the poll we did this time last year.

00:05:56.680 | And this time last year, 56% of people here

00:06:00.440 | said we're in an AI bubble in the public markets.

00:06:03.560 | Remember, Nvidia had gone from $120 a share,

00:06:06.940 | maybe at that time to $250 a share.

00:06:09.920 | And people were already saying we're in a bubble.

00:06:11.680 | Now since then, Nvidia is up 200%, okay?

00:06:15.960 | And I was watching CNBC this morning.

00:06:18.560 | So far this year, Nvidia is responsible

00:06:21.320 | for 5% of the S&P 500 returns.

00:06:24.480 | The other mag six are responsible for 5%.

00:06:28.160 | And then the other 493 companies in the S&P 500

00:06:32.560 | are responsible for 4% of the 14% year to date returns.

00:06:37.120 | If you looked at the S&P equal weighted, okay?

00:06:40.480 | So you just, everybody's in at the same amount.

00:06:42.720 | It's only up 4% this year.

00:06:44.760 | So that all led, I think, Philippe to say,

00:06:48.120 | you know, we've got three $3 trillion companies now.

00:06:51.320 | Is this sustainable?

00:06:52.520 | Are we in a bubble?

00:06:53.720 | What was surprising to me was knowing Philippe

00:06:58.280 | the way we do is he showed a slide

00:07:02.080 | of the earnings growth of Nvidia, right?

00:07:05.720 | Comparing it to Cisco from the '99, 2000 period.

00:07:10.720 | In the case of Cisco, the earnings multiple

00:07:14.080 | more than tripled during that period of time.

00:07:16.720 | But in this case, because of the earnings growth of Nvidia,

00:07:19.700 | the earnings multiple has been flat,

00:07:21.500 | despite the fact that the stock is up nearly 10X.

00:07:24.880 | So he seemed to suggest, Bill,

00:07:27.200 | that we're not in an AI bubble.

00:07:29.360 | In fact, he showed an S curve saying KOTU's view

00:07:31.960 | is that it's going to be even bigger

00:07:33.400 | than people currently think.

00:07:35.200 | Was that convincing to you?

00:07:36.720 | Because I know you've been a voice of pragmatism.

00:07:40.360 | - Certainly at the end of his presentation,

00:07:43.760 | it was hard not to believe.

00:07:46.280 | I felt a little bit like I was at church.

00:07:48.460 | And he went on to say, I believe that,

00:07:53.240 | and I think they were somewhat liberal

00:07:55.400 | in tagging AI companies,

00:07:56.820 | but they said AI companies were responsible

00:07:58.980 | for 90% of the gains in the public markets.

00:08:02.640 | I think they're including some energy stocks

00:08:04.560 | that have traded up as a result of this.

00:08:06.920 | But yeah, he pointed out that if you go to the past

00:08:11.960 | and start to notice one to three companies

00:08:15.320 | just materially blowing out numbers

00:08:17.880 | above everyone's estimates over several quarters,

00:08:22.880 | there may be something happening

00:08:25.000 | that you should pay attention to,

00:08:26.880 | which is a valid argument, right?

00:08:29.800 | - And listen, I love the self-deprecating nature.

00:08:34.480 | He says in 2022, it was all about macro.

00:08:39.480 | What's happening with inflation?

00:08:40.920 | What's happening with interest rates, right?

00:08:42.480 | Macro dominated 2022.

00:08:45.280 | We get chad GPT at the end of '22, okay?

00:08:48.600 | And we enter 2023.

00:08:50.520 | And so you have this post-traumatic stress.

00:08:52.640 | And he's saying that post-traumatic stress

00:08:54.500 | kept a lot of people out of the market

00:08:56.200 | despite all of our suspicion

00:08:58.280 | that this was an important phase shift.

00:09:01.040 | 2023, you have this liftoff.

00:09:03.160 | And what has happened is as more cards got turned over,

00:09:06.840 | by the end of the presentation,

00:09:08.380 | he said macro is shifted to the backseat, right?

00:09:11.720 | That now he's kind of in the camp.

00:09:13.440 | - Which I found a huge relief

00:09:14.840 | 'cause you know I don't like to talk about it.

00:09:18.280 | - So macro shifted to the backseat from his perspective

00:09:23.120 | that we're kind of headed toward

00:09:25.080 | this no landing, soft landing,

00:09:27.640 | that maybe inflation really was an anomaly

00:09:30.340 | of the COVID period.

00:09:32.000 | And if that's the case, then this new super cycle,

00:09:37.240 | which again, they described as transforming

00:09:39.860 | all these different parts of society is allowed to shine.

00:09:43.620 | And so that to me was a significant change,

00:09:46.920 | I think by CO2 in terms of the positioning of those two.

00:09:50.100 | - I'd add one thing to it, just from dinner last night.

00:09:54.000 | I get to see people that I may only see

00:09:56.020 | once or twice a year.

00:09:57.220 | They might be executives at some of the Mag 7

00:09:59.740 | or other VCs at other firms.

00:10:02.980 | And one thing that was congruent across them all

00:10:06.460 | is they all feel a bit like a kid in a candy store with AI.

00:10:11.180 | It's like there's a new toy to go play with.

00:10:13.460 | And I think from an intellectual curiosity standpoint,

00:10:18.460 | like I see smiles and excitement.

00:10:21.300 | And like, so it's clear to me

00:10:23.860 | that the vast majority of people here,

00:10:27.120 | not just the team at CO2 believes this is a mega wave

00:10:31.780 | that everyone's gotta be all in on.

00:10:36.420 | - Yeah, that is, I mean, I think if there's one surprise,

00:10:40.300 | one answer on that, I'd love to get your reaction to.

00:10:44.340 | So on the question of how much would it,

00:10:47.540 | and I hear this 200 billion of CapEx

00:10:49.780 | going into the ground this year,

00:10:51.180 | how much return do companies need to see?

00:10:53.740 | So we had Satya present to us one answer.

00:10:56.340 | We had Philippe give us another answer today.

00:10:58.060 | Philippe, what he called his monkey math

00:11:00.200 | was that it was gonna take $1.8 trillion

00:11:03.100 | in order to provide a 25% return on investing capital, okay?

00:11:08.360 | And of that 1.8 trillion, he went and said,

00:11:11.360 | if we got a 5% improvement in the labor force, right?

00:11:15.580 | So I think what he was saying is we effectively take 5%

00:11:19.360 | out of the labor force,

00:11:21.020 | that that would be enough cost savings

00:11:22.840 | to justify the $200 billion investment.

00:11:25.740 | Satya tackled it from a slightly different way,

00:11:28.660 | just here talking at lunch.

00:11:30.300 | He said, if we currently have a global GDP

00:11:33.760 | growing at 1% to 2%,

00:11:35.220 | he said, if we could get that up to 3% to 4%,

00:11:37.820 | the incremental gain coming from that

00:11:40.480 | would be enough to compensate again for this,

00:11:42.680 | because it would more than double

00:11:43.860 | the amount of money spent on technology.

00:11:45.540 | Convincing or not convincing?

00:11:47.100 | Seems like it answers the question for-

00:11:48.700 | The Satya, I buy more than the first one.

00:11:52.820 | The problem I have with the first one

00:11:55.060 | is simply that my entire time in technology,

00:12:00.060 | like these tools are competitive weapons,

00:12:03.100 | but if I get armed with them

00:12:04.840 | and my competitor gets armed with them,

00:12:06.780 | it doesn't necessarily increase,

00:12:08.820 | it doesn't create like free net income.

00:12:11.420 | You might die if you don't do it,

00:12:13.220 | but you gotta keep, it's the Red Queen effect.

00:12:15.380 | You gotta keep running just to keep up.

00:12:17.260 | Yes, so capitalism ultimately competes away margin.

00:12:20.020 | Yeah, down at the level of-

00:12:22.340 | Benefits humans.

00:12:23.180 | Yeah, yeah, yeah, that's why I buy the GDP argument better.

00:12:26.540 | Right, right.

00:12:27.380 | But anyway, look, the other thing that I would say

00:12:29.980 | that reinforces the super cycle

00:12:32.060 | is now that all the VCs are convinced

00:12:35.100 | and all the big tech companies are convinced,

00:12:37.700 | they're all plowing money into LLM research.

00:12:41.120 | Now, LLM might not be the best tool for every problem,

00:12:44.900 | but we're gonna find out,

00:12:46.380 | we're sure gonna find out all edge cases possible,

00:12:50.460 | 'cause they're gonna stack stuff on top of it,

00:12:54.100 | they're gonna prop it up, we're gonna go try.

00:12:57.020 | I should include the CIOs.

00:12:58.500 | I think all the CIOs are doing this.

00:13:01.100 | One thing he did mention was software stocks are down,

00:13:05.020 | and I do think that this wave is being promoted

00:13:08.500 | at such a level that it sucks air from other things.

00:13:11.260 | Yeah, for sure.

00:13:12.180 | At the CIO level, at the purchasing level,

00:13:15.100 | even at just the attention of the buy side level.

00:13:18.460 | Yes, I think it's important to point out

00:13:20.500 | that I think both Philippe and Satya believe,

00:13:26.060 | Satya even talked about it, he said,

00:13:27.420 | we have to prepare the company

00:13:29.340 | that there's gonna be a mismatch in timing here

00:13:31.900 | between investment and return.

