SPEAKER_00: so meta has a plan to build a data center that's so large it actually comes with its own map so i don't know if you saw its own threads but here is mark zuckerberg showing a super imposition of his future two gigawatt data center on top of the manhattan map and jason just for folks out

SPEAKER_03: there how much of manhattan do you think this is covering 35 40 percent it's yeah i mean it's all

SPEAKER_05: of central park it's yeah it's giant it's going from 125th street down to 34th maybe i mean this is

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SPEAKER_00: dollars off your initial setup hey everybody welcome back to this week in startups my name is alex and i am one of your two co-hosts i'm alex over on x and i'm joined today as always by the other this week in startups co-host it's jason calicanis jay cal has been under the weather but he is out and he's back

SPEAKER_14: and he is ready to rock jason how are you i'm back in the game i'm back in the game you know sometimes you

SPEAKER_16: push yourself a little too hard alex and uh at my age uh sometimes the world pushes back and you're just

SPEAKER_19: like whoa you can get knocked on your ass so i uh i went to the inauguration which for a never trumper

SPEAKER_16: people know you know i was always the biggest fan of uh donald trump but you know i always root for whoever wins for the presidency just as an american i believe should uh you know i went to this inauguration and it was quite nice you know the republicans uh they have a very wide tent uh they don't like criticism all that much you know these all political people a little sensitive about criticism uh so you know having jcal around is a little bit sensitive like oh my god am i going to say

SPEAKER_21: something critical of the president oh i called the hot swap of biden you know i i mean i call balls and strikes anyway long story short i go to all these parties i have a great time um but you know

SPEAKER_22: i just gotten back from japan which was a last minute trip that i wasn't planning on doing after i had been

SPEAKER_21: in uh you know tahoe for the the holiday break and so this is like three trips back to back to back you know austin tahoe niseko hokkaido back to austin to dc to back to austin i get to like uh you know the day after the inauguration there's all these balls going on candlelight this whatever starlight gala that i'm invited to everything the invites are flowing famous people in my dms whatever you know selfies you saw it on socials i just wake up in the morning my voice is gone this is i guess on tuesday of this week i mean it's even a blur and uh i i don't i i just pass out i'm in my hotel room 24 hours straight oh wow yeah sweats everything chills body aches felt like i get hit by a truck and it's like 19 below zero in dc is the most miserable place you've ever been dc is not my favorite city let's leave it at that i mean um i did like a four i did four days there that's enough for four years

SPEAKER_31: okay to my a little bit like vegas you single digit days get out yeah 48 hours i'm out absolutely i think

SPEAKER_21: that's exactly right yeah i can do 48 hours there don't need a hotel room i get back my wife says you know what i'm sending because we just moved here i don't have like a primary care doctor yet need to get a recommendation i had you know the whole thing dialed in when i was in the bay area had the um you know like a concierge type doctor so if you get sick you know the doctor comes to your house it's quite nice

SPEAKER_34: right uh i don't have any of that so head here i go to urgent care shout out to urgent care uh just mad appreciate appreciate for um urgent care mad appreciate it's so efficient in texas urgent care there's like 17 of them between me and my house i go to urgent care urgent care has the testing thing

SPEAKER_36: right on site so there's no guessing for influenza strap i love it covid everything so they they're

SPEAKER_16: sticking things in my nostrils down my throat and um yep within 15 minutes they're like you have influenza

SPEAKER_19: then they give me there's a new flu medicine i get the new flu medicine and it worked like a charm

SPEAKER_16: it's one pill i'm going to tell you the name of this i just want to give a mad appreche to uh zofluza x-o-f-l-u-z-a you know usually take the tamiflu and that's like a bunch of pills i don't know if you've ever taken that but i get this uh zofluza and uh you know another day of the hot sweats and the whatever uh shakes and my throat's terrible and then hey you know i i got yesterday i was 80

SPEAKER_21: percent today i feel like 85 and i'm back in the game i wake up this morning i'm about to get on air i have my coffee i go turn the shower on hot water's done no that's where i'm wearing my nick's cap

SPEAKER_31: sorry folks you don't get to see the mullet today it's a bit of a mess but i um long story uh i'm

SPEAKER_00: back in the game glad to be home i've missed you a little bit because you know you've been traveling

SPEAKER_03: so we've been doing some you know different types of shows different different setups i love consistency though and so i'm just like i'm like i'm gonna be healthy on monday you're gonna be healthy on monday let's keep going once you get back from sf we'll be back to normal so yeah yeah because there's a couple things going on in the world it's not like uh we had a a slow winter you know no i

SPEAKER_45: mean that the the tech news keeps popping and then it seems like a lot of what's happening in this new

SPEAKER_16: administration is around tech and business and you know tariffs and taxes and crypto i mean it's just going to be non-stop and i guess the pace at which they're going feels to be um you know they're

SPEAKER_22: kind of shot out of a cannon as they say in the business but what's on the docket today let's get

SPEAKER_00: let's get to work so we had a we had a number of fun things one there is a new case of fraud uh involving the startup name game on that i might want to touch on because it's one of those fraud cases when you're like what did you think was going to happen uh we also have uh notes on static team size from twilio and how i think that theme might actually need to be tweaked to be a little bit more extreme uh we have notes on trump's eos on ai and crypto we have notes on building the next supercomputer a lot of big hardware announcements not just from open ai not just from um xia but

