SPEAKER_00: These things are a different breed than your app, TikTok, you know, stealing your location or something like that. They can actually go do things in the real world. And here it is. Security researchers say G1 humanoid robots are secretly sending information to China. And yeah, what if these things go rogue is, I guess, the key. It's now off walmart.com.

SPEAKER_07: They yoinked it.

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SPEAKER_09: All right, everybody. Welcome back to This Week in Startups. I'm your host, Jason Calcanis.

SPEAKER_03: With me, my amazing co-host, Alex Wollum. How are you, sir? I'm fantastic. The kids are sick, but I am in good spirits. Let's do a show. All right, yeah. The fact that you haven't gotten sick is great.

SPEAKER_09: Let's introduce our guest today. We've got a major guest here, a major guest with a major announcement.

SPEAKER_13: Yes, so today on the show, we have Mr. Zach Dell of Base Power.

SPEAKER_15: Base Power is a startup that leases batteries to consumers, puts them in their homes,

SPEAKER_16: and then kind of balances out the grid, offering low-cost energy to consumers and more grid stability to all of us in America. The company's in the news today, Jason, because it just raised a billion dollars. Zach, welcome to the program.

SPEAKER_18: Thank you for having me. Excited to be here.

SPEAKER_09: That went fast, Zach. We were just here last year, and you guys were, I don't know, had a couple of dozen customers, I think. You were very nascent, and then, wow.

SPEAKER_19: What happened in the last year that led to this huge investment?

SPEAKER_21: Well, when intensity meets focus, you get a lot of progress very quickly.

SPEAKER_23: So we've been executing to the best of our ability over the course of the last two years, two and a half years since we started the company, and our product has really resonated with customers. So we've been growing really fast. We've got more demand than we can handle, and so we're trying to uncontrain the business by growing our supply, building a factory, starting to manufacture these batteries here in Austin, and now this new round of capital really uncontrains us from a capital perspective and is going to enable our next phase of growth.

SPEAKER_25: Got it.

SPEAKER_09: And for people who don't understand the business, instead of putting solar on your roof and a battery pack, you've come up with an interesting thesis, which was, hey, if you just put batteries in there and you load them up when electricity is cheap and then deploy it when energy is expensive, at least in our great state of Texas, that can be particularly effective. So explain that arbitrage, if you will, the peak cost of energy versus the trow cost and how much it costs to put this into somebody's home.

SPEAKER_21: Yeah, so I'll take a step back first and say that what we believe is that people want their power

SPEAKER_23: to be affordable and reliable, and that's really it, right? So when you think about your electricity, you want your bill to go down and your lights to stay on. And the way that we do that is by installing batteries that we own and operate on the homes of our members. When the grid is up and running, to your point, Jason, we use the battery to support the grid in times of high demand, and when the grid is down, the homeowner gets that battery to back up your home. So the homeowner, the consumer, is getting all the benefits of home backup without that high up-front cost, and then we get to bid these assets into the wholesale power markets and do exactly what you're talking about which is charge the batteries when the price of power is low, discharge the batteries when the price of power is high, make the grid more efficient, use more of that latent capacity on the grid, and build a more resilient, reliable power system for all of Texas and soon the entire United States.

SPEAKER_09: So explain the, and I'll let you go next, Alex, but just explain, like, the biggest arbitrage that could possibly happen, you know, here in Texas. You guys didn't, you guys didn't warn me, but it gets a little hot in the summer. You had, like, maybe 20 days over 100. People's ACs are blowing. It's incredibly expensive, I think, for electricity at that time, and then maybe overnight it can go down 20, 30 degrees, and people's AC use goes down dramatically. So just on a, I don't know, cost per kilowatt or a cost per day for the average home, what does that look like?

SPEAKER_33: That, is it 10x, 5x? What's the difference in cost?

SPEAKER_23: No, I mean, it can be, it can be $0 to, you know, power can be $0 in the middle of the day when there's tons of solar. The sun is high in the sky. There's tons of solar in Texas. About 20% of our fuel mix in Texas is solar. And so you really low-cost power in the middle of the day. And then in the middle of the night when the wind is blowing and not a lot of people are using electricity, you have very low-cost power. In the evenings, in the summer, you have what's kind of known in the industry as the evening ramp. So the sun's going down. People are using a lot of power in the evening. So, you know, and this is all supply-demand math, right? So the price of power goes up, supply goes down, demand is still high, and you have price spikes in the evening. And in the winter seasons, you have what's referred to as the morning ramp, where similar kind of situation happening where people wake up, they start, you know, heating their homes, demand is really high, supply is low, and you have price spikes.

SPEAKER_35: So you can go from $0 to, you know, $1,000 a megawatt hour. And so the swings are really dramatic here in Texas.

SPEAKER_16: So given that the swings are so dramatic, it seems to give a lot of arbitrage opportunity.

SPEAKER_15: I'm curious about how long it takes to recoup the investment into the batteries, because you guys only charge $700 to, you know, $900 to install,

SPEAKER_16: and then a low monthly fee. So you're taking a lot of upfront costs, Zach. How long does it take to pay those back?

SPEAKER_21: Yeah, so $6.95 upfront and $19 a month for one of our systems. And the paybacks are fast. It's a number of years, handful of years.

SPEAKER_30: It's roughly a 10-year useful life asset, and the payback is well inside of that.

SPEAKER_39: So essentially, within the first three-year period that you guaranteed the current rate today, which is 8.5 cents per kilowatt hour,

SPEAKER_41: you'll recoup the entire value of the battery and be into the profit on each one of those installs.

SPEAKER_23: Yeah, the idea is that as we develop new generations of the technology, our cost to deploy the marginal asset goes down, the paybacks shorten, and our returns go up, and then we pass those returns on to the customer in the form of lower prices. So our view is that electricity is a commodity. The best electron is the cheapest electron. So our vision as a business is to develop a compounding cost advantage through vertical integration, drive cost down for the consumer,

SPEAKER_26: and sell the lowest cost electron on the planet.

SPEAKER_39: Great segue into the Austin battery facility you guys are building out.

SPEAKER_41: How much can you bring costs down on the battery side of things if you can get off of Chinese supply chains and build those domestically?

SPEAKER_45: Very significantly.

SPEAKER_23: So by vertically integrating our manufacturing here in Austin, we'll be able to take a ton of costs out of the system and drive our landed costs down, tighten those paybacks as we discussed, increase our returns, and drive costs down for consumers. And really, this is what it's all about, right? It's like, why are we building a factory? Like, yes, it's cool to have a factory and it's fun to walk around and, you know, touch the machines. But the reality is, like, we're doing this because we want to drive costs down for consumers. And vertical integration is the best way to do that.

SPEAKER_47: Okay. And then what fraction of your fundraise is going to go towards financing the build-out

SPEAKER_39: of your next, I don't know, a few thousand installations versus the actual factory itself?

SPEAKER_23: A lot of the capital will go into battery CapEx. So, you know, the things that go through the factory, some amount of it will go into the machines. The building is already standing. A new building from scratch. We'll soon be able to talk more about Base Factory 2, which will be a bit more CapEx. But the majority of the capital is going to be going into these assets. And then growing our team, right? We've got 250 people, some of the best engineers, operators, and creatives from all across the country that have come to Austin to join our team. And we're going to be growing that team really aggressively. And obviously, you know, need a lot of capital to build a really strong team of people. So that's another big focus of ours.

SPEAKER_51: So just to go a little bit into the batteries themselves,

SPEAKER_09: the cells, I'm assuming you're not making the cells themselves. You're assembling everything else around the cells.

SPEAKER_53: You source those cells from a Samsung, another manufacturer. And so how does that work?

SPEAKER_45: That's right, Jason.

