If you're public with $100 million in revenue and a 10% growth rate, your valuation is not going to be all that great. But guess what? If you're private at $100 million in revenue with a 10% growth rate, it's not like you're better off. You're just fooling yourself. Hey man, good to see you.

Good to see you, Brad. I've been well. How was the eclipse? Didn't you have an eclipse party down there? We did. We had a lot of people out to a location that had a total eclipse and we got super lucky about 30 minutes prior to the total. It had been cloudy and clouds parted, blue sky, bright sun on everyone, and then a miraculous event.

It's kind of strange to see wrong humans applauding at the sky. Was it religious for you? It really was for a lot of people. It felt that, you know, that's a loaded term, but yes, let's use the word spiritual. It felt spiritual. And certainly our forefathers, you know, equated it with something religious.

Well, I was sorry to miss it. My mother told me, she's 88, and she said she was in tears. And, you know, I honestly, I was skiing with my 13-year-old son, and so we missed it. But, you know, the rest of my family saw it and they said it was incredible.

Well, lots of tensions in the world, Bill. You know, it was interesting. Oh, no. I tweeted last week that on the one side, you know, I really see a lot of great things happening in the markets. You know, M&A, I think, is going pretty bonkers right now and liquidity is definitely heating up.

You saw the rumors about the Salesforce Informatica deal, the Google HubSpot deal. I think I know at least six other deals over a billion dollars that, you know, are actively being courted in the M&A pipeline. So you got that on the one hand. On the other hand, you know, we had inflation come in hotter.

We have the 10-year kind of back at 4.7%, so up a lot for the year. And we have these geopolitical concerns that are not only tragic, you know, human events, but the backdrop is getting, I think, more challenging for the markets at the same time that the markets have been done pretty well for the year.

So that always gets me concerned. You know, I was with a legend investor over the weekend, and I said, "What was your net exposure at the beginning of '23?" And he said, "80%." I said, "What about the beginning of '24?" He said, "40%." I said, "What about now?" He said, "Zero." Right?

And so whenever you have that sort of, I think, reaction, it always, you know, you have to slow down and think about it. So I definitely think there's a lot of increasing volatility. We're heading into this election here in November that most people aren't even yet thinking about, but we know that's going to lead to a lot more volatility.

So I'm feeling, you know, looking at our own portfolios, I'm feeling that tension on the one hand really excited, on the other hand, increasingly nervous. Well, as you know, I've often sworn off the notion of macro analysis, primarily because I think the best investors of all time have sworn it off.

And through immense pressure from you, I've started paying attention to these things, which I don't like because I think it's quite clear that right now risk seems to be on the rise, like just the term risk, you know, across a bunch of different vectors, which is unfortunate. It'd be nice to see it start moving in the other way, but with the election coming and these different conflicts around the world, it's hard to have confidence that something like that could happen.

Yeah, no doubt about it. Well, speaking of the markets, maybe we just jump right into our first topic here, which is, you know, there's been a lot of debate over the course of the past few weeks on the IPO markets, the size you need to go public, why we have so few public companies in the U.S.

So maybe just kick off with looking at a little FRED data to normalize where we are, right? The number of public companies has gone in the U.S. has gone from 6,500 or so down to about 4,000 over the last 20 years. This is, you know, a cause and concern for many because on the one hand, we have more innovation, we have more startups, and so you would think you would have more public companies, not less.

And if you look around the world, that's in fact what you see. And what you saw for a long time in the history of public markets in the U.S. up until this recent period. But this is a big number. It's like over 40%. Yes. Like significant. Over probably the most prolific period of innovation in the history of the United States.

So now, of course, Jamie Dimon in his annual letter just last week said, yeah, well, that is true. And perhaps concerning the number of private equity backed companies had skyrocketed from 1,900 to over 11,000. So, you know, I started, you and I started kicking around like what are some of the, you know, first, you know, are these, is this bad?

What are some of the causes of this? And of course, there was a tweet last week about Philippe Lafont, who I think was speaking at the information event in New York, where Philippe said, listen, the markets have structurally changed. It used to be you could go public with 50 or 100 million dollars in revenue.

And he said, today you have to have a billion dollars in revenue in order to go public. Gokul tweeted something similar at first, looking at some Meritech data. He said, it looks like unless you have 700 million in revenue, then you'll probably underperform in the public markets. So here's his tweet there.

And then Jam and Ball on our team, you know, responded to that and showed some data that we'll show here that says, no, in fact, if you look at the, you know, the last 10 years, the average software IPO has been about 185 in median revenue over the last 12 months.

And it has over 50 percent growth. And so there's this real debate, right? Like how big do you have to be to go public? What is that profile look like? So maybe you could just weigh in a little bit with your thoughts on, you know, that debate online between Philippe and Gokul and Jam and about kind of what's the revenue profile that one needs in order to get out the door today?

I'll make some very quick comments about what I kind of fundamentally believe in my heart of hearts. But then I think we do need to address some of the realities that are out there. So personally, you know, I think I was on the board of OpenTable when we went public and we did on a 10 million dollar quarter.

So that's a 40 million run rate, far shy of where we are. And if I bring that up, some will say, well, that was 20 years ago. And it was. I have always believed and I'm not the only one there. There's there's an assortment of other people in our industry that being public is great for companies.

It raises the bar in terms of their performance. It causes them to to to, I think, achieve more than they would otherwise. So I think it's very positive for our ecosystem. I also think it's positive for the U.S. financial markets, for companies to feel comfortable coming public sooner. You will hear the SEC and others worried that mom and pop investors don't have exposure to these names or don't have exposure to these trends or to these companies.

And the more that that, you know, they don't go public into their billion dollars, a lot of those gains will be gone. But the people will miss out on this. So I don't think it's healthy. Now that we started with a data point that the number of public companies has shrunk.

And so, like, there is something going on and we could talk about, is there something that could happen that would change that or something that that has caused this to happen? It's interesting to me because I think there is in the boardroom in Silicon Valley today, among founders, there is a lot of question like, what do I, what's the profile of the company need to be in order to get public?

And, you know, Gokul came back and responded to Jammin in a way that I thought was interesting. He said, well, OK, you don't have to be at 700 million in revenue in order to get public, but you have to get to a billion within five years of being public.

You know, I called the heads of all the major banks who run the capital market groups because I wanted to get their opinion. Like, you know, they're the ones who actually advise. So what do you all think it needs to look like? And the heads, one of the head of capital market said to me, and I'll just read it here.