00:13:33.620 | These are nonlinear events,

00:13:35.260 | and just like we saw on the internet,

00:13:36.940 | you may go like this, draw down 30%

00:13:39.820 | on your way to a higher high,

00:13:41.980 | but I think from an investment perspective,

00:13:43.580 | whether you're a venture capitalist

00:13:44.820 | or whether you're a public market investor,

00:13:46.600 | or whether you're a founder,

00:13:47.840 | one of the founders in the audience,

00:13:49.100 | you have to assume that there is going to be an AI winter

00:13:51.860 | at some point in time,

00:13:52.940 | that zone of disillusionment

00:13:54.420 | you and I have talked about before,

00:13:56.180 | that doesn't mean that it's not going to be bigger

00:13:58.340 | than we all think,

00:13:59.420 | but it does mean that resilience through that period

00:14:02.580 | is gonna be really important.

00:14:03.540 | If you run out of money during that period, it's all over.

00:14:06.100 | Yeah, and Satya made me think of something

00:14:08.260 | that I hadn't really considered before,

00:14:09.900 | but because all AI tools are being delivered

00:14:14.200 | as a service in the cloud,

00:14:16.020 | there's just a massive amount of CapEx happening.

00:14:18.740 | And if you go back to the internet wave,

00:14:21.580 | people were buying Cisco products,

00:14:23.620 | maybe WorldCom was putting CapEx into the ground,

00:14:28.620 | Equinix was putting CapEx into the ground,

00:14:31.460 | but it wasn't like Microsoft or Netscape or whoever,

00:14:36.460 | the Yahoo, they weren't really plowing this into the ground.

00:14:41.180 | And I think the risk of the type of things

00:14:45.240 | that could happen with a reset are higher

00:14:48.180 | when you're putting all this into the ground.

00:14:50.420 | And Satya very quickly said, this is a supply-driven wave.

00:14:54.660 | And I think up to date, that is true.

00:14:57.380 | We're building ahead of demand.

00:14:59.660 | A lot of the startups and CIOs

00:15:02.980 | qualify the current AI work as experimental.

00:15:06.660 | Not all of it, I mean, the coding stuff,

00:15:08.660 | we've been through this.

00:15:09.500 | There's a lot of it that's real,

00:15:11.140 | but some of it's still experimental.

00:15:12.920 | So if there were any hesitancy or whatever,

00:15:15.580 | or if we get this, if we build too much CapEx or whatever,

00:15:19.400 | it could be, there could be costs.

00:15:22.100 | Back to the GDP thing,

00:15:23.500 | I thought it was really interesting.

00:15:24.700 | Satya said, think about how a global company had to do,

00:15:29.500 | simply had to do their annual planning,

00:15:33.900 | pre-personal computer, pre-spreadsheet, pre-internet,

00:15:39.700 | and it's no wonder that massive productivity

00:15:43.580 | was unleashed in the '80s and '90s.

00:15:45.860 | I mean, the productivity gains in the '90s were so great

00:15:48.500 | that the US government ran a surplus, if you remember,

00:15:51.100 | at the end of the '90s. - I don't remember that.

00:15:54.060 | - You don't remember it because it lasted about 10 seconds?

00:15:56.140 | - Well, also because Clinton cut taxes in front of her,

00:16:00.220 | and the market was up 30% a year.

00:16:02.220 | - Sure, sure, but the productivity gains

00:16:04.700 | to come out of that are undeniable.

00:16:06.780 | And I think there's reason to believe

00:16:09.020 | that the productivity gains we're gonna see here

00:16:11.300 | are at least as big.

00:16:12.440 | I think that's what these folks

00:16:14.300 | who are making these investments believe.

00:16:15.900 | But it was interesting that Satya said,

00:16:18.240 | here we are, I'm a software business,

00:16:21.260 | and I'm investing more in CapEx than industrial companies.

00:16:24.940 | And he spent a lot of time talking about

00:16:26.780 | what it meant to be a lean operator

00:16:29.540 | when you're investing at that level of CapEx.

00:16:31.860 | - 50 billion a year, I think. - Right.

00:16:33.820 | - Yeah, that's a lot.

00:16:34.740 | - One other thing that Philippe said

00:16:36.860 | that really caught my eye,

00:16:38.420 | and maybe he was trying to be provocative,

00:16:40.100 | but he implied, you tell me if I got this wrong,

00:16:42.740 | he implied that in the modern era,

00:16:45.420 | you need to be $10 billion to go public.

00:16:48.540 | - Yeah. - Market cap.

00:16:50.020 | - Yes.

00:16:50.860 | - Which, if it's 10 billion or bust, that's a big man.

00:16:55.140 | - Well, so let's dig into that.

00:16:58.660 | I mean, we went through the public market stuff.

00:17:01.020 | I think the punchline at the end of it

00:17:02.540 | was the market's up a lot in '23 and '24.

00:17:05.980 | You know, we haven't, multiples have not expanded that much,

00:17:08.460 | but it does assume that revenue continues to grow.

00:17:11.020 | - Right, he said NVIDIA is not expensive

00:17:12.820 | on an earnings basis.

00:17:13.820 | So if it's gonna miss, it's because either revenue growth's

00:17:18.100 | gonna stop or margins collapse in price.

00:17:20.700 | - And the second, you know, it seemed to be that they were,

00:17:24.620 | we suggested last week that smart money

00:17:26.660 | was beginning to nibble on software,

00:17:28.420 | that software is not dead.

00:17:30.060 | You know, he seemed to suggest it's just the last thing

00:17:32.520 | to benefit from AI.

00:17:34.660 | And so I've talked to a bunch of folks here,

00:17:37.700 | and I would say the number one thing

00:17:39.620 | that I hear people buying are not the semis stocks

00:17:43.780 | that have worked so well over the course of last year,

00:17:45.860 | but everybody's interested in buying software

00:17:48.340 | at five and a half times revenue, forward revenue,

00:17:50.720 | which is, as we've said, 20% below the 10-year average.

00:17:54.020 | They may be early, but I think people are really interested.

00:17:57.140 | They don't think software's dead,

00:17:58.800 | and they think that, you know,

00:17:59.780 | software starts to look interesting.

00:18:01.300 | - I think there's a, we'd have to dig in it later,

00:18:05.080 | but I think there are certain types of software companies

00:18:07.400 | that people think are more under threat

00:18:09.460 | from LLM's more workflow than who's the data repository.

00:18:13.700 | There's questions about, you know,

00:18:15.460 | whether LLM's replace queries

00:18:17.460 | and who sits in the stack where.

00:18:20.060 | So, and there are some people that still take,

00:18:24.260 | you know, I view the width of what people are willing

00:18:28.040 | to believe about AI is really wide.

00:18:30.940 | And the skeptics are like LLM's are topping out,

00:18:33.580 | but the people on the opposite end are like,

00:18:35.980 | oh, this is just gonna replace all the software I have.

00:18:38.380 | - Right, and the truth is probably in the middle.

00:18:40.100 | - I think it's probably.

00:18:40.940 | - And like, as analysts, our job is to figure out,

00:18:43.240 | you know, exactly where that is.

00:18:45.860 | So you started to reference, you know,

00:18:47.860 | after we did the deep dive this morning on public markets,

00:18:50.580 | then we talked about venture markets.

00:18:53.180 | You know, Thomas took us through that.

00:18:54.900 | And, you know, I'll lead up to the conversation on IPOs,

00:18:58.260 | which I think is really interesting.

00:18:59.660 | We've talked a lot,

00:19:00.940 | but he basically started by saying VC is normalizing.

00:19:03.940 | You know, if you look at 2021, he showed a slide,

00:19:07.000 | we had 715 billion of venture

00:19:10.500 | that went into the ground in 2021.

00:19:13.220 | We've talked a fair bit about that.

00:19:14.740 | This year, they're forecasting about 250 billion

00:19:18.140 | into the ground into venture.

00:19:19.940 | So that's about one third of the levels we were in 2024.

00:19:24.200 | However.

00:19:25.040 | - I think venture as they measure it

00:19:26.900 | has become to mean non-PE private investment.

00:19:31.900 | - Correct, correct.

00:19:32.720 | I think it's all technology investing that's not public

00:19:35.380 | and that's not private equity.

00:19:37.220 | And then they looked at the cul-de-sac of AI.

00:19:42.420 | Year to date, I think 200 deals, 22 billion of investment.

00:19:46.580 | Average valuation, wait for it, $1 billion, right?

00:19:50.980 | Average round size, 120 million.

00:19:53.340 | - Yeah, the round size and the valuation were five to six X,

00:19:56.940 | the non-AI company.

00:19:58.860 | - Correct.

00:19:59.700 | - Five to six X.

00:20:01.180 | - And that was, I thought what was so interesting

00:20:03.260 | about the way they teed up the presentation on venture,

00:20:06.360 | right, was he then took us through

00:20:09.580 | almost a bit of admonishment for some,

00:20:12.940 | or at least encouragement, strong encouragement

00:20:15.460 | for the founders in the crowd that may have raised money

00:20:18.720 | between 2020 and 2022.