SPEAKER_23: So we do everything above the cell. So we take the cells and we design modules and the modules are part of a pack. And then we build the power electronics that basically make up the inverter that allow us to move power in and out of the battery. And so we design all of those components that are above the cell. What I'll say is today we don't make cells. I think, you know, over the long arc of time, we may go into the cell business as we further vertically integrate. And if we do that, the reason we do it is so that we can drive cost down further for the customer, right? Sort of the vertically integrate, take cost out, drive cost down for the consumer. It's not the part of the business that we're in today, but it is something we're thinking about over the long term.

SPEAKER_56: And those cells are made almost exclusively in China today?

SPEAKER_23: They're not actually. There's lots of the companies that make the IP for the cells are Chinese companies, but they have factories all over the world. So you see a lot of these factories popping up in, some of them in Europe, some of them in Southeast Asia, some of them are getting built in the US largely through joint ventures. Many of them with the auto OEMs. But while most of the IP for lithium iron phosphate, not to get too technical, but there's kind of two dominant lithium-based chemistries, lithium iron phosphate, and then NMC, nickel, manganese, cobalt, the Koreans largely have been, you know, mostly indexed to NMC. The Chinese have been largely mostly indexed to LFP. Most of the LFP, IP, and electrical property is dominated and owned by Chinese companies, but the actual plants themselves are not all located in China.

SPEAKER_62: Got it. Which one of those is better for home-based batteries, Zach? I'm not as familiar with the actual breakdown of the two different chemistries. Yeah, good question.

SPEAKER_23: So LFP really do have safety, right? So when you see, you know, safety risk with batteries, most of that is oriented around NMC batteries because you have higher C rates and higher risk of thermal runaway. And effectively what that means is you can charge and discharge the battery much faster, which really matters in a car, right? Because you got to get, you know, zero to 60 in three seconds. Doesn't matter so much in a home battery.

SPEAKER_64: And so the LFP chemistry is a better solution for stationary storage.

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SPEAKER_70: Okay, not to make it at all political, but we have an administration that's been talking about clean, beautiful coal.

SPEAKER_09: You may have seen me getting into it with Chris Wright on some all-in podcasts at different points in time. And some of these folks in the movement over there believe that just batteries are not sustainable, solar is not sustainable. We're just never going to be able to make enough batteries. But then I just looked at Tesla's last quarter and they produced more battery power this year in three quarters than they did last year in four. And it's ramping up. So is there a disconnect? Is this just, you know, maybe people talking their book or, you know, it's just insane to think that clean, beautiful coal, as clean and beautiful as it might be, kind of interesting to put those words around it. It doesn't make much sense to me. And just after my cursory research, it seems like those coal plants are extremely expensive to build. And batteries, it seems like we've been ramping up and they've been increasing their density and their affordability every year. So take us through the reality, if you will.

SPEAKER_23: Yeah. So I believe in the all of the above energy strategy. The reality is we have, we are in the midst of a generational increase in electricity demand. And what we need is more supply. And there are some types of supply that are better than others. And we can debate that. But what does better actually mean? In my opinion, better means cheaper. The best electron is the cheapest electron, right? It is a commodity. The best version of the commodity is the one that is available and affordable. And so my view is that the lowest cost electron will win. And what really matters is like the marginal megawatt, right? What is the cost to produce the marginal megawatt? I think over time, to the point you're making, Jason, as we continue to ride the cost curves down that we've seen in solar, as those continue, but as the same kind of dynamics play out in the battery industry, solar and storage will be the low-cost way to generate the marginal megawatt. Now, that doesn't mean we need no coal or no natural gas or no hydroelectric or no geothermal or no nuclear, but I do think that over time, and a lot of great research online about this that I can point you to, solar and storage will win the day in terms of cost of the marginal megawatt.

SPEAKER_74: Yeah, it's pretty clear. The physics and the progress and the scale is just all there.

SPEAKER_23: Yeah, you know, people talk about nuclear fusion as this, you know, thing that we need to crack, but we have an amazing fusion reactor available to us today in the sky. It's called the sun, and it's extremely powerful.

SPEAKER_25: Yeah, no, no. Elon's been saying this for 20 years, like, let's just use the sun.

SPEAKER_09: Okay, so the key to the business, this is just my outside observation, is installing solar panels on a roof is expensive, time-consuming, damages the roof. It's just, I don't know. You're talking about taking a year. How long does it take to put those two little R2-D2 units that look like an HVAC on the side of a building? What's the total installation time?

SPEAKER_78: Yeah, so...

SPEAKER_09: You understand the cost, but the time.

SPEAKER_78: Our installs happen in a number of hours, so on the order of four to six hours with our current generation of hardware.

SPEAKER_23: Our next generation hardware that is, might I remind you, fully custom-designed and manufactured by BASE, is much faster to install. And this is a really important piece. When you have a vertically integrated business and the time and the cost of the installation hits your bottom line, you care a lot about the mechanism by which that battery is installed. And so we've designed our battery to be installed in a very different way than home batteries have really ever been installed. And I'll just leave it at that for now, and you'll see very soon, you know, what that mechanism actually is. But we have basically built a new process and technology that allows you to install many of these, a crew to do many of these installations a day, drive that cost down, allow us to, you know, increase our returns at the asset level, which, again, leads to lower prices for customers. So really excited about our next-gen battery, about the cost out that'll come from the design,

SPEAKER_52: the manufacturing, but also the install cost, which is a huge part of the cost of getting a battery in the ground.

SPEAKER_09: It does seem the way you're constructing these to go on the outside of suburban homes and not rely on solar, just to put them on the outside seems incredibly quick. I know when you get power walls put in the inside of a home, now you've got to put very heavy things on walls, studs, it's a bit complicated and it's a bit of work. Also, I suspect, but I don't know, are your units cheaper to produce than, say, the Powerwall because that is so elegant and thin and mounted? It has a certain elegance to it, but I would also think it comes with a bit of cost. Am I right?

SPEAKER_45: Yeah, the way I think about this is I think that product is,

SPEAKER_23: you know, you can think about it as the Ferrari of batteries, right? And ours is really the, you know, the Camry, Corolla, you know, workhorse product, right? It's not an iPhone, right? It's not a premium, shiny product that, you know, should be $20,000, right? Our product is an infrastructure asset. It's an efficiency box. It's a savings machine, right? And we sell it as such. We position it as such. So, you know, I think if you look at the last decade of home energy companies, they have really taken this premium product valence where, you know, these things are very expensive and they're shiny. And the reality is, like, energy is a commodity, electricity is a commodity. What matters is cost, efficiency. These are infrastructure assets. They should be sold and positioned as such. And that's really the approach that we take.

SPEAKER_09: So if you were to put these on, say, I don't know, 20% of the single-family homes here in Austin

SPEAKER_25: and the greater Hill Country area,

SPEAKER_09: you know, just around the town, what impact would that have on the grid for every 10% or 20% of homes? Like, let's say, every 10% of homes you can convert because the grid here has challenges, right? So explain to us what this could do to the ecosystem because it does seem to me at some point with electricity prices spiking because of the use of data centers, it's been going up massively in some regions, maybe this should be funded by the data centers and the companies that are trying to get more power. Has that come up?

