sometimes you make some venture bets and they don't work and then you're like I just invested in the wrong trend and in fact sometimes you invest in the wrong company but it is the right trend and those bad investment cloud your judgment Bill we're back I think it's the 10th anniversary congratulations Philippe and Thomas thank you of course we're at Cotuzzi East meets West down here in Los Angeles I think it's an event that founders I certainly know you and I look forward to every year as I said to you both it's hard to put together something that has this much durability this much impact you do this incredible overview on public markets on venture markets and technology that I think you know you publish today online that everybody should go out and download and take a look at and so you know we've been at this now for a couple decades having built something like this is really cool so I just wanted to say thank you and conversations on on on the 10th anniversary and you know Bill and I thought why don't we just go through you know you had this slide today we got to sit through and listen to you guys commentate about uh some of these slides we wanted to share it with everybody else so we're all so excited to make our our debut as a podcast duo the world premiere we've we've done them individually but not as or we we're announcing we're announcing our new pod we yeah exactly we got bg2 and now we got what is it lb2 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 just add like I think the conference is is kind of a a really amazing gift to the industry and for the founders to get to come like it it harkens back to the like when I was really young in this industry the agenda conference everyone would stay for the whole thing and so your opportunity to network is so much higher and a lot of conferences today people fly in and fly out but you know here you you've got some amazing people that are around for the entire thing it's just incredible yeah yeah agreed well I mean let's dive in you have a big budget for smoothies you know your smoothie budget really keeps people intact and by the way for for people that are listening um this deck we're going to reference some of the slides the code 2 team put it on their website uh just a few hours ago and so if you want to download it and have that as as we go through this it might be helpful yeah you should I mean Philippe let's just start off I mean you and I it seems like we spend most of our time talking when things get bad in the world and yet this is probably the most optimistic that I've heard you on this stage in the 10 years that you've been doing this right we talked you talked us through this slide four which is the AI super cycle slide and and and this slide which I thought was incredible slide six which is when will AI reach 75 percent of total US market cap which I think is incredibly provocative how you compare that to industrials and transport because everybody's saying it's so big already it can't get any bigger so just kick us off you know contextualizing your level of optimism and this slide like can it really be 75 percent of total cap yeah uh so listen um every time I'm optimistic I'm worried this is it you know this is the peak uh and now that Thomas and I are doing this podcast together we're guaranteed to be doomed but I think that at the end of the day that's how everybody thinks first of all so it's never priced in yeah everybody's worried that it's all the time the peak and yeah yet despite that uh things tend to work out I think today we've learned from these founders and stuff like that that AI is probably the defining and biggest tech trend that we're going to see and I showed you the different waves there's only been a few waves over the last 70 years or so going back to main frames and one person made the point that the networking we needed the pcs the internet we needed network pcs sass we needed what happened before and AI is also built so one of the reasons these trends get bigger 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 and bill you've been great at it and brad you've done too is let's always try to look back at the past I find that this concept that like uh even though we're talking about new trends they've been new trends you know since the canals and uh yeah uh and uh whale oil and uh things like that right and so you look in the eight eighteen hundreds and stuff you know we start having a real finance and real estate industry then uh probably uh at some point especially after the second world war we had a real manufacturing uh industry and then we've had also a market dominated by energy and right now 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 we had the ceo of the largest equipment maker for utilities today you're sort of wondering not just ai is going to become bigger tmt is going to become bigger but there's some sectors that should we reclassify them as tmt or utilities now like the next semi-cap what's the difference between a nuclear energy plant and a semi-cap guy they're both there at the beginning to help you create something that delivers a tech product yeah the you know said another way technology when when we got started thomas was five percent of global gdp today is 15 percent of global gdp and when we're sitting here in 10 years i think you're saying confidently while there'll be a lot of noise and a lot of volatility it's going to be more than 15 percent of global gdp you guys talk about again like what the new class of ai entrance are so the mag 7 has actually underperformed this year but we have ai power we have ai related software we have ai semis that are up on the year you guys have diversified out philippe into some of these other categories you were just talking about it is that the case that everybody got crowded into mag 7 and now you see all of these other companies accelerating this year that that are starting to get some of the benefits and i think this one maybe thomas you should take it and also contrast it to what's going on a bit in the private side if we can add that too because there was a time where max 7 was a real excitement and now it's changed a bit yeah so it was interesting seeing that we think that on average the max 7 i mean it was basically flat year over year and yet tremendous value accretion to the top ai companies right whether it's open ai or anthropic that's right we're all kind of the following companies but to me my other takeaway looking at this and i was thinking about core weave that recently went public and you guys are big shareholders in we are and big fans of the management team and i think a lot of skepticism around that business and that business model but at the end of the day being an ai pure play there's very few in the public market right right and so you know i look at this list there's amazing companies on on this list but a lot of them might have legacy businesses or other kind of right i think of a google as an example right of certainly has a lot of good ai but also has some disruption threats so seeing new entrants like core weave that are a pure play on the trend yes um i think has been a really kind of positive development as well another thing today's an appropriate day to talk about this the stable coin legislation you know passed today which is a major you know we're