SPEAKER_51: also metas in the mix and then finally uh what about r1 and deep seek the chinese company that has taken the ai benchmark that's pretty interesting as well so jason dealer's choice what do you want

SPEAKER_21: you know i really like this uh twilio static team size plus plus let's what's that about because i

SPEAKER_16: know return to office mandates are starting to um kick in this year a lot of people said hey 2025 is the year we get back in the office five days a week and there's a lot of hand-wringing about that sure but uh this this one sounds even a little more extreme so yeah so twilio for those who are a

SPEAKER_00: little bit out of the loop was a well-known startup when public back in 2016. it's the company that was famous for helping developers plug into sms networks and just telephony in general they

SPEAKER_51: provided the bridge essentially to get you off the internet onto phones if you needed that and it

SPEAKER_56: became a really big company jason and then spit on the program i was just about to say jeff lawson was

SPEAKER_00: the guy and then then in the post-covered world growth slowed jeff lawson's strategy kind of fell afoul of investors and eventually he was uh i i'm gonna say from what i can see defenestrated just okay kicked out out and ousted and they brought in some uh some different folks who we've been tracking this company but i was going through their investor pitch because they dropped some notes last night and their stock was up 20 today last time that i checked actually now 21 so i'm going to the documents jason just reading trying to figure out what are people so excited about here and then it

SPEAKER_58: turns out the company has put together a plan that says the following thing okay so yeah usually when

SPEAKER_19: you see 20 20 jump like that uh it's either because of earnings or getting fit in a riff right

SPEAKER_63: that would be the the two possibilities or maybe both so what the company said was they dropped this

SPEAKER_03: number right here this is their non-gap operating margin target for between 2025 and 2027. essentially they're shooting for more than 20 percent in a non-gap operating margin which

SPEAKER_00: means for those who don't track this essentially they have um 20 more uh revenue than they do um operating costs sorry that took me way longer than it should have yep this is better than investors expected people are very excited the thing is twilio is doing this with a workforce that they say has declined by 40 since q3 2022 so they are not keeping their employee size static they've cut 40 percent in the last couple of years and i don't think they're about to start increasing their cost basis because this entire pitch is about profitability cash flow and operating margins so to me

SPEAKER_03: jason static team size this thing we talked about all last year might just be too polite it might be smaller team size than static team size that's my pitch all right folks we're a couple of weeks into

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SPEAKER_16: something that you know gets lost in a lot of the i guess celebrations about ai uh we saw this stargate announcement you know high-fiving with president trump and um larry ellison sam altman and masayoshi-san and listen it is great investment hey we're going to have a hundred thousand jobs created

SPEAKER_71: to put in this 500 billion dollar supercomputer okay great what i did see in the replies to a lot of

SPEAKER_19: those comments the replies were all okay a hundred thousand jobs are being created here how many are being are going to be destroyed by ai now that sounds like a bit cynical right of course uh but there is some truth to it because as we've seen you know we do it here okay we want to research a topic how much faster are you at researching a topic now than you were three years ago or prior to chat chippy tea

SPEAKER_00: oh i mean for me probably 20 percent just thinking a lot a starting point a good things to look into then i do my own digging but it does provide some early directions yeah okay i would say for

SPEAKER_19: somebody who's in their first couple years of work it probably makes them 200 faster right absolutely you know between these two uh numbers is the truth right so for an elite person it makes them 20 faster great for somebody who's a neophyte it makes them 200 faster okay and and that's in year like

SPEAKER_16: three of this uh where will be will where will we be in year four five and six and i think that's what you're seeing in this twilio number now all big tech was fat and we used to always hire for where we would be in two years so that was always the plan but if you want to make your stock price go

SPEAKER_19: up uh there's a pretty quick way to do it is to just keep expanding earnings and then you'll expand earnings by getting rid of middle management getting rid of the dei department getting rid of the pr department getting outsourcing hr instead of having eight lawyers having six because the six

SPEAKER_16: remaining lawyers are you know 50 faster or 20 faster you know you yourself said you're 20 faster so if you were at tech crunch right now or matter mark back in the day and there were five of you and you each got 20 faster that means you either got a sixth employee or you can get rid of the weakest of the five members of that team this is moving at a quicker pace than i thought so static team size does

SPEAKER_44: need to get updated to a new name which is you know slipping sliding diminishing cutting falling i

SPEAKER_19: will we'll find the right word for it but yeah compressing consolidating something in that range but there is some compression going on here um like you're making a zip file where like i think we're just compressing talent and you're going to be able to do more with less and it used to be called right sizing but this is really more it's almost like um making elite units and so if you're not elite if you're the bottom third of employees man you gotta really get your skill set up and if you're in

SPEAKER_16: the middle of the pack i think you do need to wonder you know if you're next kind of thing i i i think you

SPEAKER_00: could draw an extrapolation in your mind of how fast ai models are improving how fast we're seeing agentic ai go from kind of like hype meme to think people are playing with to i presume in six months thing

SPEAKER_58: we all use and really begin to worry about the bottom third feels right for 2025 bottom half for 2026 i i do