SPEAKER_23: Well, you asked a couple questions, Aaron. I'll try to get to both of them. So the first one is if we're able to put batteries on, you know, 10%, let's take Texas, for example, right? So there's, you know, on the order of 10 million single-family homes in Texas, 10% of 10 million is a million homes, right? With our next generation product is a 40-kilowatt-hour battery and 20-kilowatt inverter. So, you know, a million homes with 20 kilowatts in each home is two gigawatts, right? So, you know, adding two gigawatts to the grid is, you know, massive amount of scale. Sorry, 20 gigawatts, excuse me. So, you know, that's a lot of capacity that we add to the grid with, you know, just 10% of the homes in Texas. And what that means is reliability in the state goes up, right? So we have a winter storm Yuri-type situation and we need much more flexible capacity. We now have 20 gigawatts that we can call on to protect the Texas power grid when you have these really uncertain price swings. And then prices go down, right? We are really smoothing out that curve, that peaky curve. And so, again, we drive down prices for those 10% of homeowners that have the base battery on their home. But, you know, yes, when you sign up with base, you are protecting your home and you're protecting your pocketbook, but you're also contributing to making the whole grid in Texas and soon the whole country more reliable for everybody. The next question is about the data center build-out. So we are working on a product that we call Speed to Power, which is a solution for data center developers to get grid connected faster. So it's a hyper, let's oversimplify. What this means is if you're a data center developer and you, you know, you're meta and you say, hi, I'm meta, you know, Mr. Utility, PG&E, I would like to build a one gigawatt data center, please, please give me one gigawatt of interconnection. The utility says, well, you know, we don't have a gigawatt of interconnection, so you need to get an interconnection queue and you need to wait in line effectively. And I'm oversimplifying here, but bear with me. Well, what we can do is we can say, hey, meta, we can go deploy, such that the batteries are electrically equivalent to having a big battery on the site of the data center. Now, do you really want to put big batteries on data center locations? Maybe, but, you know, if I'm a real estate developer or a data center developer and I have a site that's designed for data center, I'd like to put as many GPUs on that site as possible. That site is not designed for batteries, and I'm not an energy developer by trade, right? So what I'd rather do is have a third party come in and say, hey, you can actually just buy our battery capacity from us. We'll discharge the batteries when you're running your GPUs. We'll offset your load of the data center and you can get grid connected faster. And so we're working with some developers across the country on this product and really excited to bring it to market because we want to win the AI race. We want to help these data center loads get grid connected faster.

SPEAKER_25: Feels like a win-win-win, right? Like the consumer who has the free battery or discounted battery, you guys win

SPEAKER_19: because you have a great business and then the data centers win because, hey, my feeling is

SPEAKER_09: these data centers and the AI companies are going to become severely hated in the coming years, not just for, you know, the possibility of jobs, you know, get displaced, but they may also, people might start looking at their electrical bills like they are in Virginia right now, which is data center alley. And they say, whoa, why is my data, why is my bill going up? And then they see on the news, oh, these data centers are being built and people start making the connection

SPEAKER_93: that there is a greedy data center taking their energy.

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SPEAKER_23: Yeah, I think it could be the opposite actually where these hyperscalers are actually subsidizing the power costs for the consumer

SPEAKER_45: in this kind of mechanism that I've described. So, you know, we hope to flip that script.

SPEAKER_97: That makes it particularly brilliant.

SPEAKER_15: Go ahead, Alex. Well, I'm just curious about the transmission from the homes and their batteries back to the data center because usually when you see a large facility like that, there's a big power connection to,

SPEAKER_16: you know, a lot of copper cables and such. If you're aggregating power from individual homes, Zach, does that become a grid difficulty? Is there a congestion issue there?

SPEAKER_23: It really depends. It depends on the topology of the grid. So, and where the substations are, where the data center is, where the neighborhoods are, where the substations are. And so there's usually some kind of catchment area is a term I would use around the data center in which you can install the batteries such that they are electrically equivalent to having the battery behind the meter at the data center.

SPEAKER_16: And how large is that catchment area for, let's say, a one gigawatt data center?

SPEAKER_23: It really depends based on, again, the grid topology, where the substations are, that kind of thing.

SPEAKER_72: But it could be, you know, it could be, yeah, exactly. It could be hundreds of thousands of single-family homes.

SPEAKER_16: Got it. Okay, so lots of individual homes there to put enough capacity into them to get the grid. Okay, that makes a lot of sense to me. Who loses, though? Because Jason just said everyone seems to win here and that's not usually how capitalism works. So who's going to take a bite out of their profits if you succeed?

SPEAKER_23: Well, the incumbent retail electricity providers in the competitive markets that are competing with us, I think

SPEAKER_35: will have a very hard time.

SPEAKER_105: Well, I think we'll all cry quite a lot about that, Jason. Don't you think? Yeah, I mean, it's,

SPEAKER_09: since moving to Texas, much like in Brooklyn, you have to be resilient and you have to be a rugged individual. What I love about your business, Zach, is that it hits on those notes. People here would like to be resilient. They would like to be independent of the grid or at least semi-independent of the grid. How long, if power goes

SPEAKER_25: off, would your average installation keep a home running or keep a home running if they, you know, don't use their washer and dryer, which are like the big ones, yeah, or turn their

SPEAKER_107: AC down a bit, yeah.

SPEAKER_23: Yeah, so we have two configurations, one battery and two batteries, very simple. The average single-family home in Texas with one battery is going to get about 24 hours of backup with kind of moderate usage, and then, of course, 24 hours, sorry, 48 hours of backup with two batteries. Obviously, if you've got three AC units and two hot tubs and, you know, a bouncy house, you're going to be pulling a lot of power and you're going to run that battery down in for six hours. Wait, you've been to the ranch?

SPEAKER_109: I didn't know you were. Wait, you have how many hot tubs?

SPEAKER_09: I don't know. This is your hot tubs right now, but we're putting in 16. Can a person You're going to need

SPEAKER_114: a lot of batteries out there, Jason.

SPEAKER_09: Exactly.

SPEAKER_00: No, I mean, I've talked to you about it before and I've been thinking about it. You know, we have two wells, protein sources, two internet-connected satellite and wired. You know, you really start to think about how can I be independent and how can this, you know, home and this homestead not be reliant on anybody or anything?

SPEAKER_09: And that's where I think Americans are going to get to when it comes to energy. It's already happened. I don't know if you've done much research of what's going on in India or China where people are just buying batteries off of Amazon, basically, and solar panels and then plugging their devices into it, not even like plugging, you know, like literally getting

SPEAKER_00: a small refrigerator and plug it into an anchor battery and putting some solar in their backyard. People are becoming very, what's the word?

SPEAKER_09: Resourceful. Resourceful in the face of the energy crisis. What have you seen around the world in your research of the most resourceful places where batteries and solar and independence

SPEAKER_119: are happening?

SPEAKER_35: You know, there's a really interesting story like this playing out in Pakistan where they have seen,

SPEAKER_23: I think, the highest rate of residential rooftop solar deployment in the world. And it's much like what you're talking about, a lot of DIY kind of self-serve folks doing it themselves, which is super cool. And to our earlier conversation around the cost of solar and storage, you know, they're going to see these costs continue to go down. And so resourceful folks in all different countries, all different corners of the world will turn to these technologies as a solution to power bills going up and reliability going down.

SPEAKER_16: Speaking of expansion, how long until you're out of Texas? When can I get this in California? When's it coming to Rhode Island?

SPEAKER_23: We're working on it. We're looking to expand in early 2026. So we haven't yet announced what our next market will be, but we hope to bring base to every household in America and beyond. And we want to be a global energy technology market leader. So we're really excited to announce our next few markets and we'll hopefully

SPEAKER_64: make our way to your neck of the woods very soon.

SPEAKER_25: And what a great real estate play. If you wanted to build a bunch of batteries and put them somewhere, you've got to buy some land here.

SPEAKER_09: You just, you know, get a little 10 by 10 spot on people's existing properties and you get to distribute all this power. It's just super brilliant

SPEAKER_19: as a distributed network.

SPEAKER_25: It's very crypto-like in that way. Don't launch a coin, though. Stay focused on what you got. Oh, gosh.

SPEAKER_126: There are no coins in our future.