He said, I feel the bar for size is somewhere between 200 million and 300 million of revenues, premium growth rates to peers. So the median growth rate has been around 50 percent and attractive unit economics. I think you need to net out at greater than two billion. So two to two and a half billion in terms of market cap on average that generates an IPO of at least 200 million to 250 million dollars, which has enough float to make it reasonable position for investors.

He said to me, the IPO market is slow in volume terms for lack of supply, not lack of demand. And I've been making this case that the IPO window is wide open. It's just a matter of price. Certainly Altimeter and Cotu and others would like to buy companies at this size that we think can compound at 50 percent or higher for the next five years.

Right. Those are terrific companies to back so long as the point of entry is at a price that reflects what current market multiples is. So, you know, he's kind of taking the other side of the argument saying this is not a demand problem. This isn't that you can't get it into the market.

It's a supply problem that's for some reason companies just don't want to come into the market at that size. That becomes a circular argument, right? Because if people start saying that, you know, externally, oh, you've got to be at one hundred or you've got to be at two hundred, you've got to be at seven hundred.

Then people hear that and then they think they can't go. And so, you know, but let's talk about some things that have led to this. You know, on one hand, there's immense capital availability that I had suspected might go away with the market reset, but it clearly didn't or with interest rates going up.

And so companies that don't want to be public don't have to be because they can get access to private capital. And at least today, that private capital will let them do secondaries, which solves one of the problems that that historically has brought them to the public market. Second, you know, I think structurally those people you call have built their Wall Street businesses to cater to these larger companies.

And so they prefer to work on a bigger IPO. Way back when there was a group of bankers known as the Four Horsemen that took a ton of companies in Silicon Valley public. And I found some data which we can put up, but like the vast majority of IPOs are being underwritten by like four or five firms.

And one thing that I think would be helpful is if some of the other firms were kind of more dedicated to a smaller IPO where everyone knew they were the go to for that. But that doesn't I don't think anyone's filling that role today. And so those are two big things.

And then the third one that could contribute to it is just regulation. And I throw the cost of being public in with regulation. So that could include litigation costs, you know, the insurance you have to buy for your board, all those things like is the cost of being public.

It's probably two to five million a year just to be public. So let's break those down a little bit because I think, you know, it's a combination of factors, right? So let's just normalize around one. So if you pull up this chart on the Instacart valuation, right, over the course of the last several years.

So Instacart was one of these companies that got, you know, really high valuations during the pull forward that we saw in the Zerp COVID period. You know, it hit a valuation of almost $40 billion. They went on to raise subsequent rounds of private financing at a lot lower. They then went public at just around, I think, $6 billion.

So here's the IPO performance chart. And here's the valuation trajectory of that business over the course of the last several years. So I think one of the obstacles, right? So it's performed incredibly well. Off of the bottom, it's performed really well since the IPO. But it took a board that had the courage to say, you know, we're going to ignore what the prior valuations were.

And we're going to focus on getting the company public. Now, in the case of Instacart, I think you had, you know, the branding benefits of when they went public. I think they, you know, had access to, you know, to the cash that they needed to invest and grow in the business.

But, you know, this seems to undermine this argument that, you know, that companies can't do well if they're on the smaller side, you know, post going public. So this is an early indication. But I think that there are a lot of companies in the venture capital pipeline bill that look like this, that had these really high marks in '20 and '21.

And they need boards and founders and CEOs who have the courage to enter the public market and just accept the new set of marks. And I think this is one of the big psychic or behavioral hurdles to these companies getting out and getting into the public markets. Yeah. Yeah.

And look, I mean, there are smaller companies, you know, like even in the SPAC space, look at him and hers, or look at SoFi, Antony Noto. Like they've actually done well over the past six months, like numbers up and to the right, stock up and to the right, and much smaller than Instacart.

So it is doable. Yeah, I think you're absolutely right that the structural blocker that comes from having a previous private round is always a problem in these situations. And there are ways around that that can be negotiated around. People just need to kind of bite the bullet and take care of that.

There's another thing that happens that relates to that, which is there's this presumption that, oh, well, you're not, you know, you're not in a good place to be public. Or the other thing I hear is, oh, imagine if you get out and you're too small in your public, how horrible that is.

And to me, that's just this indication that there's this ostrich mentality. And what I mean by ostrich mentality is someone willing to stick their hand, head in the dirt, and not see anything and therefore feel better about themselves. So where I'm going with that is, if you're public, with 100 million in revenue and a 10% growth rate, your valuation is not going to be all that great.

But guess what? If you're private at 100 million in revenue with a 10% growth rate, it's not like you're better off. You're just fooling yourself, right? In fact, because of a lack of liquidity premium, you're probably worth less than that public company. And structurally, your cap chart's more rigid.

And so you have less flexibility. You can't do any acquisition. I mean, there's all kinds of reasons why that's a worse place to be. But people have this belief that if I can see that price and it says $2.33, oh my God, I'm in this horrible place. People have recovered from that.

So I think we've talked about this before. Here's a chart that we put together that looks at the valuations, the multiples that companies were coming out in different cohorts by year. So you can see that the multiples of the companies that came out, not surprisingly, in '20 and '21 were really high multiples.

And then you can see that the companies that have come out in more recent cohorts are at these much lower multiples. And so I really do think it comes down like this is one of the big hurdles that we have. And we saw this after 2006, 2007. We had companies funded at really high multiples.

I'm thinking even about Zillow or Kayak that were funded then. And they waited a much longer period of time coming out of 2008, 2009 in order to go public because it took them a while to grow above those multiples. And I think that in that case, there were actually ratchets that were in those prior preferred rounds that prevented those companies from coming public.

That's not the case in most of these deals that were done in '20 and '21. And so it seems to me when you look at this chart, the multiples that persist in the public market today, they kind of are the multiples. And so a lot of these companies will be forced into the-- they're either going to have to take a down round in the private markets to have access to cash, or they're going to have to access it by way of the public market.

It gets back to your point. There's no hiding from whatever fair value is for these businesses. And now we're talking about businesses here that are doing a couple hundred million in revenue that probably still haven't hit profitability, where growth maybe has started to slow below that 50% annual growth rate.

And I think we have over 1,000 of these companies that are marked over a billion dollars that still have to get work through the system. Now, I'm seeing some more M&A that's happening, so larger strategics coming in and buying these companies. I think that will be the answer for some.

But to me, we're starting to see the IPO pipeline fill with these companies that I think will be on the smaller side, that will have growth rates that are still 30%, 40%, 50% superior to public market growth rates. But the valuations will be below, in many cases, their last big round of private financing.