SPEAKER_00: worry a little bit about folks who are struggling to pay student loans and mortgages and so forth but i i really think that clarna gave us an early indicator of what was going on uh for those who don't remember in middle of december of last year clarna said and i'm quoting here from insider clarna ceo says the company stopped hiring a year ago because ai quote can already do all of the jobs and they've also seen their team size come down as the profitability has gone up business people love to talk about operating leverage jason which is essentially just keeping your costs flat while having more revenue more gross profit more operating etc i mean if ai lets everyone

SPEAKER_91: have operating leverage that's going to create a lot of shareholder value huzzah but i i do worry

SPEAKER_19: about the overall economy i think what people are going to have to do is say hey what else can i create in the world so it's going to force people's hand to be entrepreneurial if you were part of the group of product managers or middle managers at a company like google um or facebook or you were in

SPEAKER_16: the dei department or the pr department or that fifth lawyer you know at one of those companies um that you know did this consolidation or eliminated roles and said hey we're just going to be focused

SPEAKER_19: on profitability for some time here well look at your previous company or companies look at what they did and say hey what are they not doing that we always wanted to do there what what was a business opportunity they didn't pursue because the core business was so great right if you were at google or facebook there were some products or services they worked on that you can now say you know hey wait a second if they can do more with less maybe three of us could go do something more with less and we could make a new product or service and so more entrepreneurship is what's going to be

SPEAKER_16: necessary i think to become sustainable and then you have this work from home standoff going on currently a lot of those folks who are being exited also probably want to work from home because hey

SPEAKER_19: that's dope you and i are at home right now and so go quit create a product or service use these same ai tools that replaced you at cloner or replaced you at twilio um and make a competing product or service or maybe it's like a little nook and cranny that you know facebook or google or twilio says you know it's not worth focusing on that it's just too small of an opportunity but it might be a 10 million dollar a year opportunity or a 5 million dollar a year opportunity which for four

SPEAKER_00: people is a pretty great life yes lifestyle business is only a pejorative if you're trying to achieve a venture level outcome otherwise lifestyle business means awesome lifestyle from your business which is

SPEAKER_19: you know no sin whatsoever who's the guy who makes overcast the the great podcast player marco he does

David Friedberg: i don't know as well marco arment and uh i forgot the name of his podcast but it's very good and i i catch it once in a while and he does overcast and i was just listening to his pod and he was talking about whatever beach town he lives in i won't dox him but i don't know if he's public or not about it because he didn't say but he decides he's going to uh buy the local restaurant and his podcast mates are

SPEAKER_107: like no you're going to screw up the podcast we need you on the pod and he's like yeah you know i

SPEAKER_19: i just want to do stuff in the real world and i make enough money and i'm good yeah this all goes

SPEAKER_16: back to the counter trend so you know you could be a victim yeah or you could look at one door closing and two more opening and that's going to be the opportunity of ai so and i agree a lot with that jason

SPEAKER_00: before we move on i just want to say that for everyone who is technologically savvy this is going to be an awesome era because you can build apps faster ai models are getting so much better so quickly um we're seeing increased connectivity with starlink and project kuiper's launching and you know etc so i see the opportunity point for people who are uh ready and able to go after it but what about folks who like drive semis because you and i both think that in 10 years that's going to be entirely automated and there's there are going to be folks that don't upskill into the stuff that you

SPEAKER_58: and i understand i don't think we have an answer yet for them and i think we probably should think

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SPEAKER_19: number of them uh in let's say let's say trucking trucking is going to be like a two-stage process they're going to keep the driver in this automation scenario to be a supervisor and they'll probably have two or three of these things uh daisy chain together uh tractors um and they'll just run them

SPEAKER_16: for 24 hours so you'll be on a 24-hour run or you'll be on like let's say three eight-hour runs with a two-hour charging break in between or a refill break in between or one hour so the travel time to do this like let's say 20-hour run is going to be like seven hours an hour break seven hours an hour break whatever something like that so you'll still have the person in the cabin they they can just sleep so they're going to be like a supervisor they'll be able to take over like let's say inclement weather happens and the ai they don't want the ai driving the car in sleet snow or there's a traffic jam or there's an accident or something so i think it's going to move to that kind of mode but i wouldn't take that job in i wouldn't go into that career now just like i wouldn't start

SPEAKER_00: the career of being a coal miner now absolutely a great idea absolutely but so here's the thing that i think about i think we take a look at old models old examples of of uh times of economic and technological change and how that impacted work but i think we've been taking people and consistently say all right let's automate the the physical stuff and move you up the the value stack towards information work and if we do begin to change that broad progression by making information work less valuable and more automated i do wonder if it's going to be harder to balance employment in the society in the near term in 50 years i bet you were still at four percent unemployment but in the

SPEAKER_16: meantime people have mortgages so i generation tool belt right that's our other trend to keep an eye on so sure uh we'll see a lot of people going into trades and artisanal stuff or arts and people might enjoy it more like i have to say like the whole concept of like going and doing tps reports and mind-numbing

SPEAKER_19: labor in front of a screen uh creates its own set of downsides compared to working the land and

SPEAKER_15: enjoying being in the fresh air so i know that that's that's not wrong and speaking of people who are

SPEAKER_00: out there in the fresh air building things um it seems that every company in the world has a new push jason for even bigger data centers uh we have a graphic prepared for this we're going to pull up right now so meta has a plan to build a data center that's so large it actually comes with its own map so i don't know if you saw it's on threads but here is mark zuckerberg showing a superimposition uh his future two gigawatt data center on top of the manhattan map and jason just for folks out there