SPEAKER_25: Please, stay out in the coin business. All right, Zach, thanks so much for coming on the pod. Continue success. If people want to learn more, where can they go if they're in Texas and they want to get in the queue? I know you got a queue there. How do people get in the queue?

SPEAKER_23: Check us out at basepowercompany.com. We'd love to hear from you. Thanks to you both for having me on the show and look forward to hosting you at the office down in Austin sometime soon. Can't wait.

SPEAKER_129: Let's go get some Terry Black's beef ribs and then we'll be there any minute.

SPEAKER_130: Sounds like a plan.

SPEAKER_25: All right. It's Alex

SPEAKER_19: to see people doing real hardware work and really solving

SPEAKER_09: these problems. We were sitting here 20 years ago in Silicon Valley. The idea that a startup would be venture funded and then be able to raise a billion dollars to do an infrastructure play, this really only exists because Elon decided to do Tesla and SpaceX and kind of break people's brains that you could actually do physical stuff in the real world. Or Uber and Airbnb said, hey, well, we can do things in the real world too. And now, you know, technologists don't feel limited to laptops and iPhones. This is like a hard installation problem. But boy, what a great insight they had that, hey, we don't need another source of energy. We need to store energy when it's at the lowest possible rate. And this is where

SPEAKER_00: my frustration with my guy, Chris Wright, you know, in our debates, you know, I don't hear him talking about base power or solar enough. And this administration needs to start thinking, hey, a minute, what could these cost, what do you think the actual cost is to them to put, you know, a battery or two, those, maybe they cost 5K each, maybe it costs them 1,000 or 2,000 to install.

SPEAKER_09: So it's maybe 7,000 a home. I'm talking about their cost. Yeah. It's probably not that great. Maybe it's 10,000 a home if we just ramp it up. Well, if there's 10 million homes in this state and the state is having energy problems, well, maybe the state should be subsidizing that instead of, you know, building coal plants or whatever. And here in the great state of Texas, we have the most solar power of any state. I can tell you it's not because people here are woke or MAGA. It's because, like Zach said, they're focused on what is the cheapest energy. And it's clear solar batteries is the cheapest with the exception of maybe if there's a coal plant or a gas plant already installed and you put a data center smack dab on top of it. Sure. But, you know, let's keep our eyes on the prize here, folks.

SPEAKER_134: Really great job to Zach and his team.

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SPEAKER_15: If there were 10 million homes in Texas, just throwing a number out there, and you had to do $10,000 installation each, that would be $100 billion compared to Texas' nominal GDP, Jason, which was $2.7 trillion in 2024. We can afford this as a nation. This is within our budget.

SPEAKER_138: I mean, if you were

SPEAKER_09: to do bonds, you know, if literally the state of Texas did a bond for $100 billion or they just did it, you know, I don't know, $10 billion at a time, 10% of homes at a time. Sure. They could just do $10 billion bonds, pay 5, 6% on them, make the muni bonds so the people who buy them don't have to pay taxes, make some yum-yumskies, especially when interest rates comes down. You know, just a $10 billion bond to put 10% on the homes, that would then make the upgrades to the grid and the upgrades to the sources of power. It would kind of crack the monopolies. It would make a more efficient market. I think it's a very disruptive thing that he's doing. Yeah. I can tell you every time in three, in my last four homes, you know, over 20 years, I've owned four primary residences and each time we move homes, I look at that and I,

SPEAKER_25: my L.A. home with a shake roof,

SPEAKER_142: you know, it wasn't worth, you know, and an old house and a house built in 1940, like, they were like, yeah, you can't really put solar on here. The whole house could collapse.

SPEAKER_00: And I was like, okay. You know, then the next one, same situation, you know, in the Bay Area, just this house is like old. It's a 1945 house. You can't do it. Modern house, beautiful.

SPEAKER_09: I buy this incredible, you know, modern masterpiece and they're like, okay, you're going to ruin the aesthetic. You're going to take millions of dollars

SPEAKER_142: off the value of this house by doing it. I'm like, okay, can't do it. And now here I am on the ranch and it's like,

SPEAKER_09: yeah, just take one of your acres in the corner here and you can use like a quarter acre or less to just put a solar installation and run the cable here. You'd be off the grid forever. That's so cool. So, yeah, it's really smart that they're doing it in suburbia and where there are single family standalone homes.

SPEAKER_19: You could also do it in townhomes, I suppose, but this is going to be so disruptive. I love a great disruptive play and talk about the timing. The timing of this is just perfect because, man, prices for energy

SPEAKER_09: are going to spike and it is going to add to the resentment of AI. The resentment of AI, you can see it start to building.

SPEAKER_00: You know, cab drivers in Wuhan are already

SPEAKER_09: starting to protest. The number of licenses given in China is going to be limited. They're going to limit the number of licenses so that young men don't lose their jobs as drivers. You look at Amazon, you look at the figure robots coming out with version 3, Optimus. These things are doing Kung Fu.

SPEAKER_149: If you can do Kung Fu, I think you can fill my Amazon package.

SPEAKER_09: Yes. Yes. So we're getting pretty close to job displacement, I believe, at a level I don't think we've seen more than once

SPEAKER_19: or twice in the history of humanity, ag revolution, industrial revolution. This time

David Friedberg: could be different.

SPEAKER_16: It absolutely could be. One last thing before we move on, there's a company we had on the show, Jason, called ExoWatt. I'll put the episode number in the description. And I was just thinking about them while we're talking to Zach because I haven't checked in on them in a little bit. Here is how they're pitching their company now. It's a heat storage system, Jason, for industrial solutions, but now they've changed their branding to powering AI with 24-hour solar. So I think this is going to become the theme from basically all energy startups that we care about on Twist 500 and otherwise. It's going to be an AI play. And you know what? Good. Love it.

SPEAKER_70: I mean, these solar arrays, geothermal, you know, smoothing out the grid, batteries, it really is

SPEAKER_156: possible right now to just do this. It might take a little incentives on the margin, but not too much.

Chamath Palihapitiya: Hey, we had this little spinning wheel. We did. And I made

SPEAKER_149: some guesses and I think I was wrong.

SPEAKER_15: Yes. Sadly, I think your guesses were a lot more fun than what we ended up getting. But Tesla is a company that's a real business, not just an idea factory. So they do have products for everybody. On Monday,

SPEAKER_16: we talked about a small video from Tesla showing a spinning fan slash wheel and a sound effect. Yeah, let's show it.

SPEAKER_163: Let's show that so we

SPEAKER_19: folks don't have to imagine it. If you missed it, it's yeah, looked like a fan that would be inside of your computer. I thought this would be a fan that was used in hypercars. There's supercars

SPEAKER_163: and there's hypercars. So you have supercars, you know, Ferraris and Lamborghinis, and then you get to hypercars. Those are the million-dollar ones that have over a thousand horsepower, supercar, 600 horsepower.

SPEAKER_167: So what was that? What was it? Do we know what that is?

SPEAKER_16: The Model 3 standard, which is different than the Model Y standard. I gotta say, shout out to Tesla for having a great

SPEAKER_15: hype video, but what they announced were more affordable EVs, Jason.

SPEAKER_00: Really?

SPEAKER_167: Well, I just really wanted it to be the leaf glow or the, selfishly, the Tesla 2.0 so I could have Tesla Roadster 2.0 so I'd have the 1.0 Roadster and the 2.0 Roadster sitting next to each other in the garage. Okay, that would be pretty cool. That would be pretty

SPEAKER_174: cool, but I guess it's the wheel spinning, but

SPEAKER_09: there's major pressure right now on the EV category in terms of affordability from two fronts. One is the tax credit going away. You just get

SPEAKER_19: 7,500 or something. And then internationally, BYD, Xiaomi, we talked about a bunch of these car companies.