And by the way, I hope you're right. I mean, I hope we see that. We do have a situation where at least the big guys have been pushed away from M&A by regulatory, which is another reason why you need to be more serious about the public option, because there are fewer, relative to history, I guess, fewer options on the M&A side.

And this gets back to the point I was thinking about. There's no hiding place in being private. And I've often said, the minute you took stock options and started handing them to your employees, you're in the game, you're on the field. And it's a tough game. And the number of people that make it to the next tier always drops exponentially.

So we often talk in Silicon Valley about the Googles and the Facebooks of the world, but most people don't make it there. And so it's a hard, steep climb. And you need to have realism about what's available to you. One thing quickly that I wanted to highlight, Gokul referred to this Meritech report.

I don't know if that's public. You were able to get a copy that I was able to read. You mentioned unit economics. I think being honest with yourself about your own unit economics is super important. And at least for SaaS companies, they had a ton of great data in that report that could help one figure out where you are and what your real multiple is very, very likely to be.

I don't think it has to be a guessing game. What often happens in Silicon Valley is everyone looks at the top one or two data points and tries to equate themselves with that. If you look deep in this research report, you shouldn't be doing that. But that does happen.

And I think the number one thing, if you're a smaller company coming public, is it's about growth. Your unit economics have to be working. So your net dollar retention, if you're a software company, needs to be in a range that shows that your customers love the product, that they're sticky to the product, et cetera.

But these companies that have waited a little bit too long, Bill, now their growth rate is 20%. They're marginally profitable. They have 200 million in revenue. Unfortunately, that is not a profile that can come public. So this question, this debate, like what's the magical number? Philippe, is it a billion or is it 700 million?

The answer is, for those of us who are underwriting these businesses, we're saying, is this a fantastic business with great unit economics that can grow at above market rates for a long period of time and expand margins? If the answer to that is yes, then the public markets are wide open.

But guess what? The private markets are wide open for those companies as well. And that brings me to this point. I think the biggest thing that has changed over the last 20 years, back to if we think about the companies that went public in those early vintages, the Microsofts, the Apples, the Googles, the Salesforce, et cetera, what was one commonality, Bill?

They needed access to capital to grow, right? And if you look at the private market alternatives for them for capital, we didn't have sovereign wealth funds that were writing multi-billion dollar checks at that point in time. We didn't have deep pools of liquidity and growth equity and late stage venture that were writing multi-billion dollar checks at that time.

And I think that is a huge difference today. So I talked to the CEO of a very, very large company that many are speculating as to when they will go public. And they said, we just don't need to go public. Marks are not a consideration at all. Employees get liquidity.

We have access to capital. There's just no need. And so then I read the Jamie Dimon letter. And I'm going to read a part of his letter because he talks about us going from 1900 companies to 11,000 companies. And he talks about the liquidity in the private markets, how deep it is for these companies to be able to grow.

And he said there are good reasons for private markets and some good outcomes result from them. For example, companies can stay private longer if they wish and raise more and different types of capital without going to the public markets. However, taking a wider view, I fear we may be driving companies from the public market.

The reasons are complex and may include factors such as intensified reporting requirements, including investors growing needs for environmental, social, and governance information, higher litigation expenses, costly regulations, cookie cutter board governance, shareholder activism, less compensation flexibility, less capital flexibility, heightened public scrutiny, and relentless pressure on quarterly earnings. So going back to this company, right, if you're one of these companies, you're cash flow positive like this company is, you're growing fast, you have access to all the capital you need.

You know, think of, you know, the SpaceXs, the ByteDance, the Databricks, the Stripes of the world, all the companies people are waiting to see when they're going to come public, they all fit that profile. They don't need the public markets to provide the liquidity and given all of the headwinds that Jamie Dimon talks about, all the reasons not to come public, you know, it may very well be that the very best companies choose to stay private, right, which we may even see some adverse selection into the public markets.

And it's only the companies that can't rave private financing that try to get into the public markets. What do you think about both this idea that we have deeper and more liquid capital markets, private capital markets, and we've created all of these government burdens, litigation burdens for the public company?

Yeah. Obviously, my first reaction is if he's right, if those are all the reasons, the vast majority of them relate to this kind of cost of being public. And if you separate his list between what might have changed recently from the past, to say what might have caused this, these changes recently, you know, it's mostly the litigation, the ESG stuff, the compensation flexibility, it's the activist stuff.

And, you know, you and I already had a long discussion about SBC, but I find that it would take, if the SEC were generally worried about why more companies aren't going public, I think, and I don't even know if they have the wherewithal to do this, because some of them may live at the judge level, but it would take a reevaluation of why the cost of being public or the regulatory burden of being public has grown.

And is there anything we can do to take it in the other direction? I'm particularly worried about things like derivative lawsuits, where you have a very ambulance chaser mindset, going back to the Elon compensation thing, someone with nine shares, who made money can bring that kind of legal case against the company where the stock went up.

That's really bad. Like, that's not what I would call a efficient capital market. I would call that an inefficient, broken capital market. And so I do hope we can look at some of those things. The second thing I would say is, if you're right, and if this becomes some kind of permanent state, I think it's going to be really tough on limited partners, because you're going to have a bigger and bigger part of your assets in things that where we really don't know what the price is.

And if you have large positions, despite the fact that there may be traits for employees, you probably don't have a trade at the size that would allow you to get. Let's hit on that. That's a super important point, Bill, because we've been talking about why do we have fewer public companies than we had 20 years ago?

We've been talking about this for a long time. And people have thought, well, maybe it's just part of the market cycle. I'm evolving my own thinking to say, this is permanent and this is structural. Because the government regulatory burdens are at least semi-permanent. And the markets have responded by the private capital markets stepping in and providing the liquidity where companies can get the cash they need, can get the secondaries for employees they need, without having to go public, at least the best companies.

So if you think about that, you made a good point. So if you're an employee of SpaceX, or you're an employee of Stripe, or you're an employee of ByteDance or these other companies, you probably have quarterly or biannual liquidity events. They raise a secondary tender, and those employees can sell up to a certain amount within those tenders, right?

But in those same companies, you have massive LP gains that are locked up, right? And it's very difficult. You can't sell easily a billion or a $2 billion position in ByteDance or sell a multibillion dollar position. So all of the endowments, foundations, pension funds, they're in a different position than they've been in the past.

They perhaps have-- even if you did, it would be a trade by appointment, pink sheet kind of, likely with a banker grabbing 5% or 10% along the way. It wouldn't be an efficient transfer. Right. So that to me is if you said, what's the ultimate cause of these companies to go public?