going to want to talk about to sax about this later later but a major step forward for the for the you know kind of regulatory framework around u.s finance you were funny today uh philippe on stage talking about bitcoin you know it's this category that's broke you know you said it's broken out you lose sleep over it every single night because you're still not invested from an institutional perspective in it like a lot of us and yet you you showed this slide 18 where you said maybe the volatility of bitcoin is is coming down which might put it more into an institutional asset class talk to us a little bit about how you guys think about crypto maybe at the price you know we all have post-traumatic stress from the 1920 period i think of a venture investing in crypto is that changing is it now in the 2020 2020 i mean yeah i like that but i was like the first of the really early days of venture you know i do think it's actually really interesting to think of bitcoin as a company for the sake of our investing universe right we do think like the relative market caps becomes really interesting so as you see in in some vardec especially at the end first thing is awareness we need to include the large ones as we think about how they're valued versus kind of other things and so how do you think about how do you think about valuing it i mean listen uh but just touching back on your point so we we're looking at bitcoin it's like all right the market cap of the world the net worth of the world is like 450 500 trillion equities i think are like 120 or stuff real estate's probably another 100 150 then there's a value that people have in their homes uh gold is about 15 to 20 trillion uh above and under uh the ground and then we're like bitcoin at two and i'm like god so bitcoin it represents you know two out of 500 of the net worth of the world or 400 whatever it moves a little bit could it be four could it be five and then we're like well the largest company microsoft today is like three and a half trillion let's say that microsoft i don't know doubles in 10 years it would only be growing at seven percent per year microsoft will be a seven trillion dollar company in 10 years and could bitcoin be five or six it's a real asset class right and then on top of that it's very volatile then on top of that there's a lot of retail people that uh own it and it almost feels like sometimes you know the institutional investor is wrong and the retail investment right sometimes it's the opposite retail gets caught in a little bit of a meme stock and it comes back down and i don't think we can afford to ignore it anymore so it doesn't mean like we don't really know exactly when and how to own it and then your other point that's really interesting is sometimes you make some venture bets and they don't work and then you're like i just invested in the wrong trend and in fact sometimes you invest in the wrong company but it is the right trend and those bad investment cloud your judgment and there's bitcoin there's stable coins which we should talk about they're growing incredibly right now and then there's all these out coins and you could say okay well i don't like the out and the meme coins i don't like necessarily the collectible aspects of things but i like stable and bitcoin so for us it's more a process where we just need to become better be willing to change our mind and stay open to the future and those are a lot of the conversations that you have one thing i'm curious if you agree my one of my biggest lessons looking at private market investors versus public market investors is the appetite for institutions in the public market for assets that are perceived to have significant downside i.e.

like 70 or 80 percent that are mark to market i have found is just really low yeah right investors on the public side just don't want to take that kind of risk right and so versus on the private side you are because you may have 20 of those they're not mark to market and you're like look maybe five go to zero but my other 10 go so i do wonder how institutions versus retail may be willing to take that risk i wonder how institutions will think about an asset like that you know let me kind of telescope out for a second and i want to get bill's opinion on this as well like i think all of us you know now a couple decades into this i think one of the most powerful things about this conversation is mental flexibility yeah right and you know i think when you're when you're maybe a little bit younger in the business you're more dogmatic you develop an opinion you defend it to the hilt right and if you're wrong it can be extraordinarily costly and i think crypto was that way for a lot of people and you know they they carved out these positions they were like this is you know this is a fad and then they they're proven right at a moment in time because it'll have a 50 drawdown and so rather than re-evaluating their priors they lock in to that position bill how have you because i find venture particularly tribal yeah about this point you're locked in you can't sell so i think this is something that you guys develop more of an instinct for in the public markets right in the private because you're in you're in you're in forever like with the private companies you can learn lessons along the way but your windows are really long right whereas i think if you're in public stocks where you can you know change your mind and and make a decision right away that's very different yeah i mean you referenced drunkenmiller today you said you think this may be the most valuable attribute of the great investors i mean listen when he told me i've made 120 of my money on obvious ideas and i've lost 20 elsewhere and then you start thinking of bitcoin and a company being like the fifth largest company in the world now it's a bit odd what i'm saying i recognize it because you could also say well should we consider gold as the largest company in the world because it's worth 20 trillion and not necessarily but i do think like forcing yourself to think differently and at least being at peace okay i thought differently i came to the same conclusion yeah and being able to do that now as to us being a flexible the fact that you think that french people are highly flexible people i'm very thankful of that i'm not sure it's true but we'll take it uh two things that are new about crypto that should should lead anyone to reevaluate the government's gone from being kind of antagonistic towards supportive that's a big shift because regulatory risk was a big question for all this stuff and then the stable coin you know based on what people are talking about this is a high utility use case for people that that is companies are using it you know as part of their workflow process that's a that's a new dimension as well so one additional thing just point on that that i think is interesting is you know when you talk about the u.s dollar you know the the the view is always well what's the alternative you know i'm not going to go do i want to go into europe you know probably not it's kind of interesting well what if actually the alternative is bitcoin right um and so that's something i've kind of been spending time on we you know we talked a lot today about the dollar and interest rates and what's going to happen and sure um so it'll be interesting