SPEAKER_00: You can pop up a car company in China, like you can pop up a cell phone, a mobile handset operator. So, it is a new

SPEAKER_03: world, folks.

SPEAKER_16: Yep, and if you want to see those wheels in action, Jason, here is a picture of the new Model 3 standard with them. They're called the 18-inch Prismatic, I believe. It's a Prismata wheels. And this is the stripped-down version, which to me looks just like other Model 3s, so I think they found a pretty good way to hide the cost savings. But you can get a Model 3 standard for now just under $40K, and you can get the Model Y standard for just under $40K, and the Model 3 standard for $37K, Jason, which seems, even without discounts, pretty damn affordable. Yeah, these

SPEAKER_09: are much more affordable. The only difference is some of the trim and some of the components. If you look at the trim, the light on my new Juniper Model Y, which I think I'm leasing, but it's like $55K, maybe $60K all in. So, this is $40K, and it would be $48K with self-driving, so I think it's $12K less than mine. You have the light goes across, and you have a glass roof, not a steel roof like this one has, doesn't have the glass roof, which some people might prefer actually, because sometimes you get too much light if you're in Arizona or Texas. And these look a little slower. They have a similar range, but they use less batteries just because they made it lighter. And then all kinds of tiny savings. I saw people talking online about the seat adjuster is now in the dashboard as opposed to the components on the side. So, if you just keep stripping these things out,

SPEAKER_00: little tiny things like that add up, you know, $50 here, $150 there, a little bit less actual batteries while maintaining the range because it's lighter. They have fabric seats, not leather. You don't have the cooling, which if you're in Texas, I can tell you, you need to have air conditioned seats. You get into an air conditioned Tesla with the air conditioned seats. Oh, my God. Your car goes from being 110 degrees inside to just beautiful 72 in minutes. It's amazing.

SPEAKER_138: So, wait, the seats are

SPEAKER_184: self-cooling as well?

SPEAKER_138: Yeah, they have little holes in

SPEAKER_174: them. This has existed for a while. You have heated seats, right? Which is just like a mesh

SPEAKER_09: that warms it. You need that in the northeast. In the south, these have

SPEAKER_00: little holes in it, and I guess there's a series of pipes that blow cold air, and the cold air comes through the holes, and it

SPEAKER_138: freezes your nuts. That sounds fantastic, because

SPEAKER_186: last time I was in... Your crack.

SPEAKER_16: I mean, I was in New Orleans not too long ago, and it was very uncomfortable for a number of reasons, including car seats being too hot, so I love that. All right, last thing here, Tesla's worth 1.43 trillion last time we checked in, and the company didn't really lose any steam over this set of announcements, Jason,

SPEAKER_137: so it seems that the market's happy with what they put out. They need to put

SPEAKER_09: out the Model 2. I think this is a great step. I think the world wants a two-door hatchback, and

SPEAKER_00: then maybe a minivan from Tesla, but firing up new lines of cars is hard, and I think they,

SPEAKER_19: although they may do that, I don't have any inside information, obviously, but if they can do that, that would be amazing if they could have either of those cars, and then you would be, you know, competing with the Prius, like the two-door Prius or whatever, and, you know, get it down to 25K or 30K and under. That's when it's going to be super magical, but I think they're just going to go for Optimus, and I think even self-driving is, like, going to wind up being de minimis compared to the opportunity with Optimus, so I do think they'll get self-driving working in the next year

SPEAKER_00: or two to be able to take the safety driver out. That's my timeline. I know other people are thinking it's going to be three months or six months or three weeks. 14.1 just came out, and if you look at the website FSD Tracker, which is like consumers saying what they're getting, and then you just take the anecdotal videos from the super fans who have, you know, who are doing rides in the Bay Area with the driver, have a ride-sharing service there now and limited supply, and then the Austin one, I would say, you know, they're at 96% or 97%, depending on the ride, obviously, but the FSD Tracker, I think, still has it at 97.4%. Estimated distance with no disengagements last 30 days, 97.4%.

SPEAKER_134: Drivers with, what does it say? One or no disengagements last 30 days?

SPEAKER_15: Yeah, so this is one or no disengagements, and this is no disengagements. So essentially, it's the second layer of reliability should be showed there. But I think the city distance to critical disengagement is the most important thing because it's going up quite dramatically, Jason. If you look back at version 10 here, it was 29 miles, and now it's over 200. That's a 10x improvement over four generations of the FSD software.

SPEAKER_51: So if you were going in a critical disengagement and somebody could get

SPEAKER_09: hurt. So what that means is if the car is going 200, what did you say it was, 250 miles without a disengagement? I think it was 226. Okay. So 226, if you were going, I don't know, 30 miles per average, 30 miles per average, you're talking about every nine hours or something like that? Not even 10, like maybe eight hours. No, seven or eight hours, you would have a critical disengagement. In other words, if this was three shifts a day, or no, four shifts a day, you'd have four critical disengagement. You have a critical disengagement every eight hours. Obviously, it's not acceptable, not ready to take the driver out. It needs to be, I don't know, something critical happens once every two months. I don't know. I don't know what the right number is because the metrics and the statistics are not normalized, but Tesla is going for the wide. They're going that we can launch these anywhere, whereas Waymo's like, we're going to focus on smaller, dense areas and make it perfect. Now, if you limit the area dramatically, like Waymo has, and you have LiDAR, you're constantly, every car is building a 3D model of the world, you know, every ride. So if something changes, somebody double parks, or like there's a dumpster suddenly put outside somebody's house because they're doing a construction project, whatever it happens to be, you know, there's a construction project of some type in the street, it's going to get built into the world model faster.

SPEAKER_03: So less area equals better stability.

SPEAKER_16: Next up on the show, you can now buy Chinese humanoid robots on walmart.com. So if you happen to have $21,600, Jason, you can get yourself a Unitree G1 Basic. Here is a screenshot that I took from walmart.com. You can also purchase battery packs or their Unitree go-to air smart robot dog for just $2,200. I was blown away by this. I wanted to verify it, Jason, and I even chased down the company in question. It's a company called Futurology, and they are now an official vendor for Unitree. So if you want your Chinese spyware on two legs in your home, good news, it's now available

SPEAKER_00: for $20,000. You just, you cut me off at the pass. I mean, I think we need to talk to Vice President J.D. Vance about this, or maybe Marco Rubio.

SPEAKER_09: He's Secretary of State. Yeah. We need to talk to these two gentlemen because selling robots from China does not sound like a great idea. And was it true, I saw this spreading, that Unitree robots were sending data back to the mothership?

SPEAKER_196: Yes.

SPEAKER_15: What? I believe it was on a five-minute interval. Now, there's two ways to think about this. One is, it's a piece of technology, and they often send telemetry back and forth between individual bits of hardware and servers.

SPEAKER_16: That's not a bad thing. Lots of stuff does that. But when it comes to China, when it comes to data security, and when it comes to other things like their G01 robot having a backdoor that we found, I think it's a legitimately large problem. Now, Jason, we're an open country. We've talked a lot about self-driving cars and their training. I think that it's probably better to have an open society, more competition, and worry a little bit less about certain cybersecurity issues. But in this case, because who's going to buy this? It's going to be startups that want to play with a humanoid robot. Well, that's a great place to harvest IP. Your mom's not going to buy this, right? I mean, this is not designed for the average consumer because you have to program really excited to see more accessibility to hardware that will allow startups to build and try things. On the other hand, we don't have that deal with China you mentioned yet. And so right now, we're still geopolitical adversaries, and therefore spying is a big deal.

SPEAKER_201: So I'm kind of torn on this.

SPEAKER_51: There's spying, yeah, like TikTok, and then there's also attacking and being able to go on the offensive and do missions.