00:20:22.660 | He took, here's a slide where he said,

00:20:25.540 | outside of the AI unicorns,

00:20:29.260 | the other 1,400 unicorns are not raising any money, right?

00:20:34.260 | And he said, there's too many competing opportunities

00:20:36.940 | in the public market, risk-free rate of 5%.

00:20:40.740 | - Bitcoin.

00:20:41.580 | - Yeah, Bitcoin said we still have too many unicorns

00:20:44.140 | at 1,400.

00:20:45.380 | Here, he showed a slide of the LinkedIn employee growth

00:20:50.060 | within those 1,400 unicorns has gone from 75% to 10%.

00:20:55.060 | And that the revenue growth

00:20:58.100 | has also decelerated dramatically.

00:21:00.140 | Now you and I have been talking about this.

00:21:01.740 | - No left axis on that one, but down and to the right.

00:21:05.860 | - And shockingly, IPOs in 2024,

00:21:10.500 | 2021 through 2024 are fewer

00:21:12.940 | than during the great financial crisis in 2008.

00:21:16.460 | - No IPOs, 1,400 private unicorns,

00:21:19.860 | most of which have not had a funding round since,

00:21:24.700 | the majority of which, and he has a slide on that,

00:21:26.620 | have not had a funding round since this quote reset in 2023.

00:21:30.900 | And so maybe haven't faced the,

00:21:33.640 | taken their medicine as to what their reevaluation is.

00:21:37.500 | And then he showed a slide that where they,

00:21:39.940 | I don't know how they, maybe it was in their own portfolio,

00:21:42.220 | but where secondaries are happening

00:21:44.860 | and they're happening at the exact same multiple

00:21:47.940 | as the public companies.

00:21:50.100 | And so-

00:21:50.940 | - So just to put it,

00:21:52.680 | the secondary sales in the venture market

00:21:55.260 | are 50 to 75% off the highs,

00:21:58.540 | just like the public markets retrace 50 to 70.

00:22:01.340 | - The non-MAX 7 companies that are public, correct.

00:22:03.740 | And so I do think,

00:22:06.080 | I often hear people on a board say something like,

00:22:09.340 | well, good thing we didn't go public

00:22:11.340 | or good thing we aren't public.

00:22:12.500 | - Exactly.

00:22:13.340 | - But they're sitting on the board of a private company

00:22:15.760 | that's at 150 million in revenue and growing 10%.

00:22:19.340 | - Right, right.

00:22:20.180 | - Like you just have your head in a hole in the ground,

00:22:23.740 | like an ostrich, you're not better off.

00:22:26.260 | The only one reason you might be better off,

00:22:28.100 | you might be able to persuade your employees

00:22:31.700 | that things aren't as bad.

00:22:33.020 | Whereas if you were public, you're looking at a $4 stock.

00:22:35.940 | - I could actually say, Bill, that you're worse off.

00:22:37.700 | And here's the argument for why you're worse off.

00:22:40.980 | I mean, when the public markets gives you a sign, right?

00:22:44.220 | Like it did Meta or Facebook in the fall of 2022

00:22:48.020 | when the stock goes to $90 a share, right?

00:22:50.600 | There's nowhere to hide.

00:22:52.040 | You confront the brutal truth.

00:22:54.200 | You confront the reality.

00:22:55.680 | Public market investors,

00:22:57.600 | it's the collective wisdom of that crowd.

00:22:59.640 | And I think it motivates the company

00:23:01.720 | to do the things they should do.

00:23:02.920 | And they do them faster than they would otherwise do.

00:23:05.600 | And Zuckerberg led the charge on this

00:23:08.040 | and his stock has quintupled since that moment.

00:23:11.220 | - I could not agree more.

00:23:12.360 | And so I just, I see, you know, the irony there

00:23:15.220 | is you have a company that went from 86,000 employees

00:23:17.660 | to 69,000 employees at a faster rate

00:23:20.680 | than I've watched most of these private unicorns move.

00:23:23.560 | You know, the private unicorns hid in the cocoon

00:23:26.540 | of the fact that they didn't have to get marked daily.

00:23:29.500 | And that's why I would, you know,

00:23:30.700 | I really don't like the stay private forever idea.

00:23:34.140 | It works for some companies

00:23:35.660 | where you have an Elon Musk running SpaceX

00:23:38.960 | and you know the intrinsic motivation

00:23:41.180 | and the experience will lead to a good outcome.

00:23:43.540 | It doesn't work well for 1,350, bless you,

00:23:47.620 | of the other unicorns that are out there.

00:23:49.980 | - Yeah, and to play devil's advocate,

00:23:52.300 | I think some people are gonna make the argument

00:23:54.220 | that you don't wanna be a micro-cap public company

00:23:57.880 | and that no one will pay attention to you

00:23:59.540 | and no one will cover you.

00:24:01.500 | I still say, like, if you're liquid, you know,

00:24:04.260 | that's better off.

00:24:05.140 | You've converted away your LikPref stack,

00:24:07.500 | that's better off.

00:24:08.340 | - You want me to tell you why I don't believe that?

00:24:10.380 | - Yeah. - Okay?

00:24:11.220 | - Yeah.

00:24:12.040 | - Because investors are greedy.

00:24:13.980 | - Right.

00:24:14.820 | - Greedy investors will find you

00:24:16.980 | if your company is growing really fast

00:24:19.100 | and has great margins.

00:24:20.060 | Look at Samsara, okay?

00:24:21.780 | Samsara went public and everybody said too small,

00:24:24.520 | not enough coverage, stock's not working.

00:24:26.780 | That company has been a grand slam home run

00:24:30.140 | in the public markets, okay?

00:24:32.100 | The fact of the matter is if you're only growing 10%

00:24:34.780 | and you're marginally profitable or not profitable,

00:24:37.180 | I don't care if you're in the venture markets

00:24:38.980 | or you're in the public markets,

00:24:40.020 | you gotta fix your business model

00:24:41.640 | 'cause that's never going to fetch a big multiple.

00:24:43.980 | But let's get to the question on the table, IPOs, okay?

00:24:47.820 | So what to do about it, what to do about it, you know?

00:24:51.320 | And I think there's this question

00:24:54.220 | that we've debated amongst ourselves, with our friends,

00:24:58.060 | with Thomas and Philippe about how big you need to be.

00:25:01.800 | I think he was speaking at a conference in New York

00:25:04.700 | and he reiterated it here.

00:25:06.140 | He thought you needed to be $10 billion, okay,

00:25:09.240 | in total market cap in order to go public, okay?

00:25:12.940 | You've been at this for 25 years.

00:25:15.780 | Tell me, tell us your response to this question

00:25:19.900 | of whether or not, because that implies

00:25:21.740 | if you're a software company,

00:25:22.740 | you need to have like a billion in revenue to go public.

00:25:25.420 | Do you think that's true?

00:25:26.380 | Well, I don't, but let me take a quick aside

00:25:29.900 | and let's say that is true.

00:25:31.660 | If you have to be at a billion in revenue and growing,

00:25:36.140 | like if you want a 10X multiple, you gotta be growing 30.

00:25:39.180 | Yes, 30%.

00:25:40.980 | And if every company is gonna raise

00:25:44.480 | 500 million to a billion dollars,

00:25:46.560 | and if that's the only way they succeed,

00:25:48.620 | if they get to that level,

00:25:50.320 | this game just got a lot harder.

00:25:52.960 | Like this is massive risk on,

00:25:55.960 | and I even wonder if part of the reason

00:26:00.560 | that you have this 1,400 sitting there

00:26:03.240 | is we forced so much capital on these companies

00:26:06.880 | that they had to grow up so fast

00:26:10.460 | and they had to do things that weren't kind of the normal way

00:26:15.080 | that you would grow a company, right?

00:26:16.920 | Where you stay close to the unit economics

00:26:19.440 | and you learn as you go.

00:26:21.800 | Like if you have to just be all,

00:26:24.080 | and we talked about it last week,

00:26:26.200 | there's four companies in the coding AI space

00:26:29.320 | that have raised over 400 million each.

00:26:31.380 | You think there'll be another round behind that?

00:26:33.600 | Like they're all gonna pull out the huge guns

00:26:37.820 | and point them at one another,

00:26:39.440 | and you're gonna execute in a way that's more risk on.

00:26:42.600 | And so if that's the new world order,

00:26:46.000 | it's a form of capital competition and gamesmanship

00:26:51.000 | that is much different from classic venture capital.

00:26:56.720 | I hope it's not true, but if it is,

00:26:59.160 | this is a different game.

00:27:01.200 | Yeah, I mean, listen.

00:27:02.400 | It's like heavyweight fighting.

00:27:03.440 | I think it's a good provocation.

00:27:06.840 | Thomas presented other paths to liquidity,

00:27:11.320 | M&A, PE partnerships, he put up on the screen.

00:27:16.320 | But here's what I see, okay?

00:27:19.840 | We've recently sold two companies in our portfolio.

00:27:24.480 | One was reported by the Wall Street Journal

00:27:26.640 | for a billion to $2 billion to Databricks called Tabular.

00:27:29.800 | We have companies that have gotten fit

00:27:31.720 | and that are reaccelerating their growth rates.

00:27:35.160 | And then we have two companies in the IPO pipeline, right?