to see whether that becomes a legitimate alternative to you know the overspending of governments and when you have a stable coin right how long is it before a new regulation goes through that allows a stable coin to pay interest sort of odd stable coins can offer rewards but can't pay interest and when you have a stable coin with interest how long is it before the government creates a one-year stable coin a five-year 10-year 30-year stable coin which will allow every single person around the world to invest in the usa so the government is going to have an incentive to not have these bonds be sold through these like weird dealers and this and that right the government should go direct to the consumer just like just like companies do so i bet you that in the not too distant future people will be able to automatically invest in bonds and so that's yet another example on top of what you were saying tom about the the bitcoin and stuff that i think it's uh anyway we need to switch topic otherwise i'm gonna really pull the few hairs that you and i have left okay back to back to ai one one of the topics you guys had an incredible audience here you had andy jassy here you know talking at lunch kevin weill from uh open ai and one of the topics was consumer ai and i thought one of the most incredible pieces of data that you guys shared was looking at the impact that chat gpt which is now scaling to you know kind of a billion users is having on on google and you did this by conjoining a couple pieces of data that you guys had so thomas you want to talk to us a little bit this is slides 22 and slides 24 uh and and and and slides 26 i'll i'll pass it to philip for this chart but okay i think bill and i were chatting about this earlier it anecdotally it certainly seems to be the case right uh the more people i talk to the more i ask them um do you feel like your google search has been impacted by chat gpt and and resoundingly i i almost everybody at this point now agrees that that's the case right and we can argue whether the queries are commercial or not i think the queries are getting more commercial yes every day but without a doubt it's having that impact we could not prove it numerically it felt intuitively true obviously google is telling you it isn't right so i think we went about seeing is there is there a numerical assumption that we can make that would kind of prove this out and i think you should introduce the work yeah and and by the way as we you know all these platforms have some businesses that get threatened and other businesses and google could still be an amazing company by just saying listen maybe search is on the threat but youtube is with all this new ai content gonna explode and potentially threaten netflix and maybe waymo is gonna also do incredibly well so our judgment more is around what exactly happens i mean the assets of the android phone and the gmail and and the google docs and like that's a nice set of complementary pieces they have so many great assets it'll be very interesting to see how it plays you know for me if i were ceo of google that would be way above my yeah basically i would have no idea how to put it all together but god is it just fun to be alive and just see how what's amazon gonna do what's google gonna do what all these guys so what we try to do here is as part of the data science that we do we process probably a hundred million credit card receipts a day so we have a very fine view of what the u.s consumer does and we have another data set where we know what consumers do based on their email receipts and the trick was to try to join those two data sets and in general in data science my only lessons learned is data is useless unless you 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 that uh chart is that absent chat gdp uh chat gpt maybe uh google page views for particular user growing four percent per year so we are consuming more google then we get a subscription to chat gdp which we uh chat jesus christ i confused gdp and gpt we get a subscription and now we're like ah this guy's paying 20 bucks a month yes and then we track once he started paying the 20 bucks a month to open ai what happens to the usage and you can see peak to trough it's down eight percent year over year peak to trough it's let's say down 11.

so clearly page views are going down and that's over almost two years right so it's not like it's immediate it's not like it's an immediate gigantic threat but one thing we've learned and thomas and i repeat that to each other all the time is these major shifts they just start one little step at a time and that one little step becomes a gigantic move quickly so you can't underestimate these small moves and i i think this confirms something that we all know anecdotally as as we're talking about well and i think that you know even slide 24 you know when we were talking two years ago about chat gpt we knew it was off to a good start but the question was what's going to happen when meta you know gets its game going what's going to happen when google launches gemini what's going to happen when elon launches grok what's going to happen when you know claude gets better we all thought that when they got into the game that this line would start to flatten out but the fact of the matter is chat gpt has been radically more resilient and the engagement has increased much faster than i think any of us would have thought with that level of what's interesting about that is that's true in the us it's true internationally yes it's true whether you look at it on downloads it's true whether you look at it on engagement it has blips here and there the deep seek moment and others but the resiliency to me bill it does remind me a little bit of when uber got started right and it would just they established that market share and you know it was just incredibly difficult to disrupt right yeah for listeners that don't have the slides we're looking at chat gpt adoption against twitter instagram facebook and tick tock and it's just you know you know straight up and way ahead way ahead of those against by the way those apps had inherent virality as you know i mean you're kind of the expert of that this doesn't right this has no virality to it it's just value to the consumer correct driving adoption although i would say that we're starting to see network effects right on the data side we're starting to see switching costs with permanent memory as you and i have talked you know starting to see what's amazing is you have this level of adoption even before those things begin to kick in but it confirms what we kind of know to be true we saw this with google right we saw this with facebook yeah and now we're seeing it again with chat gpt kevin who was on stage after you guys talked made an interesting comment which i mean it's it's tautological but it it still kind of resonated with me he said look this is products going to get better so you have all of this adoption with that's what's scary you know the product's getting yeah it's not even three years old we could show the or maybe we did show the stat about also the usage in terms of minutes yes right right that more maus more weekly users more daily users and then more time per day which is a lot which is also consistent with all of our personal lives right yeah um we're going to keep forging ahead here we're going to get crunched on time slide 27 bill is i know a slide you wanted to talk about when we talk about these new hyperscalers and what you did here is you were mapping up cloud revenue market share to the share of nvidia gpus so bill why don't you i'll just describe this so people and that are listening can follow along and then we'd ask you guys to talk about your takeaways from it but they they the co2 team mapped out cloud revenue market share and you have oracle five percent amazon 44 because of the success of aws google 19 and microsoft 30 and then you show right next to it the share of nvidia gpu allocation microsoft and google are about equivalent uh 30 and 20 to what they have in the in the cloud revenue market share amazon notably 44 of cloud revenue market share but only 20 of nvidia gpu allocation and then oracle jumps from 5 to 19 and core weave comes out of nowhere to be 11.