The ultimate cause would seem to me that at some point, the LPs, the people who put up the first money into the business need to get liquidity, right? But two structural changes that we've seen there, right? One is it just seems the best companies will stay private longer, right?

And we've seen this trend over the course of the last 15 years. Although I will remind you that Zuckerberg said he should have gone public two years sooner than he did. Right. And think about how early he went public relative to the late stage private companies that exist today.

So I would say I do see that these companies will eventually come public because they need to get liquidity back to those LPs who provided that first capital, unless the private market again responds and provides some vehicle for these companies to come public. It's interesting. By the way, another negative impact of this.

I mean, I think if you're right, I think it's structurally disadvantageous to the venture capital world at large or as an asset class in an industry, because one of the things that happens if the best ones aren't doing it is there's no pressure on the next level to do it.

And it kind of trickles on down. Or just the common belief, as you've said, comes to be that, oh, well, you're not eligible for that. Right. And so then you're going to have even more companies that kind of rot in place. I hate to use such a dramatic term, but they're just going to sit there and exist and probably dilute 5%, 7%, 8% a year on new equity and never get closer to the finish.

Well, remember, the companies that can stay private, Bill, are only the very best companies. The vast majority of these companies don't get to cash flow break even, or they just barely get there. They need access to the cash in order to keep funding the business. They can get recapped.

They can get rolled up in PE. There's a lot of things that can happen that don't necessarily equate to gains for VCs and LPs. Well, that's true. And I do think, like I said, we're going to see a lot-- I think this was the point of Gokul's tweet, actually.

He's saying, hey, listen, a lot of these software companies no longer have the profile that allows them to ever get public. And so they're going to have to sell to private equity or do something else. They need to get real about their situation. And we are unquestionably in a place where, because of overfunding over the past four or five years-- I remember the one slide where there were more private unicorns than public unicorns-- there's a lot to clean up.

And so unquestionably, that's true. The last thing I would mention on this topic is-- I mentioned it quickly earlier-- but there are a number of people-- and you'll hear people talk about-- that are worried that mom and pop or the average investor doesn't have exposure to these names. And if you're right-- and this is more permanent-- rather than back up and fix the regulatory costs that put us in this place, they'll try and fix it from the other side.

They'll try and create ETFs for privates. Or they'll try and mandate that firms like yourself take on individual investors. And I think that's a complete rat's nest. We don't have to go into why. But it's not fixing the real problem, which is having a functional capital market that's open and inviting to more companies.

It's an interesting debate and one that is also evolving. So this is the question of, does the little guy get access to the best companies in technology, for example? And if those companies are in the public markets, then clearly all retail investors can buy those companies. But it's very difficult for a retail investor to get access, perhaps, to a SpaceX or a Databricks, a Stripe, et cetera, the best of the private companies.

But when you look at the evolution, Bill, of who is providing the ultimate capital, increasingly pension funds, which represent firefighters and teachers and police officers in the city of New York or the city of San Francisco or the state of Texas, increasingly they're LPs in these growth equity funds, the later stage funds like ours.

So they are gaining access, the retail investor, by virtue of being a participant in that 401(k) or that pension. So I do think that there's probably more retail exposure to these late stage big companies than appears at first blush. But I will also agree with you, it's much less egalitarian than being able to open a Robinhood account and have access to those companies.

Yes. Yeah. And my history of reading and watching the regulators, that argument won't be good enough for them. And they'll try and create what is, in essence, a new public market. Because when you want to have a market where everyone can trade and it's all fair, you need the rules that exist in the public market.

So trying to have your cake and eat it too doesn't really work. Well, a couple other points that I would make. One is, as we saw in 2021, there were a lot of companies that were just walking under the assumption that private market capital would always be available to them.

And so you don't go public because you say, oh, Masa will always be there. SoftBank will always be there to provide my next round of financing. And I think what people are starting to see as they burn through the capital that they raised during this period is that private markets are less liquid.

Granted, the liquidity has gotten way deeper for the best companies. But for the average company in the private markets, that is not the same story. The negative reflexivity, the drawdown, the tightening up of those private markets can have draconian consequences on these businesses. So again, I think that there is, for the vast majority of companies, I still, I would conclude by saying I'm in kind of the jam and go-go camp that if you're a software company, you have $250 million in revenue, you're growing at 50%, you're approaching break-even, you think you're going to compound at 30%, 40%, 50% for the next five years, expand those margins.

The public markets are a perfectly good place to innovate, to grow, to build your brand, to gain credibility. I do think we're going to see some acceleration. All those heads of capital markets that I talked to, they all told me their pipelines are filling. I know this because my team is spending more time on roadshows.

I think there's also some off-the-beaten-path companies with pretty good numbers that are going to come as well. Ironically, not in Silicon Valley, because I think these means and rules and this kind of negativity about how big you have to be, I think those things echo much louder in Silicon Valley than they do externally.

One thing that we have done, and I've encouraged LPs like endowments to think about, is we used to have these two buckets, venture and public, when I talk to technology investors. Then they would have everything in their venture bucket, all the way from a series A, all the way through Stripe or ByteDance, which obviously makes no sense.

Those companies are over $50 billion in enterprise value, all the way up. What we talk about internally is there's a venture market. Think of that as a market with less than $100 million in revenues, less than $1 billion in EV. There's a lot of mortality risk associated with these businesses.

There's a lot of volatility associated with them. Then for companies that have a couple hundred million dollars in revenue and are well over that billion dollars in EV, we call those quasi-public. There's more liquidity associated with those businesses. There's less mortality associated with those businesses. These are oftentimes companies that could be public and are choosing to stay private.

It has a whole different set of investors that invest in those companies, family offices, sovereign wealth funds, foundations and endowments, obviously big growth equity funds, private equity funds, and venture capital funds that are multistage. Then, of course, you have the public markets. They also have different characteristics in that the VC bucket, obviously, the VC chooses you.

The quasi-public bucket, that's not everybody can participate, but there are 10 to 50 firms probably that show up around those party rounds and have an opportunity to participate. Then, of course, everybody can participate in the public market. I think that at different points of the market cycle, we'll see different appetites for going public, but these underlying dynamics, I do think the structural changes are here to stay and that there will be a category of excellent companies that can choose to stay private a lot longer.

I don't necessarily think that's a bad thing. I would push back on that a little bit. I think history will show and unfortunately, we may all be in our graves by the time, the window you need to evaluate this, but that staying private forever has consequences. Unfortunately, the way it'll show up is some people will have kept some private marks in their very large positions and very large portfolios for a very long time and then they'll be corrected all at once.