00:27:38.080 | Like, I just think this has taken longer

00:27:40.000 | than any of us think.

00:27:41.440 | Out of that 1,400, I suspect that 60 to 70%

00:27:46.120 | of those companies are never going to go public, okay?

00:27:49.600 | So these are companies that are either gonna have

00:27:51.380 | to get sold off, they pass the peak

00:27:54.560 | in terms of their growth rates.

00:27:56.680 | They don't have enough revenue scale in order to get public.

00:28:00.120 | But I think that there are gonna be 30 to 40%

00:28:02.240 | of those that certainly could get public.

00:28:04.400 | They may have to accept, like Instacart did.

00:28:06.720 | By the way, look at Instacart.

00:28:08.480 | They accepted a big down round

00:28:10.360 | from their last private round.

00:28:11.560 | They went public.

00:28:13.000 | The stock traded down, didn't trade that well.

00:28:15.520 | And I think the stock is up well over 50% now

00:28:18.700 | because they've executed in the public markets.

00:28:21.080 | And so I can't reinforce enough.

00:28:26.000 | Amazon, since they went public,

00:28:27.520 | I think they've had four periods

00:28:29.040 | where they were down over 60%.

00:28:31.160 | I understand.

00:28:32.000 | And so-

00:28:32.840 | And a company I mentioned from the previous wave,

00:28:35.320 | Equinix, went from 200 down to two.

00:28:39.640 | And today is at 778 and an $80 billion market cap.

00:28:43.280 | So it can happen.

00:28:44.280 | I thought we would see way more IPOs.

00:28:46.480 | I thought people would come public

00:28:48.120 | to two kind of clues to their cap chart

00:28:51.160 | and wipe out the LICPRA.

00:28:52.600 | Maybe we still will.

00:28:56.280 | I would encourage the regulators to do anything they can

00:29:01.320 | to make sure we don't have a systematic problem

00:29:04.600 | that's causing being public to be too expensive.

00:29:08.000 | And I know that the reality we talked about

00:29:11.880 | on the last podcast, if that comes to be true,

00:29:14.240 | where just way fewer companies go public

00:29:16.680 | and all the growth is in the private markets,

00:29:19.260 | that the Gensler types are gonna come out and say,

00:29:22.040 | "That's bad for the retail investor

00:29:23.920 | and they're gonna wanna fix it."

00:29:25.240 | I hope the way they try and fix it

00:29:27.360 | is to look through the cost of being public,

00:29:30.800 | all the cost of being public and say,

00:29:32.580 | "What can we do as regulators to improve that situation?"

00:29:36.400 | That's what I hope.

00:29:37.240 | The second thing I would like to do on this podcast,

00:29:39.960 | assuming that we have a really good set

00:29:43.080 | of listeners out there,

00:29:44.440 | if there is a banker out there

00:29:46.700 | that thinks like the four horsemen did,

00:29:49.360 | who says, "I don't need you to be 10 billion to go public.

00:29:52.680 | I would love to take you public at 100 million in revenue.

00:29:56.520 | Come see me, call me.

00:29:59.160 | I will connect you to companies.

00:30:01.080 | I will promote you."

00:30:02.920 | We need someone willing to do that.

00:30:04.440 | I get the sense that the three big guys,

00:30:08.240 | JP Morgan Morgan and Goldman,

00:30:10.640 | just aren't that interested, you know?

00:30:13.440 | And so I do think some percentage

00:30:18.200 | of the 1,400 should go public.

00:30:21.040 | And I don't think that waiting is helping them at all.

00:30:24.820 | And so I'd love to help find the people

00:30:26.760 | that can be their stewards.

00:30:28.640 | Let me crystallize a question for you, okay?

00:30:32.040 | So it was rumored last week that OpenAI

00:30:35.800 | is run rating three and a half, $4 billion in revenue,

00:30:39.320 | which is, you and I, it's extraordinary, right?

00:30:42.900 | And I think it's pretty evenly split

00:30:44.920 | between a consumer business and an enterprise business.

00:30:48.160 | I think that's even more extraordinary.

00:30:49.720 | I have some potential data on that.

00:30:51.960 | And on top of that,

00:30:53.560 | I think that that team, right through the teeth

00:30:57.120 | of so much noise in the market, right?

00:31:00.640 | Like has withstood incredible turbulence.

00:31:04.480 | They have.

00:31:05.320 | To execute the way they have, okay?

00:31:07.880 | Faster than any other company I've ever seen,

00:31:10.840 | delivering great products in the market, right?

00:31:13.880 | They have Greg Brockman in the basement,

00:31:16.000 | churning out product no matter what happens

00:31:18.060 | in that business.

00:31:19.140 | They have the big announcement at WWDC at Apple last week,

00:31:22.680 | which I think was, you know,

00:31:24.040 | another master class in deal making

00:31:26.520 | and brand building by Sam and team, okay?

00:31:30.000 | So you got $4 billion in revenue.

00:31:31.440 | You're growing well over 100% a year.

00:31:33.680 | You just marked it up a little bit, but.

00:31:35.360 | Three and a half billion, whatever you want.

00:31:37.320 | Whatever you want to call it.

00:31:38.660 | Would you go public if you were,

00:31:40.120 | if you could do a conversion to a for-profit company,

00:31:43.200 | would you take OpenAI public?

00:31:44.560 | There's a lot in that second part.

00:31:46.480 | By the way, just to fill in some of this,

00:31:48.800 | and I could be wrong on my math,

00:31:50.240 | but I went into one of these credit card survey things

00:31:53.200 | and I looked at OpenAI and assuming

00:31:56.100 | that people don't pay for the API with a credit card,

00:31:58.900 | so the credit card pool just represents,

00:32:01.440 | and I compared it to a company where I knew the revenue,

00:32:04.660 | it would imply that there are about 2.1 of the three, four

00:32:08.620 | is the consumer business at $20 a pop.

00:32:11.820 | So two thirds, the consumer business.

00:32:13.740 | Put me in it and I love it.

00:32:14.960 | Well, there's one other thing that I could look at

00:32:17.620 | in the credit card data,

00:32:19.660 | at least for the cohorts that are old enough,

00:32:23.060 | the churn's about 65% annually.

00:32:25.340 | So they're only 35% retaining,

00:32:27.160 | which Sachs had hinted at on all in,

00:32:29.460 | and maybe the reason that I think Sam at one point

00:32:33.660 | said he didn't really see the $20 thing as his future.

00:32:37.460 | Right, right.

00:32:38.540 | But would I encourage them to go public?

00:32:40.540 | Well, they just hired a very reputable CFO,

00:32:44.860 | so maybe they're thinking about it.

00:32:47.340 | The reason I think they would do it is if they,

00:32:51.380 | first of all, they're very good at self-promotion

00:32:54.180 | and they're very good at promoting the company.

00:32:57.140 | They're very good at enterprise sales.

00:32:59.220 | They've convinced Apple, but many, many others.

00:33:01.720 | And so if they thought they'd get a premium multiple

00:33:06.420 | and could get out there and have access to capital

00:33:09.020 | at a much cheaper price and liquidity for the employees,

00:33:13.860 | which are now having to arrange, I could see it.

00:33:17.700 | I fear that the kind of current wisdom

00:33:22.700 | of the entrepreneurs to not do it.

00:33:25.300 | Right, well, this is my,

00:33:26.620 | we have an opportunity to make a case to Sam and to Sacha.

00:33:29.820 | And here's a bit of the case that I would make for him.

00:33:33.140 | Number one, I think this is, you know, when you build AI,

00:33:36.380 | I think it's gonna be about trust and safety.

00:33:38.960 | And I think being a public company, right,

00:33:41.300 | being exposed to public disclosures,

00:33:44.600 | the scrutiny of the SEC, all the things that come with that

00:33:47.740 | from public market investors, you know,

00:33:50.580 | I think is a good thing for that business.

00:33:52.280 | I think it would force them to tighten everything up.

00:33:54.380 | No, I'm not talking today, but if I were on that board,

00:33:58.460 | you know, and maybe we'll tell this to Larry tonight,

00:34:01.240 | I would say, you know,

00:34:02.420 | let's start moving the company in a direction

00:34:05.180 | as though we were public, right?

00:34:07.420 | Let's do the conversion to a for-profit business.

00:34:09.860 | Enough of this funky--

00:34:10.700 | By the way, I don't think that's trivial.

00:34:12.940 | I agree, I'm just telling you, like, it's doable.

00:34:17.180 | And the second thing I would say--

00:34:18.740 | I think it's only doable by putting a significant chunk

00:34:22.380 | of the company in the non.

00:34:23.860 | Yes.

00:34:24.700 | Like a share base in the nonprofit,

00:34:26.380 | not this thing where they get it at the end.

00:34:28.420 | And by the way, you can't take public that structure.

00:34:30.700 | So here's what I don't like.

00:34:32.940 | I don't like the idea that you could have a company

00:34:36.740 | that could theoretically go to a trillion dollars

00:34:39.420 | in enterprise value,

00:34:40.780 | could theoretically develop AGI,

00:34:43.340 | and a retail investor never has a shot

00:34:45.860 | to invest in that company.

00:34:47.260 | I just don't think that's good

00:34:48.380 | for the structure of our markets.