so tell 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 and then you go as a as an as an analyzer of companies this might be my favorite slide because it shows like the competitive dynamics at work and whose strategy will win out you know i mean i look at this and and one obvious takeaway is that amazon has half the share of gpus than their shave aws so that could mean one of two things either aws is behind an ai that could be one or they're pursuing a different hardware strategy than it's uh than its competitor which andy spoke specifically about so that could be or a combination thereof right so that's one and number two it shows the reinvention of oracle mm right i'm incredible incredible left for dead in this left for dead in the 2000s left for dead in the sas era left for dead in the ai era now coming back and then also i give corey a tremendous amount of credit of just entering the market as a pure play had difficulty raising capitals none of us ever believe there's no ip you're just buying gpus and reselling them just by being in market and being focused right started to build that relationship with nvidia and now it's punching way above its weight so it's a by the way the third theory could just be that nvidia would prefer not to have a dominant customer like they wouldn't want this to be the customer though it hasn't seemed to impact microsoft and google so yes do you want to add anything yeah i mean listen i would say the one thing on that chart is damn hard to get the numbers right so there we have to explain the viewers like we could be off by you know five or six percent up or down but i think where we're not off is the concept that some players are getting more gpu chips than others and so then the question is are nvidia gpus a prediction of future cloud revenues and i think the answer is like and uh we haven't even included stargate which is going to start coming up here right and what if what if anthropic also becomes its own hyperscaler you could have a world with more like a dozen hyperscalers than like the two or three that we've had before the overseas the sovereign then you're going to have the sovereigns for sure you're going to have some telecom operators more traditional operators in europe is that so there'll be more right but i think what definitely is going on now is there's sort of a battle between uh people that want to standardize on nvidia pay the nvidia rent yeah and get the supply versus people who also think like hey i'm bringing a lot of software i already have a lot of the data and i can afford a different strategy in the internet era almost every startup started with oracle and sun and five years later they weren't on it so there is some precedent there is and i also think like uh the other one that surprised me i i even have a hard time believing that those are the numbers is i thought google was more skewed to tpus than nvidia so there's some people who are going exclusively with one chip there's some people who are going to go in a hybrid way google both as a nvidia and tpu i think amazon is also choosing a path of like hey we're still making a ginormous bet on nvidia but we also would like to have you know our own bet and i wouldn't be surprised if maybe someday an anthropic or uh maybe even an open ai would say uh maybe we should design our own chips and then frankly you might have uh some very expensive model with enormous reasoning that runs on nvidia and maybe a super cheap model just for some very local applications maybe that could run on a custom chip so i think a lot of it is going to morph and change uh over time but at least what's fun here is let's go revisit this chart in like five or seven years and be like okay different people play chess the different ways what's happening and i think to me the thing that stands out most about this slide again slide 27 microsoft you know you talked about the explosion in terms of token production you know we we might be a hundred million tokens a month already out of microsoft microsoft is open ai so you got chat trillion hundred trillion i know you knew that you know for the so it's a yeah so what's really driving inference and and this token explosion like consumers first and foremost and google's got gemini right microsoft derivatively is supporting chat gpt as is oracle and core weave on the slide amazon doesn't really have a big consumer application right so their need for those gpus uh may also be a little bit lower correct uh in this slide very good one of the i want to jump ahead a a few a few sections because i want to i want to get to the private side the venture side of this but i want to end the public side with the the macro backdrop philippe you're one of the best you know we've been at this a long time we know that you know we invest in companies that are doing extraordinary well we look at fundamentals but you can't ignore the macros dan loeb says if you don't do macro macro does you um we found that out the hard way too many times in our career but if you obsess about it it can also uh be your undoing one of the things i thought was so interesting we're at this moment in time where we we've heard from elon and the guys on the all in pod david friedberg and others who are saying you know we're in this debt spiral there's no way out of the debt spiral you know and yet if you look at the tenure the tenure is still at three four three four four right despite the calls that it was going to be at six five or seven we haven't got anywhere close we've been in a band between three five and basically four eight now for two years and you presented an argument on slide 45 about the productivity cycle that may come out of ai right that may drive faster growth in the economy much like we saw in the 90s with the internet that could in fact lead to lower inflation and lower rates on a permanent basis it's kind of this backdrop that would bring the deficit to gdp below you know uh four percent i know you guys work closely with with larry summers you know and others and so as you think how important is believing this to be true in our overall kind of public uh investing today so your original question philip should we be worried that we all think that ai is a big deal right the counter to that is to say okay well what if we're right on the ai but we're wrong on something else and we actually analyzed three things we analyzed are markets