SPEAKER_03: how much of manhattan do you think this is covering 35 40 percent it's yeah i mean it's all

SPEAKER_08: of central park it's yeah it's giant it's going from 125th street down to 34th maybe i mean this is

SPEAKER_00: gigantic that's why i asked the new yorker how big this is i was hoping to get streets so thank you for that yeah a couple of crazy things about this it's not just the fact that it's very large that is incredibly important it's also what uh zuck is promising so he is saying that this year in 2025 meta ai is going to be an assistant that serves a billion people that by itself is a pretty big claim uh he claims that llama for their next open source ai model will lead and then he says we're also going to be doing a lot more of our own coding development with ai so we're going to build this two gigawatt data center one gigawatt this year 1.3 million gpus and here's the headline number jakel 60 to 65 billion dollars in investment in capex this year so wow if you're thinking that project stargate is shooting high so is meta and then over in india reliance group a company we don't talk about because it's not in our remit is talking about building a three gigawatt data center in two years yeah and then also anthropic of course is working with amazon on all of their um computing needs holy crap this is kind of crazy all right it's yeah it's more money than even i expected

SPEAKER_19: there is a cash surplus sitting around and we've talked about it for years like why does apple have the largest like private equity fund in the world sitting in their bank account what do they do with

SPEAKER_16: that like microsoft just all this money piling up and and we're talking there's going to be more and more companies like this where they're going to just keep uh having the earnings go up cash sitting there what do they do with the cash right if they don't spend it they pay tax on it right okay and when you remember all this repatriation of cash coming in apple had to deal with it coming from

SPEAKER_19: ireland and it was like a little bit of a negotiation with the government like okay well we could leave it overseas or we could bring it here you know and um well now they finally figured out something to do with it and something productive to do with it which is if you build these data centers maybe you solve

SPEAKER_16: problems that humanity appreciates the question becomes well what if they solve all the problems like what do you do with all this compute and that's where it's going to get super interesting i think because the model sizes might get smaller the things that humans need to get done might get resolved and in their day-to-day basis you know there's this concept of like surplus and you think about your average mac mini m4 your laptop of the potential compute power it has how much are you

SPEAKER_127: using well i'm using chrome right now so the answer is 110 okay so you've opened up using chrome

SPEAKER_19: two percent exactly so you've got like 75 windows open and you know they've got this amount of data but the truth is you know of all the desktop computers out there and the phones out there we're

SPEAKER_34: using a very small percentage of what they're capable of the surplus is extraordinary i wonder and why is that well because there's nothing else to do on your computer you you could fire up 20 programs but you don't have a problem to solve and you you want to go take your kids to gymnastics or get a burger or go ride a horse so humanity has a certain number of problems to solve and right now we're backed up on these language models i do wonder if we solve cancer and we solve energy we solve x y and z like what's left to solve and that's going to be a very interesting place to be feels like we're building so much compute here it'll be a dark fiber moment where we have so much fiber and what are we

SPEAKER_63: sending over it yeah you can only consume so many movies right we filled that up with higher quality

SPEAKER_00: videos but when we think about the demand question and your point of like what happens when we solve things um we're at least not there yet or even close to it this is uh a quote from the wall street journal talking to the ceo of anthropic and he said um i'll just quote him the surge in demand we've seen over the last year and particularly the last three months has overwhelmed our ability to provide the needed compute and then he says later on they're going to have a million ships powering uh the clod family by uh 2026. all that stated today as we think about these massive compute projects they are predicated on i think an anthropic level of increasing compute demand uh and just i think frankly this brings us to deep seek and it's r1 model sure and the fact that they managed to train the underlying uh v3 deep seek v3 model for something like six million dollars which scared the crap out of a lot of folks because if you can build something that's that good for six million dollars you don't need to spend a billion dollars and therefore you probably don't need a hundred thousand five hundred thousand five million nvidia chips and i i'm curious to see if the deep seek breakthroughs that they've shown which uh mark andreessen called the gift to humanity because they are open source um if that is a apparition from the trend or if it is the new trend and i don't think anyone knows yet the answer to that

SPEAKER_16: there's going to be a refocus on quality very soon because it does feel like we're getting to the point where it's answering questions there's enough capacity to answer you know a large number of questions or provide a lot of services let's just say for customer support or legal then it's going to

SPEAKER_141: be like hey can we slow down for a second and just get make sure the answers are correct

SPEAKER_19: oh i see you see what i'm saying like yeah yeah get back to five nines so there if you were doing storage uh and let's say you were building s3 in your amazon okay yeah we how much can we store okay important question okay great what's the throughput of that search okay great another important question okay we can store a whole bunch we can store a billion photos okay great and how fast can we get them off people's phones okay we can do that in a day um and what's the resiliency of that and how often

SPEAKER_16: do they break down and you know how often do we lose photos you know and then you start like okay we

SPEAKER_19: need to build a raid array now i'm just excited that we can um be sitting here in 2025 and have an industry that was trying to figure out like i don't know how to like split bills and how to do photo images and filters you know you and i were covering this as journalists for a little bit and building it in

SPEAKER_150: my case and investing in it it just feels like we're going to solve some pretty awesome problems