SPEAKER_00: These things are a different breed than your app TikTok, you know, stealing your location or something like that. They can actually go do things in the real world. And here it is. Security researchers say G1 humanoid robots are secretly sending information to China. And yeah, what if these things go rogue is, I guess, the key.

SPEAKER_03: It's now off walmart.com.

SPEAKER_16: They yoinked it, ladies and gentlemen. And they raised the price of the robot dog. So everything I told you has now been replaced by change in the last two hours.

SPEAKER_15: I was trying to point out you could buy them in a pack of six for three-day delivery from Futurology.

SPEAKER_202: But apparently, something happened. Maybe Marco Rubio did take a swing at this. Huh.

SPEAKER_15: But other startups in the U.S. are taking note, Jason. Chris Paxton, he's the AI innovation lead at Agility Robotics, a company we've talked about. When this story broke, said, this is real, WTF. Because I don't think any American company is ready to mass produce a $20,000 humanoid robot.

SPEAKER_138: Yeah, this is just a bad idea, folks.

SPEAKER_00: You know, you don't need to be paranoid to be concerned about Chinese robots.

SPEAKER_19: That's just common sense. I did see in the news people speculating about Tim Cook retiring or stepping down at some point. He's going to be 65 years old. And I guess this came from Bloomberg and the very famous Apple reporter there, Mark Gurman, who gets things right. Tell us what's going on in Cupertino.

SPEAKER_16: Yeah. So Mag7 companies, the

SPEAKER_15: largest companies, when they have a change in leadership, it's a pretty seismic deal. I reported on the Steve Ballmer to Satya Nadella

SPEAKER_16: transfer of power. And so this is not like just swapping out your VP of sales. It's picking your next leader for the next 10 to 20 years of your business. So when we discuss this, that's the scale we're talking about. Apple is a multi-trillion dollar company, relationships around the world. It's a big deal. The question was, who's going to step in after Tim Cook eventually either goes to lead the board or just sits down and plays with all of his money? The answer, it turns out, is a man named John Ternus, according to Gurman's reporting. And the reason why he's a good candidate, Jason, is that he's only 50, which is relatively young compared to much of the Apple C suite. He's also had a really long tenure at the company. He's been greatly involved in their hardware products, including some of their recent successes that we've talked about on the show, better computers, better chips, and so forth. I think it makes a lot of sense. The thing that I'm concerned about, though, is I feel like today, when I look at Apple, great hardware, crap software. And so to me, they're almost doubling down on what they're good at, and they're not investing in more in what I think they should be, which is their AI suite being complete trash, Siri not being very good, the app store being a bit of a mess. And so I think John, Mr. Ternus, makes good choice. It's a good selection if you

SPEAKER_41: want better iPads, but I think they've already nailed that. And so to me, I was kind of hoping for a different direction.

SPEAKER_19: Well, 50 years old is when I believe Tim Cook took over for Steve Jobs. And there was a guy named Jeff Williams who was supposed to be, he was the COO of Apple up until July of this year. Um, and he was supposed to be the heir apparent, Jeff Williams. And, um, you know, he was, he was involved in a lot of launches. I think he was like, even, you know, Apple watch, iPod, a bunch of like, you know, he's been there forever. What happened to, I guess, Jeff Williams was my question. Um, I know that you had Johnny Ive leaving, um, but when did Jeff Williams, yeah, he stepped down on July 8th.

SPEAKER_15: July 8th. I have the, uh, the, a bit of

SPEAKER_215: Apple and he's retiring here.

SPEAKER_15: Yeah. That's the interesting thing. It's not like he was swapping out jobs, but I mean, also maybe in this current climate business is less fun. That's my take, because if you're Steve, if you're Tim Cook, what do you have to do right now? You have to go to the Oval Office. You have to kind of bow and scrape and the president sets your travel agenda and you have to do, you know, big ribbon kinds. You're not just in the, in the weeds with technology. You're also playing a political game. And I wonder if everyone wants

SPEAKER_09: to do that. Yeah. The stakes are higher. Obviously it's a bigger company and less time actually doing product and more time being yeah. The representative of the company at times a diplomat, you're dealing with geopolitical issues, India versus China versus Vietnam. Um, yeah. And I guess, you know, at some point, the great success of Apple buying back so many shares so much cash, the stock going up, you know, so consistently over the 27 years that Jeff Williams was there. Like at a certain point, the money does become a distraction. And you have to think when you're 62 years old, like he was when he retired, he's eight years older than me. Um, yeah, maybe you're like what's left and what's left is enjoying life and you also never know what's going on with the person. Sometimes, you know, they can be going through a divorce or they have a kid who's got challenges or a parent who's sick. So I always have a little bit of grace for folks like without knowing their personal story as to why. Yeah. And for Tim Cook, I mean, 15

SPEAKER_00: years at the helm, um, he's gotta be getting tired. I mean, he looks like he's in great shape for a 65 year old. That dude's spry. I think he could do it for another 15 years, no problem. But again, if you've got 15 years left on the planet in this life form and you're 65 and you could still ski a little bit, maybe you can ski for five more years or 10 more years.

SPEAKER_09: Maybe you can, you know, uh, really have a, a, a, a fourth act, you know, you used to have like, you were a child, you worked, you retired, you had three acts. Now people seem to have like four or five.

SPEAKER_16: Good news for you and your, your small shareholding in poly market, Jason, because intercontinental exchange, the parent company of the New York stock exchange is going to invest up to $2 billion in the company, bringing its valuation all the way up to $8 billion pre money. And I thought eight plus two equals 10, but Shane did a tweet and he said eight plus two is actually nine. So it's worth either nine or 10 billion. Not quite sure why there's disagreement there. Well, they said up to 2

SPEAKER_156: billion. So maybe they're investing a billion now and 2 billion in the future. It's taking a guess.

SPEAKER_16: That I, I didn't have it nailed down. So I didn't want to speculate too much, but it's an enormous amount of money. It's an enormous up round for the company. And it really, I think gives them enough cash to crush the competition. And even more, they have a great partner in the nice, the internet, uh, intern, the intercontinental exchange is going to distribute data from poly market out, giving the company a business model for the first time. Yeah. Uh, couldn't be more bullish, uh, for poly market if you tried to make up an announcement.

SPEAKER_51: Yeah.

SPEAKER_70: So they are going to distribute the data to the financial institutions who subscribe to their products.

SPEAKER_09: And that will, um, that will create revenue for poly market. Is that my understanding correctly?

SPEAKER_137: That's my guess because when I was prepping about this, I was really confused by how poly market

SPEAKER_202: makes money.

SPEAKER_70: Well, they're going to take when they, they're going to eventually take a portion of the fees like other competitors do and they just

SPEAKER_09: haven't launched in the U S but they bought that other company. So they will be launching in the U S and in fact, on poly market people are, um, right now, um, there's a poly market for when they'll go public.

SPEAKER_00: I'm sorry, when they'll launch in the U S.

SPEAKER_16: Yeah, actually I have one of those

SPEAKER_15: pulled up right here, Jason. There's a running market, um, $3 million in volume asking, uh, will poly market go live in the U S inside of 2025 and, uh, complete unanimity, 98% chance. Everyone agrees on this. So your view then is that as they expand in the U S and they grow their volume, they'll start taking a couple

SPEAKER_41: of points off the flow.

SPEAKER_163: Yeah, of course. It would be just transaction fees. So if you want to, uh, um, you know, and if it's 10 bips, if it's 1%, who knows what it will be, but there'll be a little vague in there and that's

SPEAKER_15: it, uh, but in the meantime, as the company doesn't do that. And they, they just kind of operate this exchange right now, as far as I can tell for essentially free, a software enterprise deal with New York stock exchange is a great way to bring in some money in the interim. Um, as part of this announcement, Shane

SPEAKER_16: did drop some other notes, Jason, and this was not public. And I also want to note you did not text me this information. So sad times.