expensive and the answer is yes but they were markets were expensive the 90s during the pc and internet era and the market did well so that's number one number two we said well are tariffs a big deal and we said yes they're important and maybe they haven't gone through inflation yet but this doesn't feel to us like i like to say that the tokens trump tariffs yeah right basically and so we're basically left with this deficit first thing that's on deficit is having doge and having people like elon say that we're spending too much it's useful yes and we should repeat that every day it doesn't hurt but what i was wondering is since it's so obvious that it seems that we need more doge we need to spend less and stuff like that who are the people who every day are buying bonds 30-year bonds at four and a half percent and i'm sure you're uh the listeners know that but a one-year bond at four and a half percent stays and gives you four and a half percent a 30-year bond at four and a half percent on its way to six or seven you could lose 60 or 70 percent of your money yes you know once you have a 30-year multiplier on a change in interest from four and a half to six right and our basic instinct was to analyze what happened in the internet in the pc days where we had exceptional productivity gains when the internet and pc really took off in the 90s and to say hey what would happen yes if we had similar exceptional productivity gains and basically the answer we were trying to solve is in essence today we're at 100 percent debt to gdp on our way to 140 and we said what would it take for actually debt to gdp to stay at 100 or maybe even bend the curve and go down to 80 and what's really surprising i think if you just show maybe the next slide or or so yeah uh i think if we move forward yeah just a little bit you'll see that if productivity for the next decade or so was about two and a half to three and a half percent per year right we could achieve substantial reductions in this key ratio of debt to gdp and i'm not saying we're there but i'm saying that at least we've been able to bookend what would productivity need to be to achieve an 80 100 instead of 140 debt to gdp this is slide 51 just for the people uh following along which is you know again an incredibly important point we know there are people buying bonds every day at four and a half percent so the question is why are they doing that and one of the answers may be exactly what you're saying what if they're right exactly what if they're right and we're 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 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 uh good enough macro guy and if tech guys pretend to be good macro guys you know it's the beginning of the the end but at least we have a little bit of analytical thinking around what it would take and bill and thomas you guys are much better placed than me in terms of your discussions with all the privates which i think we're leading to now and all these amazing new products and you're telling me that that's not going to create like massive productivity i really think it is and and and drawing from that you would end up with with gdp growth more like the five percent plus maybe even six which by the way that was the case for many of the years in the 90s then sort of product uh you know uh and by the way the six would represent four and about real terms whereas in the past you know most recently we've more be at like you know two or three which is more like the one in terms of real terms so you know just to wrap up your flight path for the public markets i think it's fair to characterize as you know tariffs fairly much being under control multiples are you know pretty full but like they were in the 90s they can stay full that the backdrop is okay it's like the the bond market and rates are still in the fours and we have this ai super cycle with that on the public side would you characterize your exposures to the public market philippe as in the top third middle third or bottom third of your you know kind of average exposures you know brad i knew you would ask me that and you know i'm not 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 over to privates i think one of the things that was a consistent theme if you look at slide 60 and and 61 is this idea that the private economy uh thomas right we've had three or four years of really uh nobody getting out of the chutes these companies have all stayed private um the percentage of of of unicorns as a percentage of the public markets has gone up but now we're starting to see an unlock here both in terms of mna and in terms of ipos so talk us through the big themes from the slide 60 and 61 today about how you know ai has reignited this deployment and x and and exits are starting to rebound yeah i'm curious to get bill's view here because he probably thinks about this as much as i do and i'm curious whether he'll draw the same conclusion i i think by and large we all agree that the environment of 2021 was incredibly unhealthy both for companies and for lps too much capital going in not enough coming out a kind of a broken cycle if you will um you could see that's in so many measures amount of dollars going in no money coming out historically low ipos even worse than post-financial crisis which is kind of incredible to think about so on almost any metric you looked at we were kind of in the danger zone and i would say more or less that's been true over the past two or three years this is the first year and this is the crux of the the view i'm curious if you share where the signals are going from red to i would say yellow and potentially green we're seeing first of all a rebound in ipos we're seeing ipos perform better we showed uh basically the performance of the cohorts and how they've improved substantially since 2021 one of the data points that shocked me re-looking at this is that the 2021 cohort within one year of going ipo was down 40 percent and five years later is down 50 percent i mean just pause on that for a second that was a shocking slide that here we are five years after those companies went public and basically the market has gone vertical but that's correct on the relative basis they're probably down 71 75 i know you're right slide 71 i think i i brand i didn't believe this so i actually i i went to look at every single company on this as by this does not include specs so that which is even more extraordinary this is just traditional ipos so um it's not dollar weighted no no it's correct yeah so um so there's a lot of scar tissue there yes right but i think we have signs to see things improving so we just talked about the ipo market we've now seen some really strong ipos that have performed well core weave circle hey thomas remind me what does zerb say sorry to ask such a dumb question but what zero interest rate oh zero yeah that's how do i know but we're also seeing companies like one of the things that really impressed me about core weave we had a slide on this i can't remember what the what the number is but like people are starting to understand how public market thinks and i do think they executed incredibly well on the timetable in terms of how they release information how they explain the business model this is kind of slide 75 for people at home so we have better ipos yes that are