The learning window on that is so long that there's not a self-correcting mechanism, not in the near term for sure. Well, I would say the single greatest input to valuation and technology is growth. Number two is margin. The danger in technology, which is a highly disruptive industry, is that you stay private, your LPs and your investors don't get liquid.

During that period of time where you have ultimate confidence, a structural change occurs in the market dynamics such that your growth rate goes down. Maybe you have to spend a lot more money to defend your market position. The multiple for the business goes down a lot. You and I remember this.

There were companies in 2010, this is really pre-mobile taking off in the search industry that had vertical search engines that had really high multiples that were demolished by the transition to mobile. When that happens, those things represent permanent capital loss to the investors. I do think that getting people liquid, performing and competing in the public markets, it's certainly a terrific choice.

I think Jamie Dimon's right. We've got way more liquid private markets and the government has really mucked up through all of these regulations, allowing this excess litigation. It has mucked up and made it less attractive to be a public company today, but let's move on. Let's move on. The next thing we're going to talk about, I want to kick it off.

We're going to talk about autonomous vehicles and whether or not and how they would compete with ride-sharing services. The thing that I think is bringing this topic to the forefront, obviously you and I have talked about this for I don't know how long now, many, many, many, many, many years as both being earlier investors in Uber.

I think the thing that's bringing it to the forefront are twofold. One, Tesla has had some breakthroughs with FSD-12 and they've already announced they're going to start talking about their RoboTaxi initiative in a more public way. Then Waymo is open and available in more cities and people are riding in them and so they're having experiences.

I'll just stop there as a kickoff and let you go next. Great. I was up in the city last night. I was shocked by the number of Waymos I saw. I saw them everywhere. It reminded me, none of them had drivers. None of them had anybody in the front seat.

They had riders in the car. I think in the city of San Francisco and these other cities, that was just mind-boggling when you saw it the first time. There was at one point, I had three cars around me and they were all Waymos. People have eclipse-like experiences when they get into these things.

Listen, I think part of the setup here is it's been a tough week for Tesla. They're laying off 14,000 people or about 10% of their workforce. Car demand is clearly weak. That's on the one hand. On the other hand, there's some transformative things going on that you and I've talked about.

These imitation models are clearly better than expected at scale. They're having a larger rollout of FSD. Now, I think they pushed FSD out to everybody who has the technical capability on their Tesla in order to receive it. They've talked about dramatically lowering the cost of FSD to 99 bucks a month.

I think they've hit over a billion miles driven now with FSD. By our estimates, they're adding over a billion miles a month. I think that their confidence that their data advantage is increasing dramatically is going up. There's some speculation out there, "Oh, Elon's throwing the long ball on RoboTaxi and all this." I don't believe any of that.

I think that the conditions that get the company re-excited about RoboTaxi is that FSD is going way, way better than they expected it would 18 months ago in terms of the technology, Bill, in terms of the technology that they have available. They've reprioritized RoboTaxi. They said, "We're going to move it to the top of our priority list." I think Elon announced that they're going to have an announcement in August.

Now, of course, immediately after he does that, analysts dig in, and they called the regulators in a couple of different states, and the regulators said, "We haven't heard from Tesla." Of course, there were tweets that went out and said that a couple of states' regulators had not heard from this.

I don't think that really means anything because, of course, they could launch this in any city on the planet, right? From Abu Dhabi to South America. Certainly, there's a city on the planet that wants to be first to have Tesla RoboTaxis. Go ahead. I thought, because I know you and I've talked about this, there are a number of topics that I think are important to consider and discuss that live beyond the technical feasibility.

I know there are people that would say, "Okay, even if they're at four nines, they're not enough. It's got to be six nines," or, "Will it work in snow?" and all that kind of thing. I would say for this discussion, let's put that aside. Let's assume Waymo and Tesla have both achieved the quality it takes for the vehicle to move around by itself.

What are the other things that these companies need to think about in order to have a successful robo fleet, if you will? Well, I'm going to touch on the technical thing real briefly, and then go to the other elements required to have a successful robo fleet. If you think about the way Waymo, you and I did this breakdown on FSD-12.

We said one of the downsides of Waymo and Cruze is they have these deterministic models, right? That they have hundreds of thousands of lines of code, and they all are a rule about how they expect the car to behave. Well, it turns out in ride-sharing, cities, airports impose a lot of specific rules on the ride-sharing companies.

They tell them where you can drop off, where you can pick up, how those cars have to behave in certain circumstances. That would seem to lend itself to a deterministic model where you could just write a line of code that says, "Here's what you do at an airport in San Francisco." One of the things I had a question on is just, can an imitation model that's imitating five-star drivers, can it easily have these deterministic components to it?

I talked to some friends who are working on this, and they said, "Think of it like once the user inputs, 'I'm going from San Francisco to the San Francisco airport,' that they would drop that information into the prompt, right? That would tune the general model so that they actually have been thinking about how to solve that technical problem," because it certainly was one of the things on my mind.

But okay, let's assume that they both have this cracked and that this becomes standard and ubiquitous that these cars can drive around. Well, one of the reasons you invested in Uber is that as Uber grows, the power of the network effects gets even bigger, right? And so they have more riders, which leads to more drivers, which reduces wait times, which creates better experience, which leads to more riders.

And you have this virtuous cycle that's created by that. Obviously, that's made it very difficult on Uber's competitors, and they're achieving the natural market leadership, economics, and share position that you would expect vis-a-vis Lyft, particularly now that access to capital to Lyft got a lot harder. So we can start by just asking the question, "How do we think Tesla will go to market with its RoboTaxi?" In the case of Waymo, they've chosen to go to market, both directly, you can book it on a Waymo app, or in Phoenix, for example, you can book it on the Uber app.

So you can book your Waymo on the Uber app. And so in that case, Waymo recognizes it's a very small fleet, right? In that case, Waymo owns the fleet, so huge cost of ownership there for Waymo. They want to drive utility of that fleet, so they're using Uber as third-party demand generation into that, and they have an economic revenue-sharing relationship between those two companies.

Now, of course, that's not the way I would think that Elon might approach it, right? He has the potential to be much bigger. Tesla is a much better-known brand. There are millions of people with the app already on their phone. So I think most of the people I talk to, Bill, suggest in the first instance that he'll build an owned and operated fleet, right, where he may have outside financiers or rental car companies that take ownership of the car, but insofar as booking that fleet, you would go through the Tesla app.

So, you know, we could talk about it. I throw it back to you. Let's just say that that's the approach that they take. What are Tesla's chances of breaking down the network effects that Uber currently has on rideshare demand? Well, I think you've hit on a key point, which is I think you have to separate Tesla from everybody else.