SPEAKER_41: Uh, but before the election last year, they raised a $55 million round that blockchain capital led at a $350 million valuation. And then earlier this year founders fund led $150 million round at 1.2 billion.

SPEAKER_15: So those were kind of quietly done leading up to this, but it does explain the valuation jump from their earlier price to now this nine to $10 billion price deck, which is enormous.

SPEAKER_25: Yeah, it's pretty great. Um, I think it's, uh, going to be a huge success.

SPEAKER_09: I guess the, um, shareholders of intercontinental exchange didn't like the investment right now, or they've been, actually, they've been on a downward trajectory since August, so I don't know if that has too much to do with this deal.

SPEAKER_03: It didn't help.

SPEAKER_15: Uh, I, the chart here, if you're on the audio version, I just have a, basically a two month chart of the ice stock price. And it took another bit of a dip there. The thing I think they struggle with Jason is just growth. Uh, the, the company is very profitable off of $2.5 billion in revenue in their last quarter, it was only up 10%. They had operating income of 1.3 billion. So it's just a very lucrative enterprise.

SPEAKER_16: And so from that perspective, I think taking the swing on Polymarket makes sense twice. Not only do you de-risk yourself from the traditional stock market world and bring yourself into the new world of prediction markets, but also don't forget Polymarket is a blockchain based company. They settle their trades on Polygon, which is an Ethereum L2. And so they have both feet in the crypto world. And as we talk about tokenization, as we talk about companies like Robinhood getting more into crypto, I think it makes good sense.

SPEAKER_163: And if you look, it looks like the, the

SPEAKER_09: dune data indicates $1.4 billion worth of volume in September. And, uh, they're on pace in October for 1.2. So you, you know, you average that out, uh, that would be, you know, let's call $15 billion a

SPEAKER_19: year in volume, $15 billion a year in volume. 10% of that would be 1.5. And if they got 1%, that would be 150 million. Is that right? So this could be making a lot of money, uh, very quickly and early on, if they just get one, but

SPEAKER_119: 1% of that float.

SPEAKER_16: Yeah. I'm, I'm long-term bullish about Polymarket and Calci and prediction markets from Robinhood. Not gonna lie. I know you're a shareholder. 10 billion seems a little expensive for the company today, but if you are the New York Stock Exchange and you want to be de-risked strategic money, just trades differently than financial investments. So I'm actually really here for this.

SPEAKER_237: Shout out to my, my gut tells me this could, the

SPEAKER_09: volume here could 10 X in the next couple of years as if, cause remember they're not legal in the U S yet. They have not launched in the U S yet. Yes. When they launch in the U S I think it, the volume is going to go 10 X and now it may take a year or two, but I, I would say 10 X the volume, which means they're

SPEAKER_138: going to very quickly get to a billion dollars in revenue.

SPEAKER_62: Do you want to do a little, uh, a little twist bet on that?

SPEAKER_09: Sure. Uh, so I don't know in a year, it's a year after they launch in the U S it'll be triple two years later.

SPEAKER_00: It'll be triple again. I think they'll triple each year. So which bet do you want to take?

SPEAKER_15: Well, I think because you're the shareholder, I'm not gonna make you bet against your own company. So I'll take the under on both of those. Well, let's just take one.

SPEAKER_163: We'll just do it. Cause it was settled in a year. It'd be faster to get the juice.

SPEAKER_03: So in one year, it triples volume one year, post U S launch

SPEAKER_243: or one year from October 8th from the launch.

SPEAKER_137: Okay. I'll take the under Jason takes the over, uh, that way. You'll get paid twice if you're right. And, uh, another hundy, another hundy in.

SPEAKER_249: I'm gonna add it to the docket to the, uh, slash bets page.

SPEAKER_155: Yep. Uh, all right, let's keep moving.

SPEAKER_16: Uh, next up on the docket X AI may secure a investment from NVIDIA. Jason, you talked a little bit with Zach at the top of the show about your concern about how much money is flowing around the world of AI infra and some of the circularity thereof. Well, here's the latest, uh, according to Bloomberg reporting, X AI is looking to raise $20 billion. X AI of course is Elon Musk's AI company that has merged. So now has what was Twitter and the new AI company in one bucket, uh, looking to put together a $20 billion round, seven and a half billion in equity, 12 and a half billion dollars in debt. NVIDIA might put up 2 billion worth of money into this. The tricky thing is it's set up via an SPV, the debt is, and they're going to essentially use the chips. They're going to buy as the backing, the asset backing for that debt. And that does take some of the financial risk and put it outside of X AI, but it does seem like a bit of excessive cleverness to make the math work out. And I'm just kind of curious, putting aside the fact that it's Elon's company, how does this sound to you as a person who's been in a lot of deals?

SPEAKER_51: Yeah. I mean, it's, it's actually good for the shareholders of X AI to have the, an

SPEAKER_00: equipment lease basically. So equipment leases, people would do those even for small companies, you know, Dell has an equipment leasing program, so if you want to buy, you know, 30 laptops and

SPEAKER_09: you're $3,000 each and you, whatever, you get a monitor for people, you can do that with financing, right? So then you don't have to use your capital to do that.

SPEAKER_00: You just pay a monthly fee and spread it out over the life of these, which is five years for these. Some people are doing six, some people are doing four. So it makes a lot more sense. If you don't want to dilute your equity to set up equity financing, I suspect a decent amount of the deals we're seeing will have some component of this, which is equity financing. So what that means is if you were in the equity financing piece of one of these investments, it could be done any number of ways. You could have warrants to buy a little equity in the company or, you know, whatever, if you were putting in 20 bucks, 7.5 goes in an equity, 12.5 goes in debt. You get paid a, you know, a coupon on the debt. And then maybe you have some converts, you know, or a little pot sweetener to get a

SPEAKER_09: little extra equity. But, you know, it's pretty savvy. People are investing in these things. And yeah, it's not actually non-traditional to do equipment financing. Okay. It's pretty standard. I actually would be the thing that's actually surprising is more like the NVIDIA open AI deal where they're putting in a hundred billion and then they're buying a bunch of AMD chips. That's the weird one in all of this.

SPEAKER_16: Okay. So they're a little bit different. So the, the NVIDIA open AI deal, they only get the NVIDIA money after they buy, uh, the, the gear. So I think that's a tranche based investment as well. So they're not going to take NVIDIA money and then give it to Lisa over at, at AMD, that would be, that would be too messy. Um, but here's the thing that I've been thinking about. So if you're NVIDIA, you're essentially via different mechanisms, taking your GPUs and getting shares in some of these AI companies, your GPUs, you sell at a 70% gross margin. So do you get to essentially buy dollars in equity for 30 cents on the dollar? Because you are using high margin products. It feels like people are worried about NVIDIA.

SPEAKER_137: I think they're getting the best deal in the world. It's brilliant.

SPEAKER_09: But you know, the challenge in all of this is these are conflicted party transactions is how they get framed when you, it's okay to have a conflicted party transaction.

SPEAKER_00: You just have to explain the conflict. If there is one, and there's some diligence you have to do around that. Here's a scenario. Let's say open AI and NVIDIA, this a hundred billion dollars changes hands. And it just essentially round trips, let's say, or the majority of it round trips.

SPEAKER_09: Let's say the management teams of these two companies, not even the, the, the CEOs,

SPEAKER_00: just the management teams, they start shelling shares on the way up. Now, let's say there's a recession for whatever reason, and all these stocks go down 50%. Nothing to do with the round tripping, nothing to do with the, I shouldn't say round tripping, nothing to do with the conflicted party transaction, I think would be the way to say it.