00:34:49.660 | I think it's better for the company.

00:34:52.140 | I think it's better for the markets.

00:34:53.740 | And frankly, I think it solves

00:34:55.500 | one of Microsoft's problems as well.

00:34:57.620 | And we've seen all of the corporate, you know,

00:35:02.380 | some of the chaos around this business.

00:35:04.140 | I actually think it would be good for Sam and Greg

00:35:06.340 | and Brad and team, right, to do that.

00:35:08.420 | Now, of course, you got to put it on a path.

00:35:10.500 | This probably takes a couple of years to get there.

00:35:12.460 | But I mean, to me, that is the iconic question.

00:35:16.100 | If 4 billion isn't enough, Bill, you know,

00:35:18.900 | with a $90 billion private market valuation, then what is?

00:35:22.620 | And I just don't think it's gonna be looked on that well.

00:35:25.780 | If all of a sudden, all the best companies in the world,

00:35:29.500 | right, are only available to the folks at this conference

00:35:33.180 | and not available to Wall Street.

00:35:34.460 | - And they may wanna do acquisitions

00:35:36.260 | and getting the cap chart in a more traditional state

00:35:41.020 | would make that easier, public or private.

00:35:43.180 | So maybe we'll see that happen.

00:35:45.300 | I do think that the thing that may help us

00:35:48.380 | unlock this IPO problem, if you will,

00:35:53.020 | is a couple of AI companies going out.

00:35:56.140 | - Yeah.

00:35:56.980 | - And maybe that will even make it easier on the others

00:36:00.380 | just so that we start to prime the pump a little bit.

00:36:02.580 | So I think you'll start to hear chatter

00:36:04.980 | on who are gonna be the first, you know,

00:36:07.340 | AI first companies to go public.

00:36:09.700 | There's rumors out there about Corweave.

00:36:12.180 | There's articles about Cerebris.

00:36:14.580 | So it would be interesting to see.

00:36:16.540 | I think it would be very helpful for the ecosystem

00:36:19.580 | to get a couple of those under our belt.

00:36:21.620 | - Well, there's talk that, oh, Mr. Lafon himself,

00:36:25.780 | would you like to join us?

00:36:27.220 | I mean, just come on up here and join us for a minute.

00:36:29.820 | We're live right now.

00:36:31.020 | Philippe, we're just, first, thank you.

00:36:33.380 | - Yeah.

00:36:34.220 | - This is, you know, one of our favorite,

00:36:36.180 | if not our favorite, you know,

00:36:38.340 | conference in the investing business.

00:36:39.820 | And what I said to start is you are a positive sum.

00:36:42.860 | You have all your,

00:36:43.700 | the folks that most people would think of

00:36:45.260 | as your competitors, you know, you invite 'em here.

00:36:47.620 | You collaborate, you build partnership.

00:36:49.580 | - I'm thinking about changing my mind.

00:36:51.500 | - So we were just talking about the $10 billion to IPO,

00:37:00.100 | right, which implies something around a billion dollars

00:37:02.700 | in revenue to go public, right?

00:37:05.580 | And I was saying, I would encourage OpenAI

00:37:08.180 | to go public today, right?

00:37:10.220 | We think more, I think, and Bill agrees,

00:37:12.180 | more of these companies should go public.

00:37:13.660 | We think they can go public smaller.

00:37:15.340 | We understand if you're a micro-cap

00:37:17.380 | and you don't have great margins

00:37:19.220 | and you're not growing fast, you can't go public.

00:37:21.220 | But aren't there a lot of companies

00:37:22.540 | that could be public today?

00:37:24.460 | - Yeah, I mean, if you look at some of the big unicorns,

00:37:27.940 | they could definitely go public.

00:37:29.300 | But I think there's two criterias.

00:37:31.180 | One is, can you get to a billion of revenue?

00:37:33.780 | OpenAI would be, check, check, check the box.

00:37:36.900 | But the second one is, do you have a sort of a break-even

00:37:41.220 | or a path to break-even?

00:37:42.620 | And the only thing, I don't know the specifics of OpenAI,

00:37:46.180 | but what if you had a billion in revenue,

00:37:48.180 | but like an enormous cash burn?

00:37:51.220 | And Barry, that cash burn is really smart.

00:37:52.940 | It helps them consolidate as a clear number one.

00:37:56.300 | But will the public markets be scared

00:37:58.860 | if the cash burn is disproportionate?

00:38:00.940 | But the private markets, the investors,

00:38:03.260 | they know that there's a bit of a winner-take-all

00:38:05.380 | and they might be more patient.

00:38:06.820 | Now that's just on OpenAI.

00:38:08.500 | SpaceX, amazing company.

00:38:10.820 | It's sort of quasi-public,

00:38:13.140 | but why don't you give retail investors

00:38:15.220 | a chance to invest in SpaceX?

00:38:16.660 | They should have that right.

00:38:18.300 | - It's been proven that it might happen.

00:38:20.500 | If you're right about the billion, though,

00:38:23.020 | like if you have to have a billion in revenue

00:38:24.860 | and be growing, right?

00:38:26.300 | You gotta be at, what, 30% growth, 25?

00:38:29.820 | Like, if that's the hurdle rate,

00:38:32.900 | then how many VC companies are ever gonna make it

00:38:36.900 | to that level?

00:38:37.820 | Like, that'd be my question.

00:38:39.820 | - Listen, I was speaking to your former colleague, Eric,

00:38:43.980 | at Benchmark, and he's like,

00:38:45.820 | this is a problem for the venture business.

00:38:49.620 | This is a problem for our portfolio.

00:38:51.780 | There's gonna be less exits and bigger exits,

00:38:55.220 | so it's gonna make the business that much more risky,

00:38:57.980 | and do we need to adapt in ways

00:39:01.020 | that maybe you have to reinvest behind your best companies

00:39:04.180 | because there's not gonna be as many of them?

00:39:07.140 | Do you need to provide companies

00:39:09.940 | the ability to win in other ways?

00:39:11.540 | What's weird to me is that the government,

00:39:13.980 | by trying to protect small companies

00:39:16.780 | and not allowing big companies to buy small companies

00:39:19.500 | so big companies get bigger,

00:39:20.940 | I think it's got the reverse effect,

00:39:22.980 | where now small companies have one less chance of winning,

00:39:26.260 | and thus the public market is even less willing

00:39:28.380 | to hold a small company

00:39:29.660 | because it's less willing that it gets bought.

00:39:31.900 | And so why bother with small companies

00:39:33.660 | when you can just own big?

00:39:35.020 | Guys, I love you, and I hope you reinvent me,

00:39:38.020 | re-invite me on this amazing podcast,

00:39:40.300 | but I'm going to deal with some other people.

00:39:43.100 | - Thank you, thank you, thank you, brother.

00:39:45.060 | That's great.

00:39:45.900 | - That was good timing.

00:39:46.740 | - I mean, by the way, he's also just one-of-a-kind human.

00:39:49.180 | - I agree with you.

00:39:50.140 | - And so it's fun to see him, I'm glad he jumped in here.

00:39:54.700 | You know, Bill, I think it's a,

00:39:57.660 | you know, one of the things he was talking about

00:39:59.460 | got me thinking about something.

00:40:01.580 | You know, boards of directors, you know,

00:40:05.620 | they have influence over whether these companies go public.

00:40:08.700 | Okay?

00:40:09.540 | And it starts early, you know, in the boardroom

00:40:12.180 | about setting the conditions and building the company

00:40:15.220 | in a way it's built to go public.

00:40:16.860 | And I think one of the problems, you know,

00:40:18.700 | here we talk about it reflexively.

00:40:20.300 | I think we're going to look back at this.

00:40:21.580 | I happen to be more optimistic on this.

00:40:23.580 | I think we're going to look at this period.

00:40:26.060 | It's going to be a by-product of the age of excess.

00:40:29.420 | This is going to be like all these companies

00:40:31.060 | raise too much money at too high a valuation

00:40:33.700 | during the ZERP period,

00:40:35.340 | and therefore they couldn't go public.

00:40:37.380 | And frankly, too many boards bought into this

00:40:40.660 | stay private forever business.

00:40:42.380 | I think there is a whole new category of company coming

00:40:45.420 | that I hope that you lead the charge, I lead the charge,

00:40:48.060 | and they lead the charge.

00:40:49.700 | There is no reason these companies,

00:40:51.700 | if we set the conditions early in the business,

00:40:54.540 | stay fit, get profitable, you know,

00:40:56.940 | you don't have to grow at all costs,

00:40:58.900 | don't raise too much capital,

00:41:00.180 | don't set the valuations too high,

00:41:02.340 | you know, they can get public.

00:41:04.660 | But, you know, it's going to be an interesting-

00:41:06.300 | By the way, before we transition to our last topic,

00:41:08.940 | I would point out one irony from all that we heard today

00:41:12.500 | and what you just said, which is,

00:41:14.380 | if the 1,400 number of private unicorns

00:41:18.500 | that are the result of the age of access is a problem,

00:41:23.500 | it's not clear to me

00:41:25.460 | that we're doing anything different in AI.

00:41:27.980 | Aren't we doing the exact same thing?

00:41:30.420 | So couldn't we end up with the exact same result?