Waymo, and I don't know if Cruz and Aurora still aspire to compete with Waymo or not, but they all have this very high-tech infrastructure with LiDAR that we've talked about, and they're all here today working on a model where they own and operate all the cars, which we should get into in a little bit because financially I think that's a complete disaster.

Tesla has the benefit that they can utilize, theoretically, the cars that are already owned by their customers and not have to front the capital for each and every vehicle. If you look at the data we already have, Cruz was losing, what, $3 billion? Aurora's public lost $2 billion two years ago, a billion last year, and virtually no revenue.

I have zero reason to believe, zero reason to believe, and if anyone wants to share data with us to correct this, that Waymo's financials don't look exactly like both of the ones. What do you think Waymo's worth today? They did a, we can look up, I mean, it's a private company.

No, I'm asking you. All we can look up is what it traded for last time. Well, even Aurora's trading at, what, $4 billion here with no revenue and a billion dollars a year of losses, so there's Wall Street speculating that the IP has value. So keep going on Waymo.

Yeah, but here's the thing. I think it really comes down to supply and demand. There is a beautiful emergent quality of the Uber model where supply and demand are matched and it's enhanced with price through surcharges, but there are plenty of people who want to make incremental money that know when to get on the road.

I have a chart which we can put up which shows at one point in time the weekly pattern of ride sharing, and it's remarkably non-linear, right? It peaks in the morning, it peaks in the evening, it really peaks on Friday and Saturday, and Waymo or anyone like them with an owned fleet has, here's a huge conundrum.

Are you going to build the fleet to average or peak? And by the way, you lose whatever your answer is. If you build it to average, you're not going to be able to serve your customers during the peak at all. They're only going to be disappointed. And if you build it to peak, you're going to have a bunch of very, very, very expensive CapEx sitting around doing nothing most of the time.

Okay, so I think this is the most critical point, right? Because this is the same challenge that Amazon faced, which led to the creation of AWS. This is the same challenge that most businesses face, which is they have very spiky demand periods. And if you want to be an incredible customer experience, you have to have something that can regulate to those higher periods of demand.

Like you said with Uber, they have a natural thing. They can just charge a little bit of peak pricing. They got more people who get out of their houses, drive their cars, pick you up, wait times don't go up that much. And they benefit from that. And as the network expands, it gets even better.

Well, and you remember, it goes back to what was that word when Airbnb first came out? It was asset sharing. It was a different word that was used. But there's a huge amount of cars, especially in the US, they're sitting mostly on it. And so Uber gets to take advantage of that and utilize that CapEx.

And Tesla may have a similar advantage just because they have enough customers. Someone trying to build a completely separate fleet, I just don't think it works. And I would encourage anyone that believes in it or anyone that's a, let's call them a Waymo advocate, let's build a public Google Sheet of the 20 year financial statements for this thing.

And let's put it out there in the public. You're going to need hundreds and hundreds of billions of dollars. And I don't know how you answer this peak versus average question. I don't know how you do it. So let's talk about some of the ways that might happen. As a Tesla owner, if I had the opportunity to put my Tesla in a pool and allow it to be pulled out during peak periods of time for ride share, I'd have a problem with that because I need my car during those periods of time.

Well, it's very likely, here's another way of saying what you're saying, which is it's very likely that the average Tesla owner's usage map is similar to the Uber map that we just put on the screen. Of course, this is my point. So here would be a straw man. Tesla launches with an owned and operated fleet to prove the model, to start building the customer affinity with the product, the customer trust.

Which would unquestionably work because there's so many Tesla fans that would want to do it just to be supportive of the team. And by the way, it's a great product. It feels great. You probably already have a Tesla, so you feel good about FSD. So my hunch is they launch it on...

You might even launch it at first with only allowing Tesla owners or something like that. Oh, interesting. It's almost like a benefit of ownership. So then I think what they do is, my hunch is that they will open it up and partner with Uber. I think Uber would like that.

I think Tesla would like it. And here's my argument for that. The only way you solve the peak demand problem, Bill, is that you have to basically have high utilization at lower periods of demand. You have to reduce the delta between your trough and your peak. And the way you do that is you pull in the Uber demand when your demand is lower.

And so an example of that would be, if you think about in the city of New York, McDonald's has an app. You can go on the McDonald's app and you can order a burger, right? Or you can go on the Uber Eats app or the DoorDash app and order a burger.

And so McDonald's recognizes that they want to try to flatten that demand out over the course of the day. And so they can yield manage that by having both a 3P and a 1P strategy. So it seems to me that the only way you really crack this is have a 3P and 1P strategy.

And the upside to that, in addition, is that now you have a flywheel of Uber drivers potentially building some mini fleets of their own. You could imagine somebody who says, hey, this is pretty accretive. We saw this with black cars, I know, in the early days, where you had one operator that may have two or three or four black cars.

You could imagine somebody who says, listen, I can make money by arbing this system and by having multiple Teslas in that fleet. So I think they probably launch it on a standalone basis. They get a lot of excitement and a lot of customer love for it. But my sense is, by the time you scale this, it probably does have to be an open system.

We'll see. Yeah. And I mean, that's clearly up to the powers that be at Tesla to make that decision. The two companies have partnered to date already. They have quite a number of initiatives, including like free charging for people that buy them and put them on. So there's a there's a close partnership already.

But, you know, as as this plays out, we may see, you know, reasons why they may not want to. Can we talk a little bit just about the unit economics, you know, of these different businesses? Yeah, there's one thing I want to bring up specifically that that'll be interesting to see how it plays out.

And that's insurance. And so last time I had specific knowledge, and it's been four or five years, but I doubt it changed that much. The cost per mile of insurance for Uber in the U.S. is dramatically higher than the rest of the world. And if you look at just the cost of consumer car insurance, the same thing's true, way higher in the U.S., which gets to another problem with regulatory costs that our government should try and fix.

But anyway, it strikes me and I would be worried about this as an investor. It strikes me that the that a particularly aggressive litigator lawyer would chomp at the bit to get in front of a jury on a robot killing a human and maybe even create more litigation costs and a higher cost of insurance for a robo-taxi than a driver.

Now, I know how people, our listeners, are going to react to that. They are convinced in their heart of hearts and in their brain that these are safer than human drivers. And I am saying this even with that potentially being true. We may have just such a broken litigation situation in the U.S.

that the actual cost of underwriting the insurance for a robo-taxi may be higher than a real car. And time will tell. And as we know, Tesla's already brought some of their insurance operations internally. And if they're willing to underwrite it themselves and fight it themselves, maybe that's something they'll do as a part of this rolling out.