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SPEAKER_16: to me if you know we can just blow every thing up uh and start over and solve these problems i hope we have um empathy uh deep empathy for displacement of humans and i i'm gonna go off on a

SPEAKER_68: little emotional tangent here we have to remember that when we make this stuff it has an impact in the real world right it does and we all benefit from it we all make incredible amounts of wealth tons of money just flows to whoever hits the the gusher right and listen i've been there when a gusher gets

SPEAKER_147: hit and i had my bucket out and help hey whoa you know we hit oil you know it's like uh there will

SPEAKER_127: be blood right i mean here's what i was thinking of that's a great movie by the way if you haven't seen it i mean let's watch it i mean such a great film um let's all watch it and you know you drink

SPEAKER_147: everybody's milkshake i drink your milkshake yeah but let's get let's just remember that when that person is crossing the rio grande right and they're coming here to this country to have a better life um or you automate all those truck drivers or the cashiers you know give weight to toast and we all you know the the ordering service and hey you know all the venture capitalists and the ceos and everybody gets nice and rich you know and oh wow this is great we solved a big problem just remember your fellow human beings who helped you build the last business who you convinced to come join you on that adventure to build the last one that just got displaced they need a place in the world yeah and let's have um

SPEAKER_44: some thoughtfulness about that i'm glad you said that i'm i'm very optimistic about if us as a species

SPEAKER_00: figuring out some good path forward if technology improves at the pace we're thinking but at the same time there's there's an interesting kind of irony to this this uh deep seek story because a lot

SPEAKER_03: of vcs have put tons of capital to work backing anthropic and open ai and owning shares that are

SPEAKER_00: spending billions of dollars and then and then jason this comes out and this is a a set of data points from artificial analysis.ai which i use a lot to track models and if you look at where deep seek r1 which is their open ai o1 equivalent ranks it's darn close to exactly as good as open ai's o1 thinking model it's slower but critically look at how cheap it is compared to o1 it's like eight percent of the cost or something like that it's insanely affordable and that to me just says that look all the money that you know coastler or whoever put into open ai better get to work because apparently six million dollars and some nerds in china are out there changing that everything but here's the best part for startups that are not open ai or anthropic or one of the giants this is the this is great news

SPEAKER_44: do you want cool tools that cost less and are open source here you go have fun so i'm going to restate

SPEAKER_154: my empathy we need to have empathy for the venture capitalists and for the ceo who have deployed

SPEAKER_165: hundreds of billions of dollars only to be wiped out by open source these poor venture capitalists and their lps they made the wrong bet what's funny is that we have some grace for them too the lps are

SPEAKER_168: us man the lps are like my mom's pension fund and like you know we go listen it's all gonna work out

SPEAKER_16: as alex always says buy an index fund some are gonna win some are gonna lose we could sit here

SPEAKER_171: and tell you all day long that we think microsoft's gonna run away with it or say i or open ai nobody

SPEAKER_19: knows what's gonna happen right it's so true it's so true and you know if we were sitting here in the

SPEAKER_14: 80s looking at the pc era which is it going to be eagle computer is it going to be compact is it going to be hp there you know it's going to be gateway is it going to be dell oh gateway sure i mean there

SPEAKER_178: was there were 50 000 people making pcs in their in their dorm rooms and somehow michael dell figured

SPEAKER_19: out how to make it into an actual real business you know and then in the web arrow oh which search

David Friedberg: engine is going to make is it going to be lyco is it going to be magellan is it going to be infoseek i don't know maybe this new one google yahoo we'll see anyway this is the moment we're in and so

SPEAKER_16: it's awesome to have competition and you know what it's not just competition from the united states it's going to be all countries all of this comes back to energy now when i look at it i'm just focused on two things energy and the quality the quality of the results right like the the resiliency of of the data and is it actually just like a dumb teenager that regurgitates and i think a lot of cheating is

SPEAKER_34: going on on these tests you know how when they benchmark them i think the benchmarks are all being fed you call me a cynic but i think these teams are incented like the engineers to game the benchmarks i know this because like it's the same group of people that would like send their kids to uh get coaching on um iq tests which is like the most unethical thing you can do like also isn't that

SPEAKER_183: self-defeating that's like just putting risers in your shoes before you get measured like it doesn't

SPEAKER_34: actually make you more no but it gets you into the right school which then gets to the right tutors and teachers and then gives you the confidence and then maybe it's self-fulfilling prophecy so what do they call it when you what is it red jerseying or red uh red red shirting red shirting you know like you keep your kid back a year and put them into hockey and then they can you know check the other kids uh on their asses it's kind of like that kind of thing you know well i got my kid into

Chamath Palihapitiya: a better school with a better teacher so now now we'll see who's smarter on the uh what people are

SPEAKER_00: building and how fast if the venture capitalists will need a bailout i'll just say that this this post on blind has been going around reddit and a lot of other places and essentially um the the gist here if you're listening to the audio version is that uh this blind report which we cannot

SPEAKER_63: verify by definition because it's on blind uh but it does explain what blind is and for the folks who