00:41:33.020 | We just said 5X and 6X higher valuation.

00:41:37.380 | You said something to me a few weeks ago

00:41:39.180 | that I think is spot on, right?

00:41:40.900 | I think 15 years ago,

00:41:42.020 | not a lot of people talked about the power law, right?

00:41:44.340 | Maybe there was a small cadre, a small membership,

00:41:47.100 | you know, on Sand Hill Road that talked about power law.

00:41:49.660 | But today, everybody knows about power law distributions

00:41:53.260 | and venture returns, right?

00:41:54.900 | And so if there is any sniff

00:41:57.580 | that a company in AI land- I agree.

00:41:59.820 | Is going to be the winner-

00:42:01.980 | They get $400 million.

00:42:03.540 | The amount of capital that chases it.

00:42:05.860 | So, you know, I think that's an interesting question.

00:42:09.220 | I think it's very difficult for founders

00:42:11.180 | to resist the urge to take the money.

00:42:13.500 | I think it's very difficult for founders

00:42:15.100 | to resist the urge to take the highest valuation.

00:42:18.260 | I encourage them to reverse engineer from the outcome,

00:42:21.420 | the liquidity outcome they hope to achieve.

00:42:23.940 | If you take a lot of money at a valuation

00:42:26.380 | well over a billion dollars,

00:42:27.580 | the probability of you getting sold

00:42:29.860 | or you getting public is just a lot harder.

00:42:32.340 | That's just the truth.

00:42:33.380 | Before we move off in the venture section,

00:42:35.740 | one of the things I love

00:42:36.660 | is there are a bunch of founders running around here.

00:42:39.020 | You and I, you know, met with one or two of them earlier.

00:42:42.620 | And just a few of the anecdotes

00:42:44.340 | that I'm seeing and I'm hearing.

00:42:47.140 | You know, I spent some time with Scott Wu.

00:42:49.660 | I'm an angel investor in Cognition.

00:42:51.940 | And, you know, Scott is building, you know,

00:42:54.500 | Satya referenced him while on stage.

00:42:56.980 | Says, you know, co-pilot is building

00:42:58.460 | effectively auto-complete,

00:43:00.100 | allowing engineers to become more productive.

00:43:02.580 | You know, Cognition is building engineers.

00:43:05.100 | And I asked Scott, I said,

00:43:06.580 | "How many employees do you have?"

00:43:07.820 | Because I think he has tens of thousands

00:43:09.940 | of enterprise customers already.

00:43:11.700 | And he said, "18."

00:43:12.740 | I said, "How do you do all this work with only 18 people?"

00:43:15.300 | He said, "We have a hundred Devons.

00:43:17.300 | We have a hundred agentic engineers

00:43:19.780 | that are helping us write code."

00:43:21.940 | That's a theme I've heard from Glean.

00:43:24.900 | I heard from Distill.

00:43:27.100 | I heard from Cognition.

00:43:29.020 | This idea that we're going to have,

00:43:30.700 | and Satya referenced it,

00:43:32.260 | a workforce of people, right?

00:43:35.300 | In the not so distant future

00:43:37.420 | that are going to be able to take

00:43:38.780 | these multi-step functions.

00:43:40.620 | Go build me a website, right?

00:43:42.420 | No longer just complete a line of code,

00:43:44.700 | but complete an entire task.

00:43:46.780 | You know, we were just with, you know,

00:43:50.060 | our friend from Glean,

00:43:51.380 | and who's building a great enterprise search product.

00:43:54.820 | But, you know, you don't have to squint that hard

00:43:57.180 | to think that that could be your enterprise assistant,

00:44:00.140 | right?

00:44:01.060 | That could go perform tasks on your behalf.

00:44:04.300 | So, put me in the camp.

00:44:05.940 | Again, I don't know the time series,

00:44:08.060 | but I do think that we're on a path

00:44:11.380 | toward human replacement,

00:44:13.420 | not just augmentation.

00:44:14.780 | Now, I think those folks in this period of dislocation

00:44:17.660 | will get consumed in other tasks.

00:44:19.660 | So, I don't think this is a net negative for society,

00:44:22.420 | but I do think you'll have dislocation

00:44:24.660 | before you necessarily have that growth on the other side.

00:44:28.340 | I'll just say one thing real quick,

00:44:29.580 | which is I gave a speech 20 years ago or so

00:44:32.100 | about how we evolve with our tools.

00:44:34.900 | Yeah.

00:44:35.740 | And you wouldn't try and, you know,

00:44:38.740 | run a high production farm without a tractor.

00:44:41.300 | You wouldn't do it with a plow and an oxen.

00:44:43.580 | And that just always has been true in our society.

00:44:48.420 | And so, if you are a programmer who's worried about this,

00:44:52.980 | the best thing you can do is run at it.

00:44:55.580 | Yeah.

00:44:56.420 | Like, go hang out.

00:44:57.740 | Yes.

00:44:58.580 | Play with cognition.

00:45:00.060 | Get into GitHub Copilot.

00:45:02.100 | Like, that and learn.

00:45:04.140 | You know, Satya said that the ordering of the workflow

00:45:08.700 | of writing code is changing as a result of this.

00:45:11.220 | You won't know that unless you're in it.

00:45:13.900 | 100%.

00:45:14.740 | 100%.

00:45:15.580 | And a lot of the talk here is not just

00:45:17.460 | about who the winners are.

00:45:19.060 | It's who the losers are, right?

00:45:21.020 | The losers in the public market.

00:45:23.260 | You know, companies that are slow.

00:45:25.020 | Think about if you were a company slow

00:45:27.700 | to adopt the internet in 2000.

00:45:30.020 | If you were a retail enterprise,

00:45:31.300 | you said, "I don't need any commerce capability."

00:45:33.940 | Right?

00:45:34.780 | Right?

00:45:35.620 | That was a very bad decision.

00:45:37.460 | I think in 2024, if you're any company and you say,

00:45:40.340 | "I'm going to be, you know,

00:45:41.660 | "I don't need to do all this AI stuff.

00:45:43.420 | "I don't need."

00:45:44.260 | You need to be there even if you choose not to adopt it,

00:45:47.580 | because I think failure to learn how to reinvent

00:45:49.620 | your business is a problem.

00:45:50.460 | I don't think you have to worry about this.

00:45:51.420 | I think most of them are there.

00:45:53.420 | They're on it.

00:45:54.260 | They're on it.

00:45:55.100 | Well, another topic I think that, you know,

00:45:58.220 | we've talked about on this pod.

00:45:59.820 | We had some developments on this week, you know,

00:46:02.380 | and I wanted to dig deeper in,

00:46:03.780 | and this is to the shareholder vote

00:46:05.460 | as it pertains to Tesla.

00:46:07.100 | So we know now that Elon has won the vote for a second time.

00:46:12.060 | Retail investors, I think, voted 90/10 in favor.

00:46:15.900 | Institutional investors, something like 70/30 in favor.

00:46:20.020 | I mean, even the passive ETF Vanguard

00:46:23.380 | voted in favor of the package.

00:46:24.980 | Okay?

00:46:25.820 | But there was a big reveal here this week.

00:46:28.820 | I think some tectonic plates started moving

00:46:31.900 | on something that you and I have identified

00:46:34.500 | as an issue for a long time,

00:46:35.860 | and it relates to ISS,

00:46:37.340 | Institutional Shareholder Services, and Glass-Lewis.

00:46:40.180 | So both of those organizations recommended a no vote

00:46:44.740 | or a vote against the shareholder package.

00:46:47.340 | Okay?

00:46:48.260 | Now, that in and of itself is not that unusual,

00:46:52.980 | although I don't think it made sense

00:46:54.620 | because it was clearly in the best interest

00:46:57.140 | of shareholders, right?

00:46:58.180 | Stock would go up.

00:46:59.380 | It did go up after the vote.

00:47:00.700 | And, you know, so I started looking in again,

00:47:02.980 | and I know you and I started talking

00:47:04.460 | about the background of ISS.

00:47:05.940 | And just as a reminder, you know, ISS was founded in 1985,

00:47:10.540 | and the mission of the company

00:47:11.900 | was to provide advisory services to institutional investors,

00:47:15.380 | supposedly to do research and governance

00:47:18.020 | on their performance,

00:47:19.420 | and to help shareholders make informed decisions

00:47:22.500 | as to what would maximize their own value in the business.

00:47:25.980 | And while all this sounds benign enough,

00:47:28.140 | many of us have argued over the years

00:47:31.020 | that ISS veered off course, right?

00:47:33.660 | And this started becoming kind of this cudgel

00:47:37.220 | to, you know, to coerce board behavior

00:47:40.140 | into ways that they deemed, right,

00:47:43.540 | in maybe societal best interest

00:47:46.260 | or in their perceived best interest,

00:47:48.500 | as opposed to the corporate best interest.

00:47:52.340 | You and I have both served on boards

00:47:53.980 | where board members have said,

00:47:55.020 | "Well, I can't do this or I can't do that because of ISS."

00:47:58.460 | We know some of the best boards in the world, like Netflix,

00:48:01.420 | takes it on the chin from ISS all the time

00:48:03.980 | because they don't do the things that ISS sanctions as worthy.