being rewarded and another thing that struck me is we looked at the cohort of ipos right and by and large you can see unsurprisingly that growth and profitability yielding a rule of 40 was kind of the average of the cohort so um i i thought that was bullish for the ecosystem and then finally um you've talked about this on the pod before but the m&a environment coming back different types of structures zuck's bold move right to pay a hundred percent of a company to only get a hundred percent of the price 49 of the company by the team urgency is now i need you tomorrow uh alex to help me fix my business right i thought that that i thought that was the best description of the scale deal that i've heard and maybe just click on that again for a second so you know as you know for the audience most people know that you know meta has has done this interesting structure deal they're buying 49 percent of the company um they're paying a 30 billion valuation so they're paying effectively 15 billion they're avoiding regulatory scrutiny uh the ceo of scale is going to help lead efforts uh at meta and all the customers have left right and so they're leaving kind of a shell company behind also we don't know if that avoids regulatory scrutiny exactly we're gonna find out we're gonna find out right right 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 don't know that either but i mean i think one of the things it shines a light on is the speed at which everything is moving right here we are and we can all say that that zuckerberg's in beast mode meta is one of the greatest companies you know on the planet he's extraordinarily focused uh on getting ai talent but why do you think he was willing to pay a hundred percent of the value of a company and only get 49 is it that the imperative to have talent today is so important because two years from now you may be so far behind given the rate at which ai is moving yeah i i tend to think it's related to two factors right one is the size of the prize yeah so i think he clearly sees that this is the biggest prize in tech right in the world frankly and so i think relative to his while 15 billion to all of us is a massive number probably in the scale of the multi-trillion opportunity that he sees he might just think it's a bet i would make all day long so i think you get it as a percentage of your market cap and you say like a one percent right correct right so he so i think that's number one scale of the opportunity no pun intended and i think number two is how quickly the ecosystem is moving under some data point i mean people had this view already that that llama wasn't quite at the top but this is somewhat confirmatory of that that he's fixing a problem right we've seen anthropic we have data in here that i think it took him about a year to get to their first billion in revenue it took him three months to get to the next billion and then it took him two months to get to the one the next billion after that right so he's probably seeing how quickly chat gpt is growing social users how quickly um anthropic is growing business users through their api and thinking i don't have two years to wait in european regulatory uh purgatory i have a question for you thomas on the ipo so so so simultaneous with seeing more ipos which is awesome there there has been a trend for companies to stay private longer i think the collisons used to hint maybe and now they're more kind of maybe never and and some investors in the ecosystem are encouraging that behavior what what do you think is different about the people that choose to go out now that the windows quote open i think um i mean they each have different reasons some may have uh just view from the financing opportunity the ability to tap the public market both on the equity and the debt side to be simpler right as a public company i think that's the big piece of it second look it could be a brand defining event for a company right for for your product for your employees giving the level of transparency to your customers that you're well funded that you have a fortress balance sheet you know all of that you can with withstand the regulatory scrutiny that comes and even just the um the scrutiny from investors right that you have the discipline and and with everything that comes public people looking at your numbers so all of those things right i happen to believe that all these companies should go public um i also think by the way there's there's a democratic element to it where i think the wealth creation belongs to the public market um i think you attract different types of investors not just frankly a public market versus a private market but also the retail investor what can you learn from the retail investor either positive or negative about your business right i mean i think it's a it's such an important point and i've made this case to everybody at open ai i think they're the most important company of the era i think it's hugely important from a regulatory scrutiny and from the democratization of finance it needs to be a public company the idea that we're going to have trillion dollar companies and the only people who get to participate are the people sitting around this table right i just think is unhealthy for our capital markets yeah and the fact the fact of the matter is you know we call these companies venture-backed companies but you we all know there's a whole new market that's evolved here that i call quasi public these are companies over five or ten billion dollars in value they would have all been public 10 or 15 years ago why because the the private markets just didn't have the depth of capital to serve these companies and their voracious capital needs to do you know this is happening as we speak in private equity right some private equity companies just go from a private equity owner to another then you have continuation funds right big second transaction this is happening in the private credit market where now you have a huge private credit as an asset class not just so this sort of healthy tension between public and private is important i just think that these super super large private companies if you're not willing to submit yourself to sort of the sunshine and the and the ray of light the public markets you're going to get it through a regulatory agency so pick your poison and be careful that if you think you can live in the public market purely to sort of live in the shadows that's not going to work as you become a large company you'll be regulated and so that's why maybe even more correct that's why i really hope that these companies will choose to go public uh you make the democrat you know retail investors should have access to these companies but i just think in general the concept of mark to market it's not perfect and there's increased volatility but every day we learn something 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 speakers who made this great point of just because i'm public doesn't mean i need to change how i run my business well maybe maybe we talk about app loving on slides 91 and 92 you had the 91 is has microsoft reach peak employees and 92 was about how app loving has gone ai first and had massive uh you know margin expansion or revenue per employee i i tweeted about this the other day i called a game the golden age of margin expansion