SPEAKER_00: don't know yeah blind is a a quasi social network for employees of companies you register with your uh corporate email address to ensure that you are actually at the company in question uh and that provides a reasonable layer of bs detection in the system that said i am trying to caveat this by saying that everyone agrees this is true and real and actually what's going on but we don't have nine sources on this the point is the headline reads meta gen ai org in panic mode it started with deep seek v3 which came out last year which rendered the llama for already behind in benchmarks adding insult to injury they did it with a small budget and essentially meta is trying to dissect what this company has done and this is the same company they just pledged 60 to 65 billion dollars in hardware investments this year and has really been leading the charge for quasi open source ai domestically and i would say internationally to boot so if they're worried okay because six million dollars jason is nothing like tomato that's literally nothing because they have tens and hundreds of billions and trillions in market cap so like it's it's an impressive accomplishment and i think a lot of people are

SPEAKER_91: going to be a lot of people have spent a lot of money they're not going to get back sometimes you um

SPEAKER_16: lose money on a business venture and you learn a whole bunch and you take those learnings to the next

SPEAKER_184: one so you know i can all of these like startups where you invest 125k 500k and then blows out and

SPEAKER_34: then the founder comes back to you for the next one it blows out and then the third one you know winds up being you know like the big winner so i always like to bet on the second or third time the founders up at bat right because okay here we go bring all those learnings with you to this game and boom now we're going to the championship uh we're going to the finals so i think that's what's going to happen

SPEAKER_155: but you had mentioned there was a fraud i'm always here for a good fraud okay all right so i'm gonna have to to back up a little bit so this all comes from uh essentially an alleged fraud maybe i put a

SPEAKER_82: legend just uh pre i'm gonna preempt the uh the fraud here alleged this is an alleged fraud a massive

SPEAKER_00: brazen alleged fraud involving a company called game on that was based in san francisco and it had raised a i think about 20 million before the fraud begins and the fraud kicks off per the indictment in september of 2018 through 2024 and jason this is why i wanted to have it on the show it's funny because it's catastrophically sad but also the company went on to raise another 60 million dollars

SPEAKER_03: while committing fraud so this is actually a bad actor that is doing quite a lot of damage to vcs back

SPEAKER_00: to bailing them out um so they built an ai chat business essentially if you're a league or a sports team you could sign up with them and they'd provide a chat bot for your fans and this was a business that people were excited about you know people back in 2016 2018 chat bots had a moment ai courses had several different peaks uh but then came all the lying and the fraud so let's move on to the next slide here and talk about what the alleged lying fraud yep the alleged lying and fraud thank you see lies allegedly included jason uh revenue that never existed and cash balances that were vastly inflated so the company also lied at the beginning by saying the founder alex beckman um said that he sold the company for 100 million give or take it was actually two oh that that even by silicon valley standards is a bit of a unfortunate stress point but then they they went into all out absolute fraud pretty quickly so they did things like stealing the money they used corporate funds to pay for their children's private school tuition they bought a 4.2 million dollar house in san francisco with corporate funds uh they paid their personal credit card bills please i mean yeah keep going oh okay it gets funnier um they spent uh hundreds of thousands of dollars on jewelry and luxury retail they bought teslas they uh i believe used corporate funds to pay for their wedding too allegedly if i recall the full indictment and the lies were really insane so the amount of money they claimed that they made as a business had absolutely no bearing in reality in 2022 to pick one example one year they also lied about allegedly lied about 2023 game on said that it had nearly 70 million dollars in revenue in 2022 which jason for a startup means that you're a year or two away from an ipo if you want it's a huge number uh and they had 54 million dollars in gross profit that year in reality their revenue never

SPEAKER_46: cracked a million dollars in any year okay according to the indictment so was there a board of directors

SPEAKER_16: is the first question was there an audit committee uh would be the next question who was the cfo who was the outsourced accounting firm and who was the lead investor in these rounds this all goes to the lead investor should have these controls in place what we do with our very fledgling young startups is

SPEAKER_34: we share with them the diligence you'll get like here's a diligence list for series a and we'll run

SPEAKER_16: people through it for their uh seed round with us uh and we'll just say you know this is may seem silly because you're going to have a lot of n slash a's not applicables in this list when we go through this checklist you know you uh go through this whole thing and um this is what founders will learn over time is you know these controls are in place for a reason it's it's really to protect the founder and to to protect the shareholders to protect the employees so that you you know um you don't have a bad outcome

SPEAKER_147: yes the only people who ever object to this it's like literally like clockwork when somebody's like

SPEAKER_16: what do we have to do this you know all of a sudden red flag comes out oh and molly and i had like a joke we i have to get you red flags i don't remember but we used to just hold she would hold up a red flag

SPEAKER_107: or i would hold up a red flag yeah because this was happening so often during peak serve that we

SPEAKER_00: would just laugh at each other and just oh you know no it's it's it's a i've seen actually uh clips of that i remember for episode 2000 we went back and watched a lot so i i've seen lots of historical

SPEAKER_31: twists yes and the red flag when somebody i'll just abstract please one or two stories for you you

SPEAKER_19: know i had a founder who didn't want us to have our board seat after agreeing to it we own you know low double digits percentage of the company as like 10 let's just say 10 for for argument's sake and um you know they're they want they don't want to start board meetings they don't want us on the

SPEAKER_16: board you know we're having like all this pushback but we've already made the investment and you know we we start to like okay yeah no no but companies like trending towards a million in revenue you really need to have a board in place because we we need to go from one to five

SPEAKER_19: and to go from zero to one like i've seen founders do it like just sheer force of will you know like a great founder just barrels through some brick walls and they can get to their million they get to a million but to get to million five you kind of need a plan you can't just you need a team right it's like