00:48:07.580 | In fact, this got so bad that at the end of --

00:48:10.060 | or at the beginning of 2023,

00:48:12.620 | 21 state attorney generals, right,

00:48:16.420 | wrote a letter to ISS

00:48:18.140 | demanding that they explain -- and Glass-Lewis --

00:48:20.780 | to explain their advocacy objectives, right?

00:48:23.540 | So, in this instance,

00:48:25.860 | I think the fact that Vanguard, right, which is passive --

00:48:30.140 | these are not active investors --

00:48:32.020 | that they came out and they voted

00:48:34.140 | in the opposite direction of Glass-Lewis and ISS,

00:48:36.700 | I think it just laid bare some of the nonsense

00:48:41.340 | associated with these recommendations.

00:48:44.100 | And I really wonder whether this is going to cause

00:48:47.780 | a ripple effect, right,

00:48:49.580 | where people start pushing back now on ISS and Glass-Lewis.

00:48:53.500 | Right, because if a passive investor can do it,

00:48:55.500 | certainly -- and the active investors,

00:48:57.780 | from retail, institutional,

00:48:59.100 | they rejected ISS and Glass-Lewis straight out.

00:49:01.940 | So, what do you -- any thoughts?

00:49:03.060 | -Yeah, well, a couple things.

00:49:04.380 | So, one, I actually spoke to some people at ISS

00:49:07.620 | in their research group prior to our SBC conversation,

00:49:11.220 | and it became clear to me from talking to them

00:49:14.260 | that they're mostly backward-looking.

00:49:15.940 | They talk to investors after the fact and say,

00:49:19.420 | "Do they appreciate this particular thing or not?"

00:49:22.780 | And they're not doing first principles

00:49:25.340 | thinking around shareholder alignment.

00:49:27.580 | -Yeah. -And, you know,

00:49:28.780 | and you said it lost their way.

00:49:29.900 | I mean, it became a network effect, right?

00:49:31.780 | They charge both the company and the shareholder.

00:49:35.380 | And, like, it certainly --

00:49:37.140 | -I mean, if there's a duopoly we should worry about

00:49:39.340 | in this country, it's probably ISS and Glass-Lewis.

00:49:41.980 | But we're seeing every board to follow their marching orders.

00:49:45.420 | -And the number one reason I hear,

00:49:49.180 | a very valid reason for companies to have super-voting

00:49:52.780 | is so they don't get held up by these companies

00:49:57.540 | in their attempt to do the right thing

00:50:00.460 | and implement a compensation package

00:50:03.020 | that is aligned with shareholders.

00:50:04.380 | -Correct. -And as I said to you back then

00:50:07.660 | and I believe even more today,

00:50:09.500 | and I've seen more copycats of it,

00:50:11.980 | the Elon package is the most shareholder-aligned CEO

00:50:16.700 | compensation package I've ever seen.

00:50:19.020 | I would be thrilled if all of my hired CEOs

00:50:22.780 | had a very similar package. -Right.

00:50:25.020 | -I'd be thrilled. -Yeah.

00:50:26.340 | -I think most of them wouldn't take it.

00:50:28.380 | -Yes. -Because it requires

00:50:31.460 | outsized performance.

00:50:33.660 | I think it's excellent.

00:50:34.780 | I think that it's ridiculous that Netflix

00:50:38.380 | would ever get a no vote on anything

00:50:40.340 | because they've had incredible stock performance

00:50:43.020 | and industry-leading low dilution.

00:50:46.020 | -Yes. -With their very innovative approach

00:50:49.140 | to compensation.

00:50:50.620 | -It would be fun to look at a distribution.

00:50:52.420 | -I actually had a chance to talk with the co-CEOs recently

00:50:56.220 | and they were still getting pushed back

00:50:58.860 | because I was applauding them on their structure

00:51:01.340 | and one of their board members says,

00:51:02.700 | "Well, they are even considering change

00:51:05.300 | because ISF won't leave them alone."

00:51:07.300 | And it's just horrific.

00:51:09.020 | But anyway, there's one other thing

00:51:11.700 | that I would highlight about this

00:51:14.540 | that relates more to the Delaware situation.

00:51:16.900 | So it's my belief that many of the attorneys

00:51:23.780 | and lawyers that live in the Delaware ecosystem

00:51:27.900 | were very eager for Tesla to appeal this thing

00:51:31.300 | and push it to the Delaware Supreme Court.

00:51:33.500 | And it has been wildly discussed here and in other places.

00:51:37.340 | The reason that people chose Delaware is 100 years --

00:51:41.620 | I went back and looked up today --

00:51:43.780 | over 100 years of practice of being business-friendly.

00:51:48.180 | Obviously, all these companies aren't located in Delaware.

00:51:51.420 | -Yeah. -They're just choosing this.

00:51:54.180 | And they're choosing this place

00:51:56.820 | because of its history of precedent

00:51:59.500 | and its history of how they adjudicate different things.

00:52:05.380 | -Right. -And people felt

00:52:06.780 | that it was in the company's best interest.

00:52:09.500 | Here today, with the Tesla situation,

00:52:12.100 | we have a company whose stock performed incredibly well

00:52:16.980 | and was brought to heel by a lawyer and a law firm

00:52:23.940 | with a contingent derivative lawsuit.

00:52:27.300 | Their one customer had nine shares of stock.

00:52:32.620 | -Nine shares. -It went up.

00:52:34.100 | -Yes. -So if you consider the fact

00:52:36.180 | that, "Oh, I could be a public company in Delaware.

00:52:38.820 | My stock could go up.

00:52:40.820 | I can be --" And then they asked for $5 billion

00:52:43.620 | in compensation to the lawyer.

00:52:45.900 | -They're still asking for it.

00:52:47.740 | -And they had one customer with nine shares.

00:52:50.220 | Like, how do you ask for $5 billion?

00:52:52.140 | If -- I will say this.

00:52:54.980 | First of all, I think that these people that live in Delaware

00:52:58.740 | are very fearful that there won't actually be an appeal

00:53:02.380 | because then this thing just stands out there.

00:53:05.100 | -Yes. -And I think it's horrible

00:53:07.060 | for the entire Delaware.

00:53:09.020 | If I were the governor of Delaware,

00:53:11.380 | I would be scared shitless,

00:53:13.580 | scared shitless about what might happen.

00:53:16.740 | If this judge hands out any penalty anywhere close

00:53:22.980 | that has over $100 million even,

00:53:28.060 | I think companies need to consider

00:53:30.380 | leaving Delaware as fast as possible.

00:53:33.300 | -First, it's such a bad case law, right,

00:53:38.140 | in the state of Delaware.

00:53:39.060 | I mean, to your point, the various states are --

00:53:42.660 | -Vigilante lawyers chasing any company with high performance

00:53:47.180 | or a big market cap

00:53:48.780 | and just trying to get them on a gotcha.

00:53:50.780 | -For sure. -And see if they can get a judge

00:53:52.340 | to give them this type.

00:53:53.620 | -The corporate code that exists in various states

00:53:56.700 | around this country is very similar.

00:53:57.980 | There's a model corporate code, and most of them adopt it,

00:54:00.460 | that's predicated on Delaware's corporate code.

00:54:03.700 | What makes Delaware so different is 100 years

00:54:05.900 | of precedent of case law,

00:54:07.540 | which is very supportive of a lot of issues

00:54:10.540 | which were important to companies.

00:54:12.140 | That predictability led companies to incorporate there.

00:54:15.900 | Now we've thrown predictability out the window, right,

00:54:19.540 | and now we're talking about despite two shareholder votes

00:54:22.740 | that both voted in favor of giving Elon this package,

00:54:25.820 | both before and contemporaneous,

00:54:27.900 | and now that they're going to go back.

00:54:29.980 | If they award -- I'm not $100 million, Bill.

00:54:33.060 | If they award $1, right,

00:54:35.220 | I think you're going to see companies

00:54:36.980 | in the state of Delaware that leave the state of Delaware.

00:54:39.260 | And by the way, I think we should be encouraging them

00:54:41.660 | to leave the state of Delaware if that's the case,

00:54:44.060 | because I would like to see a lot more jurisdictions

00:54:47.100 | develop a lot more friendly corporate codes,

00:54:49.620 | friendly precedent, you know, for these companies.

00:54:52.340 | The reality is if we can't support

00:54:54.540 | a performance-based compensation package for a company,

00:54:58.100 | then what are we doing?

00:54:59.180 | Look at the garbage packages

00:55:01.180 | that people get paid tens of millions of dollars on.

00:55:04.300 | Stock goes down, companies are terrible,

00:55:06.660 | ISS is cheering that that's a good compensation package,

00:55:09.660 | and it's no problem in the state of Delaware.

00:55:11.580 | -Not to pick on one person, but people have highlighted

00:55:13.900 | that the CEO of GM has made tens and tens of millions of dollars.

00:55:18.380 | Stock hasn't gone anywhere.

00:55:19.980 | That's who, if they want to chase somebody,

00:55:22.060 | it's me chasing that situation.

00:55:24.100 | But I couldn't agree with you more.

00:55:25.820 | I think this is a very serious topic.

00:55:27.740 | I think that the, you know, even, I think,

00:55:30.180 | like the "Wall Street Journal" and "The New York Times,"

00:55:31.940 | they missed this point.