I got to take a tangent here for a second and then I'll come back to these unit economics. You know, I was with a certain investor, a group of investors in the Midwest, let's just say, over the weekend that are very big investors in the insurance business. And I asked him the question, I said, what's up with car insurance being up 22% in the CPI on a year over year basis?

I mean, it was crazy. Car insurance up 22%. And he said, here's how it works, Bill. In 20 and 21, we have very predictable and very steady number of miles driven in this country on a year over year basis. And the accident rate remains very steady. So the cost of our auto insurance has largely been pretty flat, growing with GDP.

What happened in 20 and 21, the number of miles driven fell a lot. And so it fell so much that those companies were prone to over earn, right? Because there were just, there's less chance of an accident with fewer people driving, or at least that was the assumption. But what turned out to be true is that the miles that came off the road for some reason were safe miles and the accidents per mile driven actually spiked a lot.

So much so that the insurance companies lost a lot of money during this period of time. So they went to the state regulators who control insurance pricing and they said, hey, we got to raise the price of insurance because we're losing money. Now, remember, auto insurance companies try to price the insurance to make about, you know, 3, 4, 5% on the insurance and the rest of the money they make is on the float.

Okay. But in those years, they were losing 5 to 10% on the insurance, right? So the companies were actually losing money even with the float. How long do you think it takes the California state regulator to pass along an insurance increase, right? You have to threaten them that you're going to leave the state and all this other stuff, and then eventually they do it.

So now they passed on this insurance increase and it just kicked in, which is what you saw in the CPI, right? And ironically, and not surprisingly, the patterns of driving have now returned to pre-COVID levels. So we went from a period where the auto insurance were not charging enough because they had to beg the state regulators and they were slow, and now they're charging too much.

But set that aside for a second. Let's come back to the unit economic. And by the way, I think this cost, this is a lot of guesswork. I apologize. People should treat it as such. But I think in the Uber case in the US, about 5% of gross revenue goes to insurance.

Yeah. So it's an expensive input. And we took a crack. Okay. So let's just say at the high level, most people think that taking the driver out of the Uber will lead to an explosion in profit margins because it represents 70% or 75% of the cost of the ride.

But we actually took a crack at these unit economics. And what I think that fails to understand is a couple of things. Number one, if you just break this down per car, we estimate that there's about $140,000 of revenue per car driven on the Uber network. Now, of course, this is blended across tons of different markets, tons of different cars, etc.

So $140,000 of GBV. When you do that in self-driving, we think it goes down to about $100,000. Why? Well, you have actually more rides in the self-driven car, right? But it actually comes in at a lower cost because you put so many cars on the road that the charge to the consumer gets shared back with the consumer, right?

Margins come down as you have more competition because you have more cars on the road. Next up, the revenue per car. Well, of course, you take out 70% of the cost, the driver cost, on the driver-driven car. So at a revenue level, we think that if you were comparing apples for apples, in the case of the one with a driver, they make about $40,000 a car.

Without the driver, they would make about $90,000 per car. This is just revenue. So about double the revenue. But the costs are way higher in the full self-driving case. Obviously, first up is you have to pay for the car, right? There are massive costs associated with that. Maintaining the car, the insurance on the car, all the things the driver currently does now is dropped upon-- Well, yeah, and just on that first one, because I can go buy a two-year-old used car for $25,000, $30,000 and get on the road, and then you add in the cost to the human.

You need the fully autonomous car to be really cheap in order-- because if it-- and I don't think anyone thinks the current Waymo when you were surrounded by the other day is anywhere close to even $100,000. No, those cars cost probably $150,000. It's not viable. So that car would need to get down towards this $30,000 number for that disruption to matter.

If it's in the $45,000, $50,000, and it's an alternative to $30,000 plus a driver, you have no-- But again, where Tesla has an advantage, they probably can put a car on the road at those lower price points. So when we shake it all out, and I'm happy to-- But by the way, there's other things the driver does.

I mean, the driver maintains the car. So once again, this is in the Tesla case, if it's not an owned fleet, it's a customer-owned fleet, they can clean it, and that'll just be a cost to putting your car out on the road. But in the case of a Waymo, like that car has to come back to headquarters at some point.

Someone's got to get in it. Someone's got to clean it. There's eyes that are going to be needed. So there's going to be a customer service staff that's going to have a camera because you're going to have to settle disputes. You're going to have to deal with customers. And the human does that in the case.

So there are going to be other costs that exist. So the point is, you have to take the 70% that you save on the driver, and then you have to add all these new costs that you're going to incur. We still think that the margin goes up from, let's call it, 7% of gross bookings to something like 12% or 14% of gross bookings, even taking into account all of that bill.

But that's what we're all trying to do. We're all trying to build a forecast and understand, you know, assuming that this could work, assuming that regulators pass it, assuming you could build the $25,000 or $30,000 car, assuming that you could enter into a commercial relationship with Uber and yield manage the peak and, you know, demand.

All of that is to say, there are a lot of needles that have to be threaded in order for this to work at scale. And I think if it does work at scale, I don't, you know, obviously, talking our book a little bit here, I don't think this is much of a threat to Uber.

In fact, I think if it works for Tesla, I think there's an opportunity for both companies. And by the way, like another way I'd restate what you just said, which is, it's not going to be financially disruptive at the beginning or in the middle. It might theoretically be financially disruptive at the very end.

But there's way too much capital that and the price of the car has to come down. There's too much that has to happen. There's no way for someone's not going to come out tomorrow with a robo fleet and underpriced Uber. Well, and let's put one final point here. Remember this deal that Tesla entered into with Hertz where Hertz bought a bunch of Teslas?

It turned out that the resale value on those cars was dramatically less than they had forecast. And the CEO lost his job over this. I think the write down for Hertz was like a billion dollars over this mis-forecast. So if you're in the business of buying and maintaining that fleet on behalf of Tesla, you're doing so with full knowledge that all of this is hard to forecast.

So you're going to bake into your model a huge margin of safety, right? So that you're not going to have the problem that Hertz just ran into. I would say based on everything I know and we're not in the boardroom with these guys, but like letting the customers own the Teslas that own the fleet is a better alternative.

Much, much, much, much better. And I will say this, the fact that we're even talking about a robo taxi fleet shows you the incredible progress that Tesla has made. And what we talked about on the show a few weeks ago, the month to month improvement in the model, the data that they're collecting.