right if you look at the mag 7 over the last three or four years they've grown over 20 percent compounded but the number of employees their opex is growing at two percent we've never seen this yeah in the history of technology you know that we've covered so why don't you talk a little bit about it you know well are you guys can you describe this yeah i loved this chart on 91 and previously what we had is we just had the chart without the blue lines right right which basically this chart for those listening tracks microsoft employee count what we realized when we after we did this chart is we realized wow there's actually three distinct chapters that are um kind of uh being told here chapter one is the zirp era it's covid software is everywhere the only way these companies think they can grow is by hiring more people exactly reflex big opportunity i got which by the way made sense because if you grow by producing more code you need more people for more code so i think it was completely logical we gotta hire more okay so that's the zirp era then ironically just as github copilot comes in brad familiar with the term the get fit era this is like time to get fit hold on we need to get fit we've gotten too big right and then you can see stabilization of headcount down in a lot of other companies now we're entering the ai era and i do think it's kind of a provocative provocative question which is that has microsoft reached the peak employee and while they never cross that threshold ever again right i i you know i i had conversation with the cfo of a major company recently and they said thought experiment what if our headcount was down 50 percent in three years right those questions have never been asked for companies that are growing and thriving and i do think what i get excited about from as a public market investor philippe it's not just that we're seeing a re-acceleration and top line growth for all these companies every one of these companies literally from uber they're growing their top line without growing their headcount all the way to the largest of the mag seven but apple oven has done as as good a job as tell everyone about this slide you put yeah so this is another one of my my favorites right and what this slide does is it will track app loving a public company run by a brilliant in my opinion generational entrepreneur um and it basically looks at two things one it looks at uh the revenue of the company annualized uh since q2 2021 so that's uh the blue line and second the um employee count over that same period right and basically 2021 big opportunity i gotta hire tons of employees to kind of try and capture it what else can i do right then realizes oh my god my company's gone too big i've lost control of my culture we're not innovating fast enough too many layers of bureaucracy we're not set up to capture the opportunity right sizes the workforce at the same time as ai comes in now the company's lean and mean innovates out competes companies like google and meta doubles the size of the company as the employee count is down over 35 right think about this we just showed the the slide of chat gpt going parabolic google losing right page views google has 187 000 employees open ai 2700 we're not going to be a company of 20 000 employees he didn't say we're not going to be a company of 187 000 employees right he's saying we're going to leverage our models our agents our capabilities which is exactly what jensen huang said to us last year he said brad i'm going to 3x the company and our head count may not grow or only grow a little bit i said how he said because i'm going to have agents who are reporting to me i'm not going to have employees who are by the way i'll tell you what this made me think of so back to the app loving slide so in five years four years they doubled the revenue per employee and now you know a company with a high growth rate that's profitable that's thriving is lowering head count um because of ai it it it really struck me that there's a level of confidence in a company's use of ai if they're willing to actually reduce head count and a lot of companies give lip service to their using ai but a willingness to reduce head yes is a different level yeah and by the way one point adam would make if he was here and i think it's important to state he's not doing this because he's a masochist that loves to fire people right the reason he did this is he believed that that's the shape the company needed to be in to win and out compete yeah right so i think that's really important it's not like oh my gosh all of a sudden i i want to be much more efficient and i think that you know i can create so much more value it's i believe this is what the company needs to look like so i can win this market we need to make decisions faster we need fewer layers right i think the motivation is really important um and this is just kind of an output of that and and the final thing i would say about this philippe the thing that should give us confidence about this productivity explosion in the economy is at the end of the day our economic productivity is just a combination of all these companies so if a lot of companies are doing this and you could you pile them all together right you're going to get more output for a fixed amount of labor and capital right that's going to drive economic productivity the last thing to say on that which is really important is someone is going to then say my god what's going to happen to employment yes if we have all these companies that become so efficient right and i think today someone brought up the concept of jevons paradox yes 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 the concept that uh sometimes as uh you have less employees and the cost of employment goes down actually the unemployment rate will go down not up and i'm really summarizing it in terrible terms but i think it's really important to say um that uh it's possible that companies need less employment but more companies get created because it's much easier to create a company smaller companies vibrant companies get created jobs become more interesting and so i think there's going to be a big debate around okay all this ai is it going to increase or reduce unemployment and i'm not 100 sure what's going to happen but if you force me into an answer i have faith that it might actually create more jobs more interesting jobs with more responsibility versus the other way around um yeah we have two more slides we want to cover that i think maybe we're going to end with the best because you guys had a couple powerful things um the first was slide 98 right after all of this you know covering you know uh what's happening in public and what's happening in adventure thomas i think you summed it up well which is okay so what does this mean for me if i'm a founder if i'm a a ceo what does this mean for me or or my company so bill why don't you let me let me describe what thomas did and then thomas you can do the analysis from it but he created a quadrant you know and on on one access he has a growth rate above 25 or below 25 and on this access you have profitability either you're cash flow positive or you're not and so walk us through kind of your recommendation for companies that find themselves in each of these four quadrants yeah and philippe chime in too um