David Friedberg: superman can do certain things on his own sometimes he needs the bat sometimes he needs green lantern wonder woman whatever there's just too many things even uh even the guy under the water aquaman you

SPEAKER_127: know could come in handy once in a while i believe the the collection of this is called the justice

David Friedberg: league yeah you need this justice league you need the x-men whatever it is everybody's got their purpose each mutant has a special power this is going to blend a couple of different stories that's

SPEAKER_19: totally fine i appreciate that and let's just say like the person is there's like a weird entity

SPEAKER_162: getting paid money every month and it's like who would have thought that there was something untoward

SPEAKER_19: they didn't want to be found it's like well what's this entity and this entity is like one of the founders entities that's a consultant to the other entity getting paid like whatever hundreds of thousands of dollars a year and but for what and there's no contract it's not documented but there's you know whatever tens of thousands a month let's just say it's 25 000 a month going to this entity and then well we don't have any insight to that in his books and it was like well this founder didn't feel they were getting paid enough and they had seeded the company and i'm like well why aren't they on the cap table if they're a seed investor and they're like well no it was a loan i'm like okay well where's the loan document and say well there is no loan document it's okay where's the bank transfer well there is no bank transfer was it then what did they loan goodwill was it like a pack of it was like oh yeah well they gave their services for free and you know now you're like

Chamath Palihapitiya: whoa my head's spinning as to what's going on here also like if you try to pin something down and every time you do it moves two inches away it's like a shell game right exactly and i feel like i'm

SPEAKER_34: on 42nd street playing three card monte like i know trust me yeah i'm from brooklyn i'm wearing a new

SPEAKER_154: york nicks captain and new york nicks shirt like there's a briefcase over here yeah exactly um and so i just said it's like guys time out you can't hustle the hustler like i've been here before the briefcase on the shelf you don't need to know what's in the briefcase just let's go back to first

SPEAKER_21: principles here whatever's going on here stop clean it up because and then sure enough like there's another investor finds out about it and now we're in the cleanup game and i'm like the founder goes

SPEAKER_16: oh man i should have just been straight with you from the start i said yeah we could we could have

SPEAKER_19: cleaned this up it's very simple you you had an entity you felt underpaid we raised your salary you paid your taxes you stopped paying for your apartment your loft your back pay if you had a back pay issue great we'll put it into your forward pay there's a way to do this that would be tax advantageous and fair and fair to the other co-founders just be straight and and that's what happens in these fraud cases is there's no controls in place and you know paul paul graham

SPEAKER_16: you know i don't i mean just to summon paul graham here for a second he always puts these vcs are like the enemy kind of like the vcs kill the companies vcs and i get it like there's bad actors in vc and he's the champion and only he is good for founders and he's the sole person everybody else is you know in the ecosystem is anti-founders but paul and yc are the only ones who are pro

SPEAKER_34: founder you know it's kind of their shtick but the truth is um yeah some there are some bad actors and there are also some bad actors who are founders who will do crazy sht like this and that's why controls are in place that's why you should start a board that's why you should have an audit committee

SPEAKER_68: that's why you should have a plan when you get to a certain level he's right when it's a tiny company when you hit a million two million you raise three or four million have a board with one board member and one lawyer and do four meetings for one hour a year and learn the best

SPEAKER_00: practices to clean this stuff up all of that is is fair by the way the only uh the only actual pro founder vc is the one that i'm usually talking to and every other founder that every vc they know is is terribly anti yeah no i mean i mean i i i joke but the these people so it wasn't just um alex backman it was also his uh then partner later spouse who was a lawyer who helped with a lot of this and they did not just do okay some back pay some shenanigans they were doing uh allegedly um whole cloth fraud inventing documents showing inventing email addresses from people that may or may not have existed wow i just want to highlight a single story from this indictment because it goes jason i

SPEAKER_167: mean it is it is game on it game on indeed game on from page what you wish for from page 26 of the

SPEAKER_00: indictment delivery of fake bank statement to financial institution two and i'm gonna gently paraphrase this june of last year investor one a partner serving on game on's board of directors arranged to go with the co-founder beckman to a bank in chinatown near their office and the partner quote wanted to see a statement directly from the bank to know game on's true account balance with financial institution one so they concoct a a scheme to have his i believe then wife take a document to the bank that they then dropped off so that way beckman could bring the vc to the bank have that document given to him and so he could give it to the vc as if it was from the bank to show fraudulent information but

Chamath Palihapitiya: this all how would the bank agree to do that that's deranged uh i'm trying there's a lot of yeah i mean i mean this sounds like here here it is this sounds more difficult than building a 10 million dollar

SPEAKER_238: business thank you dude the amount of the work this is like people who have like like two families and

SPEAKER_121: i'm like oh how do you have i'm i'm trying to be a good partner to one you know yes anyways uh the fake account statement that beckman and investor picked up had been planted by lao his spouse uh

SPEAKER_00: earlier in the day lao went into the same branch and met with bank employee one lao sent the false and fraudulent game on account statement described to bank employee via email asking the bank employee to print it even though she knew was false and fraudulent then lao had them arrive and then they picked it up i'm not entirely sure about the mechanics of it but that's the scale of fraud here so they they were not just incredible inflating and tinkering this was fraud on a level that i don't understand because did you think that you could steal all the money and not build a business and not get caught that's the thing that i don't get what's the end game for this yeah i think the criminal mind is