And just the anecdote I shared from last night, I am more convinced than I ever have that we're going to see tons of cars on the roads with no drivers in the years ahead. You and I are just speculating as to how the business model might come together. But by the way, one last thing, I'm so sorry.

I do think there's an argument that you might see this be prolific in a different country soon. Of course. Of course. Both China and India have much higher road deaths per mile. So you can see the government wanting it to happen. China being more autocratic could just wave their hand and change insurance rates, mandates.

They could just make it a reality. Whereas we in the U.S. with the way our litigation and regulation work are very unlikely to clear the decks and make way for something. You know, I also think, you know, as I mentioned earlier, Tesla and Uber coexist in a ton of markets around the world.

And there are a lot of markets that, frankly, are more innovative than the United States, have less regulatory headwinds. I could see this happening in Abu Dhabi or Dubai. I could see this happening in Singapore. I could see this happening in South America. I could see this happening in Mexico.

There are a ton of jurisdictions where I expect this, unfortunately, before I expected in the U.S., you know, at scale. All right. Before we wrap up, let's check in on markets since we talked last. What are you seeing out there, Brad? What do we need to be worried about?

You know, if you telescope way out, we're about ready to enter earnings season, right? Next week, we have Tesla report. We have Facebook reports, Microsoft reports, Google reports. So, you know, thinking about the setup heading into earnings. If you telescope way out, the S&P and the Nasdaq are up about 6% year-to-date, Bill.

The small caps are down about 3%. And it really comes down to a lot of those, the companies that are up in tech have beat their numbers, right? NVIDIA's beat their numbers. Microsoft's beat their numbers. Google's beat their numbers. And the companies that are down, Tesla and Apple have largely disappointed.

You know, but against this backdrop of the Nasdaq being up 6%, we've had a huge move in the 10-year, right? We've talked ad nauseum over the course of the last couple of years about how interest rates are the economic law of gravity for the financial markets. And since the start of the year, the cost of that 10-year is up 20%.

We've gone from 3.9 to now 4.7 today. So, just all else being equal, right? You would expect that growth company multiples would be down 10% to 15% because the 10-year is up a lot. So, I think the thing that's making a bunch of people nervous is usually you have this inverse relationship.

As rates are going up, you know, that's a headwind for tech. You might expect that the Nasdaq would actually be down a little bit on the year in relationship to the cost of the 10-year going up. So, if you dig in a little bit to, you know, to these businesses and say, "What has to happen in order for these stocks to work next week?" It really comes down to this.

The margin in 2023, all you had to do is be less bad, right? It was that reversion to the mean trade. But now, the only way your stock's going up is you got to beat numbers, right? Your numbers have to get revised us upward. And if you miss numbers, it'll be brutal to the downside.

You know, the team's made a chart on, an interesting chart on cloud acceleration. So, what might be driving that acceleration? We've talked a lot on the show about AI, but check out this chart. So, you can see for hyperscalers, you can see that COVID bump. So, this is absolute dollars that were added to the three large clouds over the course of the past several years.

So, you see how that really bumped up during COVID and ZURP. And then, you can see the belt tightening period as interest rates went up, people got a lot more nervous about the economy. These are CapEx numbers? Right. No, these are the absolute dollars of revenue that were added to those companies, right?

So, think of this as year-over-year revenue growth. And so, we dipped. It started to go up over the course of the last couple quarters. And now, consensus is forecasting that it continues to go up, you know, above trendline. So, those companies are going to have to deliver. That's AWS, that's Microsoft, that's Google.

And, you know, our belief is that they will. We think they will beat those forecasts because we do see that real acceleration coming out of AI. Now, look at this chart. This is that same chart, Bill, for Datadog, Mongo, Confluent, Elastic. Think of it as the data infrastructure companies.

They got a much bigger benefit during COVID, but they also had a much bigger pullback. Now, look here what the consensus is forecasting. Unlike for the hyperscalers, the consensus is saying, "No, we don't buy that they're going to re-accelerate and get back above trendline." We think they still have, you know, they have some challenges ahead, and they're not going to get back up to those COVID levels of absolute revenue dollars that were added on a year-over-year basis.

So, I think that's an interesting divergence, you know, that you'll have to keep your eye on when Snowflake and Mongo report. We actually think a bunch of those companies are seeing the flow through out of AI as more enterprises are moving more of their data into the cloud, but there's clearly tension in the market about that.

You know, one other thing that is really interesting to me is we universally see companies holding the line on expenses, right? And so, think of this as, you know, we had real questions, was the age of efficiency going to be, you know, a moment in time, or were companies going to continue to do that?

I was talking to the CEO of a major company the other day, and, you know, with tens of thousands of employees. And he said, over the course of the next three years, we'll grow our top line 50%, and we'll reduce our personnel costs by 10% to 20%, right? That's extraordinary.

Like, I don't think we've had a moment like the moment we have today in terms of margin expansion, right, in any time frame that I can remember where it was voluntary. It's not because we're in a recession, it's not, but it's because companies really do see the opportunity, both they had some, you know, they have room to cut because they got excessive in 20 and 21, and because they now have these tools, co-pilots, soon to be co-workers in engineering, that enable them to be more productive, more efficient in engineering, and also allow them to be much more efficient.

And that includes Slack and Zoom and things that allow people to have more employees outside of the Bay Area. I mean, every one of these CEOs I talked to are intentionally trying to get headcount out of the Bay Area. Which, in response to our SBC pod that we did, I had a, you know, a CEO of a major company call me and say, "Hey, we're rebalancing how we're thinking about SBC, you know, across the business." And I said, "Doesn't that make you nervous that you'll lose your best engineers, you know, if the total cost of SBC comes down?" And he said, "No, because we don't need as many engineers.

The labor market for engineers is softening. It's easy for us to keep and retain the best talent. And so now is exactly the time to get our comp plan reset for the next five to seven years." So, Net, I would say that I'm really excited about both the reaccelerating top line for some of these businesses.

Again, this is very unique to tech. You know, I see other pockets in the economy, like we just talked about autos. I mean, it's a tough story out there. Higher interest rates, less consumer demand, people have burnt through their STEMI checks, they have less savings. And so I think it is a tale of these two worlds.

But I think one of the key drivers over the course of the next several years in tech is going to be these expanding margins caused by, you know, the tool set that they're investing in around AI. Well, here's the good news. You've now set the stage for earnings. So when we get back together in two weeks and this stuff starts coming through, we'll have a lens and a framework for what to talk about.

And I'll get a report card. Okay, fair enough. Great seeing you, man. A lot of fun. Good to see you. Take care. Bye-bye. As a reminder to everybody, just our opinions, not investment advice.