00:55:33.980 | And as you said, if it's not about shareholder alignment,

00:55:38.420 | what's the point? -Right.

00:55:39.900 | -And then the last thing I would say is we started

00:55:42.900 | by talking about the dearth of IPOs

00:55:45.140 | and why aren't companies going public.

00:55:47.020 | If this is the type of thing you expose yourself to

00:55:51.060 | by being public,

00:55:52.420 | then I understand why there are less public companies.

00:55:55.300 | And I actually think, in addition to the fact

00:55:58.940 | that everyone in Delaware should be afraid of this,

00:56:01.340 | I think the SEC should be afraid of it.

00:56:03.420 | Like, you shouldn't want this type of activity,

00:56:06.580 | this type of derivative suit, to come to the table.

00:56:10.100 | 'Cause with nine shareholders and an ask for $4 billion,

00:56:14.380 | it's clearly a shakedown. -Yeah.

00:56:17.180 | -You wouldn't want that in your public market ecosystem.

00:56:19.660 | -Right. How do we give assurances to other companies

00:56:23.460 | that are reincorporating to Nevada,

00:56:25.340 | reincorporating in Texas?

00:56:27.500 | You know, Tesla's move to, you know,

00:56:29.740 | was approved to move to Texas.

00:56:31.540 | How do we give them comfort, you know,

00:56:33.540 | that they're going to be protected there

00:56:35.580 | against these type of cases? -I have work to do.

00:56:37.900 | I need to go learn more. -Yeah.

00:56:39.260 | -And, you know, as much as I would say

00:56:41.100 | that the governor of Delaware should be afraid,

00:56:44.740 | the governor of Nevada and the governor of Texas

00:56:47.180 | should be putting together a task force

00:56:50.180 | to take advantage of this

00:56:51.500 | and to answer the question that you posed.

00:56:53.900 | Like, what needs to be in place?

00:56:55.620 | Can you borrow some of the precedent case law?

00:56:58.260 | I don't know how that works. -Right.

00:56:59.460 | -But, like, it's a -- I'm shocked,

00:57:03.540 | based on everything I've been told my whole life about why --

00:57:07.980 | You know, you say, "Why are all these companies

00:57:09.740 | incorporating Delaware?"

00:57:10.740 | Oh, it's the most business-friendly state

00:57:13.220 | from a judicial standpoint.

00:57:15.860 | This blows that up.

00:57:17.420 | -Well, I mean, one of the things I --

00:57:18.540 | Again, I'll go, you know,

00:57:19.740 | call my corporate law buddies up, as well.

00:57:21.980 | Why can't the state of Texas say --

00:57:24.380 | You know, because you can't just make precedent up.

00:57:26.740 | Precedent has to be the byproduct

00:57:28.420 | of somebody bringing a lawsuit.

00:57:29.580 | That just takes time.

00:57:30.860 | But you can draft it into your corporate code provision.

00:57:34.140 | Like, you could simply say that, you know,

00:57:35.900 | we're not going to allow these type of derivative lawsuits

00:57:38.300 | with, you know, that are totally,

00:57:40.620 | you know, a farce with nine shares

00:57:42.860 | to be brought in $5 billion of, you know, of awards given.

00:57:47.180 | -I suspect you could take a industry-leading LLM

00:57:50.500 | and scan through the case precedent

00:57:53.620 | and help codify the law that you need.

00:57:56.580 | -You know, for sure.

00:57:58.300 | -So, tonight, you and I and Philippe have --

00:58:01.980 | You know, we're going to do a panel with Larry Summers,

00:58:03.660 | and we're going to talk a little bit about,

00:58:05.780 | you know, what the world looks like in 10 to 15 years

00:58:08.420 | as a byproduct of AI and some of the consequences,

00:58:12.220 | you know, that we may see.

00:58:13.020 | And when you abstract away the next five years,

00:58:15.460 | you know, because who knows how long this is going to take

00:58:18.260 | and whether we bump up against scaling laws

00:58:20.380 | and all these other things.

00:58:22.500 | When you look out 10 to 15, you know,

00:58:24.940 | any thoughts about, you know, what you want to hear,

00:58:27.740 | maybe from Larry or, you know,

00:58:29.500 | big-picture thoughts that you have,

00:58:31.500 | do you think the world is over its skis again, Bill?

00:58:34.900 | Or do you think this is -- Is this 2000,

00:58:37.980 | where we're going to go through perhaps

00:58:39.300 | a little bit of a rough patch here,

00:58:40.580 | but when we look back 10 or 15 years,

00:58:42.540 | it's going to be way bigger

00:58:43.660 | and way more consequential than we thought?

00:58:45.900 | -I didn't know you were going to ask me this question,

00:58:47.500 | but I'll tell you the one thing that's on my mind,

00:58:50.540 | and then I'll ask you the same question.

00:58:53.340 | But I really don't believe in the deglobalization push

00:58:58.220 | that's coming from either of these presidential --

00:59:01.020 | I just don't believe in it.

00:59:02.260 | I believe in Ricardo's comparative advantage.

00:59:05.180 | I believe in lifting all people out of poverty,

00:59:08.340 | not just people that happen to be born

00:59:10.220 | in the same country as you are.

00:59:12.140 | And that happens through globalization.

00:59:14.380 | And I just think more people are --

00:59:16.820 | Like, the most people that have ever been made better off

00:59:19.860 | by one person was in China when Deng Xiaoping

00:59:22.340 | brought half a billion people out of poverty,

00:59:25.140 | and that happened by introducing capitalism.

00:59:27.500 | And I just hope we can find a way to stop vilifying China

00:59:31.900 | and to stop thinking that you're going to re-onshore

00:59:35.820 | a whole bunch of --

00:59:37.580 | I don't think we'll be competitive globally.

00:59:39.940 | -Yeah, yeah. -Anyway, that's what's on my mind.

00:59:41.740 | -I mean, it's an interesting question.

00:59:44.180 | If you flipped it back around,

00:59:46.580 | I'm really interested in the productivity gains,

00:59:50.340 | you know, that I think we can achieve,

00:59:52.580 | like, the big unlock here.

00:59:53.700 | I'm interested in if he sees those same level

00:59:56.540 | of productivity gains that perhaps we saw

00:59:58.260 | in the '80s and '90s.

00:59:59.660 | I'm really interested in how he thinks

01:00:02.100 | about our national competitive advantage, right?

01:00:04.340 | Like, the United States,

01:00:05.740 | if you just look at the performance over the last --

01:00:08.940 | right, the last 10 years,

01:00:10.580 | has been a byproduct of a lot of this globalization.

01:00:13.860 | But I also see the flywheel spinning.

01:00:15.860 | Like, you just look around here.

01:00:17.540 | We have a system of risk capital

01:00:19.020 | that's better than anywhere in the world.

01:00:21.220 | We have a system of risk-taking and entrepreneurship

01:00:23.740 | that's better than anywhere in the world.

01:00:25.100 | The rate of innovation, better than anywhere in the world.

01:00:27.780 | And so, to me, it also seems like --

01:00:31.180 | -Well, let's open up that skilled immigration gap.

01:00:33.460 | -Yeah, no, I mean, like, that's, you know, absolutely one.

01:00:36.500 | And I was -- not to go, you know, off-piste here,

01:00:39.020 | but I was talking with, you know,

01:00:41.420 | the president of a major, you know,

01:00:43.100 | fintech company last night, public company,

01:00:45.700 | who was at the business roundtable,

01:00:47.780 | you know, with Trump, and he said,

01:00:49.300 | you know, they were all shocked.

01:00:51.300 | Their jaws were on the ground.

01:00:52.860 | Trump walks into the room, starts talking about immigration.

01:00:55.980 | You know, and while he says,

01:00:57.220 | "We got an illegal immigrant problem.

01:00:58.820 | We got to -- you know, we got to tighten the borders,"

01:01:01.340 | they said it was the first time they ever heard him say,

01:01:03.780 | "And I got to solve the problem for everybody in this room,

01:01:06.420 | how I get you more talented workers."

01:01:08.660 | And he proposed something, apparently, at the roundtable.

01:01:11.500 | He said, "Anybody who comes here for a four-year education,

01:01:14.340 | completes their degree in the United States,

01:01:16.220 | we're going to give them a green card."

01:01:17.580 | -I like that. -Okay?

01:01:18.660 | Like, if that's true,

01:01:20.740 | this is one of our huge issues, right?

01:01:23.380 | This is the best place on the planet

01:01:25.580 | to start these businesses, you know,

01:01:28.140 | because of ecosystems like this,

01:01:29.900 | but ultimately, you look at, you know,

01:01:31.980 | Elon came here, right?

01:01:33.700 | Larry and Sergey, you know, so great to be with you.

01:01:37.580 | -Yep, good to see you. -I look forward to chatting more

01:01:39.140 | tonight, and thanks for having us.

01:01:41.740 | -Yep.

01:01:43.340 | ♪♪

01:01:51.780 | -As a reminder to everybody,

01:01:53.500 | just our opinions, not investment advice.

Ep11. Coatue Conference Recap, Tesla & ISS Controversy | BG2 with Bill Gurley & Brad Gerstner

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