SPEAKER_147: this is why i wanted to be an fbi agent um because i i just i i became uh and i wanted to go to john jay

David Friedberg: criminal justice i was going to be a cop and then become uh an fbi agent my brother josh went into the new york uh police department as i've told the story here and i went to fordham and then i was going to go to john jay and uh do criminal forensic psychology i was fascinated by the criminal mind because

SPEAKER_16: i do think there's like just people who just commit crime like they're just sociopaths and then there's people who chase it right they think they can unwind the fraud at a certain point and then they

SPEAKER_34: realize they can't this is like the stage where you know they know they're going to get caught at some point and they're just trying to extend that period of time but they they're not even smart enough to realize i should just sell everything and leave and leave and go on the lamb these guys were like go on the lamb territory they should have been selling the teslas and the jewelry and the house

SPEAKER_71: getting cash and going to south america and disappearing maybe maybe we shouldn't give now

SPEAKER_250: that i say it out loud criminals ideas um maybe they're just not good criminals i mean at a certain point that the skill is the jig is up the problem is they were insufficiently good at fraud and that is

SPEAKER_00: why criminals get caught but no i want to bring up a different point though vcs are not fraud detectors vcs are backers of people who are building things aggressively and i think that there there's always going to be some some of this that happens yes and i just think that we're seeing now companies that during zerp as you mentioned earlier eventually implode either for normal reasons lack of revenue lack of growth losses too high whatever or frauds are coming due because one thing that you can do to check the the peak of a market is when fraud picks up you know you're at or near the peak it's basically

SPEAKER_253: just consider it like credit card one to two percent fraud yeah that would i would say one percent

SPEAKER_16: fraud is probably baked into the system uh or cheating or whatever it is and so you know we we you can't slow down the industry no to put in so much constraint so you have to trust people you

SPEAKER_19: know like it's yeah we're giving a 25 year old a four million dollar seed check well what if they go do something stupid it's like what if when you're gonna do something stupid what you're trying to do is train them on how to be stewards of capital and how to steward the ship you know but you can't learn

SPEAKER_34: how to pilot the ship without taking the controls of the ship and going out in the ocean and you know what most ships don't make it to the new world and some amount do this is what the queen of spain learned she's like you know what i'm gonna fund a lot of like adventures here to go on the spice route or to the new world and i'm gonna give them 20 carry and the reason i'm giving them 20 of whatever comes back is because i know a lot of stuff's not coming back i want to send them to bring something

SPEAKER_64: home and if they break whatever you bring home you get 20 of you know what that's where the term carry comes from the concept of harry came from ships they all they cared about is what came home what made it to port and whatever makes it to port the venture capitalist the captain of the ship they get 20 of the lps get the other 80 all hail the queen well by that analogy there's a whole lot

SPEAKER_00: of startups boats that are outside of port liquidity that one then vcs want to get the cargo carry off and uh that's the hope for this year um i do want to hit just really quickly jason a couple of things

SPEAKER_91: uh that we're not going to get into entirely uh one did you see open ai's operator announcement

SPEAKER_19: i saw the announcement i didn't watch the video yet i saw sam and had a brief conversation with

David Friedberg: him when i was in uh uh dc for the analog oration all right uh so they've announced a thing called

SPEAKER_00: operator what is it it's their first agent just in case people are curious open ai defines an agent as an ai system that can do work for you independently uh this is currently brought out to pro subscribers so the 200 per month open ai subscription um it is uh cool i think it's cool i don't know if it's better than anthropics computer use but to me this is more of a step on a longer journey i'm not trying to vet this as the bl end all but open ai is dropping more cool stuff and so as we talk about ai just keep in mind that not every uh ai system that people have built will survive the big model companies

SPEAKER_16: coming out and potentially crushing them developers have these you know on their desktops and are playing with them for some time they show them to me all the time and the reason they're not out in

SPEAKER_21: the wild is because when you give control of your browser you can do things like i don't know open up your password manager uh you know uh track your keystrokes i don't know buy stuff on amazon i don't

SPEAKER_19: know go search for things on the internet and post things to your social media that you would never want posted yes go do a phishing account yes send a thousand emails to a thousand people that are personalized based on your history with them while you're asleep that cause chaos in your life like literally you could just tell chat gpt cause chaos in alex's life open up his email box read all his history with his boss and then send a spicy message that would cause the most damage like literally that's where we're at folks that's why these things aren't in your hands yet i'm trying to figure out

SPEAKER_262: what what email i would send you that that would make you the maddest jason i'm joining the ai safety

SPEAKER_121: group at this american communist party in the office of equity i've decided to take a dei role

SPEAKER_267: at the careful i probably will at some point i've decided to lead dei at google

SPEAKER_44: um that job sounds dope yeah exactly i'm going to uh twist is back on monday jason's gonna be in san

SPEAKER_00: francisco we are back on our live streaming cadence so make sure that if you are on youtube you hit the um the bell and uh subscribe button all the things just click all the buttons we got so much coming

SPEAKER_183: this year ipos are going to come back mna is going to come back we've lost it's gonna be a great year it's gonna be a good year jason i'll see you soon and then have a good one cheers bye