look we we're very proud of the work that we put in this deck but we also want to be mindful that it's a lot of data and we thought about how do we crystallize everything that we see in the market from all the data all the smart people that we talk to in terms of generating useful advice for entrepreneurs right and so we kind of came up with this matrix if you look at the left side which is basically growing companies growing in excess of 25 right and you might argue this is kind of the easiest bucket you're growing 25 but we do think the delta is kind of different and and by the way one thing we skipped over you guys had two or three slides on the fact that growth has become more scarce in in the public market and there's a and there's a big um delta now in revenue multiple for growth and for you know and and obviously diminishing multiples for correct so we have seen in the public market now growth be re-rewarded post 2021 so our advice being to entrepreneurs that if you are growing over 25 percent you are profitable time to think about whether you should be public yeah but that doesn't necessarily mean go in public as you well know there's a difference between being ipo ready and going ipo but we think certainly putting all the steps into place kind of starts to make sense if you're burning then now might be the time to build a fortress balance sheet we just saw open ai raise 40 billion right these companies are accumulating massive war chests so you don't want to lose out time to really kind of built up your strengths i think where i think you're going bill and what we you and i spend also a lot of time thinking about is what about the companies that aren't going 25 and you know for philippe and myself we take the responsibility of having invested in companies really seriously we're on the boards of many of the companies that we are invested in and we don't uh bail on our entrepreneurs you know when we make those commitments so what do we do kind of in those companies right i think each bucket is interesting the okay i'm growing less than 25 but i'm profitable it's kind of an interesting case study because that's where you might be complacent you might have said look i got fit post 21 you told me to cut my burn yeah i'm profitable now by the way the reason i think a lot of companies ended up in these low growth situations is they had a ton of capital we had that mini correction in 2021 everybody said get to cash flow break even they all ran that way but that meant cutting headcount cutting programs that they might have been doing yeah and you end up in a low growth situation yeah so we thought that actually this bucket now we're in a potentially generational transformation and architecture shift because of ai time to maybe look at and say okay what can ai do for your business is there a new way that you can invest is there an mna opportunity or something interesting so we think now you can afford to be a little bit more on your forward foot right you've gotten the business healthy you've shown you can be profitable we have a generational architecture shift time to kind of see how we can play offense would that even include maybe becoming unprofitable potentially yeah if if if you have the science and you really start to see the growth re-accelerate because of it potentially absolutely yeah right a lot of ai companies are not profitable right now so if you think you can win and you can benefit um i think that makes sense yeah this is probably the one i had the most debate about both myself with with with with others is what to do if you're growing less than 25 and you'll you're still burning capital and look obviously no one chooses to be in this position right circumstances of the business whether it's competitive dynamics or others have put you in this position and now the question is what to do and i went through a lot of different um iterations here and the best word i could come up with is it's time to reinvent and reinvent could mean a lot of different things so let me pause it that you might have two businesses let's say you were 50 million in revenue and you might have your 40 million uh core business not really growing the unit economics are tough but maybe you think and maybe it's an on-premise product and now you think you made it a new sas uh cloud product that's maybe only one or two million in ar but it's really growing quickly it's putting the company back on offense the team's really excited might be time to say hey let's go all in on this new product even though it's much smaller right that's one reinvention so it might be you have a gem of an asset it might be trying to open source something that previously you didn't right that's kind of what i mean by reinventing yeah it's it's the opportunity of looking at this moment and thinking what can i do and also realizing that you as an entrepreneur have an opportunity cost of not doing other things so the best word i could come up with is reinvent it's going to mean different things to different people but we thought now was the time to kind of um think about that i i i thought this was amazing and i i will tell you that i think one of the biggest challenges that these companies in this quadrant i think there's a lot of them there may be a thousand of these out there one of the big thing problems i think they have is having survived to this point and having succeeded let's say they have revenue of 50 to 100 million dollars they feel like they need to protect something and it puts them on the back foot not the front foot it makes them conservative and i like your word reinvent they need to increase risk they actually because i i think one of the problems is they don't they don't internalize the fact that if they stay low growth at this size their multiple could go from five to three to one right time's revenue and they're protecting something that doesn't exist so that i'll leave you with this last thought brad you and i've talked about this there's an amazing element of the venture community they choose them to be tribal and i think there's a lot of benefits to that but i also think there's a lot of benefits to what i'll call more mercenary thinking right which is more reinventing from the ground up right and i think that ultimately the combination of both of those right which tends to be more of a public mindset again because we do have the ability to sell and venture um don't to us bringing those two kind of strains uh together in the boardroom you know can yield hopefully some good outcomes awesome thomas thank you for being with us thank you for having us at the event um it's really incredible the amount of thought that that went into this is extraordinary um and i would just say on behalf of all the founders uh those people who partner with you like altimeter and benchmark um what i love about this ecosystem most people think that we compete like dogs and uh but the truth of the matter is uh you're one of the first people i call or philippe when we're having when we're trying to figure something out and and you guys to us and that's why bill and i do this pod because we actually just want to be smarter and get to the right answer um and so appreciate you having us and uh an awesome job again okay thank you so much as a reminder to everybody just our opinions not investment advice