SPEAKER_09: So now the management has gained something, right? They sold shares, the shares went up because of these deal announcements. When these deal announcements happens, typically the shares go up and the shares will certainly go up when the revenue starts hitting, because people will be more bullish on the companies.

SPEAKER_00: Now people sell their shares. They've personally gained from a conflicted party transaction. Then the shares go back down. And if the shares go back down and then other people, you know, who own shares in the company are negatively impacted while the management teams are benefiting, you have lawsuits and

SPEAKER_09: investigations. So that's how this practically could, that's the risk in all of this.

SPEAKER_00: Now you don't have to be right to, uh, file a lawsuit or win a lawsuit. You could just be an ambulance chasing shareholder and still win that, that does happen.

SPEAKER_62: Like in the case of Tesla and Delaware Chancery Court or whatever.

SPEAKER_00: Yeah.

SPEAKER_167: So when they had the person had like 10 chairs and they were able to be represented by, you know, somebody and they made money on their shares. So you could even make money and still sue and still win. So this is all getting, um, I would say it was notable.

SPEAKER_00: And now I would say the word on the street is it's concerning people. You know, when you turn on CNBC, it's become a topic now.

SPEAKER_16: I can't stop reading about it. The Economist, FT, Bloomberg, everyone's ringing this bell because it's not just that. It's the major companies that are doing this. Neo clouds are also doing a lot of GPU core we debt core. We have is at more than $10 billion in GPU back to debt. According to Tomas Tungas theory ventures. We had him on the show and also Lambda Labs has at least a $500 million GPU backed loan as well.

SPEAKER_138: So it's a lot of money, Jason. It adds up, uh, and it's concerning to people.

SPEAKER_09: So when it goes from people in our industry talking about it or talking about it on an industry, an industry-based show like this week in startups are all in or whatever it happens to be, when the insiders in the industry are talking about it, and then at some point it tips over into mainstream media. Like you said, FT, Economist, et cetera. And, you know, and then the rest of the world's talking about it. Now people are focused on this, the attention's on it. And that's where, um, you know, if you look at the dot-com bubble, people

Chamath Palihapitiya: started to say like, wait a second, if opening eyes worth 500 billion and they're making 13 billion, but they're losing tens of billions a year with this build out or more, when are they ever going to get this money back? When does the, when, when did they get out of the J curve? And then people are going to start doing, you'll see it at some point, people are

SPEAKER_00: going to build a J curve chart when they have all the info, finally have all the information on these deals when they, when open AI files their S1. And that's when you will be in there. And other folks will be in there with a fine tooth comb saying, Hmm, this seems

SPEAKER_09: like a revenue ramp. That's not possible. And this is where the total addressable market, it comes into play. And I did a total addressable market here on the show at one point, and just broad strokes, people spend a couple thousand dollars a year in the modern world on, um, SaaS products. Right? So if we say this is roughly equivalent and you probably get more value from this, uh, maybe you keep some of that SAS, but you might replace some of that SAS spend with this. Let's take 500 million people working in the real world. Okay. So you've got 500 million there. Let's say they spend $2,000 each a year. So, uh, you know, what does that equal?

SPEAKER_00: It's a big number. I'm on it. Yeah.

SPEAKER_142: So, and then you take another, let's say, go ahead.

SPEAKER_15: Uh, no, it's, it's, it's thinking. Okay. This is why, this is why you shouldn't use, by the way, LLens for, for math when you're doing a live taping. Cause it goes, Oh, hold on. Let me think it's a trillion dollars. It's a trillion dollars.

SPEAKER_00: Yeah. So, you know, you got a trillion dollar TAM just for the business case. And I'll include in that, like the API calls and everything. Sure. Just the 500 million people who really work, you know, in the Western world, that's, you

SPEAKER_09: know, the United States, Canada, Europe, et cetera, uh, modern world spend, not discounted for local currencies or anything, just, you know, EU, U S dollars.

SPEAKER_156: Okay. Now let's say there's a billion people as consumers willing to pay, you know, roughly what they

Chamath Palihapitiya: pay for Disney plus and Netflix, 30 bucks a month, maybe 25 bucks a month. I'm gonna go with the 25 bucks a month. You got a billion people spending 300 a year on, you know, uh, consumer-based products.

SPEAKER_03: Okay. Now you got another 300 billion. Yeah. So 1.3 trillion so far. You got $1.3 trillion in revenue.

SPEAKER_00: It's a big number. That's a lot of revenue. And if it was worth, I don't know, five to, I would say seven, eight times price to

Chamath Palihapitiya: sales ratio, uh, or 10 times price ratio, you know, the prize is clearly $10 trillion.

SPEAKER_284: Yeah.

SPEAKER_09: And that's not counting any gains that come downstream in the developing or frontier markets, developing market like China or frontier market. You know, I guess that would be like maybe some of the countries in Africa, et cetera, that don't have rule of law exactly, but they're still gonna, doesn't mean they're not

SPEAKER_03: gonna use some of this stuff, but they just might use it on average for a buck a person or five bucks a person in India, they're breaking out a $5 a month, uh, chat GBD subscription to put a price point on that. Yeah. 20% of what us pays. Right.

SPEAKER_09: So yeah, you have all that stuff going on around the world. That's where I think we're gonna wind up.

SPEAKER_25: I'm only including the, the, you know, uh, first world, uh, the developed world, uh,

SPEAKER_134: developed world is the correct, politically correct way to say it.

SPEAKER_83: So the developed world, I don't know, it's a pretty big TAM, it's a pretty big TAM.

SPEAKER_00: If you build that, what's the build out? The build out's gonna be three, four, 500 billion. Is that what we're seeing right now? More than that. More than that. I think, but I just, if you look at what's been announced, it's like a hundred billion from, well, I mean, Sam said a trillion.

SPEAKER_138: I'll, we'll just throw that number away, but let's say there's 70, I know.

SPEAKER_144: I think that's just him.

SPEAKER_138: Sorry.

SPEAKER_294: I know. I just, I just, I mean, how do you spend a trillion dollars? A lot of, that's a lot of money.

SPEAKER_09: So let's say there's 10 companies playing in this big game, XAI, OpenAI, Anthropic, Amazon, Microsoft, Google, Apple, eventually, you know, you start to get, let's say seven players or, you know, a Tesla, you know, let's say seven players, seven players put, uh, you

SPEAKER_156: know, 200 billion in each, 300 billion in each.

SPEAKER_09: Now you're at $2 trillion. So it's, it's quite possible. There'll be a trillion or two trillion and spend 10 over the next five, 10 years. But that means per year, 200 billion a year.

SPEAKER_00: So it's quite possible that the revenue from this at 1.3 trillion could actually work out. It could actually work out the, the math, maths.

SPEAKER_09: So for me, and I'll have, uh, Kabir, uh, work on a model.

SPEAKER_00: So somebody let Kabir know to send him this link here. I'm going to make a model for this and we'll put it in the docket and then we'll make the

SPEAKER_19: model open source. Y'all can create new tabs in the model and, and, and make it better than what I explained here. But this is my back of the envelope, which is my speciality.

SPEAKER_142: Back of the envelope, man.

SPEAKER_163: Just making some notes. Boatee. All right. This is what I do. I tell people in my venture firm, do Boatee.

SPEAKER_19: Back of the envelope, just do it in your head and this breaks people's brains to be able to do math in your head is, uh, I don't want to say a sign of intelligence, but it's a sign of a hustler when they can do back of the envelope math. That's when, you know, you, you don't want to be in a poker game with that one.

SPEAKER_129: All right. It's been another amazing episode of this week in startups. We'll see you on Friday.

SPEAKER_97: Bye everybody.